H.R. 4365: To amend title 5, United States Code, to make clear that accounts in the Thrift Savings Fund are subject to certain Federal tax levies

H.R. 4365

To amend title 5, United States Code, to make clear that accounts in the Thrift Savings Fund are subject to certain Federal tax levies

Date
July 31, 2012 (112th Congress, 2nd Session)

Staff Contact
Sarah Makin

Floor Situation

On Tuesday, July 31, 2012, the House is scheduled to consider H.R. 4365, a bill to amend title 5, United States Code, to make clear that accounts in the Thrift Savings Fund are subject to certain Federal tax levies, under a suspension of the rules requiring a two-thirds majority vote for approval.  H.R. 4365 was introduced by Rep. Ann Marie Buerkle (R-NY) on April 17, 2012, and was referred to the Committee on Oversight and Government Reform, which held a mark-up and reported the bill, as amended, on April 18, 2011.

Bill Summary

H.R. 4365 would amend the Internal Revenue Code to make Thrift Savings Fund accounts subject to federal tax levies used to collect unpaid federal taxes. 

Background

According to the sponsor’s office, the bill would treat Federal employees the same as private sector employees, whose 401K and similar retirement accounts are subject to IRS levy.

“Under present U.S. code, TSP accounts are not listed in the Internal Revenue Code provisions identifying property that is exempt from tax.  In fact, the Thrift Board brought the matter to the Committee of Oversight and Government Reform’s attention mentioning that the authority for the IRS to impose a tax on an employee’s TSP account does not exist under current tax codes.  H.R. 4365 would amend the rule to include TSP accounts held by government employees.

“Simply put, this is about fairness; this bill will treat Federal employees the same as private sector employees, whose 401K accounts are subject to IRS levy.  At the end of 2010, 279,000 Federal employees owed $3.4 billion in Federal taxes.  According to the Joint Committee on Taxation enactment of this bill will provide $22 million in revenue from taxpayers with outstanding liabilities.  Failure to pay Federal taxes is a violation of the Government Code of Ethics, which prescribes that Federal employees ‘satisfy in good faith their obligations as good citizens, including all just financial obligations, especially those such as Federal, State or local taxes that are imposed by law.’

“It is time for the government to reform the current tax code and shoulder the same tax burden carried by the private sector.  As Americans we all need to pay our fair share in order to move towards a balanced budget and a more fiscally responsible approach to our economy.”

Cost

The staff of the Joint Committee on Taxation (JCT) estimates that enacting H.R. 4365 would increase revenues by $24 million over the 2012-2022 period. The entire revenue increase would result from an increase in on-budget revenues, and thus pay-as-you-go procedures apply. Enacting the bill would not affect direct spending.

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. Enacting H.R. 4365 would result in revenue gains in each year from 2013 to 2022. The net reduction in the deficit is shown in the following table.