PAYMENT PROCESSING

CS 541P Distribution of Collections - State Tax Intercept Payments

03/99 Revised 11/09/16 Training Completed 07/05/09 Last Reviewed 08/04/25

42 U.S.C 657, R527-475

Section 457 of the Social Security Act (42 USC 657) requires payments received from any source, other than Federal tax intercept, be credited to unpaid current support first. Any amounts received that exceed current support must be applied to Non-IV-A arrears debts before IV-A arrears debts. For more information and details on distribution, refer to CS 537P Distribution of All Payments Other Than Discounted Settlements and Federal Tax Intercept Payments.

State tax refund intercept payments are automatically posted according to the ORSIS distribution program when the interdepartmental transfer from State Finance is received. For more information on the state tax intercept program, refer to CS 651P State Tax Intercept – Procedures.

1. ORSIS determines the PO BOX CODE to identify the ORSIS distribution program the tax payment will follow.

2. ORSIS posts the state tax payment to the obligor’s participant account and places a hold on the transaction.

a. The 30-day transaction hold is entered to allow 25 days for the noncustodial parent’s (NCP’s) present spouse to file a claim with CSS to receive his/her share of the state tax refund before it is applied to the NCP’s debt(s).

b. The “hold state tax exception” transaction hold is entered when the NCP identified on a state tax intercept payment does not match an ORSIS participant (e.g., participant’s last name or SSN does not match). ORSIS also enters the information on a State Tax Exception Report that is forwarded to accounting.

3. During the 30 days that the transaction is held, an overpayment worker will determine the debts that were referred for State tax intercept.

4. After 30 days, the hold will automatically release and the payment will distribute to the NCP’s case(s)/debt(s).

5. If the State tax refund posting exceeds the balance owed on the NCP’s IVDS, FSTR, or YCOR cases, and the balance referred for state tax intercept from the NCP’s DSPD, USDC, USHC, or NHCS cases, ORSIS distributes the remaining amount the NCP’s non-child support cases that were referred for state tax intercept.

6. If the State tax refund posting exceeds the balance owed on all of the NCP’s cases which qualify for State tax refund intercept, it will appear on your “Funds Remaining” report.