COUNTY TAX REFUND SETOFF PILOT PROGRAM TIMELINE OF ACTIVITIES

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1 COUNTY TAX REFUND SETOFF PILOT PROGRAM TIMELINE OF ACTIVITIES Activities through Year End Aug. 15 Aug. 20 Sept. 2 Sept. 8 Sept. 24 Deadline for counties to sign up to participate in pilot program Concurrent session held at ACCA convention to provide program details An overview of how the program will operate Discussion of county responsibilities Discussion of documents and procedures to be executed/adopted by counties Pilot program participants finalized Deadline for ACCA to distribute program documents to pilot program counties Resolution to be adopted by county Sample Public Notice Participation agreement to be executed Appeal Procedures to adopt Meeting with pilot program counties at ACCA office Discussion of county responsibilities in administration of program Debt submission training Explanation of appeal procedures Q and A from counties Meeting attendees should include the following: Commission Chair or Commissioner County Tax Refund Offset Coordinator Representative from each department participating in program Oct. 15 Nov. 3 Dec. 1 Deadline for county to adopt resolution for participation in pilot program and return signed participation agreement to ACCA Deadline for ACCA to provide counties information/materials for submitting debts Q and A Webinar on submission issues Deadline for counties to send first debt submissions to ACCA Counties should send regular updates thereafter

2 Activities in 2015 and Beyond Jan. 5 Jan. 31 Feb. 15 April 4 ACCA begins submitting debts to Department of Revenue Debts submitted quarterly thereafter ACCA begins mailing setoff notices to debtors with copy ed to county Notices mailed daily as setoff lists received from the Department of Revenue Counties establish escrow account ACCA begins distributing to counties a monthly summary of state income tax refunds that are being setoff by the Department of Revenue ACCA begins quarterly distribution of setoff monies to participating counties First distribution for monies received from setoffs between Jan. 1 and March 31 Payments distributed to counties quarterly hereafter Money paid to counties in order that setoff monies are received from Department of Revenue

3 COUNTY TAX REFUND SETOFF PROGRAM COUNTY RESPONSIBILITIES A county participating in the county income tax refund setoff program will work very closely with the Association for the submission of debts and deposit of monies paid as a result of state income tax refunds which are set off for payment of debts due the county. As required in Ala. Code , the Association will be responsible for submitting debt information to the Alabama Department of Revenue (the Department ) and for distributing refund monies collected by the Department to the counties participating in the program. In order to properly execute these required functions, the county will need to coordinate with the Association in an ongoing basis. Resolution and Participation Agreement The county s first step will be to adopt a resolution to participate in the program and execute a participation agreement with the Association setting out each entity s responsibilities in management and administration of the program. The adopted resolution and signed participation agreement must be received in the Association office no later than October 15, 2014 for counties participating in the pilot program. County Tax Refund Setoff Coordinator The county will need to designate someone to serve as the county tax refund setoff coordinator (the coordinator ) to be responsible for: Coordinating all county activities with county departments that will be submitting debts for setoff Coordinating submissions of debts to the Association for transmission to the Alabama Department of Revenue Updating debt information sent to the Association as needed Setting up and managing escrow account where refund monies will be deposited Setting the review hearing upon receipt of a contest from either the debtor or a person who has filed a joint income tax return with the debtor Conducting the review hearing Making the final determination about whether setoff will stand after the review Sending notice of final determination to the person filing the contest Returning any monies from a setoff determined to not be due for a debt Transferring monies from the escrow account to the county fund entitled to debt payments following a final determination that the debt is due Monitoring for appeals to circuit court following final determination that debt due 1

