STATE OF CALIFORNIA

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STATE OF CALIFORNIA FRANCHISE TAX BOARD
Franchise Tax Board
Interagency Intercept Collections
California Municipal Revenue Tax Association
Conference October 15-17, 2003
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Topics

• Interagency Intercept Collections
• Legislation
• Types of Debts Submitted
• Cost and Collections
• Steps to Participate
• Collection Process
• Payment Process
• Record Formats and Media Types
• Edit Criteria and Error Reports
• Questions and Answers
• Wrap Up!
• Thank You!

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Interagency Intercept Collections
Many of Californias citizens owe delinquent sums
of money to agencies at all levels of government.
Ironically, at the same time these individuals
owe government agencies money, the Franchise Tax
Board (FTB) may owe the same individuals a tax
refund! Since 1975, FTB has been intercepting
the tax refunds of Californians who owe
delinquent amounts to state and local agencies.
FTB also intercepts California State Lottery
prizes. Once intercepted, the refunds and
lottery prizes are redirected to the agencies to
which the debts are owed. FTB operates the
intercept program on behalf of the State
Controllers Office.
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Legislation
Participating state agency and university
personnel should be familiar with California
Government Code Sections 12419.2 thru 12419.11,
as well as with the State Administrative Manual
Sections 8790.1 through 870.8 Participating city
and county personnel should be familiar with
California Government Code Sections 12419.2,
12419.3, 12419.8 and 12419.10, as well as Revenue
and Taxation Code 19551.
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Types of Debts Submitted
Interagency Intercept Collections
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Types of Debts Submitted
Question What kind of debts can we submit
through the intercept program? This is a
question that we frequently receive from
agencies. Neither FTB nor the State Controllers
Office (SCO) has a specific list of debt types
that can be submitted. If you have questions
regarding the submission of a specific debt type,
please consult your legal department for a
determination. The types of debts that are
permissible are outlined and discussed in the
appropriate Government Code Sections.
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Costs and Collections
Interagency Intercept Collections
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Cost

• Question What is the administrative fees or
  cost to participate?
• We do not charge an administrative fee. The
  cost to submit each account depends on the type
  of media you choose. The estimated fees are
• 0.15 for each account submitted via cartridge,
  diskette, CD or TSO file transfer or
• 0.25 for each account submitted on paper
  listings.
• The fees are based on the actual number of
  accounts submitted. You are only charged to
  add the accounts and are not charged to either
  modify information on those accounts or to delete
  the accounts.

estimated fees include FTB, SCO and Lottery
charges
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Cost
Question When will I receive a bill for the
accounts that I submit for intercept? Once the
final administrative costs and processing fees
are established in January, the State
Controllers Office will bill participating
agencies. This billing will be mailed around
April 1, 2004, to the address noted on your
agencys Intent-to-Participate notice. In
addition to program participation costs, those
city and county tax officials that request Social
Security number searches for unsecured property
tax, will be billed approximately December 1st.
discussed in the Question and Answer portion
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Intercept Success
The Interagency Intercept Collections program has
proven very successful and cost-beneficial,
bringing in millions of dollars that may not have
otherwise been collected. Beginning January 2,
2003 thru end of August 2003, the Franchise Tax
Board has already intercepted 121.9 million
dollars for only 235 participating agencies! Ask
yourselfWhy are you not getting in on the money?!
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Calendar Year Collection Results

• Ok but show me the money!
• A historical overview of collections has shown an
  increase in collections in the past several
  years. Collections depends largely on several
  factors taxpayers filing refund returns, lottery
  winners and the number of agencies participating
  in the intercept program. The economy in the
  State of California also plays a part in the
  collection results.
• The combined total collection results for
  personal income tax refunds and lottery winnings
  for the calendar years are
• 2003 121.9 million (as of 08/30/03)
• 2002 141.4 million
• 2001 117.7 million
• 2000 89.0 million
• 1999 97.1 million

