GENERAL ASSEMBLY OF NORTH CAROLINA

1997 SESSION

 

 

SESSION LAW 1997-490

SENATE BILL 39

 

 

AN ACT TO REVISE THE SETOFF DEBT COLLECTION ACT.

 

The General Assembly of North Carolina enacts:

 

Section 1.  Chapter 105A of the General Statutes reads as rewritten:

"Chapter 105A.

"Setoff Debt Collection Act.

"ARTICLE 1.

"In General.

"§ 105A-1.  Purposes.

The purpose of this Article Chapter 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 or to a local government through its their various claimant agencies and who qualify for refunds from the Department of Revenue. It is also the intent of this Article Chapter that procedures be established for setting off against any such refund the sum of any debt owed to the State. State or to a local government. Furthermore, it is the legislative intent that this Article Chapter be liberally construed so as to effectuate these purposes as far as legally and practically possible.

"§ 105A-2.  Definitions.

The following definitions apply in this Chapter:

(1)       Claimant agency. -- Either of the following:

a.         A State agency.

b.         A local agency acting through a clearinghouse or an organization pursuant to G.S. 105A-3(b1).

(2)       Debt. -- Any of the following:

a.         A sum owed to a 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 the sum.

b.         A sum a claimant agency is authorized or required by law to collect, such as child support payments collectible under Title IV, Part D of the Social Security Act.

c.         A sum owed as a result of an intentional program violation or a violation due to inadvertent household error under the Food Stamp Program enabled by Chapter 108A, Article 2, Part 5.

e.         A sum owed as a result of having obtained public assistance payments under any of the following programs through an intentional false statement, intentional misrepresentation, intentional failure to disclose a material fact, or inadvertent household error:

1.         The Aid to Families with Dependent Children Program or the Aid to Families with Dependent Children -- Emergency Assistance Program, enabled by Chapter 108A, Article 2, Part 2.

2.         The Work First Cash Assistance Program established pursuant to federal waivers received by the Department of Human Resources on February 5, 1996.

3.         The State-County Special Assistance for Adults Program, enabled by Chapter 108A, Article 2, Part 3.

4.         A successor program of one of these programs.

(3)       Debtor. -- An individual who owes a debt.

(4)       Department. -- The Department of Revenue.

(5)       Reserved.

(6)       Local agency. -- A county, to the extent it is not considered a State agency, or a municipality.

(7)       Net proceeds collected. -- Gross proceeds collected through setoff against a debtor's refund minus the collection assistance fee retained by the Department.

(8)       Refund. -- An individual's North Carolina income tax refund.

(9)       State agency. -- Any of the following:

a.         A unit of the executive, legislative, or judicial branch of State government.

b.         A county, to the extent it administers a program supervised by the Department of Human Resources or it operates a Child Support Enforcement Program, enabled by Chapter 110, Article 9, and Title IV, Part D of the Social Security Act.

As used in this Article:

(1)       "Claimant agency" means and includes:

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 collection duties for intentional program violations and violations due to inadvertent household error 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 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 the Work First Cash Assistance Program established pursuant to the federal waivers received by the Department on February 5, 1996, 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, intentional failure to disclose a material fact, or inadvertent household error;

s.         The Employment Security Commission of North Carolina.

t.          Any State agency in the collection of salary overpayments from former employees.

u.         The State Board of Education through the Superintendent of Public Instruction when in the performance of his duties of administering the program under which the State encourages participation in the National Board for Professional Teaching Standards (NBPTS) Program, enabled by Section 19.28 of Chapter 769 of the 1993 Session Laws.

(2)       "Debtor" means any 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" means any liquidated sum due and owing any claimant agency which 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" means the North Carolina Department of Revenue.

(5)       "Refund" means any individual's North Carolina income tax refund.

(6)       "Net proceeds collected" means gross proceeds collected through final setoff against a debtor's refund minus any collection assistance fee charged by the Department.

"§ 105A-3.  Remedy additional; mandatory State usage; optional local usage; obtaining identifying information. information; registration.

(a)         Remedy Additional. --The collection remedy under this Article Chapter is in addition to and not in substitution for any other remedy available by law.

