Setoff Debt Collection.

Ala. Code tit. 40, ch. 18, art. 3

in effect

Ala. Code § 40-18-100 Definitions.

40-18-100. Definitions. For the purposes of this article, the following terms shall have the following meanings: (1) CLAIMANT AGENCY. Any of the following: a. The Alabama Commission on Higher Education with respect to the collection of debts under either of the following: 1. The Alabama Student Grant Program provided for by Chapter 33A of Title 16. 2. The Alabama Guaranteed Student Loan Program provided for by Chapter 33B of Title 16. b. The Alabama Department of Human Resources with respect to the collection of debts and money owed under any and all of its public assistance programs and other programs administered by that department, including support programs administered pursuant to the requirements of Title IV-D of the Social Security Act. c. The Alabama Medicaid Agency with respect to the collection of debts and money owed under any and all of the programs it administers. d. The Alabama Department of Labor with respect to the collection or recovery, or both, of debts owed as a result of overpayments of state unemployment compensation benefits. e. The Unified Judicial System with respect to the collection of fines and court costs owed as a result of any court or judicial proceeding. f. Counties and municipalities acting through an organization as provided in Section 40-18-103, with respect to the collection of any debt owed and finalized by law, ordinance, or resolution. For the purposes of this section and Section 40-18-103, counties and municipalities, without limitation, shall include all corporations and other instrumentalities whose governing boards are comprised of a majority of members who are appointed or elected by counties or municipalities. g. A housing authority under Chapter 1, Title 24, with respect to the collection of debts and money owed under any and all of the programs administered by the authority. (2) DEBTOR. Any individual owing money 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. Any liquidated sum due and owing any claimant agency which has accrued through contract, subrogation, tort, or operation of law regardless of whether there is an outstanding judgment for that sum, or any liquidated sum of child or spousal support, or both child and spousal support, due and owing any individual eligible for and receiving child support enforcement services through the Alabama Department of Human Resources. An agreement between a claimant agency defined in paragraph f. of subdivision (1) and a public entity or non-profit established by a public entity authorized by subdivision (30) of subsection (a) of Section 22-21-318 or Section 11-62-7 for management or administrative services does not affect the claimant agency’s ability to collect the debt defined herein. (4) DEPARTMENT. The Department of Revenue of the State of Alabama. (5) REFUND. The Alabama income tax refund which the department determines to be due any individual taxpayer. (Acts 1981, No. 81-696, p. 1168, §1; Acts 1985, 2nd Ex. Sess., No. 85-994, p. 360, §1; Acts 1995, No. 95-750, p. 1748, §1; Acts 1997, No. 97-246, p. 426, §1; Act 2004-505, p. 981, §1; Act 2014-321, p. 1145, §1; Act 2014-424, p. 1553, §2; Act 2019-184, §1.)

Ala. Code § 40-18-101 Remedy Additional.

40-18-101. Remedy Additional. The collection remedy authorized by this article is in addition to and not in substitution for any other remedy available by law. (Acts 1981, No. 81-696, p. 1168, §1.)

Ala. Code § 40-18-102 Collection of Debts by Setoff.

40-18-102. Collection of Debts by Setoff. (a) A claimant agency may submit debts in excess of $25 to the department for collection through setoff, under the procedure established by this article, except in cases where the validity of the debt is legitimately in dispute, an alternate means of collection is pending and believed to be adequate, or such collection would result in a loss of federal funds or federal assistance. (b) Upon the request of a claimant agency, the department shall set off any refund, as defined in subdivision (5) of Section 40-18-100, against the sum certified by the claimant agency as provided in this article. (Acts 1981, No. 81-696, p. 1168, §1; Acts 1985, 2nd Ex. Sess., No. 85-994, p. 360, §2.)

Ala. Code § 40-18-103 Procedure for Setoff and Notification of Taxpayer.

