ORDERS:
STATEMENT OF THE CASE
STATEMENT
OF THE CASE
This
matter comes before me pursuant to Petitioner Susie Cooper’s request for a
contested case hearing to challenge the setoff of her South Carolina Income Tax
Return at the request of the Department of Mental Health (“Department”) to
defray costs of services provided to Michael Cooper, the Petitioner’s husband,
in November1999. The Administrative Law Court (ALC) has jurisdiction over
this matter pursuant to S.C. Code Ann. §§ 1-23-600 (B) (Supp. 2004); S.C. Code
Ann. § 1-23-310, et seq. (1986 & Supp. 2004); and S.C. Code
Ann. § 12-56-65 (Rev. 2000). A hearing was conducted on September 20, 2005, at
the Administrative Law Court in Columbia, South Carolina.
FINDINGS
OF FACT
Having carefully
considered the testimony and the arguments of both sides, and taking into
account the credibility of the evidence and witnesses, I find the following by
a preponderance of the evidence:
1. Notice of the time, date, place and subject matter of the hearing was
given to all
parties in a timely manner.
2. In November 1999, Michael Cooper sought and received inpatient treatment
services
at one of the Department’s
facilities. At the time he received these services, he was not married to the
Petitioner; in fact, he was married to a different woman and did not even know
the Petitioner.
3. Following his
hospitalization, Michael Cooper met the Petitioner in December 2000. They were
married in February 2003. Michael Cooper was declared permanently disabled retroactive
to July 21, 2003; he was notified of the disability determination by the Social
Security Administration on July 30, 2005.
4. The Petitioner claimed
her husband, Michael Cooper, as a dependent on her 2004 tax return and sought a
refund of $1,389.00 from her 2004 SC Joint Tax Return.
5. In
July, 2005, the Department sent a letter to Petitioner notifying her of its intent
to submit her husband’s debt of $2,741.00 to the South Carolina Department of
Revenue (“DOR”) pursuant to the Setoff Debt Collection Act.
CONCLUSIONS
OF LAW
Based upon these Findings of Fact,
I conclude as a matter of law:
1. The Administrative Law Court has subject matter jurisdiction over this
case pursuant to S.C. Code Ann. § 1-23-600 (B) (Supp. 2004)and S.C. Code Ann.
§§ 1-23-310, et seq. (1986 & Supp. 2004).
2. The Department is authorized to charge its patients for the maintenance
and medical care those patients receive. S.C. Code Ann. § 44-23-1110 (Supp.
2004). The maintenance and care of the mentally ill “is not unconditional
charity but is based upon expectations of future reimbursement if the
circumstances should thereafter permit.” Minter v. State Dept. of Mental
Health, 258 S.C. 186, 187 S.E.2d 890 (1972).
3. Pursuant to the Setoff
Debt Collection Act, a state agency may collect a delinquent debt by submitting
a claim to the South Carolina Department of Revenue for the debtor’s tax
refund. S.C. Code Ann. §§ 12-56-60 et seq.(Supp. 2004). This section
provides, in part:
(B) Upon receiving the certification of the claimant
agency of the amount of the delinquent debt, the department shall determine if
the debtor is due a refund. If the debtor is due a refund of more than a
tolerance amount as determined by the department, the department shall set off
the delinquent debt against the amount of the refund. The department may retain
an amount not to exceed twenty-five dollars of each refund set off to defray
its administrative expenses, and that amount may be added to the debt.
Apportionment is not required in the case of a refund resulting from filing a
joint return. A person has no property right or property interest in a refund
until all amounts due the State and claimant agencies are paid. The department
shall consider a delinquent debt and debtor list provided by a claimant agency
as correct and the department is not liable for a wrongful or improper setoff. S.C.
Code Ann. §12-56-60 (B) (Supp. 2004).
4. In addition, the Act
provides for the notice necessary to notify the parties of the Agency’s intent
to collect the debt owed through setoff. This section, SC Code Ann. § 12-56-62
states:
SECTION 12-56-62. Notice
of intention to set off debt; form, delivery and presumption.
The notice of intention to set off must be given by
mailing the notice, with postage prepaid, addressed to the debtor at the
address provided to the claimant agency when the debt was incurred or at the
debtor's last known address. The giving of the notice by mail is complete upon
the expiration of thirty days after deposit of the notice in the mail. A
certification by the claimant agency that the notice has been sent is
presumptive proof that the requirements as to notice are met, even if the
notice actually has not been received by the debtor. The notice must include a
statement of appeal procedures available to the debtor, substantially as
follows:
"According to our records, you owe the (claimant
agency) a debt in the amount of (amount of the debt), plus interest, if
applicable, for (type of debt). You are hereby notified of the (claimant
agency's) intention to submit this debt to the South Carolina Department of
Revenue to be set off against your individual income tax refunds until the debt
is paid in full. Pursuant to the Setoff Debt Collection Act, this amount, plus
all costs, will be deducted from your South Carolina individual income tax
refunds unless you file a written protest within thirty days of the date of
this notice. If you file a joint return with your spouse, this amount will
be deducted from the total joint refunds without regard to which spouse
incurred the debt or actually withheld the taxes. The protest must contain
the following information:
(1) your name;
(2) your address;
(3) your social security number;
(4) the type of debt in dispute; and
(5) a detailed statement of all the reasons you
disagree with or dispute the debt.
The original written protest must be mailed to the
(claimant agency) at the following address:
(address of the entity requesting the setoff)".
(Emphasis added.)
5. Although
this section states that the setoff may be collected from a joint tax return,
without regard to which spouse incurred the debt, it fails to note that there
may be a dispute when the debt was incurred prior to the marriage.
6. The
Department was unable to cite any cases on point for this issue. The relevant
statutes do not address the issue of when a debt is incurred. Moreover,
this debt was incurred by Michael Cooper in 1999. The record contains no
evidence that the Department of Mental Health attempted to setoff this debt
prior to 2003—when he married the Petitioner.
The
court is, therefore, led to cases in the marital litigation realm for guidance
in apportioning a debt of a party. Our Supreme Court has held “a ‘marital
debt’ is a debt incurred for the joint benefit of the parties regardless of
whether one party is individually liable. Hardy v. Hardy, 311 SC 433,
436-37, 429 S.E.2d 811, 813 (Ct. App. 1993)” Wooten v. Wooten, 364 SC
532, 615 S.E.2d 98 (2005). This line of cases deals with “marital debt”
incurred by one spouse prior to the dissolution of the marriage. It stands to
reason, therefore, that debt incurred by one spouse prior to the inception of
the marriage is not “marital debt.” Even assuming, arguendo, that the
refund would be used jointly by the parties for the sustenance of the marriage,
the fact remains that the income which generated the refund was earned solely by
the Petitioner, and that the debt which generated the setoff was incurred solely
by her husband prior to their marriage.
Therefore, I find and conclude that the
Department is not entitled to setoff the debt of the Petitioner’s husband from
the refund generated from the 2004 joint tax return.
AND IT IS SO
ORDERED.
___________________________________
CAROLYN C.
MATTHEWS
Administrative
Law Judge
December 28, 2005
Columbia, South Carolina |