(b)        Mandatory State Usage. --All claimant agencies shall submit, for collection under the procedure established by this  Article, all debts which they are owed, except debts that they are advised by A State agency must submit a debt owed to it for collection under this Chapter unless the State Controller has waived this requirement or the Attorney General has advised the State agency not to submit the debt 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.  The State Controller may waive the requirement for a State agency, other than the Department of Human Resources or a county acting on behalf of that Department, to submit a debt owed to it for collection under this Chapter if the State Controller finds that collection by this means would not be practical or cost effective.  A waiver may apply to all debts owed a State agency or a type of debt owed a State agency.

(b1)      Optional Local Usage. --  A local agency may submit a debt owed to it for collection under this Chapter.  A local agency that decides to submit a debt owed to it for collection under this Chapter must establish the debt by following the procedure set in G.S. 105A-5 and must submit the debt through one of the following:

(1)       A clearinghouse that is established pursuant to an interlocal agreement adopted under Article 20 of Chapter 160A of the General Statutes and has agreed to submit debts on behalf of any requesting local agency.

(2)       The North Carolina League of Municipalities.

(3)       The North Carolina Association of County Commissioners.

(c)        Identifying Information. --All claimant agencies shall whenever possible obtain the full name, social security number, address, and any other identifying information required by rules promulgated by the Department pursuant to G.S. 105A-16 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. Chapter.

(d)       Registration and Reports. --A claimant State agency must register with the Department and with the State Controller. Every State agency must report annually to the Department State Controller 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.

A clearinghouse or an organization that submits debts on behalf of a local agency must register with the Department.  Once a  clearinghouse registers with the Department under this subsection, no other clearinghouse may register to submit debts for collection under this Chapter.

"§ 105A-4.  Minimum sum collectible. debt and refund.

A claimant agency shall not be allowed to effect final setoff and collect debts through use of the remedy established under this Article unless both the debt and the refund, if any, are  This Chapter applies only to a debt that is at least fifty dollars ($50.00). ($50.00) and to a refund that is at least this same amount. 

"§ 105A-5.  Local agency notice, hearing, and decision.

(a)       Prerequisite. --  A local agency may not submit a debt for collection under this Chapter until it has given the notice required by this section and the claim has been finally determined as provided in this section.

(b)       Notice. -- A local agency must send written notice to a debtor that the agency intends to submit the debt owed by the debtor for collection by setoff.  The notice must explain the basis for the agency's claim to the debt and that the agency intends to apply the debtor's refund against the debt.  The notice must also inform the debtor that the debtor has the right to contest the matter by filing a request for a hearing with the local agency, must state the time limits and procedure for requesting the hearing, and must state that failure to request a hearing within the required time will result in setoff of the debt.

(c)       Administrative Review. -- A debtor who decides to contest a proposed setoff must file a written request for a hearing with the local agency within 30 days after the date the local agency mails a notice of the proposed action to the debtor.  A request for a hearing is considered to be filed when it is delivered for mailing with postage prepaid and properly addressed.  The governing body of the local agency or a person designated by the governing body must hold the hearing.

If the debtor disagrees with the decision of the governing body or the person designated by the governing body, the debtor may file a petition for a contested case under Article 3 of Chapter 150B of the General Statutes.  The petition must be filed within 30 days after the debtor receives a copy of the local decision.  Notwithstanding the provisions of G.S. 150B-2, a local agency is considered an agency for purposes of contested cases and appeals under this Chapter.

In a hearing under this section, an issue that has previously been litigated in a court proceeding cannot be considered.

(d)       Decision. -- A decision made after a hearing under this section must determine whether a debt is owed to the local agency and the amount of the debt.

(e)       Return of Amount Set Off. --  If a local agency submits a debt for collection under this Chapter without sending the notice required by subsection (b) of this section, the agency must send the taxpayer the entire amount set off plus the collection assistance fee retained by the Department.  Similarly, if a local agency submits a debt for collection under this Chapter after sending the required notice but before final determination of the debt and a decision finds that the local agency is not entitled to any part of the amount set off, the agency must send the taxpayer the entire amount set off plus the collection assistance fee retained by the Department.  That portion of the amount returned that reflects the collection assistance fee must be paid from the local agency's funds.

If a local agency submits a debt for collection under this Chapter after sending the required notice and the net proceeds collected that are credited to the local agency for the debt exceed the amount of the debt, the local agency must send the balance to the debtor.  No part of the collection assistance fee retained by the Department may be returned when a notice was sent and a debt is owed but the debt is less than the amount set off.

Interest accrues on the amount of a refund returned to a taxpayer under this subsection in accordance with G.S. 105-266. A local agency that returns a refund to a taxpayer under this subsection must pay from the local agency's funds any interest that has accrued since the fifth day after the Department mailed the notice of setoff to the taxpayer.

