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Debt Setoff Programs Policy

Setoff Debt Collection Act
The 1979 session of the General Assembly established the Setoff Debt Collection Act (G.S. 105A). The Act provides that North Carolina individual income tax refunds are subject to State claims. A refund in whole or in part may be applied against any past due indebtedness owed the State, provided both the debt and refund, if any, are at least fifty dollars ($50.00).
The Setoff Debt Collection Act must be incorporated into an agency's collection procedures. State agencies and institutions will submit for collection all delinquent debts which they are owed by individuals, provided the administrative cost of submitting the debt does not exceed the amount of the past due debts. Past due debts include those that have been written off as uncollectible for financial statement reporting purposes as well as those that are still in the collection process.

G.S. 105A-3(b). Mandatory Usage, states: 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 the Attorney General not to submit 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. G.S. 105A-3(d). states: A claimant agency must register with the Department of Revenue and report annually to them 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.

Vendor Setoff Program (Currently under development)
The Vendor Setoff program will provide State agencies with an additional method for the collection of past due accounts receivable owed to the State, primarily by businesses and individuals acting in a business capacity. Under the Vendor Setoff program, a payment made by the State to the debtor may be withheld, in full or in part, to satisfy the debt owed the State.

The following past due receivables are exempt from submission to the setoff programs:

• from businesses or individuals in bankruptcy;
• from individuals if the administrative cost of submitting the debt to the Individual Setoff program exceeds the debt; and,
• for which the responsible party has yet to be determined.

Past due receivables may be submitted or updated as frequently as daily by any registered agency.