Opinion
22-ALJ-30-0151-CC
09-22-2022
Kyle Joslin, Petitioner, v. Spartanburg Community College, Respondent. In re: Ashley Joslin
Kyle Joslin, pro se Scott Talley, Esq. For Respondent Spartanburg Community College
Kyle Joslin, pro se
Scott Talley, Esq. For Respondent Spartanburg Community College
FINAL ORDER
S. PHILLIP LENSKI S.C. ADMINISTRATIVE LAW JUDGE
STATEMENT OF THE CASE
This case is before the Administrative Law Court (ALC or court) pursuant to a request for a contested case hearing filed by Kyle Joslin (Petitioner) on April 26, 2022. The Petitioner challenges the determination of the Spartanburg Community College (SCC) that a debt owed by the Petitioner's wife, Ashley N. Joslin, to SCC in the amount of $941.96 was properly submitted through the Setoff Debt Collection Act (SOD Act) and deducted from the Petitioner's joint tax return. Specifically, SCC contends that: (a) the Petitioner lacks standing to contest the setoff on behalf of his wife; (b) the protest of the debt setoff was untimely filed; and (c) no evidence or argument has been presented indicating that the Petitioner has a legitimate dispute as to the validity or amount of the underlying debt. The Petitioner, on the other hand, argues that SCC failed to follow proper procedure in submitting the debt through the SOD Act and deprived him of his right to a hearing.
A $25 administrative fee was added to the debt, bringing the total setoff amount to $966.96. See S.C. Code Ann § 12-56-60(B) (2014) ("The [Department of Revenue] may retain an amount not to exceed twenty-five declare of each ~& refund set off to defray its administrative expenses, and that amount may be added to the debt.")
See S.C. Code Ann. § 12-56-10 to -120 (2014).
A hearing in this matter was held on August 31, 2022, at the ALC in Columbia, South Carolina. After careful consideration of the evidence presented and the applicable law, the court finds that the Petitioner failed to carry his burden of establishing that he is entitled to relief under the facts of the case.
At the hearing, the Petitioner moved under Rule 605, SCRCP, to be permitted to record the hearing on his personal; video camera as a member of the media. The court denied this request upon finding that the Petitioner had not & previously identified his alleged media company and did not present evidence of any credentials to establish that he met the definition of "media" under Rule 605. The Petitioner also moved to sequester SCC's witness, Mr. Snead. The court denied that request as well but allowed the Petitioner wide discretion to impeach Mr. Snead as needed.
ISSUES
1. Does the Petitioner have standing to contest the debt setoff on behalf of his wife?
2. Was the protest of the debt setoff timely filed?
3. Did SCC follow proper procedure in submitting the debt under the SOD Act?
4. Did the Petitioner establish a legitimate dispute as to the validity of the underlying debt?
FINDINGS OF FACT
Having carefully considered all testimony, exhibits, and arguments presented at the hearing in this matter, and considering the credibility and accuracy thereof, the court makes the following findings of fact by a preponderance of the evidence:
1. On May 29,2018, SCC sent a letter via U.S. mail and e-mail to the Petitioner's wife, Ashley N. Joslin, notifying her that it had been informed by the Business Office that she had withdrawn from SCC. The letter also notified her that her financial aid eligibility needed to be recalculated, her federal aid award needed to be adjusted, and that the unearned aid had been returned to the U.S. Department of Education.
2. On October 13, 2020, SCC sent a letter to Mrs. Joslin informing her of a debt to SCC in the amount of $2,518.96 that it planned to submit to the Department of Revenue (DOR) for collection under the SOD Act until the debt was paid.
3. On October 22, 2021, SCC sent another letter to Mrs. Joslin indicating that the amended debt now owed to SCC was $941.96 and notifying her of its intent to submit or resubmit the debt under the SOD Act. The letter informed Mrs. Joslin of her protest rights and noted that "[t]he original written protest must be mailed to Spartanburg Community College prior to November 23, 2021."
4. On December 1, 2021, Mrs. Joslin's delinquent debt was submitted to DOR in accordance with a filing deadline for delinquent debts submitted under the SOD Act.
5. On December 2, 2021, SCC received a brief, undated written protest from Mrs. Joslin stating merely "I dispute that I owe this debt." The envelope containing this letter was postmarked November 22, 2021.
6. At the hearing, Mr. James Snead testified on behalf of SCC and Mr. Joslin testified on his own behalf.
7. Mr. Snead is a financial coordinator with SCC. In that position, he is charged with collecting debts over one (1) year old, collecting scholarships, and general bookkeeping duties. Mr. Snead testified that he received training materials from DOR-referred to as the Governmental Entity Collections (GEC) Program Guide-setting forth the debt setoff procedures that SCC must employ. Generally speaking, SCC must first send notice of the bad debt and give the debtor an opportunity to protest the setoff determination. Debt setoff protests must be timely filed in writing and must contain certain information to be valid. After receipt of a valid protest, Mr. Snead must provide notice of the protest to DOR by filing a GEC-2 form. Thereafter, SCC must provide the protesting debtor with a hearing before Mr. Snead, who was appointed by SCC as the hearing officer. In the absence of a valid protest, delinquent debts may be submitted to DOR for collection on or before December 1st of every year-a strict, DOR-imposed deadline for setoff claims.
