DAR File No. 43803

Administrative Services, Debt Collection

Rule R21-3

Debt Collection Through Administrative Offset

Notice of Proposed Rule

(Amendment)

DAR File No.: 43803
Filed: 06/13/2019 12:58:25 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

Section R21-3-7 was added to ensure agencies are not delaying the mailing of required notices to debtors. This will ensure levied individuals will have the appropriate, legal amount of time to respond. Section R21-3-9 was newly allowed under S.B. 120, passed in the 2019 General Session, it provides for consistent application of injured spouse claims in regards to levied amounts.

Summary of the rule or change:

These changes add the Treatment of Injured Spouse forms, and how an agency proceeds with the injured spouse claim. The changes also add a requirement that agencies mail notices to debtors within two days of the date on the notice.

Statutory or constitutional authorization for this rule:

• Subsection 63A-3-504(2)(f)
• Section 59-10-529
• Section 63A-3-302
• Section 63A-3-303
• Section 63A-3-310

Anticipated cost or savings to:

the state budget:

There may be some costs to the state for the amount it will not collect if a valid injured spouse form is submitted. The Division of Finance (Division) does not have a reasonable ability to measure how often injured spouse claims have been filed with garnishers, or how often the forms are approved or denied.

local governments:

Local governments will not see any additional costs. These changes do not affect local governments.

small businesses:

Small businesses will not see any additional costs. These rule changes affect individuals and not businesses.

persons other than small businesses, businesses, or local governmental entities:

A valid injured spouse claim for the first year filed will protect from collection the portion of a state income tax refund derived from the income of a spouse that doesn't owe a debt. This will result in an increase in the amount of the income tax refund to the married couple, and a decrease in the amount of administrative offset processed by the Division. The amounts will vary by individual case and the Division currently is unable to measure the aggregate impact.

Compliance costs for affected persons:

Individuals may incur some costs to submit the required documents necessary for a valid claim. This will vary by individual. Copy and mailing costs will be incurred if injured spouse claims are not submitted electronically.

Comments by the department head on the fiscal impact the rule may have on businesses:

I have reviewed these changes with the Division of Finance Director and believe that these changes are reasonable.

Tani Downing, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Administrative Services
Debt Collection
Room 4130 STATE OFFICE BLDG
450 N STATE ST
SALT LAKE CITY, UT 84114-1201

Direct questions regarding this rule to:

• Cory Weeks at the above address, by phone at 801-538-3100, by FAX at , or by Internet E-mail at cweeks@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/31/2019

This rule may become effective on:

08/07/2019

Authorized by:

John Reidhead, Director

Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs	FY 2020	FY 2021	FY 2022
State Government	$0	$0	$0
Local Government	$0	$0	$0
Small Businesses	$0	$0	$0
Non-Small Businesses	$0	$0	$0
Other Person	$0	$0	$0
Total Fiscal Costs:	$0	$0	$0
Fiscal Benefits
State Government	$0	$0	$0
Local Government	$0	$0	$0
Small Businesses	$0	$0	$0
Non-Small Businesses	$0	$0	$0
Other Persons	$0	$0	$0
Total Fiscal Benefits:	$0	$0	$0
Net Fiscal Benefits:	$0	$0	$0

 

*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described in the narrative. Inestimable impacts for Non - Small Businesses are described in Appendix 2.

 

Appendix 2: Regulatory Impact to Non - Small Businesses

These rule changes will have no effect on non-small businesses.

 

The Executive Director of the Department of Administrative Services, Tani Downing, has reviewed and approved this fiscal analysis.

 

 

R21. Administrative Services, Debt Collection.

R21-3. Debt Collection Through Administrative Offset.

R21-3-1. Purpose.

The purpose of this rule is to establish procedures to be followed by agencies to reduce or eliminate accounts receivable through administrative offset of tax overpayments or state payments due to entities.

 

R21-3-2. Authority.

This rule is established pursuant to Subsection 63A-3-310, and Subsection 63A-3-504(2)(f), which authorize[s] the [Office of State Debt Collection]Division of Finance to establish, by rule, an implementation of the debt collection technique of administrative offset.

