Administrative Rule 55 - INCOME TAX RETURN SETOFF FOR UNPAID COURT-ORDERED FINES, FEES, AND COSTS

Section 1. Purpose. This rule implements N.D.C.C. ch.57-38.3, which enables the state court administrator on behalf of the state courts to seek a setoff against income tax refunds for purposes of satisfying unpaid court-ordered fines, fees, or costs.

Section 2. Identification and Submission of Unpaid Fines, Fees, or Costs. On at least an annual basis the state court administrator must identify persons owing unpaid fines, fees, or costs deemed delinquent. For purposes of this rule, an unpaid fine, fee, or cost is delinquent if payment has not been received within ninety days of the payment due date. The state court administrator must certify to the tax commissioner the full name and social security number of each person obligated to the pay the unpaid amount and the amount of the outstanding obligation, which must exceed 25 dollars. The state court administrator must provide any additional information required by the tax commissioner to initiate the setoff process.

Section 3. Notice Requirements - Joint Return - Hearing Request. 

(a) Within 14 days of being notified by the tax commissioner that a transfer of funds to achieve a setoff against a person's income tax return has been approved, the state court administrator must provide the person with written notice setting forth the person's name, the manner in which the unpaid obligation arose, the amount of the unpaid obligation, the intention to setoff the person's income tax return against the unpaid obligation, and the amount of income tax refund in excess of the unpaid obligation, if any. 

(b) If the income tax return affected by the requested setoff is a joint return, the notice required under subsection 3(a) must also set forth the name of the person named in the return, if any, against whom no debt is claimed; the fact that the unpaid obligation is not claimed against the person; the fact that the person may be entitled to receive a refund if it is due the person regardless of the unpaid obligation asserted against the person's spouse; that in order to obtain a refund due the person, the person must apply in writing within 30 days of the date of the mailing of the notice for a hearing with the state court administrator; and that failure to apply for a hearing within 30 days of the mailing of the notice will be considered a waiver of the opportunity to contest the setoff.

(c) Notices required under this section must be sent by first class mail to the address listed on the income tax return.

Section 4. Hearing. If a hearing under subsection 3(b), the hearing must be held within 14 days of the request. A formal hearing is not required but the state court administrator must record the hearing and retain the recording for six months. All documents submitted and considered during the hearing must be retained for six months. Issues to be considered at the hearing are limited to whether the person against whom the unpaid obligation is asserted was required by court order to pay the fine, fee, or cost; whether the amount identified for collection is correct; and whether the person identified in the joint return is entitled to receive a refund regardless of the unpaid obligation asserted against the person's spouse. The nonobligated spouse must provide to the state court administrator copies of the obligated and nonobligated spouse's federal W-2 forms and state and federal tax returns for the affected year of return. If the state court administrator determines the setoff is proper, the setoff must be limited to a proportionate share of the joint return amount. The person requesting the hearing must be notified of the state court administrator's decision within seven days after conclusion of the hearing.

Section 5. Appeal. The person requesting a hearing under section 4 may appeal the decision of the state court administrator. The person must send or deliver a written notice of appeal to the state court administrator within 14 days after the date of the mailing of the state court administrator's decision. Failure to send or deliver the written notice waives the appeal. An appeal hearing must be conducted within 30 days after receipt by the state court administrator of the written notice of appeal. The appeal will be conducted by a panel of three members designated by the chief justice. Issues to be considered during the appeal hearing are limited to issues raised under section 4 and to whether the state court administrator's decision was in error.

Section 6. Disposition of Funds Transferred for Setoff. Upon final determination of the setoff amount following a hearing under section 4 or an appeal under section 5, or upon the failure of the person to request a hearing under subsection 3(b), the state court administrator must submit funds transferred for setoff to the state treasurer for deposit in the manner provided by law. Any funds in excess of the final setoff amount must be refunded to the person whose income tax return was the subject of the setoff. Court records must reflect application of the setoff amount to any outstanding fines, fees, or costs owed by the person whose tax return was subject to setoff.

Section 7. Confidentiality. Any confidential information provided by the tax commissioner to the state court administrator and any information submitted by a person requesting a hearing as part of the setoff process is confidential and may be used only for collection activities.

Section 8. Effective Date. This rule is effective September 1, 2007.