Collection of sums due claimant agencies through setoff.

Subject to the limitations contained in this Article, the Department of Revenue shall upon request render assistance in the collection of any delinquent account or debt owing to any claimant agency. This assistance shall be provided by setting off any refunds due the debtor from the Department by the sum certified by claimant agency as due and owing.

"§ 105A-6.  Procedure for Department to follow in making setoff.

(a)       Notice to Department. --A claimant agency seeking to attempt collection of a debt through setoff shall must notify the Department in writing and supply (i) information necessary to identify the debtor whose refund is sought to be set off and (ii) off.  The claimant agency may include with the notification the date, if any, that the debt is expected to expire.  Notification to the Department and the furnishing of identifying information must occur on or before a date specified by the Department in the first year preceding the calendar year during which the refund would be paid. The notice is effective to initiate setoff against refunds that would be made in calendar years following the year in which the notice was first made until the date specified in the notice that the debt is expected to expire.  The agency shall must notify the Department in writing when a debt has been paid or is no longer owed the agency.

(b)       Setoff by Department. --The Department, upon receipt of notification, shall must determine each year whether the debtor to the claimant agency is entitled to a refund of at least fifty dollars ($50.00) from the Department.  Upon determination by the Department that a debtor specified by a claimant agency qualifies for such a refund, the Department shall notify in writing the claimant agency that a refund is pending, specify its sum, and indicate the debtor's address as listed on the tax return.

(c)        Unless stayed by court order, the Department shall, upon certification as provided in this Article, must set off the certified debt against the refund to which the debtor would otherwise be entitled. entitled and must refund any remaining balance to the debtor.  The Department must mail the debtor written notice that the setoff has occurred and must credit the net proceeds collected to the claimant agency.  If the claimant agency is a State agency, that agency must credit the amount received to a nonreverting trust account and must follow the procedure set in G.S. 105A-8.

"§ 105A-7. Notification of intention to set off and right to hearing.

(a)       The claimant agency, upon receipt of notification from the Department that a debtor is entitled to a refund, shall within 10  days send a written notification to the debtor and a copy of same to the Department of its assertion of rights to the refund or any part thereof. Such notification shall inform the debtor of the claimant agency's intention to direct the Department to apply the refund or any portion thereof against the debt certified as due and owing. For the Department to be obligated to continue holding refunds until receipt of certification of the debt, if any, pursuant to G.S. 105A-10, the copy of the notification to the debtor by the claimant agency of its intention to set off must be received by the Department within 15 days of the date of the Department's mailing to the respective claimant agency the notification of the debtor's entitlement to a refund.

(b)       The contents of the written notification to the debtor (and the Department's copy) of the setoff claim shall clearly set forth the basis for the claim to the refund, the intention to apply the refund against the debt to the claimant agency, the debtor's opportunity to give written notice of intent to contest the validity of the claim within 30 days of the date of the mailing of the notice, the mailing address to which the application for a hearing must be sent, and the fact that failure to apply for a hearing in writing within the 30-day period will be deemed a waiver of the opportunity to contest the claim causing final setoff by default.

(c)       The written application by the debtor for a hearing shall be effective upon mailing the application postage prepaid and properly addressed to the claimant agency.

"§ 105A-8.  Hearing procedure. State agency notice, hearing, decision, and refund of setoff.

(a)       Notice. -- Within 10 days after a State agency receives a refund of a debtor, the agency must send the debtor written notice that the agency has received the debtor's refund.  The notice must explain the debt that is the basis for the agency's claim to the debtor's refund and that the agency intends to apply the refund against the debt.  The notice must also inform the debtor that the debtor has the right to contest the matter by filing a request for a hearing, must state the time limits and procedure for requesting the hearing, and must state that failure to request a hearing within the required time will result in setoff of the debt.  A State agency that does not send a debtor a notice within the time required by this subsection must refund the amount set off plus the collection assistance fee, in accordance with subsection (e) of this section.

(b)        Hearing. -- A hearing on a contested claim of a State agency, except a constituent institution of The University of North Carolina or the Employment Security Commission, must 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 must be conducted in accordance with administrative procedures approved by the Attorney General.  A hearing on a contested claim of the Employment Security Commission must be conducted in accordance with rules adopted by that Commission.  A request for a hearing on a contested claim of any State agency must be filed within 30 days after the State agency mails the debtor notice of the proposed setoff.  A request for a hearing is considered to be filed when it is delivered for mailing with postage prepaid and properly addressed.  In a hearing under this section, an issue that has previously been litigated in a court proceeding cannot be considered.

