Payments made from the Judgment Fund to satisfy awards are statutorily required to be offset under 31 U.S.C. § 3728 (Setoff Against Judgment) and 31 U.S.C. § 3716 (Administrative Offset). Without explicit statutory language to the contrary, there is no exception to the statutory requirement that these payments be offset.
To understand the distinction between the two statutes, it's helpful to know something about the payment process. In a nutshell, awards are ultimately paid by a disbursing official, 31 U.S.C. § 3321(a). To process an award for payment, the disbursing official must receive a certified voucher from a certifying official, 31 U.S.C. § 3325(a)(1). Fiscal Service's Judgment Fund Branch is the certifying official for all payment vouchers that will result in a payment from the Judgment Fund. By certifying an award for payment from the Judgment Fund, the Judgment Fund Branch is, among other things, confirming that there is no other source of funding for that award and that the payment is proper.
- money judgment against, or a monetary settlement by, the United States.
- Judgment Debt
- An amount owed to the United States by a Judgment Plaintiff that has been reduced to judgment.
- Judgment Fund Branch
- The part of Treasury's Bureau of the Fiscal Service (Fiscal Service) responsible for processing agency submissions requesting payments from the Judgment Fund.
- Judgment Fund
- The permanent, indefinite appropriation provided by Congress for the payment of certain awards.
- Judgment Plaintiff
- The person legally entitled to the payment of an award from the Judgment Fund.
Setoff Against Judgment
Setoff under 31 U.S.C. § 3728 occurs at the payment certifying level. The statute requires the payment of a judgment against the United States to be withheld to the extent necessary to satisfy a debt owed to the United States by the Judgment Plaintiff. Regulations implementing this statute are in Subpart C to 31 CFR Part 256.
An agency requesting payment of an award from the Judgment Fund must identify on the appropriate form (currently Form 196, "Judgment Fund Award Data Sheet," line 6) any known Judgment Debts owed by the Judgment Plaintiff and any known IRS tax levy to which the Judgment Plaintiff is subject. As indicated on Form 196, the Judgment Debt or levy is deducted from the judgment or settlement amount and the Judgment Fund Branch will certify the balance to the disbursing official for payment, provided the payment is otherwise proper.
Agencies must also identify on Form 196 any known debts owed by the Judgment Plaintiff to the United States that have not been reduced to judgment. 31 CFR 256.22 provides additional details as to what occurs if such a debt is identified on Form 196.
Entirely separate and apart from setoff under section 3728, the Debt Collection Improvement Act of 1996 (DCIA) requires federal agencies to refer delinquent nontax debts to Fiscal Service for purposes of collection by offset of nontax payments pursuant to 31 U.S.C. § 3716. Administrative offset occurs at the disbursing official level, after a payment has been certified, 31 U.S.C. § 3716(c)(1)(A). (Because the two offsets occur at different stages in the payment process, it's possible for a single payment to be set off for one debt under section 3728 and administratively offset for a different debt under section 3716.)
Regulations implementing administrative offset by the disbursing official are at 31 C.F.R. Part 285. In particular, Part 285.5 addresses the centralized offset of federal payments to collect nontax debt owed to the United States. Federal payments subject to administrative offset by the disbursing official include payments from the Judgment Fund, 31 CFR 285.5(e)(1).
Fiscal Service conducts centralized administrative offset and other debt collection activities to reduce payments though its Treasury Offset Program (TOP). TOP compares the names and taxpayer identification numbers (TINs) on debts with the names and TINs on federal payment vouchers. If there is a match, the federal payment is offset to satisfy the overdue debt, 31 C.F.R. 285.5(c)(2). Section 285.5(e)(8) provides that "payment agencies shall prepare and submit payment vouchers in the manner prescribed by the disbursing official to ensure that all payments legally eligible for offset will be offset and all payments not eligible will not be offset."
An agency requesting payment of an award from the Judgment Fund must provide the TIN(s) of the person(s) legally entitled to the payment from the Judgment Fund on Form 197, "Judgment Fund Voucher for Payment," line 6. In almost all cases, this means the TIN(s) of the plaintiff(s) for payments arising out of actual or imminent litigation or the TIN(s) of the claimant(s) for payments arising out of an administrative settlement. Providing the TIN for the plaintiff's or claimant's attorney, even if the payment is being made to the attorney or into the attorney's trust fund, is not proper and will result in the submission being rejected. 31 CFR 256.13, 256.14 ("The TIN provided must be for the party entitled to the payment, whether or not that party is the payee. Failure to include a required TIN results in an incomplete request for payment. Fiscal Service may return, without action, any request for payment that is incomplete.").
- TIN for each person legally entitled to payment of funds from the Judgment Fund must be provided even if the actual or imminent lawsuit is a class action or other multiple plaintiff lawsuit, and even if a lump-sum payment will be made to a claims administrator or other entity that will issue individual payments to the persons entitled to the funds. In such a case, please contact the Judgment Fund Branch prior to submitting a request for payment to ensure the proper process is established to handle the TINs.
- Even in the case of an award of attorney fees, the TIN that must be provided is the TIN for the plaintiff or claimant, as the plaintiff or claimant is generally the person legally entitled to the payment under the laws that provide for awards of attorney fees against the United States. It does not matter if the plaintiff or claimant has asked that the fees or costs be paid directly to his/her attorney.
- Even if the agency requesting payment from the Judgment Fund has done its own due diligence to ascertain if a payment made by that agency should be offset, that fact has no effect on the Judgment Fund Branch's responsibility to submit properly completed certified payment vouchers to the disbursing official. For the Judgment Fund Branch to be able to submit proper vouchers, it must have the TIN(s) of the person(s) legally entitled to the payment and will reject any submission that does not include this information.