HOUSE BILL 478

47th legislature - STATE OF NEW MEXICO - second session, 2006

INTRODUCED BY

Ben Lujan

AN ACT

RELATING TO WORKERS' COMPENSATION; AMENDING THE TAX REFUND INTERCEPT PROGRAM ACT TO INCLUDE CERTAIN DEBTS BY EMPLOYERS INCURRED UNDER THE WORKERS' COMPENSATION ACT OR THE WORKERS' COMPENSATION ADMINISTRATION ACT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     Section 1. Section 7-2C-2 NMSA 1978 (being Laws 1985, Chapter 106, Section 2, as amended) is amended to read:

     "7-2C-2. PURPOSE.--

          A. The purpose of the Tax Refund Intercept Program Act is to comply with state and federal law:

                (1) by enhancing the enforcement of child support and medical support obligations;

                (2) to aid collection of outstanding debts owed for:

                     (a) overpayment of public assistance and overissuance of food stamps; [and]

                     (b) overpayment of unemployment compensation benefits and nonpayment of contributions or payments in lieu of contributions or other amounts due under the Unemployment Compensation Law;

                     (c) nonpayment of reimbursements owed to the uninsured employers' fund under the Workers' Compensation Act; and

                     (d) nonpayment of the workers' compensation fee due under the Workers' Compensation Administration Act;

                (3) to promote repayment of educational loans;                 (4) to aid collection of fines, fees and costs owed to the district, magistrate and municipal courts;

                (5) to aid collection of fines, fees and costs owed to the Bernalillo county metropolitan court; and

                (6) to aid in the payment to the state investment officer of film production tax credit amounts owed to the state investment officer due to [a loan] loans made against the credit pursuant to Subsection D of Section

7-27-5.26 NMSA 1978.

          B. Efforts to accomplish the purpose of the Tax Refund Intercept Program Act may be enhanced by establishing a system to collect debts, in particular, outstanding child support obligations, educational loans, amounts due under the Unemployment Compensation Law, the Workers' Compensation Act and the Workers' Compensation Administration Act, fines, fees and costs owed to the district, magistrate and municipal courts, film production tax credit amounts owed to the state investment officer and fines, fees and costs owed to the Bernalillo county metropolitan court, by setting off the amount of such debts against the state income tax refunds or film production tax credit amounts due the debtors."

     Section 2. Section 7-2C-3 NMSA 1978 (being Laws 1985, Chapter 106, Section 3, as amended) is amended to read:

     "7-2C-3. DEFINITIONS.--As used in the Tax Refund Intercept Program Act:

          A. "claimant agency" means the taxation and revenue department or any of its divisions, the human services department, the employment security division of the labor department, the workers' compensation administration, any corporation authorized to be formed under the Educational Assistance Act, a district, magistrate or municipal court or the Bernalillo county metropolitan court;

          B. "debt" means a legally enforceable obligation of an employer subject to the Unemployment Compensation Law, the Workers' Compensation Act and the Workers' Compensation Administration Act, or an individual to pay a liquidated amount of money that:

                (1) [that] is equal to or more than one hundred dollars ($100);

                (2) [that] is due and owing a claimant agency, which a claimant agency is obligated by law to collect or which, in the case of an educational loan, a claimant agency has lawfully contracted to collect;

                (3) [that] has accrued through contract, tort, subrogation or operation of law; and

                (4) [that in the case of an amount due under the Unemployment Compensation Law, has been secured by a warrant of levy and lien or, in all other cases, has been reduced to judgment] either:

                     (a) has been secured by a warrant of levy and lien for amounts due under the Unemployment Compensation Law or workers' compensation fees due under the Workers' Compensation Administration Act; or

                     (b) has been reduced to judgment for all other cases;

          C. "debtor" means any employer subject to the Unemployment Compensation Law, the Workers' Compensation Act and the Workers' Compensation Administration Act, or any individual owing a debt;

          D. "department" or "division" means, unless the context indicates otherwise, the taxation and revenue department, the secretary of taxation and revenue or any employee of the department exercising authority lawfully delegated to that employee by the secretary;

          E. "educational loan" means any loan for educational purposes owned by a public post-secondary educational institution or owned or guaranteed by any corporation authorized to be formed under the Educational Assistance Act;

          F. "medical support" means amounts owed to the human services department pursuant to the provisions of Subsection B of Section 40-4C-12 NMSA 1978;

          G. "public post-secondary educational institution" means a publicly owned or operated institution of higher education or other publicly owned or operated post-secondary educational facility located within New Mexico;

          H. "spouse" means an individual who is or was a spouse of the debtor and who has joined with the debtor in filing a joint return of income tax pursuant to the provisions of the Income Tax Act, which joint return has given rise to a refund that may be subject to the provisions of the Tax Refund Intercept Program Act; and

          I. "refund" means a refund, including any amount of tax rebates or credits, under the Income Tax Act or the Corporate Income and Franchise Tax Act that the department has determined to be due to an individual or corporation."

     Section 3. Section 7-2C-6 NMSA 1978 (being Laws 1985, Chapter 106, Section 6, as amended) is amended to read:

     "7-2C-6. PROCEDURES FOR SETOFF--NOTIFICATIONS TO

DEBTOR.--

          A. Each year a claimant agency seeking to collect a debt through setoff shall notify the department in the manner and by the date required by the department, which date shall be in the period from November 1 through December 15. The notice to the department shall include the amount of the debt, the name and identification number of the debtor and such other information as the department may require. The notice shall also include certification that the debt is due and owing the claimant agency or that the claimant agency is obligated by law to collect the debt. This notice shall be effective only to initiate setoff against refunds that would be made in the calendar year subsequent to the year in which notification is made to the department.

