32 V.S.A. § 5931 Short title
5931. Short title
This subchapter may be cited as the Vermont Setoff Debt Collection Act.
Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982.
Setoff Debt Collection
V.S.A. tit. 32, ch. 151, subch. 12
in effect32 V.S.A. § 5932 Definitions
5932. Definitions
As used in this chapter:
(1) “Claimant agency” means any unit of State government, including agencies, departments, boards, commissions, authorities, or public corporations, including the Vermont Student Assistance Corporation and a collection agency under contract with the Court Administrator pursuant to 4 V.S.A. § 1109(d) or 13 V.S.A. § 7171. Notwithstanding the foregoing, the Department of Taxes shall not be considered a claimant agency and shall not be subject to the limitations contained in this chapter when it applies a refund to the outstanding Vermont State tax liability of a taxpayer, including a taxpayer’s liability for interest, penalties, and fees.
(2) “Debtor” means any individual owing a debt to a claimant agency or owing any support debt that may be collected by the Department for Children and Families.
(3) “Nondebtor spouse” means any individual who is not a debtor, but has filed a joint income tax return or claim under chapter 154 of this title with a debtor.
(4) “Debt” means any obligation to pay a sum of money to a claimant agency, the amount of which is fixed by agreement between the debtor and the claimant agency or by operation of law.
(5) “Department” means the Vermont Department of Taxes.
(6) “Refund” means any individual’s State income tax refund under chapter 151 of this title and any payment due a claimant under chapter 154 of this title.
(7) “Support debt” means a support delinquency pursuant to an obligation determined under a court order or as a result of an administrative process established by this or another state.
(8) “Court” means a Superior Court or the Judicial Bureau.
(9) “Judgment debtor” means any person who has not paid in full a court judgment for payment of a fine, penalty, surcharge, or fee, but not damages, due and payable to the State or a political subdivision thereof.
Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 1985, No. 63, §§ 15, 15a; 1987, No. 278 (Adj. Sess.), § 14, eff. June 21, 1988; 1999, No. 147 (Adj. Sess.), § 4; 2001, No. 144 (Adj. Sess.), § 26, eff. June 21, 2002; 2003, No. 57, § 13, eff. July 1, 2004; 2005, No. 38, § 11, eff. June 2, 2005; 2005, No. 167 (Adj. Sess.), § 4, eff. Sept. 1, 2006; 2005, No. 174 (Adj. Sess.), § 64; 2007, No. 33, § 3, eff. May 18, 2007; 2009, No. 4, § 115, eff. April 24, 2009; 2009, No. 154 (Adj. Sess.), § 216.
32 V.S.A. § 5933 Collection of debts through setoff
5933. Collection of debts through setoff
(a) A claimant agency may submit any debt of $45.00 or more to the Department for collection under the procedure established by this chapter. This setoff debt collection remedy is in addition to and not in substitution for any other remedy available by law.
(b) The Department shall, upon request of a claimant agency, set off any refund that it owes to a debtor against the amount of debt certified by a claimant agency in accordance with the procedure established by section 5934 of this chapter.
Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 2019, No. 175 (Adj. Sess.), § 25a, eff. Oct. 8, 2020.
32 V.S.A. § 5934 Procedure for setoff
5934. Procedure for setoff
(a) Annually, on or before a date specified by the Department, a claimant agency shall supply the Department with information necessary to identify each debtor whose refund is sought to be set off and shall certify in writing the amount of each debt submitted to the Department for collection through setoff.
(b) If a debtor identified by a claimant agency is entitled to a refund, the Department shall transfer to the claimant agency an amount equal to the refund owed or the amount of the debt certified by the claimant agency, whichever is less.
(c) Prior to requesting the Department to reduce a taxpayer’s refund by the amount of certified debt in accord with this subchapter, the claimant agency shall notify the debtor at the debtor’s last known address. The notice shall state that the agency intends to request a setoff and shall advise the debtor of the procedure, the amount and basis for the alleged debt, and that the debtor may contest the validity and amount of the debt sought to be collected through setoff by applying in writing for a hearing before the claimant agency within 30 days of the date of mailing of the notice. The notice shall also include the name and mailing address of the claimant agency to which the application for a hearing must be sent and shall advise the taxpayer that failure to apply in writing for a hearing within the 30-day period will be deemed a waiver of the opportunity to contest the setoff.
Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 1997, No. 156 (Adj. Sess.), § 9, eff. April 29, 1998.
32 V.S.A. § 5935 Joint returns
5935. Joint returns
(a) With respect to State income tax refunds under chapter 151 of this title and renter credit payments due a claimant under chapter 154 of this title, when the Department transfers funds payable on a joint return to a claimant agency and only one of the spouses filing the return is identified as a debtor of the claimant agency, the nondebtor spouse may, within 30 days after the date of mailing of the notice to the taxpayer described in subsection 5934(c) of this subchapter, petition the Department in writing for a return of that portion of the refund attributable to the income of the nondebtor spouse. The Commissioner shall thereafter conduct a hearing at which the nondebtor spouse shall bear the burden of establishing what portion of a refund transferred to a claimant agency, if any, is attributable to the nondebtor’s income.
(b) With respect to payments due a claimant under chapter 154 of this title based on property ownership, when the Department transfers funds payable on a claim filed with a joint return to a claimant agency and only one of the spouses filing the return is identified as a debtor of the claimant agency, the nondebtor spouse may, within 30 days of the date of mailing of the notice to the taxpayer described in subsection 5934(c) of this title, petition the Department in writing for a return of that portion of the claim equal to the ownership share that the nondebtor spouse holds in the property upon which the claim is based. If the property is held as tenancy by the entirety, the claim shall be divided equally. The Commissioner shall thereafter conduct a hearing at which the nondebtor spouse shall bear the burden of establishing his or her ownership interest in the property.
(c) The final determination of the Commissioner regarding the amount of a refund attributable to the income of a nondebtor spouse or the ownership interest of a nondebtor spouse may be appealed in the same manner as income tax appeals under subsection 5885(b) of this title.
(d) Upon receipt of a petition under this section, the Department shall notify each claimant agency to which funds payable on a joint return or claim have been transferred that the petition is pending. If it is established that any amount of a refund or claim transferred to a claimant agency is attributable to the income or ownership interest of a nondebtor spouse, that amount shall be refunded to the nondebtor spouse.
Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 2003, No. 70 (Adj. Sess.), § 45, eff. March 1, 2004; 2021, No. 105 (Adj. Sess.), § 549, eff. July 1, 2022; 2023, No. 6, § 383, eff. July 1, 2023.
32 V.S.A. § 5936 Hearing procedure
5936. Hearing procedure
(a) If a debtor applies in writing for a hearing before a claimant agency within 30 days of the date of mailing of the notice described in subsection 5934(c) of this chapter, the claimant agency shall conduct a hearing to determine the validity and amount of debt owed by the debtor. The hearing shall be held in accordance with 3 V.S.A. §§ 809 through 813.
(b) The final determination of any claimant agency regarding the validity and amount of any debt may be appealed within 30 days to the Civil Division of the Superior Court of the unit in which the taxpayer resides, except that if the claimant agency is the Office of Child Support, the appeal shall be to the Family Division of the Superior Court. Upon appeal, the provisions of the Vermont Rules of Civil Procedure or the Vermont Rules for Family Proceedings, as appropriate, shall apply, and the court shall proceed de novo to determine the debt owed.
(c) Upon conclusion of the hearings and appeals granted under this section, and upon notification by the Commissioner of the result of any appeal under section 5935 of this chapter, a claimant agency shall notify each taxpayer whose refund is set off that a final setoff has occurred. The notice shall include the amount of refund transferred to the claimant agency, the amount of debt finally determined to be owed to the claimant agency, the amount of refund, if any, returned to a non-debtor spouse, and the amount of any outstanding balance due the debtor after final setoff. The claimant agency shall disburse any outstanding balance due the debtor along with the notice of the final setoff.
Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 1997, No. 63, § 20, eff. Sept. 1, 1997; 2009, No. 154 (Adj. Sess.), § 217.
32 V.S.A. § 5937 Priorities in claims to setoff
5937. Priorities in claims to setoff
(a) Priority in multiple claims to refunds allowed to be set off under the provisions of this chapter shall be in descending order of magnitude.
(b) Notwithstanding the priority set forth in subsection (a) of this section, the Department may apply a refund to the outstanding Vermont State tax liability of a taxpayer, including a taxpayer’s liability for interest, penalties, and fees, before any portion of a refund is transferred to a claimant agency.
Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 2021, No. 105 (Adj. Sess.), § 550, eff. July 1, 2022.