4 It is strongly advised that these duties be assigned to one person rather than someone in each department submitting debts. This is necessary to make sure that there is one contact person for the Association to work with and to ensure consistency in the way the program is handled. Debt Submission Debts of at least $25 that are at least 60 days delinquent are eligible for submission. Each debt submitted to the Association and ultimately to the Department must include all of the following information: Debtor s name Debtor s mailing address Debtor s Social Security Number Amount of the debt due Type of debt (i.e., unpaid solid waste collection fees) The county will be responsible for submitting this information in a format that can be transmitted to the Department easily and securely. Association staff will provide the county with instructions and tools for proper submission. It will be very important that the county carefully follow those instructions or debts may not be submitted to the Department. ACCA Director of Finance Lauren Westbrook will work with the county to make sure you have the right information for proper submission. The Association will begin quarterly submissions to the Department on January 5, Therefore, the county must have all information gathered and submitted to the Association no later than December 1 to be included in the first submission. Updating Submissions The county will be responsible for regularly updating debt information provided to the Association. This will include both new debts to be submitted and updates on previously submitted debts where there has been full or partial payment of the debt or some other activity affecting the accuracy of information previously submitted to the Department regarding a particular debt. 2

5 Establishing Escrow Account The State Comptroller s Office will distribute all refund setoff monies collected for county debts to the Association as they receive notice of setoff from the Department. The Association will determine which county is entitled to the setoff money based upon reports of setoff received from the Department. Monies will be distributed to participating counties by the Association on a quarterly basis beginning April 4, Pursuant to Ala. Code (a), the Association will deduct a $25 administrative fee from each refund setoff collected by the Department. This fee will be added to the debt due from each debtor and will not reduce monies due the county from the debtor. After deducting the administrative fee, the balance of each setoff shall be distributed to the county by the Association. Monies will be distributed quarterly to the individual participating counties in the order that refund setoffs are reported to the Association from the Department. Ala. Code (f) requires that the claimant agency (the county) hold funds in an escrow account until a final determination of the validity of the debt is made. Therefore, the county will need to set up an escrow account for this purpose and hold setoff monies received in payment for a debt in the escrow account until either: (1) Thirty (30) days after date of notice of setoff if no contest is filed in that time frame or (2) The final determination that the debt is due following a review hearing in the event a contest of the setoff is filed by a debtor or joint filer. Notice of Setoff Ala. Code (e) requires that notice of a tax refund setoff be sent to any debtor or person who has filed a joint Alabama income tax return with the debtor. The notice must include, among other things, identifying information about the debtor, the basis for the debt, and how to file a contest of the setoff. The Association will send these notices out on behalf of the county as refunds are set off and will forward a copy of the notice to the county. However, the debtor or joint filer must file his or her contest with the county. Therefore, the Association must have the proper address of the county to include in the notice sent to the debtor or joint filer. The notice of setoff will be mailed on letterhead bearing the county s name and will direct the debtor or joint filer to address any contest to the county tax refund offset coordinator. Therefore, the county will need proper procedures in place to ensure any contest letters are immediately delivered to the coordinator when received in the county commission office. 3

6 Review Hearing As noted above, the debtor or joint filer has a right to file a written contest seeking review of the setoff. The notice of contest must be filed within thirty (30) days of the date on the Notice of Setoff. Upon receipt of a timely-filed contest, the county must schedule and conduct a review hearing using the review hearing procedures developed by the Association. It is important that all participating counties utilize the same general procedures which have been designed by the Association to comply with the requirements of the law. Therefore, the county should contact Association Counsel Mary Pons before making any substantive changes to the model procedures. A set of guidelines for developing internal procedures for processing contests of any setoffs has also been developed by the Association. Circuit Court Appeal The person filing a contest to the setoff has thirty (30) days from a final determination that a debt is due to appeal to circuit court. The coordinator should monitor carefully for the filing of an appeal and contact the county attorney immediately upon notice that a debtor or joint filer has filed an appeal. 4

