This chapter
may be cited as the "Setoff Debt
Collection Act".
SECTION 12-56-20.
Definitions.
As used in
this chapter:
(1) "Claimant
agency" means a state agency, board,
committee, commission, public
institution of higher learning,
political subdivision, or other
governmental or quasi-governmental
entity of any state or the United
States. It includes the South
Carolina Student Loan Corporation,
housing authorities established
pursuant to Articles 5, 7, and 9 of
Chapter 3 of Title 31 and the
Internal Revenue Service, and the
United States Department of
Education. It also includes a
private institution of higher
learning for the purpose of
collecting debts related to default
on authorized educational loans made
pursuant to Chapter 111, 113, or 115
of Title 59. "Political subdivision"
includes the Municipal Association
of South Carolina and the South
Carolina Association of Counties
when these organizations submit
claims on behalf of a county or
local governmental or
quasi-governmental entity. A
political subdivision who submits a
claim through an association is a
claimant agency for the purpose of
the notice and appeal provisions and
other requirements of this chapter.
(2)
"Department" means the South
Carolina Department of Revenue.
(3) "Debtor"
means a person having a delinquent
debt or account with a claimant
agency which has not been adjusted,
satisfied, or set aside by court
order, or discharged in bankruptcy.
(4)
"Delinquent debt" means a sum due
and owing a claimant agency,
including collection costs, court
costs, fines, penalties, and
interest which have accrued through
contract, subrogation, tort,
operation of law, or other legal
theory regardless of whether there
is an outstanding judgment for that
sum which is legally collectible and
for which a collection effort has
been or is being made. It does not
include sums owed to county
hospitals when the hospital and the
debtor have entered into a written
payment agreement and the debtor is
current in meeting the obligations
of the agreement. "Delinquent debt"
also includes any fine, penalty,
cost, fee, assessment, surcharge,
service charge, restitution, or
other amount imposed by a court or
as a direct consequence of a final
court order which is received by or
payable to the clerk of the
appropriate court or treasurer of
the entity where the court is
located.
(5) "Refund"
means any individual or corporate
South Carolina income tax refund
payable. This term also includes a
refund belonging to a debtor
resulting from the filing of a joint
income tax return.
SECTION 12-56-30.
Collection of debt; information to
be given by claimant agency;
information to be given by
department to claimant agency.
(A) The
collection remedy under this chapter
is in addition to any other remedy
available by law.
(B) Claimant
agencies may submit for collection
under the procedure established by
this chapter all delinquent debts
which they are owed.
(C) All
claimant agencies, whenever
possible, shall obtain the full
name, social security number,
address, and any other identifying
information, required by regulations
promulgated by the department for
implementation of this chapter, from
any person for whom the agencies
provide any service or transact any
business and who the claimant
agencies can foresee may become a
debtor under the terms of this
chapter.
(D) Upon
request from a claimant agency, the
department shall furnish the
claimant agency the home address,
corrected Social Security number or
additional Social Security number of
any taxpayer whose name has been
submitted to the department for
collection of a delinquent debt.
SECTION 12-56-40. Choice of
claimant agency as to use of or
participation in setoff program.
If the
claimant agency determines that the
administrative cost of utilizing
this chapter is prohibitive, it may
choose not to participate in the
setoff program, or it may choose to
participate only in cases of
delinquent debts above an amount it
determines appropriate.
SECTION 12-56-50.
Department to assist in collection
of account or debt by setoff of any
refunds due to debtor.
Subject to the
limitations contained in this
chapter, the department, upon
request, shall render assistance in
the collection of any delinquent
account or debt owing to any
claimant agency by setting off any
refunds due the debtor from the
department by the sum certified by
the claimant agency as delinquent
debt.
SECTION 12-56-60.
Notification by claimant agency;
refund determinations; department
liability.
(A) A claimant
agency seeking to attempt collection
of a delinquent debt through setoff
shall notify the department in
writing and supply information the
department determines necessary to
identify the debtor whose refund is
sought to be set off. A request for
setoff may be made only after the
claimant agency has notified the
debtor of its intention to cause the
debtor's refund to be set off not
less than thirty days before the
claimant agency's request to the
department. The claimant agency
promptly shall notify the debtor
when the liability out of which the
setoff arises is satisfied. The
claimant agency promptly shall
notify the department of a reduction
in the delinquent debt.