8. In this case, Mr. Snead confirmed that he sent a notice of intent to setoff debt dated October 22, 2021, to Mrs. Joslin regarding the outstanding balance on her account. He received Mrs. Joslin's protest with the required information on December 2, 2021, though he recalled that the letter was postmarked November 22, 2021, prior to the stated deadline.In any event, by the time the protest was delivered to SCC on December 2nd, Mr. Snead
had already submitted Mrs. Joslin's account to DOR for collection the previous day, which Mr. Snead informed Mr. Joslin of by phone when he received the protest on December 2nd. As such, Mr. Snead did not file a GEC-2 form with DOR and did not offer or hold a hearing on the protest, as required. Mr. Snead confirmed that, as of the date of the hearing, he had not received or seen any specific information regarding the Petitioner's challenge to the underlying debt and still did not know why the debt was being disputed.
9. The Petitioner is still married to Ashley Joslin and was aware that she attended SCC for a period of time prior to the debt setoff efforts. He maintained that the protest was timely and properly filed with SCC and, as such, he was entitled to a hearing. The Petitioner further contends that SCC violated procedure and due process when it failed to offer or conduct such a hearing.
10.When asked, pointedly and repeatedly at this court's hearing, by counsel for SCC what argument or evidence he would have presented in dispute of the debt had he been afforded a hearing, the Petitioner stated only that, upon receiving notice of the hearing, he would have gathered information, prepared for the hearing, and had reasons to dispute the debt.
Although SCC's appointment of Mr. Snead as hearing officer for SCC's SOD claims appears to be in compliance with the SOD Act, the court has some concern about the appearance of partiality. Because Mr. Snead, as financial coordinator, is charged with collecting delinquent debts for SCC and also has investigative duties in that capacity, the court questions whether his role as hearing officer for those same claims does not create an appearance of partiality on his part. See Ross v. Med Univ. of S.C, 328 S.C. 51, 68, 492 S.E.2d 62, 71 (1997) ("Partiality exists where, among others, an adjudicator either has ex parte information as a result of prior investigation or has developed, by prior involvement with the case, a "will to win.") (citation omitted); but see Babcock Ctr., Inc. v. Off. of Audits, 286 S.C. 398, 402, 334 S.E.2d 112, 114 (1985) (holding that due process under article I, section 22 is not violated when an administrative agency adjudicates claims using "persons within the same agency who did not participate in investigative or prosecutorial capacities.").
This is SCC's second attempt to collect a debt of Mrs. Joslin's under the SOD Act. The first debt was apparently submitted under the SOD Act in 2020 and paid off through setoff tax returns.
There was inconsistent testimony at the hearing regarding the timeliness of the protest, specifically whether it is considered filed when deposited in the mail or when it is received. Nevertheless, Mr. Snead testified that it was mailed the "very last day," prior to the November 23, 2021, deadline.
Notably, Mrs. Joslin was not present in the courtroom at any point during the hearing in this matter and, therefore, did not submit any argument or evidence in this case. Mr. Joslin, who is not a licensed attorney, testified and argued the case on behalf of his wife.
CONCLUSIONS OF LAW
Based on the forgoing findings of fact, the court concludes the following as a matter of law:
1. The court has jurisdiction over this matter pursuant to section 12-56-65 of the South Carolina Code. S.C. Code Ann. § 12-56-65(C) (2014); see S.C. Code Ann. § l-23-600(A) (Supp.2021).
2. This court reviews contested cases de novo, meaning "the whole case is tried as if no trial whatsoever had been had in the first instance." Marlboro Park Hosp. v. & C. Dep 't of Health & Env 't Control, 358 S.C. 573, 579,595 S.E.2d 851, 854 (Ct. App. 2004) (quoting Blizzard v. Miller, 306 S.C. 373, 375, 412 SE.2d 406, 407, (1991)). In other words, the court "does not review the decision of someone else, but makes the determination himself. Thus, the [ALC], while he may use the record compiled earlier as part of the evidence in the case, may receive additional evidence and decides the issue without regard to the decisions made by the agency." Kiawah Dev. Partners, II v. S. C, Dep't of Health and Env 't Control, 411 S.C. 16, 54-55, 766 S.E.2d 707, 729 (2014) (citation omitted).
3. The SOD Act allows claimant agencies to submit for collection under the program all delinquent debts which they are owed. S.C. Code Ann. § 12-56-30(B) (2014). Collection efforts under the program are facilitated by DOR, which, "upon request, shall render assistance in the collection of any delinquent account or debt owing to any claimant agency by setting off any refunds due the debtor from the department by the sum certified by the claimant agency as delinquent debt." S.C. Code Ann. § 12-56-50 (2014).