40-18-103. Procedure for Setoff and Notification of Taxpayer. (a) A county or municipality may submit a debt of at least $25 owed to it for collection under this chapter. Provided, however, that a county or municipality must submit the debt to the department through one of the following: (1) The Association of County Commissions of Alabama or an entity established through the Association of County Commissions of Alabama. (2) The Alabama League of Municipalities or an entity established through the Alabama League of Municipalities. The organization which submits a debt on behalf of any county or municipality may assess a reasonable fee, which shall be twenty-five dollars ($25) for submitting the debt. This fee may be assessed against the debtor and collected as the first amount set off against any tax refund. (b) Within a time frame specified by the department, a claimant agency seeking to collect a debt through setoff shall supply the information necessary to identify each debtor whose refund is sought to be set off and certify the amount of debt or debts owed by each such debtor. (c) If a debtor identified by a claimant agency is determined by the department to be entitled to a refund of at least $25 the department shall transfer an amount equal to the refund owed, not to exceed the amount of the claimed debt certified, to the claimant agency. When the income tax refund owed exceeds the claimed debt, the department shall send the excess amount to the debtor within a reasonable time after such excess is determined. (d) At the time of the transfer of funds to a claimant agency pursuant to subsection (c), the department shall notify the taxpayer or taxpayers whose refund is sought to be set off that the transfer has been made. Such notice shall clearly set forth the name of the debtor, the manner in which the debt arose, the amount of the claimed debt, the transfer of funds to the claimant agency pursuant to subsection (c) and the intention to set off the refund against the debt, the amount of the refund in excess of the claimed debt, the taxpayer’s opportunity to give written notice to contest the setoff within 30 days of the date of mailing of the notice, the name and mailing address of the claimant agency to which the application for a hearing must be sent, and the fact that the failure to apply for such a hearing, in writing, within the 30-day period will be deemed a waiver of the opportunity to contest the setoff. In the case of a joint return or a joint refund, the notice shall also state the name of the taxpayer named in the return, if any, against whom no debt is claimed, the fact that a debt is not claimed against such taxpayer, the fact that such taxpayer is entitled to receive a refund if it is due him or her regardless of the debt asserted against his or her spouse, and that in order to obtain a refund due, such taxpayer must apply, in writing, for a hearing with the claimant agency named in the notice within 30 days of the date of the mailing of the notice. If a taxpayer fails to apply in writing for such a hearing within 30 days of the mailing of such notice, the taxpayer will have waived the opportunity to contest the setoff. (e) Notwithstanding subsection (d), a claimant county or municipality as provided for in subsection (a) shall, at the time of the transfer of funds to the claimant county or municipality, notify the taxpayer or taxpayers whose refund is sought to be set off that the transfer has been made. Such notice shall clearly set forth the name of the debtor, the manner in which the debt arose, the amount of the claimed debt, the transfer of funds to the claimant county or municipality pursuant to subsection (c) and the intention to set off the refund against the debt, notice that any refund in excess of the claimed debt will be sent to the taxpayer, the taxpayer’s opportunity to give written notice to contest the setoff within 30 days of the date of mailing of the notice, the name and mailing address of the claimant county or municipality to which the application for a hearing must be sent, and the fact that the failure to apply for such a hearing, in writing, within the 30-day period will be deemed a waiver of the opportunity to contest the setoff. In the case of a joint return or a joint refund, the notice shall also state the name of the taxpayer named in the return, if any, against whom no debt is claimed, the fact that a debt is not claimed against such taxpayer, the fact that such taxpayer is entitled to receive a refund if it is due him or her regardless of the debt asserted against his or her spouse, and that in order to obtain a refund due, such taxpayer must apply, in writing, for a hearing with the claimant county or municipality named in the notice within 30 days of the date of the mailing of the notice. If a taxpayer fails to apply in writing for such a hearing within 30 days of the mailing of such notice, the taxpayer will have waived the opportunity to contest the setoff. (f) Upon receipt of funds transferred from the department pursuant to subsection (c), the claimant agency shall deposit and hold such funds in an escrow account until a final determination of the validity of the debt. (Acts 1981, No. 81-696, p. 1168, §1; Act 2014-321, p. 1145, §1.)

Ala. Code § 40-18-104 Hearing Procedure.

40-18-104. Hearing Procedure. (a) When the claimant agency receives a protest or application in writing from a taxpayer within 30 days of the notice issued by the department pursuant to subsection (c) of Section 40-18-103, the claimant agency shall set a date to hear the protest and give notice to the taxpayer by registered or certified mail of the date so set. The time and place of such hearing shall be designated in such notice and the date set shall not be less than 15 days from the date of such notice. If, at hearing, the sum asserted as due and owing is found not to be correct, an adjustment to the claim may be made. The claimant agency shall give notice to the debtor of its final determination and inform the debtor of his right to appeal such final determination as provided in subsection (c) of this section. (b) No issues shall be reconsidered at the hearing which have been previously litigated. (c) If any debtor is dissatisfied with the final determination made at the hearing by the claimant agency, he may appeal the final determination to the Circuit Court of Montgomery County or to the circuit court of the county in which the debtor resides by filing notice of appeal with the administrative head of the claimant agency and with the clerk or register of the circuit court of the county to which the appeal shall be taken within 30 days from the date notice of final determination was given by claimant agency. (Acts 1981, No. 81-696, p. 1168, §1.)

