Just as the Office of Motor Vehicles has tried to collect on old fines — some dating back decades — other Louisiana agencies have ramped up efforts to recoup money believed owed to the state.
But as with the OMV effort, it hasn’t always gone smoothly.
Earlier this month, the Louisiana Department of Revenue sent out 400,000 letters to individuals and businesses, soliciting payment through its tax amnesty program, which promises to cancel interest and additional penalties on taxes owed as long as the primary debt is paid. But the agency recalled the letters Tuesday after acknowledging they were flawed — some were sent to the wrong people, while others overstated the debts by thousands of dollars.
The Revenue Department’s efforts are the latest example of more aggressive moves by state government agencies to collect from taxpayers. Along with the tax amnesty program created in 2013, a parallel initiative established the same year — the Office of Debt Recovery — has been seeking back taxes and old fines once thought to be out of the state’s reach.
The Debt Recovery Office was the impetus for the state’s Office of Motor Vehicles to blast out more than a million letters last month telling people to pay old fines, some going back as far as three decades. The Legislature gave the Debt Recovery Office powers to act as a centralized collections agency, providing it more muscle to collect debts than any similar agency in any other state, the office’s architects say.
OMV’s efforts to collect, however, have sparked a significant backlash, with some questioning whether it was a slapdash attempt to gather old and, in some cases, illegitimate fines. Amid the outcry, OMV’s supervisor, State Police Superintendent Col. Mike Edmonson, walked back the organization’s demand for fines as old 1986 and said it wouldn’t pursue records older than 2006.
While the OMV drew most of the attention, a slower, quieter version of the same mission has been rolled out by the Revenue Department, which has issued 600,000 notices about overdue taxes over the past two years. The department hopes to recoup $125 million over five years — funds it wouldn’t have been able to collect if not for the existence of the Debt Recovery Office, Secretary of Revenue Tim Barfield said.
In fiscal year 2015 alone, the Revenue Department collected $13 million it wouldn’t have gathered without the debt office’s ramped-up powers, he said. Getting people to pay up on old debts isn’t insignificant in a state strapped for cash, facing a projected $1 billion budget deficit next year.
The Debt Recovery Office, created in 2013, is an organization within the Revenue Department that enables the state to collect money on “final debt,” said Deputy Secretary of Revenue Jarrod Conniglio. “Final debt” is money owed that’s become non-negotiable after a few notices have been issued and the due-process period has lapsed, he said. Some 45 state agencies have formalized agreements to partner with the office, as they’re required to by statute, he said.
The law creating the new office says, “It shall be the public policy of this state to aggressively pursue the collection of accounts or claims due and payable to the state of Louisiana through all reasonable means.”
To go after money owed to the state, the agency was given many new tools. Those include intercepting people’s federal tax refunds, recommending that residents’ professional licenses be suspended and extracting money from people’s bank accounts using a method called financial institution data match. Previously, if a debtor switched banks, the state had no recourse to collect, but with financial institution data match, the state will be able to locate the new institution and claim the money.
A bank levy was used on Caroline Conville, a 49-year-old IT professional who said she discovered that $5,000 was missing from her bank account in September. The cash was swiped by the state after she inadvertently missed notices about her 2005 taxes sent to her old address in Austin, Texas, she said.
Conville filed her 2005 taxes in Louisiana and was in fact owed a dollar by the state as a refund that year — claims the Revenue Department later acknowledged were true, she said. But it took a month for Conville to be reimbursed the $5,000 after she spent weeks gathering old W2s and other documents proving she didn’t owe the money in the first place. She is still out $300 in bank overdraft fees, she said.
“They got my bank account. Why couldn’t they find my address?” she asked.
She added she was lucky to be able to afford a sudden $5,000 loss that overdrew her bank account by $800.
If she’d been surviving “paycheck to paycheck” and took the same $5,000 hit, Conville said, she “would probably be getting an eviction notice and wouldn’t be able to afford (her) kid’s day care.”
Revenue Department officials said they couldn’t discuss an individual taxpayer’s records in response to a question about Conville’s case.
But Barfield, the revenue secretary, admitted, “There’s some frustration in this for all of us.” He said the agency is still tinkering with the process of making sure letters aren’t sent to the wrong people. Overall, he said, the error rate is low.
“I think if that was a real serious problem, you would hear more than one or two isolated complaints,” he said.
He said that because many people pay what they owe, it’s unfair to them for the state to be lax toward those who fail to pay.
“The effort is not to go out and harass people,” he said, referring to the Debt Recovery Office’s initiatives as a “paradigm shift.” For too long, people receiving notices of fines ignored them, perhaps knowing the state didn’t have the power to force them to pay.
“At the end of the day, this is the prudent way to run any organization,” he said.
Yet some question whether state agencies and the Debt Recovery Office are truly giving due process to those who never receive debt notices sent to invalid addresses.
“I don’t care if they send 100 notices; if it’s not going to the right address, they haven’t sent a notice,” said Rep. Regina Barrow, D-Baton Rouge, who was elected to the state Senate this year.
“If an individual owes money, we want them to pay what they owe,” she said. “What I don’t want to see is the average middle-class citizen being overly taxed or being double-taxed on something that they don’t owe.”
Rep. Chris Broadwater, R-Hammond, who sponsored the bill that created the Office of Debt Recovery, said Louisiana appears to have the most robust in-house state collections agency, based on his research of other similar offices in other states.
“No one has anything to the extent that we do,” he said.
Other states with strong debt collection programs include Kentucky and Wisconsin, Barfield added.
Malfunctions by state agencies trying to erroneously collect funds may have damaging effects on low-income people, said Sara Zampierin, a senior attorney with the Southern Poverty Law Center.
“If threats to seize tax refunds or suspend professional licenses materialize, it will be devastating to many working-class families and harmful to the economy,” she said.
Barfield noted even after a state agency takes funds on final debt, a person still has the right to appeal.
“We are far from a perfect organization, and we’ve proved that this week, right?” he said, referring to the improperly sent letters. Barfield added that there is always a risk in sending out a high volume of letters, and he takes seriously the consequences of seizing money from the wrong people.
The agency plans to reissue the tax amnesty letters, sending out 400,000 new letters to correct its flawed notices at an estimated mailing cost of $200,000, said spokeswoman Kizzy Payton. The program, designed to give an incentive for people to pay overdue taxes, will run through December.
“We apologize to our taxpayers for this mistake and for any inconvenience that we may have caused them,” Barfield said. “LDR will exercise better quality assurance, review and control to prevent this type of human error from occurring again in the future.”
Follow Maya Lau on Twitter, @mayalau.