32 V.S.A. § 5938 Collection assistance fees
5938. Collection assistance fees
Annually, the Department shall determine the actual per-offset costs incurred by the Department in setting off debts and, notwithstanding section 502 of this title, the Department may assess against a debtor a collection assistance fee equal to the per-offset cost so determined.
Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 2009, No. 160 (Adj. Sess.), § 6.
32 V.S.A. § 5939 Confidentiality exemption; nondisclosure
5939. Confidentiality exemption; nondisclosure
(a) Notwithstanding any other provision of law prohibiting disclosure by the Department of the contents of taxpayer records or information and notwithstanding any confidentiality statute of any claimant agency, disclosure of the name, address, and Social Security number of a debtor; amount of refund owed to a debtor; amount of debt owed by a debtor; and amount of refund attributable to the income of non-debtor spouse, between the Department and the claimant agency as necessary to effectuate the intent of this chapter, is lawful.
(b) The information obtained by a claimant agency from the Department in accordance with the exemption allowed by this section shall only be used by a claimant agency in the pursuit of its debt collection duties and practices, and any person employed by, or formerly employed by, a claimant agency who discloses any such information for any other purpose, except as otherwise allowed by law, shall be penalized in accordance with the terms of section 3102 of this title as if that person were an agent of the Commissioner. The claimant agency to which information is disclosed shall provide for the protection and security of the information as required by the Commissioner.
Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982; amended 2005, No. 14, § 12, eff. May 3, 2005.
32 V.S.A. § 5940 Rules and regulations
5940. Rules and regulations
The Commissioner of Taxes and the head of any claimant agency are authorized to prescribe forms and make procedural rules and regulations under 3 V.S.A. chapter 25 that they deem necessary to effectuate the purposes of this subchapter, to include identification of any information regarding the debtor and the debt, holding of hearings, assessment and transfer of funds, and exchange and security of information.
Added 1981, No. 228 (Adj. Sess.), § 1, eff. May 4, 1982.
32 V.S.A. § 5941 Procedure for setoff of court judgments
5941. Procedure for setoff of court judgments
(a) The court shall include in any judgment a notice that any unpaid amount of a fine, penalty, surcharge, or fee, but not damages, may be certified to the Department for a setoff on the judgment debtor’s income tax refund and property tax credit under chapter 154 of this title, and the notice shall explain how the judgment debtor may challenge the certification.
(b) Subsection 5934(c) and section 5936 of this title, relating to the procedure for contesting the debt, shall not apply to a court seeking setoff from a judgment debtor under this subchapter.
(c) Notwithstanding section 502 of this title, the Department may assess against the judgment debtor a collection assistance fee in an amount established pursuant to section 5938 of this title.
(d) If a judgment debtor identified by the court clerk is entitled to a refund, the Department shall retain the collection assistance fee and then transfer to the court in which the judgment was issued an amount equal to the refund owed or the amount unpaid, whichever is less.
(e) The Court Administrator may contract with one or more collection agencies to serve as a claimant agency on behalf of a court for purposes of this subchapter.
Added 2005, No. 167 (Adj. Sess.), § 5, eff. Sept. 1, 2006; amended 2007, No. 33, § 4, eff. May 18, 2007; 2009, No. 4, § 116, eff. April 24, 2009; 2021, No. 105 (Adj. Sess.), § 551, eff. July 1, 2022.
32 V.S.A. § 5942 Offset for taxes owed in another state; reciprocity
5942. Offset for taxes owed in another state; reciprocity
(a) Upon the request and certification of a tax officer of a claimant state to the Commissioner that a taxpayer owes taxes to the claimant state and that the debt is fixed and no longer subject to appeal under the laws of that state, the Commissioner may set off any refund that it owes to the taxpayer against the amount of the certified debt and pay that amount to the requesting state.
(b) The Commissioner shall not set off any debt unless the laws of the requesting state allow the Commissioner, in cases where the taxpayer owes taxes to this State, to certify that a tax is owed and to request a tax officer of the requesting state to set off any refund owed to the taxpayer and pay that amount to this State.
Added 2009, No. 160 (Adj. Sess.), § 7, eff. June 4, 2010.
Source: Vermont General Assembly (legislature.vermont.gov)URL: https://legislature.vermont.gov/statutes/chapter/32/151Fetched: 10/21/2026