(B) Upon
receiving the certification of the
claimant agency of the amount of the
delinquent debt, the department
shall determine if the debtor is due
a refund. If the debtor is due a
refund of more than a tolerance
amount as determined by the
department, the department shall set
off the delinquent debt against the
amount of the refund. The department
may retain an amount not to exceed
twenty-five dollars of each refund
set off to defray its administrative
expenses, and that amount may be
added to the debt. Apportionment is
not required in the case of a refund
resulting from filing a joint
return. A person has no property
right or property interest in a
refund until all amounts due the
State and claimant agencies are
paid. The department shall consider
a delinquent debt and debtor list
provided by a claimant agency as
correct and the department is not
liable for a wrongful or improper
setoff.
SECTION 12-56-62. Notice of
intention to set off debt; form,
delivery and presumption.
The notice of
intention to set off must be given
by mailing the notice, with postage
prepaid, addressed to the debtor at
the address provided to the claimant
agency when the debt was incurred or
at the debtor's last known address.
The giving of the notice by mail is
complete upon the expiration of
thirty days after deposit of the
notice in the mail. A certification
by the claimant agency that the
notice has been sent is presumptive
proof that the requirements as to
notice are met, even if the notice
actually has not been received by
the debtor. The notice must include
a statement of appeal procedures
available to the debtor,
substantially as follows:
"According to
our records, you owe the (claimant
agency) a debt in the amount of
(amount of the debt), plus interest,
if applicable, for (type of debt).
You are hereby notified of the
(claimant agency's) intention to
submit this debt to the South
Carolina Department of Revenue to be
set off against your individual
income tax refunds until the debt is
paid in full. Pursuant to the Setoff
Debt Collection Act, this amount,
plus all costs, will be deducted
from your South Carolina individual
income tax refunds unless you file a
written protest within thirty days
of the date of this notice. If you
file a joint return with your
spouse, this amount will be deducted
from the total joint refunds without
regard to which spouse incurred the
debt or actually withheld the taxes.
The protest must contain the
following information:
(1) your name;
(2) your
address;
(3) your
social security number;
(4) the type
of debt in dispute; and
(5) a detailed
statement of all the reasons you
disagree with or dispute the debt.
The original
written protest must be mailed to
the (claimant agency) at the
following address:
(A) A debtor
who protests the debt shall file a
written protest with the claimant
agency at the address provided in
the claimant agency's notification
of intention to set off. The protest
must be filed within thirty days of
the date of the notice of intention
to set off and must contain the
debtor's name, address, and tax
identification number, identify the
type of debt in dispute, and give a
detailed statement of all the
reasons that support the protest.
The requirements of this section are
jurisdictional.
(B) To recover
costs incurred by the Municipal
Association of South Carolina and
the South Carolina Association of
Counties for submitting a debt
pursuant to this chapter and Section
12-4-580 to the department for
collection, the association may
charge an administrative fee, not to
exceed twenty-five dollars, that
must be added to the debt. An
association is exempt from the
notice and appeal procedures of this
chapter. The entity that has
submitted its claim through the
association is responsible for the
notice and hearing requirements of
this chapter.
SECTION 12-56-65. Protest
and contested case hearings;
refunds; erroneous retention or set
off; time limit.
(A) Before
submitting a debt to the department,
the claimant agency shall appoint a
hearing officer to hear a protest of
a debtor. This hearing officer is
vested with the authority to decide
a protest in favor of either the
debtor or the claimant agency. The
claimant agency shall certify to the
department, on a form prescribed by
the department, that a hearing
officer has been appointed and shall
inform the department of the name,
address, and telephone number of the
hearing officer. If this hearing
officer is unable to serve at any
time, the claimant agency shall
appoint another hearing officer.
(B) Upon
receipt of a notice of protest, the
claimant agency shall notify the
department that a protest has been
received and shall hold an informal
hearing at which the debtor may
present evidence, documents, and
testimony to dispute the debt. The
claimant agency shall notify the
debtor of the date, time, and
location of the informal hearing. At
the conclusion of the informal
hearing, the hearing officer shall
render his determination. Upon
receipt of a sworn certification
from the hearing officer that he
held an informal hearing and ruled
in favor of the claimant agency, the
department may proceed to collect
the delinquent debt regardless of a
subsequent appeal by the debtor.
(C) A debtor
may seek relief from the hearing
officer's determination by
requesting, within thirty days of
the determination, a contested case
hearing before the Administrative
Law Judge Division. A request for a
hearing before the Administrative
Law Judge Division must be made in
accordance with its rules.
(D) If a
portion of the delinquent debt is
collected by the department and the
determination of the hearing officer
in favor of the claimant agency is
later reversed or the debtor
prevails in a claim for refund, the
claimant agency shall refund the
appropriate amount to the taxpayer,
including the appropriate amount of
the fee. That portion of the refund
reflecting the department's fee must
be paid from claimant agency funds.