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Intercept Collection Distribution
Question What is the distribution of funds to
participating agencies?
For the fiscal year 02/03, the distribution of
funds are
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Steps to Participate
Interagency Intercept Collections
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Step 1 Initial Request-to-Participate Notice
Question How do I get started in the Intercept
program? Agencies that have never before
participated in the Interagency Intercept
Collections program must first receive approval
by the State Controllers Office. An example of
the Request-to-Participate notice is provided in
the Participation Booklet. (You only need to
complete this form when initially joining the
program.) When your agency has been approved, the
State Controllers Office will send an approval
notice to FTB and will also mail a copy to your
agency.
Complete the Request-to-Participate Notice in
booklet
Step 1
SCO sends approval to FTB and agency
Mail completed notice to SCO
Approved!
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Request-to-Participate Notice Occurs at any
time during the year
You may complete the notice in the booklet or, if
you prefer, simply provide the required
information in a letter. You must also attach a
copy of the letter that you will use to notify
debtors of a possible intercept.
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Step 2 Intent-to-Participate Notice
Question After Im approved by the SCO, whats
next? When FTB receives your approval from the
SCO, your agency will receive a Welcome packet.
This welcome packet includes a welcome letter,
your unique two-digit agency code and a
participation booklet on CD. (The two-digit
agency code is assigned by FTB as an identifier
for each participating agency.) All agencies
must notify FTB by October 15th of each year,
that they plan to participate in the next process
year. To do this, you must complete the Annual
Intent-to-Participate Notice provided in the
Participation Booklet.
Step 2
Agencies receive their Welcome Packet
and two-digit agency code
Mail the completed Intent-to-Participate notice
to FTB by October 15th
Information updated!
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Intent-to-Participate Notice Occurs yearly
October 15th

• This is a two-page notice. You must sign and
  complete both pages in full.
• The first page ask for specific agency
  information such as
• public contact information
• FTB intercept program liaisons
• agency information to send listings, warrants,
  bills, etc and
• account/fund information.

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Intent-to-Participate Notice continued

• The second page is the Agency Certification. This
  certifies that your agency will
• comply with the government code sections
• agree to pay the cost for processing your
  accounts and
• destroy confidential taxpayer information as
  outlined in the certification.

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Step 3 Pre-Intercept Notice
Question Can I start submitting accounts after
I send the Intent-to-Participate Notice to FTB?
There is one more step left to complete before
you can start submitting accounts to FTB. After
you send the Intent-to-Participate notice to FTB,
you must then notify your debtors in writing
that your agency plans to submit their name to
FTB for an intercept of any state tax refunds or
lottery winnings to pay their liabilities. The
Pre-Intercept notice should be identical or
substantially similar to the sample
pre-intercept notice provided in the
Participation Booklet.
Step 3
Prior to submitting accounts to FTB for
intercept
Ready to submit accounts!
Notify debtors with Pre-Intercept notice
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Pre-Intercept Notice Occurs prior to submitting
debtor accounts for intercept

• Participating agencies must send debtors a
  Pre-Intercept notice prior to submission of the
  name to FTB. Your notice should
• notify the debtors of your agencys intent to
  submit their names to FTB for an intercept and
  
• allow for a review of the liability by your
  agency.

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Summary
Question Tell me the process again Step 1
Request-to-Participate to SCO (due any
time) Step 2 Intent-to-Participate to FTB (due
by October 15th) Step 3 Pre-Intercept notice to
debtor (as needed) Step 4 You are ready to submit
accounts! Its that easy!
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Collection Process
Interagency Intercept Collections
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Interagency Intercept Collection Process Overview

• Question Ok. Ive sent the Pre-Intercept notice
  to the debtor. Whats next? Can I submit my
  accounts to FTB for intercept?
• You are now ready to submit your accounts! The
  following is a quick over-view of the collection
  process.
• Participating agencies refer accounts to FTB
  using one or a combination of media types to
  submit accounts.
• FTB loads agencies accounts onto our Taxpayer
  File.
• FTBs system cross-matches accounts by Social
  Security number and name control.
• When theres a match (social security number
  and name control), the account is intercepted.
  If no match, it goes to a suspense file to
  await an exact match.
• When there is a match, the money is applied
  disbursed based on the agencys priority.

