GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

S	1 

SENATE BILL 761

Short Title:  Local Debt Setoff.	(Public)

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Sponsors: Senator Conder.

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Referred to:  Finance

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April 19, 1995

A BILL TO BE ENTITLED
AN ACT TO AUTHORIZE COUNTIES AND CITIES TO COLLECT DEBTS THROUGH THE SETOFF DEBT COLLECTION ACT.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105A-1 reads as rewritten:
"§ 105A-1.  Purposes.
The purpose of this Article is to establish as policy that all claimant agencies and the Department of Revenue shall cooperate in identifying debtors who owe money to the State through its various claimant agencies or to a local government and who qualify for refunds from the Department of Revenue.  It is also the intent of this Article that procedures be established for setting off against any such refund the sum of any debt owed to the State or a local government.  Furthermore, it is the legislative intent that this Article be liberally construed so as to effectuate these purposes as far as legally and practically possible."
Sec. 2.  G.S. 105A-2 reads as rewritten:
"§ 105A-2.  Definitions.
The following definitions apply in this Article:
(1)	 " Claimant agency. – A State agency or a local agency.
(1a)	Local agency. – A county or municipality in the collection of ad valorem taxes levied under Subchapter II of Chapter 105 of the General Statutes or in the collection of debts for ambulance services provided by or on behalf of the county or municipality.
(1b)	State agency. – Any of the following:
a.	The State Education Assistance Authority as enabled by Article 23 of Chapter 116 of the General Statutes;
b.	The North Carolina Department of Human Resources when in the exercise of its authority to collect health profession student loans made pursuant to G.S. 131-121;
c.	The North Carolina Department of Human Resources when in the performance of its duties under the Medical Assistance Program enabled by Chapter 108A, Article 2, Part 6, and any county operating the same Program at the local level, when and only to the extent such a county is in the performance of Medical Assistance Program collection functions;
d.	The North Carolina Department of Human Resources when in the performance of its duties, under the Child Support Enforcement Program as enabled by Chapter 110, Article 9 and Title IV, Part D of the Social Security Act to obtain indemnification for past paid public assistance or to collect child support arrearages owed to an individual receiving program services and any county operating the program at the local level, when and only to the extent that the county is engaged in the performance of those same duties;
e.	The University of North Carolina, including its constituent institutions as specified by G.S. 116-2(4);
f.	The University of North Carolina Hospitals at Chapel Hill in the conduct of its financial affairs and operations pursuant to G.S. 116-37;
g.	The Board of Governors of the University of North Carolina and the State Board of Education through the College Scholarship Loan Committee when in the performance of its duties of administering the Scholarship Loan Fund for Prospective College Teachers enabled by Chapter 116, Article 5;
h.	The Office of the North Carolina Attorney General on behalf of any State agency when the claim has been reduced to a judgment;
i.	The State Board of Community Colleges through community colleges as enabled by Chapter 115D in the conduct of their financial affairs and operations;
j.	State facilities as listed in G.S. 122C-181(a), School for the Deaf at Morganton, North Carolina Sanatorium at McCain, Western Carolina Sanatorium at Black Mountain, Eastern North Carolina Sanatorium at Wilson, and Gravely Sanatorium at Chapel Hill under Chapter 143, Article 7; Governor Morehead School under Chapter 115, Article 40; Central North Carolina School for the Deaf under Chapter 115, Article 41; Wright School for Treatment and Education of Emotionally Disturbed Children under Chapter 122C; and these same institutions by any other names by which they may be known in the future;
k.	The North Carolina Department of Revenue;
l.	The Administrative Office of the Courts;
m.	The Division of Forest Resources of the Department of Environment, Health, and Natural Resources;
n.	The Administrator of the Teachers' and State Employees' Comprehensive Major Medical Plan, established in Article 3 of General Statutes Chapter 135;
o.	The State Board of Education through the Superintendent of Public Instruction when in the performance of his duties of administering the Scholarship Loan Fund for Prospective Teachers enabled by Chapter 115C, Article 32A and the scholarship loan and grant programs enabled by Chapter 115C, Article 24C, Part 1;
p.	The Board of Trustees of the Teachers' and State Employees' Retirement System and the Board of Trustees of the Local Governmental Employees' Retirement System in the performance of their duties pursuant to Chapters 120, 128, 135 and 143 of the General Statutes;
q.	The North Carolina Teaching Fellows Commission in the performance of its duties pursuant to Chapter 115C, Article 24C, Part 2;
r.	The North Carolina Department of Human Resources when in the performance of its intentional program violation collection duties under the Food Stamp Program enabled by Chapter 108A, Article 2, Part 5, and any county operating the same Program at the local level, when and only to the extent such a county is in the performance of Food Stamp Program intentional program violation collection functions.
	The North Carolina Department of Human Resources when, in the performance of its duties under the Aid to Families with Dependent Children Program or the Aid to Families with Dependent Children – Emergency Assistance Program provided in Part 2 of Article 2 of Chapter 108A or under the State-County Special Assistance for Adults Program provided in Part 3 of Article 2 of Chapter 108A, it seeks to collect public assistance payments obtained through an intentional false statement, intentional misrepresentation, or intentional failure to disclose a material fact;
s.	The Employment Security Commission of North Carolina;
t.	Any State agency in the collection of salary overpayments from former employees.
(2)	 " Debtor. – An individual owing money to or having a delinquent account with any claimant agency which obligation has not been adjudicated satisfied by court order, set aside by court order, or discharged in bankruptcy.
