Attorney General Paxton has lodged a lawsuit against the Internal Revenue Service (“IRS”) in response to a detrimental policy revision that could significantly hamper the operational capacity of child support enforcement agencies (“CSEAs”) nationwide to employ essential contractor resources in supporting the families they cater to. The objective of the lawsuit is to overturn this damaging policy.
“It is profoundly distressing that millions of families will bear the brunt of the Biden Administration’s measures, which are set to negatively impact child support initiatives across the country that are essential in providing financial security to families in need,” remarked Attorney General Paxton. “It is disgraceful that Joe Biden is striving to create obstacles for the efficient administration of child support programs. The policy implemented by the Biden Administration is set to have disastrous effects on millions of American children, and Joe Biden must be held accountable for why his Administration is making it so challenging for child support enforcement agencies to perform their duties.”
On February 15, 2023, CSEAs across the country were informed by the IRS of a policy alteration necessitating the termination of contractor access to data crucial for the management of Title IV-D child support programs, effective from October 1, 2023. On a nationwide scale, Title IV-D programs depend on contractor services to facilitate financial, medical, and dental support to over 13.2 million children. In Texas alone, contractor services aided the state’s collection of nearly $4.5 billion for 1.5 million child support cases statewide during the fiscal year 2022.
The sudden policy shift contrasts with the IRS’s prior stance, which recognized the requirement for contractor access to information in previous audits. For more than ten years, the IRS has scrutinized these contractor services, and pending resolution by the IRS and the Office of Child Support Enforcement, it has withheld findings due to conflicting interpretations of federal statutes. This unexpected policy alteration poses a threat to nearly all Title IV-D child support programs.
The new policy’s effective date, by which CSEAs are expected to conform, presents an unrealistic timeline for CSEAs to compensate for the contractor services that the federal government’s decision will eliminate. This leaves IV-D programs at risk of contravening 42 U.S. Code § 654(18), which permits states to take necessary actions to recover past-due support from overpayments to the Secretary of the Treasury. This IRS decision is set to result in a minimum annual loss of $300 million in child support collections for families in Texas.