4. For purposes of debt collections under the SOD Act, "refund" includes "a refund belonging to a debtor resulting from the filing of a joint income tax return." S.C. Code Ann. § 12-56-20(5) (2014). To that end, "[apportionment is not required in the case of a refund resulting from filing a joint return. A person has no property right or property interest in a refund until all amounts due the State and claimant agencies are paid." S.C. Code Ann. § 12-56-60(B); see also S.C. Code Ann. § 12-56-62 (2014) ("If you file a joint return with your spouse, [the setoff] amount will be deducted from the total joint refunds without regard to which spouse incurred the debt or actually withheld the taxes.").
5. "A request for setoff may be made only after the claimant agency has notified the debtor of its intention to cause the debtor's refund to be set off not less than thirty days before the claimant agency's request to the department." S.C. Code Ann. § 12-56-60(A) (2014).
6. Pursuant to the Act, a "debtor" may protest the debt by "fil[ing] a written protest with the claimant agency at the address provided in the claimant agency's notification of intention to set off." S.C. Code Ann. § 12-56-63(A) (2014).
The protest must be filed within thirty days of the date of the notice of intention to set off and must contain the debtor's name, address, and tax identification number, identify the type of debt in dispute, and give a detailed statement of all the reasons that support the protest. The requirements of this section are jurisdictional.Id; see also S.C. Code Ann. § 12-56-62 ("The giving of the notice by mail is complete upon the expiration of thirty days after deposit of the notice in the mail.").
7. "Upon receipt of a notice of protest, the claimant agency shall notify the department that a protest has been received and shall hold an informal hearing at which the debtor may present evidence, documents, and testimony to dispute the debt." S.C. Code Ann. § 12-56-65(B) (2014). Thereafter, "[a] debtor may seek relief from the hearing officer's determination by requesting, within thirty days of the determination, a contested case hearing before the Administrative Law Court." S.C. Code Ann. § 12-56-65(C).
8. Any party seeking to challenge a claimant agency's setoff determination must have standing to do so. "Standing refers to a party's right to make a legal claim or seek judicial enforcement of a duty or right." Pres. Soc'y of Charleston v. S.C. Dep't of Health and Env't Control, 430 S.C. 200, 209, 854 S.E.2d 481, 486 (2020) (citation omitted). It is "a fundamental prerequisite to instituting an action." Youngbloodv. S.C. Dep 't of Soc. Servs., 402 S.C. 311, 317, 741 S.E.2d 515, 518 (citation omitted).
9. "Standing may be acquired (1) by statute, (2) under the principle of 'constitutional standing,' or (3) via the 'public importance' exception to general standing requirements." Pres. Soc'y of Charleston, 430 S.C. at 209-10, 854 S.E.2d at 486 (citation omitted). The Petitioner did not argue standing via the public importance exception; therefore, only the concepts of statutory and constitutional standing are relevant to this case.
10."Statutory standing exists, as the name implies, when a statute confers a right to sue on a party, and determining whether a statute confers standing is an exercise in statutory interpretation." Youngblood, 402 S.C. at 317, 741 S.E.2d at 518 (citations omitted). As previously stated, pursuant to the SOD Act, a "debtor" may protest a claimant agency's intention to set off a debt. S.C. Code Ann. § 12-56-63(A). A "debtor" means "a person having a delinquent debt or account with a claimant agency which has not been adjusted, satisfied, or set aside by court order, or discharged in bankruptcy." S.C. Code Ann. § 12-56-20(3) (2014). A "delinquent debt" means, in pertinent part:
A sum due and owing a claimant agency, including collection costs, court costs, fines, penalties, and interest which have accrued through contract, subrogation, tort, operation of law, or other legal theory ... which is legally collectible and for which a collection effort has been or is being made.S.C. Code Ann. § 12-56-20(4) (2014). Therefore, statutory standing under the SOD Act exists for persons with an outstanding "sum due and owing ... which have accrued through contract, subrogation, tort, operation of law, or other legal theory." See id.; S.C. Code Ann. § 12-56-20(3).
11. Separately, the Administrative Procedures Act (APA) provides that "[a] party who has exhausted all administrative remedies available within the agency and who is aggrieved by a final decision in a contested case is entitled to judicial review pursuant to this article and Article 1." S.C. Code Ann. § 1-23-380 (Supp. 2021); see also S.C. Const, art. I, § 22 ("No person shall be finally bound by a judicial or quasi-judicial decision of an administrative agency affecting private rights except on due notice and an opportunity to be heard;... nor shall he be deprived of liberty or property unless by a mode of procedure prescribed by the General Assembly, and he shall have in all such instances the right to judicial review.").
12.For purposes of the APA, a "contested case" means "a proceeding including, but not restricted to, ratemaking, price fixing, and licensing, in which the legal rights, duties, or privileges of a party are required by law to be determined by an agency after an opportunity for hearing." S.C. Code Ann. § 1 -23-310(3) (2005). Likewise, "party" means "each person or agency named or admitted as a party, or properly seeking and entitled as of right to be admitted as a party." S.C. Code Ann. § 1-23-310(5) (2005).
