OFFSET PROCEDURES - 8293.4

(Revised and renumbered from 8790)

Offsetting is the process where an amount owed to a debtor is used to pay an outstanding account of the debtor. Before offsetting, agencies/departments must ensure collection procedures have been followed in accordance with SAM section 8293.1, and agencies/departments must notify the debtor and provide them with an opportunity to present any valid objection to use the offset procedure.

The different types of offsets available to state agencies/departments are:

Internal Offsets Within an Agency/Department

Agencies/departments should collect outstanding advances from separating employees by offsetting their final paycheck from the agency/department. Similarly, when a vendor has both a credit invoice and an overdue receivable, the credit invoice that may otherwise create a refund should be offset by the amount the vendor owes to the agency/department.  

Franchise Tax Board (FTB) Intercept Program

Individuals who have outstanding debts to the state may also receive FTB refunds, California State Lottery winnings, or Unclaimed Property. FTB has an Interagency Intercept Collections Program to intercept or “offset” these funds and pay the individuals’ debts to participating departments if departments have a social security number for the debtor. This collection method should be used after three collection letters have not resulted in payment.

For more information regarding this program, departments may contact the FTB Interagency Intercept Collections Unit at (916) 845-5344.

Offsets Against Payments Among Agencies/Departments

The taxing departments (FTB, California Department of Tax and Fee Administration, and the Employment Development Department) regularly offset refunds for outstanding debts among taxing agencies/departments. Non-taxing agencies/departments that become aware that another state agency/department will be issuing payment to a debtor that owes their department should contact the other department to initiate the offset of the payment. The agency/department issuing payment will reduce (offset) the payment by the amount owed to the debtor agency/department. A separate no warrant claim schedule should be submitted for the offset amount to transfer that amount to the debtor agency/department.