17-1706

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1706-1
HAWAII ADMINISTRATIVE RULES
TITLE 17
DEPARTMENT OF HUMAN SERVICES
SUBTITLE 12
MED-QUEST DIVISION
CHAPTER 1706
INCOME TAX SETOFF PROGRAM
§17-1706-1 	Purpose
§17-1706-2 	Definitions
§17-1706-3 	Tax setoff process
§17-1706-4 	Pretax setoff notice
§17-1706-5 	Informal review
§17-1706-6 	Tax setoff notice
§17-1706-7 	Right to an administrative hearing
§17-1706-8 	Rights of the claimant
§17-1706-9 	Action on request for an administrative
hearing
§17-1706-10 	Department's responsibility
§17-1706-11 	Responsibility of the administrative
appeals office
§17-1706-12 	Denial of request for administrative
hearing
§17-1706-13 	The administrative hearing
§17-1706-14 	Administrative hearing decision
§17-1706-15 	Appeal rights of the claimant
§17-1706-1 	Purpose. 	The purpose of this chapter
is to establish the provisions by which the state
income tax refunds of those persons who owe a debt to
the department of human services, 	Med-QUEST division,
shall be setoff to recover this debt, and to establish
the provisions of the administrative hearing process to
contest the tax setoff. 	These rules do not afford the
debtor the opportunity to a hearing on any issue which
has been previously litigated or for which an
opportunity to a hearing has been previously provided.
[Eff 08/01/94 	] 	(Auth: 	HRS §346-14) 	(Imp: 	HRS
§§231-51 to 231-59)

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§17-1706-2 	REPEALED. 	[R 09/30/13]
§17-1706-3 	Tax setoff process. 	(a) The
department shall setoff any valid debt due and owing
the department by the debtor against any debtor's
refund. 	Any amount of the refund in excess of the
amount retained to satisfy the debt shall be refunded
to the debtor.
(b) 	The department shall compile an annual list
of debtors identified 	for a tax setoff.
(c) 	A pretax setoff notice shall be mailed to
each debtor.
(d) 	The debtor shall be provided an opportunity
for an informal review of the debt.
(e) 	All debtors who receive an adverse informal
review decision shall be provided an opportunity to
request an administrative hearing.
(f) 	The informal review and pretax setoff
administrative hearing shall be conducted and concluded
prior to the setoff of the debtor's state tax refund.
(g) 	The debtor's name shall be referred to the
comptroller, department of accounting and general
services (DAGS), for tax setoff if no pretax setoff
review is requested; or if the debt is established in
the review or the pretax setoff administrative hearing.
(h) 	At the time the setoff is identified, the
debtor shall be notified by the comptroller (DAGS) of
the State's intention to apply the state income tax
refund against the debt.
(i) 	The debtor shall be provided the opportunity
to request an administrative hearing to contest the
setoff, regardless of whether an administrative hearing
was requested at the time of the pretax setoff notice.
(j) 	The setoff against the debtor's state income
tax refund shall become final if an administrative
hearing is not requested. 	[Eff 08/01/94;
am 01/29/96 	] 	Auth: 	HRS §346-14) 	(Imp: 	HRS
§§231-51 to 231-59)
§17-1706-4 	Pretax setoff notice. 	(a) 	The
department's administrative services office, recovery
section (ASO-recovery) shall mail a pretax setoff
notice annually to all debtors as identified by the
department's administrative services office.
(b) 	The notice shall inform debtors of:

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(1) 	The department's intent to setoff the
debtor's state income tax refunds due to
nonpayment of a debt to the department;
(2) 	The total amount of the debt (to include
financial, medical and food stamp programs);
(3) 	The opportunity to request an informal review
of the debt within thirty calendar days from
the date of the pretax setoff notice if they
disagree with the department's intent;
(4) 	The office address and toll free telephone
numbers at which an informal review can be
requested;
(5) 	The opportunity to request a formal
administrative hearing to all debtors who
receive an adverse informal review decision;
(6) 	The commonly used defenses in tax setoff
administrative hearings; and
(7) 	The opportunity to present the case
independently or with the aid of others
including legal counsel. 	[Eff 08/01/94;
am 01/29/96 	] 	(Auth: 	HRS §346-14)
(Imp: 	HRS §§231-51 to 231-59)
§17-1706-5 	Informal review. 	(a) 	A debtor may
request an informal review from ASO-recovery orally or
in writing. 	The request shall be received by
ASO-recovery within thirty calendar days of the date of
the pretax setoff notice.
(b) 	The informal review shall be conducted by
telephone or in person at the request of the debtor as
follows:
(1) 	ASO-recovery will review the debtor's account
balances using account records and forward
any unresolved requests to the investigations
office (INVO).
(2) 	INVO will review the requests referred by
ASO-recovery to resolve account balances
using the case records and applicable Hawaii
Administrative Rules.
(3) 	All debtors shall be informed in writing of:
(A) 	The disposition of the review;
(B) 	The opportunity to request an
administrative hearing in writing within
fourteen calendar days from the date of
a written adverse informal review
decision; and