13."The traditional concepts of constitutional standing are inapplicable when standing is conferred by statute." Pres. Soc'y of Charleston, 430 S.C. at 210, 854 S.E.2d at 486 (citations omitted). When standing is not conferred by statute, however, courts turn their analysis to one of constitutional standing.
14."Constitutional standing is based on Article III of the United States Constitution, which limits the jurisdiction of the federal courts to actual cases or controversies." Pres. Soc y of Charleston, 430 S.C. at 210, 854 S.E.2d at 486 (citation omitted).
"[T]he irreducible constitutional minimum of [Article III] standing contains three elements": (1) the plaintiff must have suffered an "injury in fact," i.e., an invasion of a legally protected interest that is concrete and particularized, and actual or imminent; (2) there must be a causal connection between the injury and the conduct complained of; and (3) it must be likely that the injury will be redressed by a favorable decision.Id. (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992)).
15.Unless otherwise required by law, the standard of proof in an administrative proceeding such as this is by a preponderance of the evidence. S.C. Code Ann. § l-23-600(A)(5) (Supp. 2021); Anonymous (M-156-90) v. State Bd. of Med. Exam'rs, 329 S.C. 371, 375, 496 S.E.2d 17,19 (1998) (citation omitted). A 'preponderance of the evidence' is evidence which convinces as to its truth. Frazier v. Frazier, 228 S.C. 149, 168, 89 S.E.2d 225, 235 (1955).
16. As the moving party in this matter, the Petitioner bears the burden of establishing, by a preponderance of the evidence, a right to relief from the setoff of his joint return. See Leventis v. S.C. Dep't of Health & Env't Control 340 S.C. 118, 132-33, 530 S.E.2d 643, 651 (Ct. App. 2000) (holding that the burden of proof in administrative proceedings generally rests upon the party asserting the affirmative of an issue) (citations omitted); see also 73A C.J.S. Pub. Admin. Law and Proc. § 296 (August 2022 Update) ("In administrative proceedings, the general rule is that an applicant for relief, benefits, or a privilege has the burden of proof, and the burden of proof rests upon one who files a claim with an administrative agency to establish that required conditions of eligibility have been met").
OPINION
The Petitioner argues that, because SCC failed to follow proper procedure in submitting his debt for collection under the SOD Act, the setoff should be nullified and his joint tax refund should be returned. Alternatively, SCC argues that the Petitioner's protest was untimely and that he has not established a legitimate dispute as to the validity of the underlying debt. Before those issues may be considered, however, the court must first address the threshold matter of standing.
Standing
At the hearing, counsel for SCC questioned the Petitioner's ability to contest the setoff of his joint tax refund on behalf of his spouse. The setoff of his joint tax returns for a debt incurred by his wife involves and certainly affects the Petitioner to a degree. Nevertheless, it is undisputed that the underlying delinquent debt that was subject to the setoff is associated with Ashley Joslin, not the Petitioner. It is further undisputed that Ashley Joslin was absent from the hearing, did not offer any explanation for her absence or request any continuance or delay of the proceeding, and did not introduce any testimony or evidence. The Petitioner appeared at the hearing and argued the case alone on behalf of his spouse. As set forth below, the court shares SCC's concerns regarding the Petitioner's ability to contest this case on his wife's behalf under South Carolina's unique debt setoff scheme.
Notably, the Petitioner is not an attorney and is, therefore, not authorized to represent his wife in court without independent standing to challenge the setoff. See SCALC Rule 8(A) ("Any party may be represented by an attorney .... No one shall be permitted to represent a party where such representation would constitute the unauthorized practice of law.").
Statutory Standing
Standing Under the SOD Act
For the Petitioner to gain statutory standing under the SOD Act, he must be a "debtor." See S.C. Code Ann. § 12-56-63(A). To qualify as a "debtor" under the Act, he must have an outstanding "sum due and owing a claimant agency . . . which have accrued through contract, subrogation, tort, operation of law, or other legal theory." See S.C. Code Ann. § 12-56-20(3) to -20(4).
Here, Mrs. Joslin's debt plainly qualifies as a "delinquent debt" under the terms of the Act, as it is a sum due and owing to SCC which accrued through contract and/or operation of law. However, there is no evidence that the Petitioner incurred any portion of that debt or that Mrs. Joslin's debt is attributable to him in any way. There is also no evidence to suggest that the Petitioner ever carried a balance with SCC, let alone a delinquent one, or that he personally owes SCC any money. While the Petitioner's joint tax refund was setoff to satisfy the debt of his spouse, this did not create a new "delinquent debt" to SCC in his name, nor did it alter or amend the terms of his spouse's delinquent debt to render any portion of it his.