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Assignment of Priority for Tax Overpayments
Intercept requests are satisfied in the order of
priority as set by the State Controllers Office
per California Government Code Section 12419.3.
Any overpayment remaining after satisfaction of
the first agency request will be applied to
succeeding agency claims. If there is more than
one agency offset request, the priority of
intercepts are as follows Priority 1 Dept of
Child Support Services Priority 2 All other
state agencies and universities (including
colleges) Priority 3 All city and county
agencies Priority 4 Internal Revenue Service
(IRS)
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Payment Process
Interagency Intercept Collections
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Payment Process

• Question Ive sent my accounts and have
  received notification of intercepts from FTB.
  When will I receive the funds?
• Good question! The following is a quick overview
  of the payment process.
• Weekly reports are sent to agencies to notify
  them of intercepts.
• At the same time, debtors receive
  notification from FTB that a state tax refund
  and/or lottery prize has been intercepted.
• At the end of each month, FTBs Fiscal
  Accounting Dept, notifies the SCO of the total
  amount to be paid to each agency.
• Funds are paid monthly by the SCO for
  intercepted accounts. You generally receive
  your warrant, around the 20th of the following
  month that intercepts occur. For example, you
  will receive a check around September 20th for
  all intercepts that occurred in August.

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Weekly Detail Payment Report Occurs weekly if
intercepts occur

• Agencies are mailed a detail payment report for
  any week in which offsets occur.
• This report provides
• the week the intercepts occurred
• the debtors SSN and name
• agency account/case number (if provided to
  FTB) and
• the amount intercepted.
• The SCO will pay agencies amounts offset
  following the close of the calendar month.

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Debtor Notification Occurs daily

• When a refund or lottery prize is intercepted,
  FTB notifies the debtor. This notification to
  the debtor includes
• agency name,
• agency account number,
• agency address,
• agency public telephone number,
• total amount intercepted, and
• balance to be refunded.

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PIT Fund Transfer Letter Occurs monthly
FTBs Fiscal Accounting Department will either
send a Transfer Letter to the SCO (to request
funds be transferred to state agencies or
universities) or will send a claim schedule to
the SCO (to request that a warrant be issued for
city and county agencies). This request occurs
at the end of each month.
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Record Formats and Media Types
Interagency Intercept Collections
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Record Formats

• FTB uses two records formats for each process
  year.
• The first type of record format is used for the
  New Process Year only. This format is
• due by December 1st (this is the only time it is
  used during the year)
• used to add accounts for the initial load
  process and
• uses a 45-character record format.
• The second type of record format is more commonly
  used and is for the modification submissions.
  This format is
• submitted at any time during the year
• used for adds, changes and deletes and
• uses a 50-character modification format.

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Media Types

• Participating agencies can refer accounts to FTB
  using one or a combination of media types
• Cartridges must be IBM compatible, 3480 or
  3490 series
• Compact disks (CDs)
• 3 ½-inch diskettes
• Time Sharing Option (TSO) file transfers (for
  state agencies only) and/or
• Paper listings (can be used for submissions of
  250 accounts or less).

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Edit Criteria and Error Reports
Interagency Intercept Collections
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Edit Criteria

• Accounts submitted to FTB must pass an initial
  edit criteria before being loaded to the FTB
  Taxpayer system. An account will not pass the
  edit criteria if any of the following occur
• More than five other agencies submitted the same
  debtor name
• The same Social Security number was entered for
  more than one account by the same agency. FTB
  will not combine accounts with the same SSN only
  the account with the largest liability will be
  accepted. However, agencies may combine the
  amounts and submit the total with a case number
  of multiple
• The liability was less than 10.00
• The Social Security number was invalid (i.e. 8
  or 9 numbers)
• The name control was invalid (the name control
  must be in all caps and must consist of the first
  four letters of the debtors last name, with
  spaces and hyphens omitted.)
• If an account is rejected, an Error Report will
  be generated and sent to your agency. Agencies
  must review this data to determine if the account
  should be resubmitted.

