TOPIC: Offsetting Vendor Payments
OFFICE: Office of Administration
QUESTION / ISSUE:
STATE: MO DATE: 09/13/13
1. Does your state have a practice of offsetting (or intercepting) vendor payments to satisfy outstanding debts owed to the state such as uncollected state taxes?
2. If yes, do you indiscriminately offset vendor payments (similar to TOP) or do you exclude certain types of payments?
3. If you exclude certain types of payments, what is the criteria used to exclude payments (ex. federal or dedicated payment fund, individual vendor, etc)?
State
Alaska
Iowa
Comments
1. No, the state of Alaska does not perform offsets at the state level, and we do not participate in the federal TOPS program. We do not have a state income tax or sales tax imposed on our residents. Our revenue base is mainly attributable to rents and royalties plus some corporate taxes and some use type taxes. We are currently in the process of an ERP implementation, and we have been made aware that debt offsets are a functionality that would be available and we are discussing this process.
2. Yes, Iowa offsets vendor payments for debts owed to the state.
3. Iowa excludes certain types of payments.
4. Aid payments are exempted, prohibited by federal law, retirement payments, and unemployment payments.
Kentucky
Massachusetts
1. Yes
2. We exclude certain payments.
3. We use a variety of ways to exclude certain payments, to name a few; Object Code, agency code and document type. We also have a “check writer” process that we use to group payments of a like kind (retirement, unemployment, benefit payments, etc.) together and issue many checks or EFT’s with minimal accounting transactions. Each individual check writer can be designated to be included or excluded from the offset process as desired.
1. Yes, we have been offsetting both warranted vendor payments made by the
Comptroller’s Office and personal income tax refunds made by the MA Department of
Revenue since 1995 to relieve delinquent debt including delinquent personal income tax, higher education, welfare and Medicaid overpayments, child support, and other non-tax debts. Our collections (against warranted vendor payments and DOR tax refunds) since inception through June 2013 have topped $100M ($102,229,000) (this does not include
DOR’s own internal offsets of child support or delinquent taxes against their income tax refunds).
2. We do not indiscriminately offset vendor payments; we can exclude payments based on broad or specific criteria.
3. For offsets within the vendor warrant process, we have an automated filter (table) that allows us to systematically exclude payments by comptroller defined criteria including payment type across all departments, payment classification, a specific department, a specific vendor or a specific payment itself.

State
Minnesota
Montana
Nevada
North Carolina
Comments
Minnesota plans to start executing vendor offsets in October of 2013. We implemented a new accounting system in July of 2011, but the offset portion was delayed. We previously had a system in place where vendor payments were diverted to the MN Department of
Revenue if the tax ID on their debt file matched the tax ID on our vendor file.
We have a statute in place that prohibits us from intercepting government assistance payments based on need. In part, this includes, but is not limited to, Minnesota family investment program, general assistance medical care, Supplement Security income, medical assistance, Minnesota Care, Medicare part B premiums or receipt of part D extra help, emergency assistance, energy and fuel assistance, and food support. Additional exclusions include unemployment compensation, state retirement benefits, and adoption assistance payments.
Montana has an offset system which is a program attached to our central accounting system.
The programming is maintained by Department of Administration staff within the State
Financial Services Division. The actual program is run by Department of Revenue staff.
- A debt has to be input into the offset system and can be from any agency. The agency debt can be taxes, licenses, fees, judgments, etc.
- When a payment by any agency is made there is a potential to offset that payment.
- We define whether a payment is subject/not subject to offset. For example, payments for child support, UI and other benefits are not subject to offset in our system.
- Then we look for a SSN/TIN match for each payee payment subject to offset as compared to each associated with offset debt.
- If a payment subject to offset is made and a match is found, then payment is held for potential offset by the accounting system during nightly batch processing.
- If a determination is made to offset, then payee is provided a letter discussing the offset procedure their rights under this process.
- After 30 days, the money is provided to agency to which is owed the debt.
- The Department of Revenue will take a fee on most payments that are offset. This fee, if charged, is paid by the payee not the agency.
Agencies are asked to provide the federal law, state statute or other regulations as to why that type of payment is not subject to offset. Only payment with proper documentation will not be subject to offset.
1. Yes, the state of Nevada uses the "State Debt Offset" process. It includes state vendors and current state employees.
2. We exclude some types of payments such as federal funds.
3. So far federal funds and some dedicated funds to take care of incapacitated children are not included in the debt offset process so our office does not touch these types of funds.
The link below provides information on the state of North Carolina vendor attachment program: http://www.osc.nc.gov/programs/Vendor_Attachment_Presentation_Agencies_Final8-17-
10.ppt
1. Yes – currently only vendor payments in the North Carolina Accounting system – for taxes receivable only.
2. By legislation – we exclude child support, payment to the blind for living assistance and all payments recorded as grants – specifically federal supported.
3. Stated above

State
Rhode Island
Virginia
Comments
1. Yes, we process offsets for the taxation department including personal income, corporate, employee withholding and sales/use taxes.
2. Our taxation department requests an offset against any outstanding payment pending and the deduction will apply automatically upon processing of payments. Exclusions are reviewed on a case-by-case basis at the request of the agency making payment and are only allowed with taxation's approval.
3. Taxation normally only excludes court related payments such as court ordered settlement payments and payments required to file court documents.
1. Yes – we have an Individual Set-Off Debt Collection Program (uncollected tax debts) and a Comptroller’s Debt Set-Off Collection Program (debts owed to state agencies).
2. Certain types of payments are excluded for the Comptroller’s Debt Set-Off Program only.
3. Examples of criteria used to exclude payments from Comptroller’s Debt Set-off are salaries, wages, OPEBs, Unemployment Compensation Awards, Title IV Federal
Financial Aid, Federal Grants, EFTPS payments to the IRS, and payments to localities.
This is not an all-inclusive list.