Even if a setoff could itself create a delinquent debt under the SOD Act, the only arguable "sum due and owing" to SCC (i.e., "delinquent debt") associated with the Petitioner would be for the amount setoff of his joint tax refund from SCC's actions in this case, which would not change the terms of his wife's original debt. Thus, even if the Petitioner is a debtor under the terms of the SOD Act, his spouse's delinquent debt is still not his.
To that end, the SOD Act expressly disclaims any right or entitlement to a joint tax refund for the non-debtor spouse. For purposes of the SOD Act, a joint refund is treated as if it were individually filed by the debtor and the non-debtor spouse has no property right or interest in any portion of the refund until the delinquent debt is paid in full. See S.C. Code Ann. § 12-56-20(5); S.C. Code Ann. § 12-56-60(B); S.C. Code Ann. § 12-56-62. Thus, because the Petitioner is not a "debtor" under the terms of the SOD Act and does not have a statutory right or interest in the setoff of his joint refund, it does not appear that he has standing under the Act to initiate this claim.
The non-debtor spouse, also termed the "injured spouse," refers to someone who filed jointly and whose share of the refund was applied against the debt of their spouse. See Topic No. 205 Innocent Spouse Relief (Including Separation of Liability and Equitable Relief), INTERNAL REVENUE SERV., https://www.irs.gov/taxtopics/tc205 (last visited September 14,2022) ("You're an injured spouse if all or part of your share of a refund from a joint return was or will be applied against the separate past-due federal tax, state tax, child or spousal support, or federal non-tax debt (such as a student loan) owed by your spouse."). The Petitioner is analogous to a non-debtor, or injured spouse.
Standing Under the APA
Alternatively, the Petitioner may acquire statutory standing under the APA. To be eligible to gain standing under the APA, the Petitioner must have "exhausted all administrative remedies available within the agency" and be "aggrieved by a final decision in a contested case." See S.C. Code Ann. § 1-23-380.
Here, it is does not appear that the Petitioner exhausted his administrative remedies with SCC prior to seeking judicial review. To exhaust administrative remedies under the SOD Act, one must begin by filing a valid protest. See S.C. Code Ann. § 12-56-63(A). While the Petitioner's testimony makes clear that he was aware of and involved with filing the protest with SCC, Ashley Joslin is the only person named or identified in the protest itself. To that end, there is just one signature on the single-sentence protest and the person who wrote it used the singular pronoun "I," instead of the plural "we." Therefore, the evidence suggests that only Ashley Joslin attempted to exhaust her administrative remedies by filing a protest.
Even if the Petitioner had attempted to exhaust his administrative remedies by filing a protest, he was not aggrieved, in a legal sense, by SCC's setoff decision. As stated above, under the express terms of the SOD Act, "a person has no property right or property interest in a refund until all amounts due the State and claimant agencies are paid." S.C. Code Ann. § 12-56~60(B). Thus, for joint filers, "[apportionment is not required"; "[the setoff] amount will be deducted from the total joint refunds without regard to which spouse incurred the debt or actually withheld the taxes." Id; S.C. Code Ann. § 12-56-62. The Petitioner is, therefore, not aggrieved by SCC's decision under the SOD Act. Consequently, the APA does not explicitly confer standing upon the Petitioner either.
Constitutional Standing
The final path to standing is through Article III of the constitution. In order to establish constitutional standing, one must demonstrate an "injury in fact," a causal connection between the injury and conduct complained of, and that said injury is redressable by a favorable decision. Pres. Soc'y of Charleston, 430 S.C. at 210, 854 S.E.2d at 486 (citing Lujan, 504 U.S. at 560-61). To establish an "injury in fact," the Petitioner must show that there was "an invasion of a legally protected interest that is concrete and particularized, and actual or imminent." Id.
Here, the "injury" claimed by the Petitioner is the seizure of his joint tax refund to setoff his wife's delinquent debt. While that may arguably constitute an injury or invasion of the Petitioner's interests in a general sense, there does not appear to be a legally protected interest in his joint tax refund under South Carolina's unique setoff scheme. As previously stated, in South Carolina, "a person has no property right or property interest in a refund until all amounts due the State and claimant agencies are paid." S.C. Code Ann. § 12-56-60(B). Thus, not only is it not legally protected, but any right to or interest in a joint refund that is subject to the SOD Act is explicitly disclaimed in South Carolina. As such, there was no invasion of a legally protected interest in this case. Since there was no invasion of a legally protected interest, it does not appear that the Petitioner can acquire standing under Article III.
Notably, however, South Carolina is in the minority in this regard. The U.S. Department of Treasury and at least nine (9) other states-Iowa, Kentucky, Massachusetts, New York, North Carolina, Ohio, Oklahoma, Oregon, Virginia-have programs established to seize tax refunds to offset certain outstanding debts. As set forth below, in all but one of those programs, the non-debtor spouse is entitled to notice of the setoff and/or an opportunity to secure their share of the refund or otherwise object to the setoff.