7 SAMPLE RESOLUTION TO PARTICIPATE IN COUNTY TAX SETOFF PROGRAM WHEREAS, Act authorizes counties to participate in Alabama s state income tax refund setoff program established and operated pursuant to Ala. Code et seq. to collect through setoff of a debtor s Alabama income tax refund, any liquidated sum of at least $25.00 due and owing to the county through contract, subrogation, tort, or operation of law regardless of whether there is an outstanding judgment for that sum; and WHEREAS, pursuant to Ala. Code , the Association of County Commissions of Alabama (the Association ) or an entity established through the Association may submit eligible debts to the Alabama Department of Revenue (the Department ) on behalf of a county provided the county provides the Association with required information related to the debtor and the debts due; and WHEREAS, the Association has developed a county tax setoff program which complies with the requirements of Ala. Code et seq., whereby the Association will submit county debts to the Department on behalf of counties that have executed a participation agreement with the Association, which agreement sets out the procedures for debt submission and receipt of funds collected as a result of state income tax refund set off by the Department; and WHEREAS, the inability to collect outstanding debts due to the county in its (insert the program or programs in which the county will use setoff, such as solid waste collection program) increases the financial burdens the county commission faces in its efforts to continuously provide efficient and quality services to the citizens it represents; and WHEREAS, the County Commission believes that participation in this program will be an effective method to collect delinquent debts due to the county from the nonpayment of (insert any debts that will be submitted such as solid waste collection fees, court costs, community corrections fees, etc.); and WHEREAS, the County Commission is willing to comply with all requirements for participation in this program including the execution of a participation agreement with the Association and the adoption of procedures to allow any debtor to contest a setoff through the statutory procedures set out in Ala. Code and WHEREFORE BE IT RESOLVED BY THE COUNTY COMMISSION, that it does hereby adopt a county tax setoff program for the collection of delinquent (insert any debts that will be submitted such as solid waste collection fees, court costs, community corrections fees, etc.) whereby it will utilize the Alabama s income tax refund setoff program for the collection of delinquent debts due to the county from the nonpayment of (insert any debts that will be submitted such as solid waste collection fees, court costs, community corrections fees,

8 etc.). BE IT FURTHER RESOLVED that the county commission will comply with the requirements of the law related to participation in Alabama s income tax refund setoff program, will execute a participation agreement with the Association to allow for debt submissions to the Department and receipt of funds received as a result of state income tax refund set off by the Department for delinquent debts due the county, and will develop procedures to allow any debtor to contest a setoff through the statutory procedures set out in Ala. Code and BE IT FURTHER RESOLVED that a public notice announcing the county tax setoff program will be distributed to media outlets in the county, will be posted on the bulletin board in the County Courthouse, will be posted on the home page of the county website, and (insert any other places appropriate to post notice). IN WITNESS WHEREOF, the County Commission has caused this Resolution to be executed in its name and on its behalf by its Chairman on this the day of, Chairman, County Commission

9 IMPORTANT PUBLIC NOTICE The County Commission hereby serves notice to the citizens of the county that, effective (insert date of county commission action/resolution), the county will be seeking collection of delinquent debts due to the county from the nonpayment of (insert debts the county will be offsetting like solid waste collection fees) through Alabama s income tax refund setoff program, established and administered pursuant to Ala. Code et seq. Under this program, the Alabama Department of Revenue will intercept a taxpayer s Alabama income tax refund if the taxpayer has an unpaid debt due to County for the nonpayment of (insert type of debt or debts). The tax setoff program will be utilized to collect (insert type of debt or debts) if: The outstanding debt is at least $25.00 and The outstanding debt is at least 60 days delinquent The county will be submitting its first list of unpaid debts to the Alabama Department of Revenue by December 1, 2014 for debts which are at least 60 days delinquent as of November 1, Persons who are delinquent in the payment of (insert type of debt or debts) are encouraged to pay their balance in full to avoid interception of your Alabama income tax refund. Contact (insert department or person in the department to contact) to make payment or determine whether you have an outstanding debt subject to tax refund setoff.

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11 COUNTY TAX REFUND SETOFF PROGRAM REVIEW HEARING PROCEDURES DEFINITIONS For the purposes of these procedures, the following terms shall have the following meaning: ACCA or ASSOCIATION The Association of County Commissions of Alabama. CLAIMANT AGENCY -- The County Commission as provided in Ala. Code (1)(f). CONTEST A written notice or application for a review of the tax refund setoff which is filed with the county tax refund setoff coordinator by a debtor or joint filer as provided in Ala. Code COUNTY The County Commission, including any and all county departments which submit debts for tax refund setoff pursuant to the procedures established by the county. COUNTY TAX REFUND SETOFF COORDINATOR The person designated by the county commission to administer the county debt setoff program and conduct all review hearings held pursuant to a timely-filed contest from a debtor of joint filer as required in Ala. Code (3) or Ala. Code COUNTY TAX REFUND SETOFF PROGRAM The program established by the county to submit debts for collection by setoff of Alabama income tax refunds as provided in Ala. Code et seq. DEBT -- A liquidated sum of at least $25.00 due and owing the county which has accrued through contract, subrogation, tort, or operation of law regardless of whether there is an outstanding judgment for that sum. DEBTOR -- An individual owing money to or having a delinquent account with the county in an amount of at least $25.00, which obligation has not been adjudicated, satisfied by court order, set aside by court order, or discharged in bankruptcy. DEPARTMENT -- The Alabama Department of Revenue. 1