(c)       Decision. -- A decision made after a hearing under this section must determine whether a debt is owed to the State agency and the amount of the debt.

(d)       Return of Amount Set Off. --  If a State agency fails to send the notice required by subsection (a) of this section within the required time or a decision finds that a State agency is not entitled to any part of an amount set off, the agency must send the taxpayer the entire amount set off plus the collection assistance fee retained by the Department.  That portion of the amount returned that reflects the collection assistance fee must be paid from the State agency's funds.

If a debtor owes a debt to a State agency and the net proceeds credited to the State agency for the debt exceed the amount of the debt, the State agency must send the balance to the debtor.  No part of the collection assistance fee retained by the Department may be returned when a debt is owed but it is less than the amount set off.

Interest accrues on the amount of a refund returned to a taxpayer under this subsection in accordance with G.S. 105-266. A State agency that returns a refund to a taxpayer under this subsection must pay from the State agency's funds any interest that has accrued since the fifth day after the Department mailed the notice of setoff to the taxpayer.

(a)         A hearing on a contested claim, 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.  Additionally, 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)       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 issues may be considered at the hearing which have been previously litigated.

"§ 105A-9.  Appeals from hearings.

Appeals from action taken at hearings allowed under this Article Chapter, other than those conducted by the Employment Security Commission, 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 hearings allowed under this Article Chapter that are conducted by the Employment Security Commission of North Carolina shall be in accordance with the provisions of Chapter 96 of the General Statutes.

"§ 105A-10. Certification of debt by claimant agency finalization of setoff.

(a)       Upon final determination through hearing provided by G.S. 105A-8 of the debt due and owing the claimant agency or upon the  debtor's default for failure to comply with G.S. 105A-7 mandating timely request for review of the asserted basis for setoff, the claimant agency shall within 20 days certify the debt to the Department and in default thereof, the Department shall no longer be obligated to hold the refund for setoff.

(b)       Upon receipt by the Department of a certified debt from the claimant agency, the Department shall finalize the setoff by transferring the net proceeds collected for credit or payment in accordance with the provisions of G.S. 105A-14 and by refunding any remaining balance to the debtor as if setoff had not occurred.

"§ 105A-11. Notice of final setoff.

Upon the finalization of setoff under the provisions of this Article, the Department shall notify the debtor in writing of the action taken along with an accounting of the action taken on any refund. If there is an outstanding balance after setoff, the notice under this section shall accompany the balance when disbursed.

"§ 105A-12.  Priorities in claims to setoff.

Priority in multiple claims to refunds allowed to be set off under the provisions of this Article shall be in the order in time which a claimant agency has filed a written notice with the Department of its intention to effect collection through setoff under this Article. Notwithstanding the priority set forth above according to time of filing, the The Department has priority over all other claimant agencies for collection by setoff whenever it is a competing agency for a refund.  State agencies have priority over local agencies for collection by setoff.  When there are multiple claims by State agencies other than the Department, the claims have priority based on the date each agency registered with the Department under G.S. 105A-3.  When there are multiple claims by two or more organizations submitting debts on behalf of local agencies, the claims have priority based on the date each organization registered with the Department under G.S. 105A-3. When there are multiple claims among local agencies whose debts are submitted by the same organization, the claims have priority based on the date each local agency requested the organization to submit debts on its behalf.

"§ 105A-13.  Disposition of proceeds collected; collection 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 determine its actual cost of collection under the Setoff Debt Collection Act for the immediately preceding year and shall calculate the percentage that cost represents of the preceding year's collections, excluding collections of child support arrearages under G.S. 105A-2(1)d.  The Department shall retain that percentage from the gross proceeds collected by the Department through setoff for the current year, other than the gross proceeds collected of child support arrearages under G.S. 105A-2(1)d. To recover the costs incurred by the Department in collecting debts under this Chapter, a collection assistance fee of no more than fifteen dollars ($15.00) is imposed on each debt collected through setoff.  The Department must collect this fee as part of the debt and retain it.  The Department must set the amount of the collection assistance fee based on its actual cost of collection under this Chapter for the immediately preceding year.  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.  The collection assistance fee shall not be added to child support debts or collected as part of child support debts.  Instead, the Department shall retain from collections under Division II of Article 4 of Chapter 105 of the General Statutes the cost of collecting child support debts under this Chapter.