Virginia is the only state identified by this court that offers a similar debt setoff program to South Carolina, in that it treats joint tax refunds as if they had been individually filed by the debtor and does not appear to offer any right to notice or apportionment to the non-debtor spouse. See Va. Code Ann. § 58,1-520 ("'Refund' . . . includes any refund belonging to a debtor resulting from the filing of a joint income tax return or a refund belonging to a debtor resulting from the filing of a return where married individuals have elected to file a combined return and separately state their Virginia taxable incomes ... .")•
For tax refund offsets conducted under the U.S. Department of Treasury's Treasury Offset Program, non-debtor spouses are entitled to notice and an opportunity to request their portion of the joint tax refund back from the IRS. In Iowa, non-debtor spouses are entitled to an opportunity to request to divide a jointly owned right to payment. Like South Carolina and Virginia, Kentucky also treats refunds resulting from jointly filed tax returns as if they were individually filed but has a different taxing scheme that allows married taxpayers the option of filing separately on a combined return if they wish to file together while keeping their tax liabilities and/or refunds separate. Non-debtor spouses in Kentucky are, therefore, still able to secure their share of the refund. Massachusetts provides non-debtor spouses with notice and an opportunity to contest the setoff and apportion the refund for certain debts, and outright prohibits the seizure of a non-debtor's portion of a joint refund for others. Non-debtor spouses in New York are entitled to notice and an opportunity to secure his or her share of the refund. In North Carolina, a non-debtor spouse had their share of the joint refund apportioned before the North Carolina Department of Revenue transmitted any setoff funds for payment of the debtor spouse's medical debt. Ohio explicitly excludes a non-debtor spouse's share of a joint refund from being subject to an offset and allows for the non-debtor spouse to apply for an apportionment of the refund. Oklahoma provides non-debtor spouses with notice that the debt is not being claimed against them and an opportunity to claim their share of the refund. Finally, in Oregon, non-debtor spouses may apply to have a refund of jointly filed taxes separated, so that any liabilities may be deducted from the debtor's share only.
See 31 C.F.R. § 285.2(e)(1)(ii) ("The notice . . . will also advise any non-debtor spouse who may have filed a joint tax return with the debtor of the steps which a non-debtor spouse may take in order to secure his or her proper share of the tax refund."); 31 C.F.R. § 285.2(f) ("If the person filing a joint return with a debtor ... takes appropriate action to secure his or her proper share of a tax refund from which an offset was made, the IRS will pay the person his or her share of the refund and request that Fiscal Service deduct that amount from amounts payable to the creditor agency."),
See Iowa Code Ann. § 8A.504(f)(1) ("Upon notice of entitlement to a payment, the public agency shall send written notification to that person of the public agency's assertion of its rights to all or a portion of the payment and of the public agency's entitlement to recover the liability through the setoff procedure, the basis of the assertion, the opportunity to request that a jointly or commonly owned right to payment be divided among owners, and the person's opportunity to give written notice of intent to contest the amount of the allegation. A public agency shall provide the person with an opportunity to contest the liability."); Iowa Code Ann. § 8A.504(g) ("Upon the timely request of a person liable to a public agency or of the spouse of that person and upon receipt of the full name and social security number of the person's spouse, a public agency shall notify the collection entity of the request to divide a jointly or commonly owned right to payment.").
See Ky. Rev. Stat. Ann. § 131.575(1), (2) (providing that any refund stemming from a jointly filed return shall be coupled together, while any refund stemming from combined but separately filed returns must be apportioned before being setoff).
See Mass. Gen. Laws Ann. ch. 62D, § 5 ("In the case of a joint return, the notice shall also state the name of a nondebtor spouse named in the return, if any, against whom no debt is claimed and the fact that a debt is not claimed against such nondebtor spouse. The notice shall advise the nondebtor spouse that he may apply in writing for a hearing before the claimant agency to determine what portion of the refund is attributable to the income of the nondebtor spouse."); Mass. Gen. Laws Ann. ch. 62D, § 16 ("If an individual filed a joint income tax return and the other state tax liability certified by a tax officer is not the liability of both parties to the joint income tax return, the commissioner shall not withhold or pay to the state that portion of the income tax refund attributable to the individual not owing the liability."); Mass. Gen. Laws Ann. ch. 62D, § 19 ("If an individual filed ajoint income tax return and the debt certified by a federal official is not the liability of both parties to the joint income tax return, the comptroller may not withhold or pay to the federal official that portion of the income tax refund attributable to the individual not owing the debt.").
See N.Y. Tax § 171-f(7) ("The commissioner of taxation and finance shall notify each taxpayer who makes an overpayment, in writing, of the amount of such overpayment and the interest thereon certified to the comptroller as an amount to be credited against a past-due legally enforceable debt . . . and of the name of the state agency which certified the amount to the commissioner of taxation and finance. Such notice shall include notification to any other person who may have filed a joint return with the taxpayer of the steps such other person may take in order to secure his or her proper share of the refund.").
See Barney Kohout v. UNC Hosps., Docket No. 13 UNC 18549, 2014 WL 1207844 (N.C. O.A.H. 2014).