12 HEARING The administrative review of a tax refund setoff scheduled and conducted by the county tax refund setoff coordinator in response to a written contest timely filed by the debtor or joint filer. JOINT FILER A person who files his or her Alabama income tax return jointly with a debtor. REFUND -- Any Alabama income tax refund which the Department determines to be due any individual taxpayer. SETOFF Any portion of a debtor s refund which has been withheld by the Department and transferred to the county pursuant to the provisions of Ala. Code et seq. as payment of a debt due the county by the debtor FILING A CONTEST WITH THE COUNTY Pursuant to Ala. Code (d), a debtor has thirty (30) days from the date of notice of a refund setoff to file a written contest with the county seeking review of the setoff. Failure to timely file the written contest is deemed a waiver of the opportunity to contest the setoff. If no contest is filed within thirty (30) days, the county tax refund setoff coordinator shall remove the amount of the debt due and owing from the county s escrow account established pursuant to Ala. Code and credit such amount to the debtor's debt. Pursuant to Ala. Code (e), a joint filer has thirty (30) days from the date of the notice of a refund setoff to file a written request for a hearing with the county seeking to obtain the refund which has been set off due to a debt owed the county by the person filing a joint return with the joint filer. Failure to timely file the written contest within thirty (30) days is deemed a waiver of the opportunity to contest the setoff, resulting in the setoff being applied to the debt due to the county by the debtor. SETTING AND PROVIDING NOTICE OF REVIEW HEARING Upon receipt of a timely-filed contest from a debtor or joint filer, the county tax refund setoff coordinator shall set the matter for a review hearing and give notice to the debtor or joint filer by registered or certified mail. The hearing shall not be set less than 15 days from the date of the notice. The notice shall include the date, time and place of the review hearing and shall advice the debtor or joint filer to bring any documentation or evidence he or she believes is relevant to the contest. 2

13 A copy of the hearing notice should also be delivered to any department head or other county personnel who may have information to provide to the county tax refund setoff coordinator either before or at the review hearing. The notice shall also advice the person filing the contest that, pursuant to Ala. Code (b), no issues that have been previously litigated in a court of law will be reconsidered at the review hearing and that a copy of these procedures will be ed or faxed to the person filing the contest prior to the review upon request. The notice may also offer the person filing the contest an opportunity to submit documentation prior to the date of the review hearing, if he or she has documentation that the debt has been paid in full (such as a cancelled check) or that the person filing the contest does not owe the debt. If such documentation is presented to the county tax refund setoff coordinator prior to the scheduled date for the review hearing and is sufficient to satisfy the county tax refund setoff coordinator that the debt has been paid or that the person who filed the contest is not responsible for the debt due the county, the county tax refund setoff coordinator shall notify the person filing the contest that the amount set off from the refund for payment of the debt due the county will be released to the person who filed the contest and that the scheduled review hearing will not be necessary. COUNTY HEARING PROCEDURES The county tax refund setoff coordinator shall conduct the review hearing in an informal setting designed to provide the person who filed the contest an opportunity to be heard on the matter. However, the person filing the contest shall be granted the opportunity to present any relevant documentation or other evidence he or she believes will establish: 1. That he or she does not owe the debt for which the tax refund was set off; 2. That he or she has been paid through means other than tax refund setoff; 3. That the amount claimed to be due is erroneous due to partial payment of the debt by means other than tax refund setoff; or 4. Where the contest has been filed by a joint filer, that the debt is not claimed against the joint filer and he or she is entitled to receive the refund due him or her regardless of the debt asserted against the debtor. Except where there are special circumstances and the county tax refund setoff coordinator consents, there will be no witnesses other than the person filing the contest and any county personnel appearing at the request of the county tax refund setoff coordinator. Additionally, 3

