City can hold tax returns to collect debt

Published 3:00 am Thursday, February 16, 2017

The Troy City Council approved an agreement with Municipal Intercept Services (MIS) on Tuesday that will allow the city to collect debt by withholding state tax returns.

MIS is a service of the Alabama League of Municipalities formed in 2015 after State legislators passed legislation in 2014 that would allow municipalities and counties to collect delinquent debts through state tax refunds.

Mayor Jason Reeves said that the agreement gives the city another avenue to collect its debts without having to go to small claims courts.

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“If someone, for instance, has got a debt that they owe the municipality – which in our case would be mostly utilities – if somebody skipped out on that debt or something of that nature, the City would have the ability through this legislation to deduct those funds from a state income tax refund,” Reeves said.

The ALM notes to its members on its website that “all traditional forms of debt collection should be attempted by the municipality before using Municipal Intercept Services (MIS).”

Reeves said as much in the work session on Tuesday, noting that this is not the first route the city will take. He also said that notice will be sent before the city takes this step.

The service works by having the municipality submit debts to MIS through a database for the Alabama Department of Revenue (ADOR) to find a matching tax refund.

The municipality is responsible for validating the debt information and only those debtors receiving state tax refunds can have money collected from them, according to the ALM.

MIS charges a $25 processing fee which is taken out of the refund before the remainder is directly deposited to the municipality.

The law that allows this can be found in the Code of Alabama Section 40-18-103. The law details that municipalities and counties can utilize this method to collect debt if they go through the determined organizations– ALM for municipalities and the Association of County Commissions of Alabama for counties. T

he law also sets the $25 processing fee that is allowed and disallows debts under $25 to be submitted.

The agreement was unanimously approved by the full city council.

The next meeting of the Troy City Council is Tuesday, February 28 with an executive committee session upstairs at City Hall at 4:00 p.m. followed by the business meeting in the City Council Chambers at 5:00 p.m.