Procedure for setoff and notification of taxpayer.

(a) A county or municipality may submit a debt of at least $25 owed to it for collection under this chapter. Provided, however, that a county or municipality must submit the debt to the department through one of the following:

(1) The Association of County Commissions of Alabama or an entity established through the Association of County Commissions of Alabama.

(2) The Alabama League of Municipalities or an entity established through the Alabama League of Municipalities.

The organization which submits a debt on behalf of any county or municipality may assess a reasonable fee, which shall be twenty-five dollars ($25) for submitting the debt. This fee may be assessed against the debtor and collected as the first amount set off against any tax refund.

(b) Within a time frame specified by the department, a claimant 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 debt or debts owed by each such debtor.

(c) If a debtor identified by a claimant agency is determined by the department to be entitled to a refund of at least $25 the department shall transfer an amount equal to the refund owed, not to exceed the amount of the claimed debt certified, to the claimant agency. When the income tax 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.

(d) At the time of the transfer of funds to a claimant agency pursuant to subsection (c), the department shall notify the taxpayer or taxpayers whose refund is sought to be set off that the transfer has been 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, the transfer of funds to the claimant agency pursuant to subsection (c) 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 notice to contest the setoff within 30 days of the date of mailing of the notice, the name and mailing address of the claimant agency to which the application for a hearing must be sent, and the fact that the failure to apply for such a hearing, in writing, within the 30-day period will be deemed a waiver of the opportunity to contest the setoff. In the case of a joint return or a joint refund, the notice shall also state the name of the 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 or her regardless of the debt asserted against his or her spouse, and that in order to obtain a refund due, such taxpayer must apply, in writing, for a hearing with the claimant agency named in the notice within 30 days of the date of the mailing of the notice. If a taxpayer fails to apply in writing for such a hearing within 30 days of the mailing of such notice, the taxpayer will have waived the opportunity to contest the setoff.

(e) Notwithstanding subsection (d), a claimant county or municipality as provided for in subsection (a) shall, at the time of the transfer of funds to the claimant county or municipality, notify the taxpayer or taxpayers whose refund is sought to be set off that the transfer has been 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, the transfer of funds to the claimant county or municipality pursuant to subsection (c) and the intention to set off the refund against the debt, notice that any refund in excess of the claimed debt will be sent to the taxpayer, the taxpayer's opportunity to give written notice to contest the setoff within 30 days of the date of mailing of the notice, the name and mailing address of the claimant county or municipality to which the application for a hearing must be sent, and the fact that the failure to apply for such a hearing, in writing, within the 30-day period will be deemed a waiver of the opportunity to contest the setoff. In the case of a joint return or a joint refund, the notice shall also state the name of the 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 or her regardless of the debt asserted against his or her spouse, and that in order to obtain a refund due, such taxpayer must apply, in writing, for a hearing with the claimant county or municipality named in the notice within 30 days of the date of the mailing of the notice. If a taxpayer fails to apply in writing for such a hearing within 30 days of the mailing of such notice, the taxpayer will have waived the opportunity to contest the setoff.

(f) Upon receipt of funds transferred from the department pursuant to subsection (c), the claimant agency shall deposit and hold such funds in an escrow account until a final determination of the validity of the debt.

(Acts 1981, No. 81-696, p. 1168, §1; Act 2014-321, p. 1145, §1.)