17-4-105. Authority to collect debt -- offsets. (1) When the department enters into an agreement to collect a delinquent account pursuant to 17-4-103(3) or a debt of an agency has been transferred to the department pursuant to 17-4-104, the department may collect it. The department may contract with commercial collection agents for recovery of debts owed to agencies.

(2) The department shall, when appropriate, offset any amount due an agency from a person or entity against any amount, including refunds of taxes, owing the person or entity by an agency. The department may not exercise this right of offset until the debtor has first been notified by the department and been given an opportunity for a hearing pursuant to 15-1-211. An offset may not be made against any amount paid out as child support collected by the department of public health and human services. The department shall deduct from the claim and draw warrants for the amounts offset in favor of the respective agencies to which the debt is due and for any balance in favor of the claimant. Whenever insufficient to offset all amounts due the agencies, the amount available must be applied first to debts owed by reason of the nonpayment of child support and then in the manner determined appropriate by the department.

(3) (a) The department may enter into an agreement with the federal government to offset against tax refunds payable by the federal government and pay to the state any taxes or other debts owed to an agency of the state. Except as provided in subsection (3)(c), the state may also enter into a reciprocal agreement with the federal government for the state to offset against tax refunds payable by the state and pay to the federal government any taxes or other debts owed to the federal government.

(b) For purposes of offsetting of debts referred to in subsection (3)(a), offsets or payments will be made in the following priority:

(i) child support payments;

(ii) any debts that are owed to this state, an agency of this state as defined in 17-4-101, or a local government unit, including a county, city, town, consolidated city-county, school district, or local public entity with the authority to spend or receive public funds; and

(iii) any debts owed to the federal government.

(c) Taxes or debts that cannot be liened or levied upon pursuant to 26 U.S.C. 5000A(g) must be excluded from the offset.

(d) (i) The department may enter into an agreement with another state or an agency of another state to offset against tax refunds payable by the other state or agency of the other state and pay to this state any taxes or other debts owed to this state or an agency of this state.

(ii) To facilitate an agreement of the kind authorized by subsection (3)(d)(i), the department may enter into an agreement that allows the other state or agency of the other state to offset against tax refunds payable by this state the whole or part of an amount owed for taxes to the other state or agency of the other state. However, the department may enter into an agreement of the type authorized by subsection (3)(a) or (3)(d)(i) only if the other state or agency of the other state or the federal government allows the offset against tax refunds owed by the other state or agency of the other state or the federal government any taxes or other debts owed to this state or an agency of this state.

(e) A state or agency of another state or the federal government entering into an agreement with the department pursuant to subsection (3)(a) or (3)(d)(i) may not exercise the offset against tax refunds unless the other state or agency of the other state or the federal government has notified the taxpayer of the taxes due and has given the taxpayer an opportunity for review or appeal of the tax debt. Another state or agency of another state intending to offset taxes shall provide the department with proof of notification and opportunity for review or appeal before the offset is exercised.

(4) (a) A debt owed to the department of public health and human services or being collected by the department of public health and human services on behalf of any person or agency may be offset by the department if the debt is being enforced or collected by the department of public health and human services under Title IV-D of the Social Security Act.

(b) The debt does not need to be determined to be uncollectible as provided for in 17-4-104 before being transferred to the department for offset. The debt must have accrued through written contract, court judgment, administrative order, or a distribution the recipient was not entitled to retain as described in 40-5-910.

(c) Within 30 days following the notification provided for in subsection (2), the person owing a debt described in subsection (4)(a) may request a hearing. The request must be in writing and be mailed to the department. The person owing a debt is not entitled to a hearing if the amount of the debt has been the subject matter of any proceeding conducted for the purpose of determining the validity of the debt and a decision made as a result of that proceeding has become final. The hearing must initially be conducted by teleconferencing methods and is subject to the provisions of the Montana Administrative Procedure Act. The department of public health and human services shall adopt rules governing the hearing procedures.

(5) If the department determines that a person or entity has refused or neglected to file a claim within a reasonable time, the head of the state agency owing the amount shall file the claim on behalf of the person or entity. If the claim is approved by the department, the claim has the same force and effect as if it were filed by the person or entity. The amount due any person or entity from the state or any agency of the state is the net amount otherwise owing the person or entity after any offset, as provided in this section.

(6) A debt owed to a state agency by a local government may not be offset against a payment due to a local government pursuant to 15-1-121.