Attor­ney Gen­er­al Ken Pax­ton Urges U.S. Sen­ate to Pass Per­ma­nent Fix to IRS Pol­i­cy That Could Under­mine State Child Sup­port Systems

Texas Attorney General Ken Paxton sent a letter to Texas Senators Ted Cruz and John Cornyn urging them to support bipartisan legislation that would permanently fix a problematic IRS policy that interferes with States' ability to administer child support programs. The U.S. House of Representatives recently passed the Strengthening State and Tribal Child Support Act and similar legislation is now pending in the Senate.

In February 2023, the Internal Revenue Service's ("IRS") Office of Safeguards issued a new regulation that abruptly reversed decades of established legal interpretation regarding the use and definitions of contractors hired by Title IV-D child support agencies. The new policy significantly limited contractor access to Federal Tax Information ("FTI") and the IRS threatened to withhold the data necessary to operate these programs completely if States did not comply. This would eliminate the States' ability to receive child support collections through the Tax Offset Program.

Attorney General Paxton sued the IRS in May 2023, eventually forcing the IRS to delay the effective date of the proposed policy to October 2024 and allowing states to submit mitigation plans that would prevent any enforcement action. While the IRS backed down, the threat remains that the policy could be reversed at any time. If the proposed policy had taken effect, it would have forced state child support programs to spend an additional $1 billion in increased operating costs.

In the letter, Attorney General Paxton said: "While the threat to Texas families and the Texas child support program may be temporarily held at bay, the fact remains that the IRS has demonstrated time and again that Congress must take action to clarify in statute that IV-D programs are authorized to redisclose FTI-with rigorous safeguards-to contractors for the purpose of operating the program. Otherwise, the programs and the families who rely on them for vital economic support are subject to the interpretive whims of the IRS. Without a legislative solution, estimates exceed $1 billion annually in additional costs for child support programs nationwide."

To read the letter, click here.