Ala. Code § 40-18-105 Finalization and Notice of Setoff.

40-18-105. Finalization and Notice of Setoff. (a) Upon final determination of the amount of the debt due and owing by means of a hearing provided by Section 40-18-104 or by the taxpayer’s default through failure to comply with Section 40-18-103 mandating timely request for review, the claimant agency shall remove the amount of the debt due and owing from the escrow account established pursuant to Section 40-18-103 and credit such amount to the debtor’s obligation. (b) Upon transfer of the debt due and owing from the escrow account to the credit of the debtor’s account, the claimant agency shall notify the debtor in writing of the finalization of the setoff. Such notice shall include a final accounting of the refund which was set off including the amount of the refund to which the debtor was entitled prior to the setoff, the amount of the debt due and owing, the amount of the refund in excess of the debt which was returned to the debtor by the department pursuant to subsection (b) of Section 40-18-103, and the amount of the funds transferred to the claimant agency pursuant to Section 40-18-103 in excess of the debt determined to be due and owing at a hearing held pursuant to Section 40-18-104, if such a hearing was held. At such time, the claimant agency shall refund to the debtor the amount of the claimed debt originally certified and transferred to it by the department in excess of the amount of the debt finally found to be due and owing. (Acts 1981, No. 81-696, p. 1168, §1.)

Ala. Code § 40-18-106 Priority.

40-18-106. Priority. The department has priority over every claimant agency for collection by setoff under this article. (Acts 1981, No. 81-696, p. 1168, §1.)

Ala. Code § 40-18-107 Commissioner May Provide Claimant Agency Information; Confidentiality of Information.

40-18-107. Commissioner May Provide Claimant Agency Information; Confidentiality of Information. (a) Notwithstanding any confidentiality statute, the Commissioner of Revenue may provide to a claimant agency all information necessary to accomplish and effectuate the intent of this article. (b) The information obtained by a claimant agency from the department in accordance with the provisions of this article shall retain its confidentiality and shall only be used by a claimant agency in pursuit of its debt collection duties and practices; and any employee or prior employee of any claimant agency who unlawfully discloses any such information for any other purpose, except as specifically authorized by law, shall be subject to the same penalties specified by law for unauthorized disclosure of confidential information by an agent or employee of the Department of Revenue. (Acts 1981, No. 81-696, p. 1168, §1; Acts 1992, No. 92-186, p. 349, §58.)

Ala. Code § 40-18-108 Effect of Setoff on Refund.

40-18-108. Effect of Setoff on Refund. When the setoff authorized by this article is exercised, the refund which is set off shall be deemed granted. (Acts 1981, No. 81-696, p. 1168, §1.)

Ala. Code § 40-18-109 Issuance by State Treasurer of Separate Warrants.

40-18-109. Issuance by State Treasurer of Separate Warrants. In those cases where the amount claimed to be due and owing by the claimant agency is less than the refund due the taxpayer the State Treasurer is authorized upon the request of the department to issue two warrants, one payable to the claimant agency for the amount claimed to be due and owing and one to the taxpayer for the amount of the refund in excess of the amount claimed to be due and owing by the claimant agency. (Acts 1981, No. 81-696, p. 1168, §1.)

Ala. Code § 40-18-110 Payment of Fee.

40-18-110. Payment of Fee. (a) The fee charged to the department by the United States Department of the Treasury to intercept a federal income tax refund and forward it to the department to pay any unpaid Alabama tax liability that is eligible to be submitted to the United States Department of the Treasury for collection shall be considered reasonable and shall be paid by the debtor whose federal income tax refund was intercepted. (b) The fee charged to the department by the United States Department of the Treasury shall be deducted from the debtor’s federal income tax refund by the United States Department of the Treasury and the eligible debt submitted by the department will further reduce the debtor’s federal income tax refund. (Act 2009-223, p. 320, §1.)

Source: Alabama Legislature (alison.legislature.state.al.us)URL: https://alison.legislature.state.al.us/code-of-alabamaFetched: 10/20/2026