Over the last five years, state agencies, including public colleges and a university hospital system, collected a total of nearly $95 million in past-due payments through deductions from state income-tax refunds, records reviewed by The Nerve show.
A little-known state law, titled the “Setoff Debt Collection Act” (SDCA), allows state and local government agencies, “quasi-governmental” agencies and private colleges to seek deductions from income tax refunds by filing claims with the S.C. Department of Revenue.
The department recently provided The Nerve with collection records from 2016 through last year under the state Freedom of Information Act. This story examines collections by state agencies only.
The Nerve’s review found that 45 state agencies collected a total of $94.8 million over the five-year period, with overall collections ranging from $278 by the state Department of Juvenile Justice to $28.1 million by the S.C. Department of Social Services. The median total collected amount, which represents the midway point on the list, was $400,246.
Department of Revenue (DOR) records also show a total of 254,382 “offsets,” or deductions, from tax refunds during the period, ranging from two each by the S.C. Attorney General’s Office and S.C. Department of Agriculture to 63,929 by DSS.
Following is a list of the agencies that collected a total of at least $1 million from 2016 through 2020:
- Department of Social Services: $28.1 million
- Medical University of South Carolina Hospital Authority: $22.1 million
- Department of Employment and Workforce: $13.2 million
- Department of Mental Health: $5.6 million
- University of South Carolina (including Aiken, Beaufort and Upstate campuses): $3 million
- Horry-Georgetown Technical College: $2.2 million
- Department of Probation, Parole and Pardon Services: $1.8 million
- Santee Cooper: $1.8 million
- Florence-Darlington Technical College: $1.8 million
- Spartanburg Community College: $1.8 million
- Piedmont Technical College: $1.6 million
- Trident Technical College: $1.5 million
- South Carolina State University: $1.4 million
- York Technical College: $1.2 million
The refund deductions sought by the agencies likely were higher than actual collected amounts. For example, the MUSC Hospital Authority last year collected a total of $5.4 million, DOR records show, though the agency sought a collective $56.1 million from 51,047 accounts that year, MUSC spokeswoman Heather Woolwine said Tuesday in a written response to The Nerve.
That worked out to be an average of about $1,100 owed per account. The Charleston-based health system owns and operates eight hospitals in Charleston, Chester, Florence, Lancaster and Marion counties.
“MUSC Health considers this (setoff debt) program a last resort in trying to settle these outstanding balances,” Woolwine said. “We would much rather work with our patients in real time to make payment arrangements, help them navigate next steps with their insurance companies or determine if they qualify for charity care.”
Woolwine said $50 is the lowest debt amount that the hospital authority will seek to collect under the SDCA. An account is designated in “bad debt status” if the amount owed is more than 270 days old during the prior three years, she said, noting patients receive “at least” four billing statements and six phone calls, plus three letters, before SDCA claims are made.
The law requires that an agency give those with delinquent debts at least 30 days’ notice of its intention to seek to refund deductions. DOR can retain up to $25 of each refund to process a claim.
A taxpayer who is subject to a claim has “no property right or property interest” in a refund until “all amounts due the State and claimant agencies are paid,” under the law, though a written protest can be filed with the agency seeking the refund deduction.
Last year, the MUSC Hospital Authority received 143 protests, with 40 accounts “being removed from the setoff,” Woolwine said, adding that in two cases that were appealed to the state after refund deductions were taken, the amounts were returned to the patients.
Other state agencies
At the University of South Carolina, tuition and academic fees are the most common types of debt owed, university spokesman Jeff Stensland told The Nerve in a written response Monday. He said $100 is the lowest debt amount that the school will seek to collect under the SDCA.
“Typically a debt is delinquent for at least 180 days before it is deemed uncollectible and written off,” Stensland said. “At the time of writing the debt off of our books, we submit to an outside collection agency and SDCA simultaneously.”
Last year, the university made 2,658 claims under the SDCA, he said.
Clemson University collected a total of $976,665 through refund deductions over the five-year period, The Nerve’s review found. The university didn’t answer any written questions submitted by The Nerve; school spokesman Joe Galbraith on Tuesday said he was waiting for “one response from our finance team,” though he made no follow-up reply.
DSS, which had the largest amount of total collections over the five-year period, also didn’t respond to written questions. DOR records listed most of that agency’s collections under a category labeled “child support”; the remainder was listed under a separate category labeled “food stamps.”
In a written response Tuesday to The Nerve, state Department of Mental Health spokeswoman Tracy LaPointe said the agency made 18,679 claims last year under the SDCA. Inpatient hospital bills are the most common type of debt owed to the department, she said.
“Debt is submitted to the SC Department of Revenue if no payment is made within one year of discharge,” she said, adding that $50 is the lowest debt amount that the agency will seek to collect under the law.
Dorothy Weaver, spokeswoman for the S.C. Department of Employment and Workforce, told The Nerve in an email response Tuesday that “nonfraudulent overpayments” of unemployment benefits are the most common type of debt owed to the agency.
She referred The Nerve to the agency’s website instead of directly answering other questions, noting, “Agency staff are currently focused on helping claimants navigate off of the federal pandemic unemployment insurance programs as well as reemployment resources.”
The state House Ethics Committee also has used the SDCA to collect unpaid fines – typically for campaign reporting violations, as The Nerve previously revealed. DOR records show that the committee collected a total of $19,195 from 2016 through 2020 under the law.