See Ohio Admin. Code 5703-7-13 ("In the case of taxpayers who file joint returns, where one taxpayer is a liable spouse and one taxpayer is a non-liable spouse, only the portion of the refund belonging to the liable spouse is subject to the offset under paragraph (A) of this rule. The burden is on the taxpayers to prove that a portion of the refund is not subject to offset based on the information shown on the taxpayers' joint income tax return and the attachments thereto.").
See Okla. Stat. Ann. tit. 68, § 205.2 ("In the case of a joint return, the notice shall state: a. the name of any taxpayer named in the return against whom no debt... is claimed, b. the fact that a debt... is not claimed against the taxpayer, [and] c. the fact that the taxpayer is entitled to receive a refund if it is due regardless of the debt.. . asserted against the debtor or defendant. ...").
See Or. Admin. R. 150-314-0254 ("The department may . . . issue separate refunds when either spouse submits a signed request. . . . If either spouse has an amount owing to the state of Oregon, any refund due that person will be applied to the liability and the balance, if any, issued in a separate refund check.").
Thus, in the vast majority of jurisdictions, including the federal government, non-debtor spouses are entitled to some level of due process. This suggests that, outside of South Carolina, non-debtor spouses typically have some degree of a property interest, constitutional or otherwise, in their share of a tax refund stemming from a jointly filed return. See U.S. v. Elam, 112 F.3d 1036, 1038 (9th Cir. 1997) ("Spouses who file a joint return have separate interests in any overpayment, the interest of each depending upon his or her relative contribution to the overpaid tax."); see also 34 Am. Jur. 2d Fed. Tax'n § 70729 (August 22 Update) ("Each spouse has a separate interest in any overpayment of tax under a joint return."); 34 Am. Jur. 2d Fed. Tax'n § 70803 (August 22 Update) ("Only the portion of the overpayment applicable to the spouse who has an unpaid tax liability outside the joint return may be applied to that liability."); cf. City of Chicago v. Mich. Beach Hous. Co-op., 242 Dl.App.3d 636, 648, 609 N.E.2d 877, 886 (111. App. Ct. 1993) (noting the "now well-settled proposition that current or expected income tax refunds are general intangible property interests under [UCC] Article 9") (citations omitted).
However, these various statutory schemes also demonstrate that were the South Carolina General Assembly inclined to grant a non-debtor spouse a property interest in debt set-off actions, it could have done so. That there is no such provision in the relevant South Carolina statutes evidences a clear intent by our legislature to make no such provision for non-debtor spouses. Therefore, the court finds that the Petitioner lacks standing to contest the debt set-off action taken against his spouse.
Timeliness of the Protest
Assuming, arguendo, that the Petitioner does have standing, it appears that the protest in this case was timely filed. With respect to the deadline to protest a setoff, the SOD Act provides only that "[t]he protest must be filed within thirty days of the date of the notice of intention to set off. . . ." S.C. Code Ann. § 12-56-63(A). However, the SOD Act is silent as to when a protest may be deemed "filed." See id.
"Where a word is not defined in a statute, our appellate courts have looked to the usual dictionary meaning to supply its meaning." Lee v. Thermal Eng'g Corp.y 352 S.C. 81, 91-92, 572 S.E.2d 298, 303 (Ct. App. 2002) (citations omitted). Black's Law Dictionary defines "file" as "[t]o deliver a legal document to the court clerk or record custodian for placement into the official record." File, Black's Law Dictionary (11th ed. 2019). The dictionary definition, therefore, suggests that a protest would not be considered filed until it is actually delivered. However, the notice of intent to setoff debt that Mr. Snead sent Mrs. Joslin unequivocally states that "[t]he original written protest must be mailed to [SCC] prior to November 23,2021." Therefore, pursuant to the notice, the protest need only be mailed prior to the stated deadline. Because the protest was mailed on November 22,2021, it appears to have been sent in compliance with the deadline set by Mr. Snead's letter.
SCC Setoff Procedures
Once again assuming the Petitioner possesses standing, the court finds that SCC violated setoff procedures in this case. According to Mr. Snead and the GEC Program Guide, upon receipt of a valid protest, a claimant agency "must immediately submit [a GEC-2 form] to notify the SCDOR." Collection may not proceed until DOR has received confirmation from the hearing officer that a hearing was held and a decision was rendered in favor of the claimant agency.
Here, despite the apparent timeliness of the protest, SCC failed to submit a GEC-2 form to DOR, failed to provide notice and a hearing, and failed to notify DOR of the final adjudication of said hearing before the Petitioner's joint refund was setoff. Mr. Snead explained that those actions were not taken because Mrs. Joslin's account had already been submitted to DOR on December 1, 2021, in accordance with DOR's yearly setoff submission deadline, by the time the protest was received on December 2, 2021. While the court appreciates that DOR has a strict deadline for submitting claims and that Mr. Snead did wait the requisite thirty (30) days after notifying Mrs. Joslin before submitting her file to DOR, a timely protestant is nevertheless entitled to a hearing. As such, SCC violated the procedure established by the SOD Act and GEC Program Guide.
