Gov. Nikki Haley urges agencies to step up collection of unpaid taxes

S.C. Gov. Nikki Haley (PROVIDED)

COLUMBIA, S.C. — Gov. Nikki Haley wants South Carolina’s agencies to step up collections on the hundreds of millions of dollars owed by delinquent taxpayers.

About 50 agencies and colleges are potentially owed more than $1 billion in unpaid fees, fines, taxes and tuition, according to a report released this month by Inspector General Patrick Maley. He cautions that the tally is flawed, due to agencies’ different reporting methods, but “regardless of the true number, it’s a big number,” Maley told The Associated Press.

Haley has directed her Cabinet agencies to “maximize everything you can” to collect, to include enrolling in the Department of Revenue’s two debt-collection programs, which are available to agencies and local governments.

In the “setoff debt” program, Revenue siphons money from income tax refunds the debtor would otherwise get. The other program is more extensive, with recovery methods that include garnishing people’s wages and seizing money from bank accounts. Fewer agencies use it, partly because they don’t know the 19-year-old program is an option, Maley said.

“If you’re not a member of both programs, enroll,” Haley told directors of her 16 Cabinet agencies at a Jan. 23 meeting.

Revenue’s 28.5 percent collection fee for the broader program, deducted from what it sends the owed agency, is another reason it’s not used. That’s higher than the 20-25 percent that private debt-collection businesses charge, Maley said. By comparison, Revenue charges a fixed, $25 per refund for money collected through “setoff debt.”

Maley recommends that Revenue better market both programs to agencies and local governments and lower its fees for collecting through the more intensive GEAR (Government Enterprise Accounts Receivable). He also suggests that legislators pass a law allowing Revenue to collect those fees by taking more from the debtor, rather than subtracting it from what it sends the agency.

In 2013, Revenue recovered $120 million through its “setoff debt” program, taking $7 million from what it sent the owed agencies, and recovered $24 million through GEAR, collecting $4 million in fees for that program, according to data from Revenue.

Revenue Director Rick Reames said his agency is exploring the recommendations. Increasing collection efforts may require more employees, he said.

“We don’t view it as a way for the department to make money,” he said. “If we can cover our costs and provide the service, we’re happy.”

According to Maley’s report, 16 of the 44 agencies and colleges listed as having outstanding debt don’t use Revenue’s programs. Those include five Cabinet agencies.

Republicans on the House’s budget-writing committee had not yet seen Maley’s report but said they generally support encouraging better collections.

“It’s a huge amount. For every dime not collected, taxpayers have to pick up the shortfall because people aren’t paying what they truly owe,” said Rep. Bill Herbkersman, R-Bluffton, a Ways and Means subcommittee chairman.

He suggested offering residents a fee-forgiveness day to recover what’s initially owed, before fees accrued that may have put paying the debt out of reach.

The agency reporting the most outstanding debt as of Dec. 31, 2013, was — perhaps ironically — the Department of Revenue, with $594 million owed. That represents unpaid taxes due to the state over the past 10 years, rather than “true accounts receivable,” said agency spokeswoman Ashley Thomas.

Public colleges were among 10 of the top 20 on Maley’s list in amounts owed.