"§ 105A-14.  Accounting to the claimant agency; credit to debtor's obligation.

(a)         Simultaneously with the transmittal of a check for the net proceeds collected to a claimant agency, the Department shall must provide the agency with an accounting of the setoffs finalized for which payment is being made. The accounting shall, must 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 collectedcharged per setoff.

(b)        Upon receipt by a claimant agency of a check representing net proceeds collected on a the claimant agency's behalf by the Department Department, a final determination of the claim if it is a State agency claim, and an accounting of the proceeds as specified under this section, the claimant agency shall must credit the debtor's obligation with the gross net proceeds collected. 

"§ 105A-15.  Confidentiality exemption; nondisclosure.

(a)       Notwithstanding G.S. 105-259 or 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, all the exchange of any information exchanged among the Department, the claimant agency, the organization submitting debts on behalf of a local agency, and the debtor necessary to accomplish and effectuate the intent of this Article implement this Chapter is lawful.

(b)       The information obtained by a claimant agency or an organization submitting debts on behalf of a local agency obtains from the Department in accordance with the exemption allowed by subsection (a) shall only may be used by a claimant the agency or organization only 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 G.S. 105-259, shall be penalized in accordance with the terms of that statute. practices and may not be disclosed except as provided in G.S. 105-259, 153A-148.1, or 160A-208.1.

"§ 105A-16.  Rules and regulations. Rules.

The Secretary of Revenue is authorized to prescribe forms and make all rules which he deems necessary in order to effectuate the intent of this Article. may adopt rules to implement this Chapter.  The State Controller may adopt rules to implement this Chapter."

Section 2.  G.S. 105-266(b) reads as rewritten:

"(b)       Interest. -- An overpayment of tax bears interest at the rate established in G.S. 105-241.1(i) from the date that interest begins to accrue until a refund is paid. A refund sent to a taxpayer is considered paid on a date determined by the Secretary that is no sooner than five days after a refund check is mailed.

A refund set off against a debt pursuant to Chapter 105A of the General Statutes is considered paid five days after the Department mails the taxpayer a notice of the setoff, unless G.S. 105A-5 or G.S. 105A-8 requires the agency that requested the setoff to return the refund to the taxpayer.  In this circumstance, the refund that was set off is not considered paid until five days after the agency that requested the refund mails the taxpayer a check for the refund.

Interest on an overpayment of a tax, other than a tax levied under Article 4 or Article 8B of this Chapter, accrues from a date 90 days after the date the tax was originally paid by the taxpayer until the refund is paid. Interest on an overpayment of a tax levied under Article 4 or Article 8B of this Chapter accrues from a date 45 days after the latest of the following dates until the refund is paid:

(1)       The date the final return was filed.

(2)       The date the final return was due to be filed.

(3)       The date of the overpayment.

The date of an overpayment of a tax levied under Article 4 or Article 8B of this Chapter is determined in accordance with section 6611(d), (f), (g), and (h) of the Code."

Section 3.  The State Controller is directed to study whether it is desirable and feasible for the State to establish a central clearinghouse for compiling debt set-off information required by the Department of Revenue to comply with Chapter 105A of the General Statutes.  In conducting the study, the State Controller shall consider which State agency is the most appropriate agency to serve as a clearinghouse and the costs and benefits of developing a clearinghouse, including the extent to which separate agencies must establish duplicative functions in the absence of a central clearinghouse.

The State Controller shall report the findings of this study to the Revenue Laws Study Committee by February 16, 1998.  The Revenue Laws Study Committee shall report any recommendations on this issue to the 1998 Regular Session of the General Assembly.

Section 4.  Section 3 of this act and the changes to G.S. 105A-3(d) and G.S. 105A-16 made by this act are effective when this act becomes law.  The changes to G.S. 105A-5 made by this act become effective January 1, 1999.  The remainder of this act becomes effective January 1, 2000, and applies to income tax refunds determined on or after that date.

In the General Assembly read three times and ratified this the 28th day of August, 1997.

s/   Marc Basnight

President Pro Tempore of the Senate

 

s/   Harold J. Brubaker

Speaker of the House of Representatives

 

s/   James B. Hunt, Jr.

Governor

 

Approved 11:15 a.m. this 10th day of September, 1997