STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5794

October 7, 1980

SOCIAL SERVICES, DEPARTMENT OF:

Recovery of welfare benefit overpayments

TREASURY, DEPARTMENT OF:

Authority of revenue division over state claims

Set off of state claim against income tax refund

Claims for overpayment of welfare benefits may be referred by the Department of Social Services to the revenue division of the Department of Treasury for collection by the revenue division.

Uncollectible claims in the amount of more than $100 may be submitted by the revenue division to the State Administrative Board for its determination that the claims are to be written off and cancelled.

Where a person who has received overpayment of welfare benefits agrees to repayment or a court judgment in favor of the state is obtained against such person, the Department of Treasury may set off such claim against any income tax refund which may be due such person.

John T. Dempsey

Director

Michigan Department of Social Services

300 S. Capitol Avenue

Lansing, Michigan 48909

You have requested my opinion on several questions regarding procedures for collecting overpayments of welfare benefits made to public assistance recipients. You express concern about situations where the recipients are no longer receiving public assistance and where the Department of Social Services has obtained a judgment against or an agreement with the former recipient whereby he or she is obligated to repay a specified sum to the Department of Social Services.

First, you have asked what procedures must the Department of Social Services follow with respect to overpayments which the Department of Social Services has been unable to collect through its own efforts. At the outset, it should be noted that through the Social Welfare Act, 1939 PA 280, Sec. 60; MCLA 400.60; MSA 16.460, the Department of Social Services is authorized to take any necessary steps to recover overpayments of public assistance due to fraud or other fault of the recipient. That section provides, in pertinent part:

Once the Department of Social Services has determined that a given claim for reimbursement is uncollectible through its own efforts, it must report the debt to the revenue division of the Department of Treasury. Pursuant to 1941 PA 122, Sec. 13; MCLA 205.13; MSA 7.657(13), the powers and duties pertaining to collecting past due monies and accounts due the State of Michigan were transferred from the office of Attorney General to the Department of Revenue. ⁽¹⁾ To this effect, 1941 PA 122, Sec. 13, supra, in pertinent part, states:

1927 PA 375, Sec. 3; MCLA 14.133; MSA 3.233, referred to in 1941 PA 122, Sec. 13, supra, states:

Once the delinquent account is referred to the revenue division, it is authorized, pursuant to 1927 PA 375, Sec. 4; MCLA 14.134; MSA 3.234, 'to bring suits, to settle and compromise all such claims and accounts and to receive and receipt for all such collections and payment; under the direction of the Attorney General . . .'

It is, therefore, my opinion that claims for overpayment of welfare benefits may be referred by the Department of Social Services to the revenue division of the Department of Treasury for collection.

You have also asked whether OAG, 1956, No 2561, p 583 (October 8, 1956) directs the Department of Social Services to refer its uncollectible accounts to the Office of the Attorney General, rather than the Department of Revenue, pursuant to 1927 PA 375, supra. In that opinion, the Attorney General was asked whether 1927 PA 375, supra, applied to claims for reimbursement of old age assistance. Reimbursement of old age assistance was governed by the Social Welfare Act, 1939 PA 280, Sec. 34a; MCLA 400.34a; MSA 16.434a, which section was subsequently repealed by 1965 PA 305. The former section provided that the Department of Social Services was authorized to file claims in probate court 'for reimbursement from the estate of the deceased for old age assistance grants paid during the lifetime of the deceased.' OAG, 1956, No 2561, supra, stated that because such claims could only be realized through court proceedings, the claims should be referred directly to the Attorney General's office, rather than to the then Department of Revenue and, thus, 1927 PA 375, supra, did not govern reimbursement proceedings filed pursuant to 1939 PA 280, Sec. 34a, supra. Since court proceedings are not necessarily required to collect overpayments of welfare assistance due to recipient wrongdoing, OAG, 1956, No 2561, supra, is not controlling here and delinquent accounts, therefore, should be referred to the revenue division, rather than to the Attorney General. ⁽³⁾

It is my opinion, therefore, in response to your second question, that claims for overpayments of welfare benefits should be referred to the revenue division of the Department of Treasury rather than to the Attorney General.

You next ask whether the Department of Social Services may 'write off' uncollectible accounts without the approval of the State Administrative Board. 1927 PA 375, Sec. 4, supra, provides that, while the revenue division is empowered to settle and compromise all accounts and claims owing to the State of Michigan, 'no claim or account in the amount of more than 100 dollars shall be compromised or settled at a greater discount than 15%, without the approval of the State administrative board.' As noted above, the Department of Social Services is required to forward statements of all uncollectible accounts to the revenue division, regardless of the size of the claim, and the revenue division is then empowered to take whatever action it deems appropriate on the account.

Therefore, in answer to your third question, it is my opinion that the decision to 'write off' or cancel a delinquent account of $100.00 or less, or to seek approval from the State Administrative Board to write off or cancel an overdue account over $100.00, must be made by the revenue division of the Department of Treasury.

In your last question you have asked whether the State may, as a means of recovering overpayments of public assistance owed to the State, set off the amount owed by the recipient against any tax refund due to the recipient. RS 1846, ch 12, Sec. 18; MCLA 13.18; MSA 3.122, provides:

While this authority was expressly vested in the Auditor General, this authority is now vested by law in the State Treasurer. 1959 PA 43, Sec. 1; MCLA 12.41; MSA 3.140(1). This grant of authority to examine, adjust and settle the claims of all persons indebted to the State and to draw a warrant when the State Treasurer determines that there may be an amount due to any person includes the authority to set off any sums that are due the State providing the amount is liquidated either by agreement of the debtor or a judgment obtained against the person making the claim.

Further, neither RS 1846, ch 12, Sec. 18, supra, nor any provision of the Income Tax Act of 1967, 1967 PA 281; MCLA 206.1 et seq; MSA 7.557(101) et seq, abrogate or modify the common law right of the State to set off any liquidated sums which may be due it by a citizen against any refund of income tax which may be due the citizen. Brown v Lobdell, 36 Or App 399; 585 P2d 4 (1978), United States v Muncie Trust Co, 332 US 234; 67 S Ct 1599; 91 L Ed 2022 (1946).

It is, therefore, my opinion that where a former public assistance recipient has signed an agreement to repay a sum certain or where a court judgment has been obtained for the same in favor of the State, such sums due the State may be set off against any income tax refund due the recipient.

Frank J. Kelley