 

R21-3-3. Definitions.

In addition to terms defined in Section 63A-3-501, the following terms are defined below as follows:

(1) "Division" means the Division of Finance.

(2) "Match or Matched" means a one-to-one corresponding of a social security number or a federal employer's identification number between the entity and the tax overpayment or other state payment to the entity.

 

R21-3-4. Eligible Accounts Receivable.

(1) If a delinquent account receivable meets the criteria established under Section 59-10-529, an agency shall proceed under this rule to collect the delinquent amount against tax overpayments.

(2) If a delinquent account receivable meets the criteria established under Section 63A-3-302, an agency shall proceed under this rule to collect the delinquent amount against tax overpayments or state payments due to entities.

 

R21-3-5. Submission of Accounts Receivable to the Division.

(1) Upon qualifying the account for administrative offset as established in Section R21-3-4, the agency shall submit the account receivable to the division. The account receivable submission shall include:

(a) name of entity;

(b) social security number or federal employer's identification number of the entity;

(c) amount of delinquent account receivable; and

(2) Once the account has been established for administrative offset, it matches continuously from the date of the establishment until the account receivable is totally satisfied.

 

R21-3-6. Control of Matched Tax Overpayments or Payment Due to Entity by the Division.

The division shall place the entity's matched tax overpayment or payment due to entity in a separate agency fund in the [state's]State's Accounting System (FINET).

 

R21-3-7. Notification to Debtors.

All notifications required in 63A-3-303 must be sent within two business days of the date listed on the notice.

 

R21-3-[7]8 . Notification and Response.

(1) The division shall notify the agency submitting the account receivable of each administrative offset match.

(2)(a) The agency shall verify the delinquent account balance; and

(b) notify the division of the amount to be offset.

(3) The amount shall include the outstanding balance of the delinquent account receivable plus any penalty, interest or applicable collection costs.

(4) The agency shall identify for the division the exact amount(s) to be offset as early as practicable.

 

R21-3-9. Treatment of Injured Spouse Forms.

(1) Subject to Subsection R21-3-9(2), upon receipt of an injured spouse claim from the spouse of a debtor, a garnisher shall:

(a) Review the claim for validity;

(b) Determine the frequency of claims made; and,

(c) Release the offset of matched funds proportionate to the income of the injured spouse using the following formula: (income of injured spouse/total household gross income) x levied amount.

(2) Recognizing that garnishers are not statutorily required to honor injured spouse claims:

(a) Agencies garnishing taxes under this section must honor at least a first-time injured spouse claim that is determined to be valid.

(b) Subsequent claims may be denied at the discretion of the garnisher.

(3) Valid injured spouse claims should require at a minimum:

(a) Federal tax returns

(b) IRS Form 8379

(c) Income documents, including all Form W-2s and Form 1099s.

(d) State tax returns.

 

R21-3-[8]10 . Offsetting Matched Accounts.

(1) The division will offset the matched entity tax overpayment or payment due to entity by:

(a) an "administrative fee". Which shall be charged for performing debt-collection functions associated with the administrative offset; plus

(b) the amount identified in Subsection R21-3-[7]8(3) to satisfy the delinquent account receivable.

 

R21-3-[9]11 . Release of Offset Funds by the Division.

(1) The division shall retain the administrative charge.

(2) The division shall release the offset funds to the agency.

(3) The division shall release the balance of any available funds from the match to the entity.

 

R21-3-[10]12 . Credit of Accounts Receivable.

Upon receipt of the offset funds from the division, the agency shall deposit the amount into their account and credit the entity's accounts receivable for the amount received.

 

R21-3-[11]13 . Administrative Fee.

Pursuant to Section 63A-3-502(4), the division may charge the agency a fee for the debt collection effort. This fee may be deducted from the amounts collected.

 

KEY: accounts receivable, administrative offset

Date of Enactment or Last Substantive Amendment: [August 13, 2002]2019

Notice of Continuation: March 17, 2017

Authorizing, and Implemented or Interpreted Law: 63A-3-310; 63A-3-504(2)(f)