Dispute & Prejudice
However, any procedural errors committed by SCC were harmless, as the Petitioner failed to assert any prejudice from the procedural failures, and therefore is not entitled to any relief. "As a general rule, a party must establish prejudice as the result of another's failure to follow mandatory statutory procedure." See Gardner v. S.C. Dep't of Rev., 353 S.C. 1, 14, 577 S.E.2d 190, 197 (2003) (citation omitted); see also Palmetto All., Inc. v. S.C. Pub. Serv. Comm'n, 282 S.C. 430, 435, 319 S.E.2d 695, 698 (1984) ("[P]roof of a denial of due process in an administrative proceeding requires a showing of substantial prejudice.") (citation omitted).
Here, the Petitioner contends that SCC failed to provide notice and a hearing prior to initiating the setoff of his joint tax refund. However, the Petitioner has not offered any evidence or argument to dispute the validity of the underlying debt, or show that the seizure of his joint tax return prejudiced him in any way. Even after being questioned repeatedly by SCC's counsel as to what, specifically, he would have presented at such a hearing, the Petitioner would only state that he would have gathered information, prepared for the hearing, and had reasons to dispute the debt if he had been given notice of a hearing. The court finds this argument unavailing.
While the court acknowledges that the Petitioner was not afforded an administrative hearing before SCC, he was afforded a de novo hearing before this court. See Marlboro Park Hosp. , 358 S.C. at 579, 595 S.E.2d at 854 (citation omitted); Mclntyre v. Sec. Comm V of S.C, 425 S.C. 439, 445, 823 S.E.2d 193, 196 (Ct. App. 2018) ("A party is not entitled to a hearing at each stage of agency review, but a meaningful hearing must occur at some stage.") (citation omitted). During the hearing, the Petitioner was provided a full and fair opportunity to dispute the debt and provide any additional evidence or argument against it. See Kiawah Dev. Partners, ZT, 411 S.C. at 54-55,766 S.E.2d at 729 (citation omitted). The de novo hearing before this court, therefore, cured any procedural defect or due process violation based on the insufficiency of SCC's review in this case. See Unisys Corp. v. S.C. Budget & Control Bd, 346 S.C. 158, 174, 551 S.E.2d 263, 272 (2001) ("An adequate de novo review renders harmless a procedural due process violation based on the insufficiency of the lower administrative body.") (citation omitted); Ross, 328 S.C. at 67, 492 S.E.2d at 71 (holding that any defect in an administrative hearing is remedied by full and meaningful participation at a later hearing) (citations omitted); Wayne's Auto. Center, Inc. v. S.C. Dep't of Pub. Safety, 431 S.C. 465, 480, 848 S.E.2d 56, 64 (Ct. App. 2020) ("[A] defect that deprives a party of a de novo review in an administrative law matter can be cured if the de novo review is subsequently commenced in another proceeding.") (citation omitted).
The Petitioner was unwilling or unable to offer any basis for his dispute of the debt at the hearing. Even after the passage of nine months since filing his protest and claiming to have a dispute regarding the debt, the Petitioner could not articulate a single substantive reason to question the debt's validity or its amount. To that end, the court finds it disingenuous that the Petitioner would assert a dispute to the debt and then contend before this court, nine months later, that he has yet to cobble together a single reason to dispute it. He failed to establish any valid reason to dispute the debt or otherwise demonstrate that, had he received a hearing before SCC, he could and would have had some argument over the debt's validity or amount. Therefore, because the Petitioner failed to demonstrate that he suffered any prejudice from SCC's procedural failures, the court is precluded from granting the relief he seeks. See Gardner, 353 S.C. at 115, 577 S.E.2d at 197 (citation omitted); Palmetto All, Inc., 282 S.C. at 435, 319 S.E.2d at 698 (citation omitted).
CONCLUSION
The court is obligated to determine whether the Petitioner carried his burden of establishing entitlement to relief from the set off of his joint tax return. It is this court's determination that the Petitioner lacked standing to contest the debt set off on behalf of his wife. However, even if he had standing, the Petitioner's wholesale failure to offer any testimony or evidence establishing prejudice from SCC's procedural failings precludes any right to relief. In light of that, and for the reasons set forth above, the Petitioner has not carried his burden of establishing a right to relief from the setoff. The Petitioner's joint tax return is, therefore, eligible to be garnished under the SOD Act program to satisfy the delinquent balance owed to SCC.
ORDER
IT IS THEREFORE ORDERED that Spartanburg Community College is entitled to receive a debt set-off from the Petitioner in the amount of $966.96, including administrative fees, for the delinquent amount owed on the debt.
AND IT IS SO ORDERED.
CERTIFICATE OF SERVICE
I, Erika S. Easier, hereby certify that I have this date served this Order upon all parties to this cause by depositing a copy hereof, in the United States mail, postage paid, or by electronic mail to the address provided by the party(ies) and/or their attorney(s).