If the claimant agency is found to
be entitled to a portion of an
amount collected by set off, it is
not required to refund the setoff
fee retained by the department.
(E) If a
refund is retained in error, the
claimant agency shall pay to the
taxpayer interest calculated as
provided in Section 12-54-20 from
the date provided by law after which
interest is paid on refunds until
the appeal is final, except that
interest does not accrue when the
claimant agency is the Office of
Child Support Services of the South
Carolina Department of Social
Services.
(F) If the
claimant agency determines that
money has been erroneously or
illegally collected, the claimant
agency, in its discretion, may issue
a refund, even if the debtor does
not file a protest or file a claim
for refund.
(G) A
collection may not be contested more
than one year after the date it was
made. The date of collection must be
conclusively determined by the
department. This provision must be
construed as a statute of repose and
not as a statute of limitation.
(H) A debtor
may make a claim for refund of an
amount collected pursuant to this
chapter within one year from the
date the amount is collected, in the
same manner as seeking relief from a
hearing officer's determination
pursuant to Section 12-56-65 or
12-56-67.
SECTION 12-56-67. Jury
trial rights.
This section
does not create a right to jury
trial where one does not already
exist. Where a debtor otherwise is
entitled to have a jury determine
the issue of indebtedness, that
right is preserved specifically. If
a right to a jury trial already
exists and the debtor wishes to
exercise that right, the debtor is
not required to request a contested
case hearing before the
Administrative Law Judge Division
but instead must file a summons and
complaint in the Court of Common
Pleas and serve the pleadings on the
claimant agency within thirty days
from the date of the hearing
officer's determination. The summons
and complaint must name the claimant
agency as a defendant and the
allegations of the complaint must
contest the debt and any potential
setoff.
SECTION 12-56-70. Priority
of claims to refund.
Claims to
refunds allowed to be set off under
this article must be made by a
claimant agency filing a written
notice with the department of its
intention to effect collection
through setoff under this article.
The following is the order of
priority for multiple claims filed:
(1) claims of
the Department of Revenue;
(2) claims of
the Division of Child Support
Enforcement of the State Department
of Social Services;
(3) other
claims of the State Department of
Social Services and other state
agencies;
(4) claims of
the Internal Revenue Service and
claims filed by institutions of
higher learning;
(5) claims of
other agencies not given a specific
priority.
Priority
within a class in which multiple
claims are filed is the order in
time in which the claimant agencies
filed the written notice with the
department of the intention to
effect collection through setoff
under this article.
SECTION 12-56-80. Proceeds
collected transmitted to agency;
accounting provided by department to
agency; credit to debtor's
obligation by agency; notification
of agency to debtor of setoff.
(A)
Simultaneously with the transmittal
of proceeds collected to a claimant
agency, the department shall provide
the agency with an accounting,
which, whenever possible, must
include the full names of the
debtors and the debtors' social
security numbers. No federal tax
return information may be divulged
by the department under any
circumstances.
(B) Upon
receipt by a claimant agency of
proceeds collected on its behalf by
the department and an accounting
thereof as specified under this
section, the agency shall credit the
debtor's obligation and shall notify
the debtor in writing of the amount
of the setoff.
SECTION 12-56-90.
Information from department to be
used only by agency for collection
purposes; penalties for disclosure.
(A) The
exchange of information among the
department, claimant agency, and the
debtor pursuant to this chapter is
lawful.
(B) The
information obtained by a claimant
agency from the department in
accordance with the exemption
allowed by subsection (A) may be
used by the agency only in the
pursuit of its debt collection
duties and practices. A person
employed by or formerly employed by
the agency who discloses the
information for another purpose is
subject to the penalties provided in
Section 12-54-240.
SECTION 12-56-100.
Indemnification of department by
agency.
Claimant
agencies shall indemnify the
department against any injuries,
actions, liabilities, or proceedings
arising from performance under the
provisions of this chapter.
SECTION 12-56-110.
Department regulations, forms and
procedures permitted.
The department
may promulgate regulations and
prescribe forms and procedures
necessary to implement this chapter.
SECTION 12-56-120.
Department and Internal Revenue
Service exempt from notice and
appeal procedures; other procedures
as exclusive remedy.
The department
and Internal Revenue Service are
exempt from the notice and appeal
procedures of this chapter. The sole
and exclusive appeal procedure for
the setoff of a debt owed to the
department is governed by the
provisions of Chapter 60 of Title
12. The appeal procedure in
connection with a liability to the
Internal Revenue Service is governed
by Title 26 of the United States
Code.