(a) Before discharging a delinquent debt (also referred to as a close out of the debt), the CFO must take all appropriate steps to collect such debt, including (as applicable), the following:

(1) Administrative offset;

(2) Tax-refund offset;

(3) Offset of Federal salary;

(4) Referral to private collection contractors;

(5) Referral to Federal Departments or Agencies that are operating a debt-collection center;

(6) Reporting delinquencies to credit-reporting bureaus;

(7) Garnishing the wages of a delinquent debtor; and

(8) Litigation or foreclosure.

(b) The CFO will make a determination that collection action is no longer warranted and request that litigation counsel release any liens of record that are securing the debt. Discharge of indebtedness is distinct from the termination or suspension of collection activity, and the Internal Revenue Code might apply. When the CFO suspends or terminates collection action on a debt, the debt remains delinquent, and USAID may pursue further collection action at a later date in accordance with the standards set forth in this part. When a debt is discharged in full or in part, further collection action is prohibited, and USAID must terminate debt-collection action.

Upon discharge of indebtedness, USAID must report the discharged debt as income to the debtor to the IRS in accordance with the requirements of 26 U.S.C. 6050P and 26 CFR 1.6050P-1. USAID may request Fiscal Service to file such a discharge debt report to the IRS on the Agency's behalf.