14 pursuant to Ala. Code (b), no evidence will be allowed that has as its purpose the relitigation or reconsideration of any matter that has already been decided by a court of law. The Alabama s Rules of Civil Procedure will not apply during the review hearing and no court reporter will in attendance. However, the person who filed the contest may record the proceedings provided the recording is not disruptive to the proceedings. FINAL DETERMINATION Following the review hearing, the county tax refund setoff coordinator shall issue written findings regarding the tax refund setoff. A copy of the final determination shall be delivered to the person who filed the contest by registered or certified mail, mailed on the date of the order. In addition to the county tax refund setoff coordinator s findings, in compliance with Ala. Code (c), the notice of final determination shall advise the person who filed the contest that he or she has thirty (30) days to appeal the county s final determination to the circuit court of the county in which he or she resides by filing notice of appeal with the county tax setoff coordinator and with the clerk of the circuit court of the county to which the appeal will be taken. 4

15 COUNTY TAX REFUND SETOFF PROGRAM GUIDELINES FOR OFFSET REVIEW AND FUNDS PROCESSING The law authorizing the setoff of Alabama income tax refunds for payment of debts due to the county (and other state and local entities), requires that the claimant agency provide the debtor or and any person who files a joint return with the debtor an opportunity to protest the setoff if he or she files a contest to the setoff. See, Ala. Code (d) and (e) and (a). The county is the claimant agency. There is no requirement that this be a formal hearing applying court rules of procedure. However, it should be a fair opportunity for the debtor or joint filer to be heard on whether or not the refund was properly setoff. The hearing procedures developed by the Association are designed to operate informally while satisfying the requirements of the law. The Association has tried to keep the written procedures as simple as possible because the county will need to carefully design its process to carry out each detail as set out in the procedures. However, we thought it might be helpful to provide the county with some guidelines it may want to implement internally to accomplish both the requirements and the spirit of the law. Notice of Setoff and Right to Contest The law requires that notice of a tax refund setoff be sent to any debtor or any person who has filed a joint Alabama income tax return with the debtor. See, Ala. Code (e). The notice must advise the debtor or joint filer that he or she may contest the setoff and request a review by the claimant agency (in this case, the county). The Association will send this letter on behalf of the county once notified by the Alabama Department of Revenue that a setoff has occurred. However, any contest will be filed with the county which will handle all review hearings. Any notice of contest must be in writing and filed with the county within thirty (30) days of the date on the Notice of Setoff. If no contest is filed within thirty (30) days, the debtor or joint filer will be deemed to have waived his or her right to contest the setoff. If there is no timely filed contest, county may retain the setoff monies received from the debtor s refund. In many instances, the thirty (30) day deadline for filing a contest will run before the county has actually received the monies since the Association will be distributing setoffs to the county on a quarterly basis. However, once the monies are received, the county tax refund setoff coordinator 1

16 (the coordinator ) may transfer the setoff monies from the county s tax refund setoff escrow account to the general fund or other fund entitled to the monies collected for the debt due the county. Pre-Notice Review of Debt If a contest is timely filed, the coordinator should carefully review all information the county has regarding the debt, including each of the following: Who owes the debt The basis for the debt (i.e., unpaid solid waste collection fees) Whether any payments have been made since the debt was submitted for setoff Any other information the county has that may be helpful in determining that the county is still owed the debt and that the correct person s income tax refund has been set off. If the coordinator finds there are any errors or that there have been any changes, he or she may want to contact the person who has filed the contest to provide them updated information and determine if review is still needed. If so, the coordinator should proceed with setting the matter for review. Setting Review Hearing and Preparing for the Hearing The review hearing procedures set out the notice requirements found in Ala. Code The notice must be sent by registered or certified mail, and must set the time and place for the hearing. The hearing cannot be set less than two weeks from the date of the notice of contest. There is no requirement that the hearing be held in a courtroom, so the setting can be the coordinator s office or a conference room available for such purpose. While not required by law, in an effort to possibly eliminate the need for a hearing, it is recommended that the hearing notice offer the person filing the contest an opportunity to submit any proof of payment or proof that he or she is not the person owing the debt to the county prior to the scheduled hearing date. If the debtor or joint filer can produce documents that satisfy the coordinator that some adjustment in the setoff is warranted because of a mistake on the part of the county or because the debt has been paid, the coordinator may be able to cancel the hearing and send the person who filed the contest a check in the amount of the setoff from the county s tax refund setoff escrow account or the county general fund, whichever is appropriate. While every effort should be made to keep the hearing as informal as possible, the coordinator may feel that it is important to have someone present from the county department that submitted the 2