(3)	 " Debt. – A liquidated sum due and owing any claimant agency that has accrued through contract, subrogation, tort, operation of law, or any other legal theory regardless of whether there is an outstanding judgment for that sum.
(4)	 " Department. – The North Carolina Department of Revenue.
(5)	 " Refund. – An individual's North Carolina income tax refund.
(6)	 "  Net proceeds collected. – Gross proceeds collected through final setoff against a debtor's refund minus any collection assistance fee charged by the Department."
Sec. 3.  G.S. 105A-3 reads as rewritten:
"§ 105A-3.  Remedy additional; mandatory State usage; optional local usage; obtaining identifying information.
(a)	The collection remedy under this Article is in addition to and not in substitution for any other remedy available by law.
(b)	All State agencies shall submit, for collection under the procedure established by this Article, all debts they are owed, except debts that they are advised by the Attorney General not to submit because the validity of the debt is legitimately in dispute, because an alternative means of collection is pending and believed to be adequate, or because such a collection attempt would result in a loss of federal funds.
(b1)	A local agency may submit for collection under the procedure established in this Article all debts they are owed, other than debts the validity of which is in dispute and debts for which an alternate means of collection is pending and believed to be adequate.  The local agency may act individually or jointly pursuant to an interlocal agreement adopted under Article 20 of Chapter 160A of the General Statutes.
(c)	All claimant agencies shall whenever possible obtain the full name, social security number, address, and any other identifying information required by the Department 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 this Article.
(d)	A State agency must register with the Department and report annually to the Department the amount of debts owed to the agency for which the agency did not submit a claim for setoff and the reason for not submitting the claim."
Sec. 4.  G.S. 105A-8 reads as rewritten:
"§ 105A-8.  Hearing procedure.
(a)	State Agency. – A hearing on a contested claim of a State agency, other than a claim of a constituent institution of The University of North Carolina, or a claim of the Employment Security Commission of North Carolina, shall be conducted in accordance with Article 3 of Chapter 150B of the General Statutes.  A hearing on a contested claim of a constituent institution of The University of North Carolina shall be conducted in accordance with administrative procedures approved by the Attorney General.  A hearing on a contested claim of the Employment Security Commission of North Carolina shall be conducted in accordance with regulations adopted by the Employment Security Commission of North Carolina.
(b1)	Local Agency. – If a debtor contests the claim of a local agency, the agency shall file a civil action to resolve the contested claim in the superior court for the county in which the debtor resides.
(b2)	Determination. –It shall be determined at the hearing whether the claimed sum asserted as due and owing is correct, and if not, an adjustment to the claim shall be made.
(b)	Setoff Stayed. – Pending final determination at hearing of the validity of the debt asserted by the claimant agency, no action shall be taken in furtherance of collection through the setoff procedure allowed under this Article.
(c)	No Hearing of Issues Previously Litigated. – No issues may be considered at the hearing that have been previously litigated."
Sec. 5.  G.S. 105A-9 reads as rewritten:
"§ 105A-9.  Appeals from hearings.
Appeals from action taken at hearings on State agency claims allowed under this Article shall be in accordance with the provisions of Chapter 150B of the General Statutes, the Administrative Procedure Act, except that the place of initial judicial review shall be the superior court for the county in which the debtor resides.  Appeals from actions allowed under this Article conducted by the Employment Security Commission of North Carolina shall be in accordance with the provisions of Chapter 96 of the General Statutes.
Either the debtor or the local agency may appeal to the appellate division from the judgment of the superior court on a local agency claim.  The procedure for the appeal shall be as provided by the rules of appellate procedure."
Sec. 6.  G.S. 105A-13 reads as rewritten:
"§ 105A-13.  Disposition of proceeds collected; collection assistance fees.
(a)	Upon effecting final setoffs, the Department shall periodically write checks to the respective claimant agencies for the net proceeds collected on their behalf.
(b)	Each year the Department shall calculate its actual cost of collection as a percentage of the immediately preceding year's collections under the Setoff Debt Collection Act.  The Department shall add that percentage as a fee to each debt collected through setoff for the current year, collect it as part of the debt, and retain it.  If the Department is able to collect only part of a debt through setoff, the collection assistance fee has priority over the remainder of the debt."
Sec.  7.  G.S. 105A-14 reads as rewritten:
"§ 105A-14.  Accounting to the claimant agency; credit to debtor's obligation.
(a)	Simultaneously with the transmittal of a check for net  proceeds collected to a claimant agency, the Department shall provide the agency with an accounting of the setoffs finalized for which payment is being made.  The accounting shall, whenever possible, include the full names of the debtors, the debtors' social security numbers, the gross proceeds collected per individual setoff, the net proceeds collected per setoff, and the collection assistance fee added to the debt and collected per setoff.
(b)	Upon receipt by a claimant agency of a check representing net proceeds collected on a claimant agency's behalf by the Department and an accounting of the proceeds as specified under this section, the claimant agency shall credit the debtor's obligation with the net proceeds collected."
Sec. 8.  G.S. 105A-15(b) reads as rewritten:
"(b)	The information obtained by a claimant agency from the Department in accordance with the exemption allowed by subsection (a) may be used by a claimant agency only in the pursuit of its debt collection duties and practices and may not be disclosed except as provided in G.S. 105-259, 153A-148.1, or 160A-208.1."
Sec. 9.  Sections 6 and 7 of this act become effective January 1, 1996; the remainder of this act is effective upon ratification.