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Error Reports

• As with the initial edit pass, each time your
  agency submits data to FTB during the process
  year, an Error Report will be generated for only
  those accounts that were not processed. Again,
  your agency must review the error messages and
  correct the data if necessary in order to
  resubmit the account to FTB.
• Below are some of the most common error
  messages.
• SSN MUST CONTAIN 9 NUMBERS
• SSN CANNOT BEGIN WITH 8 OR 9
• LAST NAME MUST BE IN ALPHA CHARACTERS
• REQUESTED CHANGE/ADD WAS LESS THAN 10
• EXCEEDS MAXIMUM NUMBER OF REQUESTS
• MULTIPLE SSN MATCHES FOUND CANNOT OFFSET
• YOUR AGENCY PREVIOUSLY ADDED THIS ACCOUNT
• NO AGENCY LIABILITY TO CHANGE OR DELETE
• C/D REQUEST IS LESS THAN AMOUNT OFFSET

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Questions and Answers
Interagency Intercept Collections
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Questions and Answers
Q Its September 30th and my Participation
Booklet states I have to get approval to join
from the SCO by August 15th, am I too late?
A No, the dates in the Participation Booklet
for new and participating agencies are simply
guidelines to keep you on track. Our intercept
program is very flexible in that you can join at
any time during the year and send accounts as
often as you wish! Dont wait to join! Q If
I submit an account for the 2004 process year, do
I need to resubmit it again or will it be
carried forward to the next year? A Our
intercept records are purged each December,
therefore, you will need to resubmit your debts
each year with the Annual Load process mentioned
before. Q May I submit more than one debt per
SSN? A You may submit more than one debt per
SSN, however, you need to combine the total
amount owing and send only one account. Q
Do you file a lien or report the intercept to
any credit bureaus? A No, we do not file liens
nor report intercepts to any credit bureau
agencies. Q Can I work with a collection
agency to submit accounts on my behalf? A Yes,
you may have a collection agency submit accounts
to FTB on your behalf, however, FTB will not
send the collection agency any reports, warrants,
listings, etc. because of the confidentiality of
our taxpayer accounts and social security
numbers.
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Questions and Answers, continued
Q What if I lose my weekly detail reports. Can
I get a replacement? A No, weekly reports are
not retained by FTB and cannot be replaced if
lost by the agency, however, we can provide you
with a monthly microfiche at the end of the
month. To request a microfiche, complete
Exhibit N in the Participation Booklet. Q
Will lottery intercepts be combined with state
tax refund offsets? A Lottery intercepts and
state tax refund offsets are handled separately.
You will receive a separate weekly detail
payment report which will be labeled
appropriately (i.e. Lottery Weekly Detail
Payment Report). You will be paid separately by
the SCO for lottery intercepts. Q Does the
Intercept staff handle debtor calls? A No, we
only have a staff of two people. The debtors
intercept notification from FTB, instructs the
debtor to call your agency to discuss their
account. FTB has no jurisdiction over accounts
referred for intercept. Q Can I submit a
request for a Social Security Search? A Tax
officials (city and county) may request that FTB
search for and provide them with a debtor's
Social Security number. In doing so, tax
officials must notify each debtor via registered
or certified mail that the tax return information
is being requested to offset an unsecured
delinquent property tax obligation only (no other
purpose may be requested). The estimated cost
for SSN searches is 0.64 per account for the
2004 process year.
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Wrap Up!
Interagency Intercept Collections
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Participation Booklet
The Franchise Tax Board has developed a complete
and thorough Participation Booklet to assist
agencies wanting to participate in the
Interagency Intercept Collections program.
This process is intended for both new agencies
and agencies that have participated before and
outlines important information needed to enter
the program. FTB has produced this booklet in a
CD format and you will be given a copy today. If
you have any questions or need a paper copy of
the booklet, please contact the Interagency
Liaison at [phone].
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The Interagency Intercept staff looks forward to
working with your agency in the Intercept
program! Please do not hesitate to call us with
any questions that you may have! We look forward
to hearing from you! The Intercept Program
provides your agency flexible account management,
low cost referrals and most importantly.results!
Interagency Intercept Collections
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STATE OF CALIFORNIA FRANCHISE TAX BOARD NON-TAX
DEBT COLLECTION BUREAU
Thank you!
Contacts Lori Castille Jane Frank John
Brooding Intercept Liaison Intercept Program
Technician Intercept Manger (916)
845-5344 (916) 845- 6982 [phone] Fax
845-0677 Fax [phone] John.Brooding
_at_ftb.ca.gov Lori.Castille_at_ftb.ca.gov Jane.Frank
_at_ftb.ca.gov