17 debt for setoff. If this is the case, the coordinator should make sure someone from that department will be available at the hearing with any information that might be helpful in addressing questions or concerns from the person filing the contest. In preparation for the hearing, the coordinator should review all documentation evidencing the debt for which the debtor s refund has been set off and make sure he or she has everything needed to proceed with the review. Conducting the Review As stated above, the review hearing is designed to be very informal, without use of court rules or the like. However, it is important that the person filing the contest feels he or she is given an adequate opportunity to present any documentation or other evidence that will establish that he or she does not owe the debt or that some or all of the debt has been paid. The coordinator should give the person as much leeway as possible to make his or her case. However, Ala. Code (b) does state that No issues shall be reconsidered at the hearing which have been previously litigated. Therefore, if the debt is based upon a ruling of the court, the coordinator should prohibit the person who filed the contest from any attempts to retry the court case. Additionally, the coordinator may want to make clear to the debtor or joint filer that he or she does not have the authority to forgive the debt. There is no specific requirement that the county present any witness or evidence at the proceeding but there may be instances where the coordinator feels the county can present some evidence that will satisfy the person who has filed the contest that the money is due and the setoff was appropriate. Because the person who filed the contest will have a right to appeal to the circuit court if he or she is not satisfied with the final determination, every effort the county makes to convince the debtor or joint filer that the debt was properly set off may reduce the chance of further appeal. Notice of Final Determination The coordinator will be responsible for making a final determination following the review hearing. There is no requirement in the law that this final determination be made at the hearing, so if the coordinator believes there are issues that should be investigated before making a final decision, he or she may want to state at the conclusion of the review that the person who filed the contest will be notified in writing of the final determination. The law does require that the person who filed the contest receive written notice of the final determination, and that the notice advise him or her of the right to appeal to the circuit court within thirty (30) days of the decision. See, Ala. Code

18 The law does not set out any guidelines or requirements regarding how the final determination should be reached, other than stating in Ala. Code (a) that, If, at hearing, the sum asserted as due and owing is found not to be correct, an adjustment to the claim may be made. However, the decisions to be made with regard to a contest filed by a debtor will generally be limited to one or more of the following: 1. That the debt is due and owing and that the setoff will stand. 2. That the sum asserted as due and owing is not correct and that an adjustment to the claim should be made. 3. That there has been partial payment of the debt reducing the amount due and, if applicable, allowing for a return of some portion of the refund that was set off. In the event the contest has been filed by a joint filer, the final determination to be made by the coordinator will be whether or not the joint filer should be entitled to receive the refund since he or she does not owe the debt submitted for setoff. This decision will likely be based on whether the debt is a household debt (such as unpaid solid waste collection fees) or whether the debt is something incurred by the debtor that the spouse is not legally responsible for as well (such as court costs related to an arrest or a debt resulting from a contractual arrangement that did not include the spouse who jointly filed the state income tax return). The Alabama Department of Revenue takes the position that each person filing a joint tax return is jointly and severally responsible for any taxes due. Therefore, in most instances, the county may take the position that any refund from that joint return can be applied to a debt that either person filing the return has incurred. Circuit Court Appeal As noted above, the person who filed a contest to the setoff has thirty (30) days from a final determination that a debt is due to appeal to circuit court. The coordinator should monitor carefully for the filing of an appeal and contact the county attorney immediately upon notice that a debtor or joint filer has filed an appeal as there will be deadlines for filing a response. The coordinator will need to work with the county attorney to gather any information he or she needs to defend the case. Once the appeal has been filed, the coordinator should not have any further contact with the debtor or joint filer who filed the appeal, but instead should refer the person to the county attorney. 4