Using a 1992 amendment to the Setoff Debt Collection Act, the Association compiles and forwards to the Department of Revenue each December a database of delinquent accounts and debts owed to participating municipalities.
Participants of the Municipal Association of South Carolina's Setoff Debt Program submit claims to the Association who forwards them to the Department by December 1 each year. The Department of Revenue only accepts social security numbers not taxpayer identification numbers. Therefore, all claims submitted by participants must include the debtor's social security number.
The Department matches the claims list with the refunds due to taxpayers. If there is a match, the Department sets off the debt, notifies the taxpayer of the setoff, and forwards the amount collected to the Association, which then forwards the amount collected, minus an administrative fee of $25 per offset to the entity making the claim. The Department also collects $25 from the debtor for every successful setoff. These collection costs are charged in addition to the original debt amount.
Participants must notify debtors in writing both before the Association can submit the information to the Department of Revenue and after a debtor's income tax refund is setoff. If the debtor wishes to contest the setoff, he must file a written protest within 30 days of the date of the initial notification letter. Participants must also appoint a hearing officer who has the authority to decide a protest in favor of either the debtor or the entity. Participants must notify the Department of the hearing officer's name, address and telephone number.
After an informal hearing, the hearing officer may decide the setoff amount was in error. The participant must refund the appropriate amount to the taxpayer. If the participant determines it is not entitled to any of the setoff, it must refund the entire amount, including the administrative fees of the Department of Revenue and Municipal Association. The participant must refund administrative fees from its own funds and is required to pay interest to the taxpayer.