Effective 28 Aug 1994

143.784. Debt owed to state agency, setoff procedure — contesting setoff, taxpayer's rights, how waived — joint returns only one taxpayer liable for setoff, procedure — deposit of funds — reciprocal agreements with other state. — 1. Within the time frame specified by the department, a state 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 the debt or debts owed by each such debtor.

2. If a debtor identified by a state agency is determined by the department to be entitled to a refund of at least twenty-five dollars, the department shall notify the state agency that a refund has been set off on behalf of the agency and shall certify the amount of such setoff, which shall not exceed the amount of the claimed debt certified. When the 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.

3. The department shall notify by certified mail the taxpayer whose refund is sought to be set off that such setoff will be 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 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 application for a hearing to contest the setoff within thirty days of the date of receipt of the notice, the name and mailing address of the state agency to which the application for a hearing must be sent, the fact that the application for hearing must state any defense which the debtor claims to the setoff, and the fact that failure to apply for such a hearing, in writing, within the thirty-day period will be deemed a waiver of the opportunity to contest the setoff and will cause the setoff to be applied toward the debt. If the application for hearing alleges a defense to the nature or amount of the claim upon which the setoff is based which requires an evidentiary hearing, the state agency shall promptly conduct such hearing in accordance with the provisions of chapter 536. Failure of the debtor to make application for a hearing shall cause the setoff to be applied toward the debt. If the debt is based on a court or administrative order, the debtor shall be entitled to assert only those defenses which arose subsequent to such court or administrative order, and no issue may be raised at the hearing which has previously been litigated. In the case of a joint or combined return, the notice shall also state the name of the nonobligated 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 regardless of the debt asserted against his spouse. In order to obtain a refund due him such taxpayer must apply, in writing, for an apportionment of the refund with the state agency named in the notice within thirty days of the date of receipt of the notice, unless, in anticipation of the setoff of his spouse's refund, such nonobligated taxpayer provided the department of revenue with a request for apportionment of the anticipated refund which was filed at the same time the original tax return was filed, in which case the department of revenue shall determine the apportionment of the refund and forward the determination of apportionment and the nonobligated taxpayer's portion of the refund to the nonobligated taxpayer within fifteen working days of the transfer of the obligated taxpayer's portion of the refund to the agency requesting such setoff. Unless a request for apportionment of the anticipated refund was provided to the department of revenue as provided in this section, within ninety days after the filing of such taxpayer's application for apportionment of the refund with the state agency named in the notice a determination of apportionment shall be mailed to the nonobligated taxpayer by the appropriate state agency. The apportionment of the refund shall be final upon the expiration of thirty days from the date on which the determination of apportionment is mailed to the nonobligated taxpayer unless, within such thirty-day period, the nonobligated taxpayer applies in writing for a hearing with the state agency named in the determination of apportionment.

4. Upon receipt of funds transferred from the department pursuant to subsection 2 of this section, the state agency shall deposit such funds in the state treasury, to be held in an escrow account, which is hereby established, until a final determination of the validity of the debt. Interest earned on those funds shall be credited to the escrow account.

5. The provisions of sections 143.781 to 143.841 and any other provisions of law to the contrary notwithstanding, the director of revenue shall have the authority to promulgate rules to enter into reciprocal agreements with any other state which extends a like comity to this state, to set off any refund, as defined in section 143.782, due to any individual taxpayer by this state or any other state which extends a like comity to this state, and who upon final determination is identified as a debtor, as defined in section 143.782, by a state agency of this state or any other state extending a like comity.

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(L. 1982 H.B. 946 § 4, A.L. 1984 H.B. 1275, A.L. 1993 H.B. 874, A.L. 1994 S.B. 494)