          B. The claimant agency shall inform the department within one week of any changes in the status of any debt submitted by the claimant agency for setoff.

          C. Upon proper and timely notification from the claimant agency, the department shall determine whether the debtor is entitled to a refund of at least fifty dollars ($50.00). The department shall notify the claimant agency in writing, or in such other manner as the department and the claimant agency may agree, with respect to each debt accepted for setoff whether the debtor is due a refund of fifty dollars ($50.00) or more and, if so, the amount of refund, the address of the debtor entered upon the return and, if the refund arises from a joint return, the name and address of the spouse as entered upon the return.

          D. Within ten days after receiving the notification from the department pursuant to Subsection C of this section, the claimant agency shall send a notice by first class mail to the debtor at the debtor's last known address. The notice required by this subsection shall include:

                (1) a statement that a transfer of the refund will be made and that the claimant agency intends to set off the amount of the transfer against a claimed debt;

                (2) the amount of the debt asserted and a description of how the debt asserted arose;

                (3) the name, address and telephone number of the claimant agency;

                (4) the amount of refund to be set off against the debt asserted;

                (5) a statement that the debtor has thirty days from the date indicated on the notice to contest the setoff by applying to the claimant agency for a hearing with respect to the validity of the debt asserted by that agency; and

                (6) a statement that failure of the debtor to apply for a hearing within thirty days will be deemed a waiver of the opportunity to contest the setoff and to a hearing.

          E. If the refund against which a debt is intended to be set off results from a joint tax return, the claimant agency shall send a notice by first class mail to the spouse named on the return within ten days after receiving the notification from the department pursuant to Subsection C of this section. The notice to the spouse shall contain the following information:

                (1) a statement that a transfer of the refund will be made and that the claimant agency intends to set off the amount of the transfer against a claimed debt;

                (2) the total amount of the refund and the amount of each claimed debt;

                (3) the name, address and telephone number of the claimant agency;

                (4) a statement that no debt is claimed against the spouse and that the spouse may be entitled to receive all or part of the refund regardless of the claimed debt against the debtor spouse;

                (5) a statement that to assert a claim to all or part of the refund, the spouse [must] shall apply to the claimant agency for a hearing within thirty days from the date indicated on the notice with respect to the entitlement of the spouse to all or part of the refund from which a transfer will be made at the request of the claimant agency; and

                (6) a statement that failure of the spouse to apply for a hearing within thirty days may be deemed a waiver of any claim of the spouse with respect to the refund.

          F. A debtor may contest the setoff of a debt by applying to the claimant agency for a hearing within thirty days of the date the notice required by Subsection D of this section is sent to the debtor. Failure of the debtor to apply for a hearing within the time required shall constitute a waiver of the right to contest the debt or the setoff of the debt.

          G. A spouse may contest the setoff of a debt against a refund to which the spouse claims entitlement in whole or in part by applying to the claimant agency for a hearing within thirty days of the date the notice required by Subsection E of this section was sent to the spouse. Failure of the spouse to apply for a hearing within the time required shall constitute a waiver of the right to contest the setoff of the debt against a refund to which the spouse may claim entitlement.

          H. The department shall apply against the refund the amount of the claimed debt, not to exceed the amount of the refund, and shall transfer that amount to the claimant agency with an accounting of the amount transferred. When the amount of refund due exceeds the amount of all applied debts, the department shall treat the excess as it does other refunds relating to income taxes.

          I. Whether or not the refund due the debtor exceeds the amount of the applied debt, the department shall notify the debtor at the time of the transfer to the claimant agency of:

                (1) the fact of the transfer and that the claimant agency intends to set off the amount of the transfer against the asserted debt;

                (2) the total amount of the refund;

                (3) the amount of debt asserted by the claimant agency; and

                (4) the name, address and telephone number of the claimant agency.

          J. Once the department has sent to the debtor the notice required by Subsection I of this section, together with any excess of the amount of refund over the amount of asserted debts, the department shall be deemed to have made the refund required by the Income Tax Act or the Corporate Income and Franchise Tax Act."

     Section 4. Section 7-2C-11 NMSA 1978 (being Laws 1985, Chapter 106, Section 11, as amended) is amended to read:

     "7-2C-11. PRIORITY OF CLAIMS.--

          A. Claims of the department take precedence over the claim of any competing claimant agency, whether the department asserts a claim or sets off an asserted debt under the provisions of the Tax Refund Intercept Program Act or under the provisions of any other law that authorizes the department to apply amounts of tax owed against any refund due an individual pursuant to the Income Tax Act.

          B. After claims of the department, claims shall take priority in the following order before claims of any competing claimant agency:

                (1) claims of the human services department resulting from child support enforcement liabilities;

                (2) claims of the human services department resulting from medical support liabilities;

                (3) claims resulting from educational loans made under the Educational Assistance Act;

                (4) claims of the human services department resulting from AFDC liabilities;

                (5) claims of the human services department resulting from food stamp liabilities;

                (6) claims of the employment security division of the labor department arising under the Unemployment Compensation Law;

                (7) claims of a district court for fines, fees or costs owed to that court;

                (8) claims of a magistrate court for fines, fees or costs owed to that court;

                (9) claims of the Bernalillo county metropolitan court for fines, fees or costs owed to that court; [and]

                (10) claims of a municipal court for fines, fees or costs owed to that court; and

                (11) claims of the workers' compensation administration arising under the Workers' Compensation Act or the Workers' Compensation Administration Act."

     Section 5. APPLICABILITY.--The provisions of this act apply to tax refunds issued on or after January 1, 2007.

- 12 -