South Carolina              
Administrative Law Court
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SC Administrative Law Court Decisions

CAPTION:
Susie Cooper vs. SCDMH

AGENCY:
South Carolina Department of Mental Health

PARTIES:
Petitioner:
Susie Cooper

Respondent:
South Carolina Department of Mental Health
 
DOCKET NUMBER:
05-ALJ-30-0161-CC

APPEARANCES:
Susie Cooper, Pro Se, Petitioner

Mark W. Brinkley, Esquire, Respondent and Monique Lee, Esquire
 

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


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