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(C) 	The office and address at which the
request for an administrative hearing
may be submitted.
(c) 	Requests for informal reviews that are not
received within the timeframe specified in subsection
(a) shall be denied.
(d) 	The informal review shall be concluded prior
to the setoff of the debtor's state tax refund and
within forty-five calendar days of the date the request
was received. 	[Eff 08/01/94 	] 	(Auth: 	HRS
§346-14) 	(Imp: 	HRS §§231-51 to 231-59)
§17-1706-6 	Tax setoff notice. 	(a) 	The tax
setoff notice shall be mailed to prospective tax refund
recipients who are identified as having a debt at the
time that the state income tax refund is identified for
setoff by DAGS.
(b) 	The notice shall inform the debtors of the
following:
(1) 	The amount of the debtor's state income tax
refund for a specified tax year;
(2) 	The amount of the debt;
(3) 	The amount that has been identified for
setoff to repay a debt to the department;
(4) 	The balance of the state tax refund that is
due to the debtor;
(5) 	The applicable state statute;
(6) 	The opportunity to request an administrative
hearing within thirty calendar days of the
date of the tax setoff notice;
(7) 	The setoff against the debtor's state income
tax refund becomes final after thirty
calendar days from the date of the tax setoff
notice if an administrative hearing is not
requested;
(8) 	The commonly used defenses in tax setoff
administrative hearings;
(9) 	The rights of the debtor as specified in
section 17-1706-8; and
(10) The office, address, and toll free telephone
numbers to which a written request for an
administrative hearing may be submitted.
[Eff 08/01/94; am 01/29/96 	] 	(Auth:
HRS §346-14) (Imp: 	HRS §§231-51 to 231-59)

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§17-1706-7 	Right to an administrative hearing.
(a) 	Identified debtors may request an administrative
hearing as follows:
(1) 	Within fourteen calendar days of the date of
the adverse pretax setoff review notice; and
(2) 	Within thirty calendar days of the date of
the tax setoff notice.
(3) 	If the fourteenth or thirtieth day falls on a
weekend or holiday, the fourteenth or
thirtieth day shall then be the first working
day after the weekend or holiday.
(b) 	All debtors requesting an administrative
hearing shall have the right to submit a written
request naming an authorized representative for
administrative hearing purposes. 	The written
authorization shall be received by the department
before the department acknowledges any action taken by
the authorized representative on the debtor's behalf.
[Eff 08/01/94 	] 	(Auth: 	HRS §346-14) 	(Imp: 	HRS
§§231-51 to 231-59)
§17-1706-8 	Rights of the claimant. 	The claimant
or the authorized representative shall have an
opportunity to:
(1) 	Examine the case record as well as all
documents and records to be used at the
hearing at a reasonable time before the date
of the hearing as well as during the hearing;
(2) 	Present the case independently or with the
aid of others including legal counsel;
(3) 	Bring witnesses, including an interpreter if
the claimant is non-English speaking. 	If the
claimant does not have an interpreter and the
department believes an interpreter is
necessary, an interpreter shall be obtained
by the department;
(4) 	Establish all pertinent facts and
circumstances;
(5) 	Advance any arguments appropriate to the
issue being heard without undue interference;
and
(6) 	Question or refute any testimony or evidence,
and to confront and cross examine any
witness. 	[Eff 08/01/94 	] 	(Auth: 	HRS
§346-14) 	(Imp: 	HRS §§231-51 to 231-59)

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§17-1706-9 	Action on request for an
administrative hearing. 	(a) 	A request for an
administrative hearing after an adverse informal review
decision shall be received by the department within
fourteen calendar days of the date of the written
adverse informal decision. 	When an administrative
hearing is requested due to an adverse informal review
decision on a pretax setoff notice, the department
shall not refer the name of the individual to DAGS as a
debtor. 	The individual's name shall be referred to
DAGS as a debtor only if the administrative appeals
office renders a decision in favor of the department.
A circuit court appeal shall not stay the referral.
(b) 	A request for an administrative hearing after
a tax setoff notice shall be received by the department
within thirty calendar days of the date of the tax
setoff notice. 	When an administrative hearing is
requested at the time of the tax setoff, the individual
will receive that portion of their state tax refund
that was setoff only after a decision favorable to the
claimant has been rendered by the administrative
appeals office.
(c) 	When an administrative hearing request is
received by a unit other than ASO-recovery, the unit
shall stamp the request with the date of receipt and
immediately forward the hearing request to ASO-
recovery.
(d) 	When an administrative hearing request is
received by ASO-recovery, ASO-recovery shall:
(1) 	Stamp the request with the date of receipt if
the request is initially received by ASO-
recovery;
(2) 	Make one copy of the request and send the
original request to the administrative
appeals office if the request is initially
received by ASO-recovery;
(3) 	Make copies of the account ledgers of all
debts (to include financial, medical, and
food stamp claims) for the identified debtor;
and
(4) 	Forward the copy of the administrative
hearing request and copies of the account
ledgers to the respective division.
[Eff 08/01/94 	] 	(Auth: 	HRS §346-14)
(Imp: 	HRS §§231-51 to 231-59)

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§17-1706-10 	Department's responsibility. 	(a)
The Policy and Program Development Office (PPDO) of the
Med-QUEST Division shall review all requests for fair
hearing to assure that all facts are properly
considered. 	If any basis for the grievance is found
prior to the hearing, the PPDO office shall promptly
take necessary corrective action.
(b) 	The PPDO office shall complete the branch
report.
(c) 	The PPDO office shall remain in touch with
the claimant and shall immediately notify the hearing
officer of any change in address or circumstances which
may affect the need for the hearing.
(d) 	The PPDO office shall represent the
department in tax setoff hearings on Oahu branch. 	In
all other branches, the supervisors of the unit in the
geographic area nearest the debtor's residence shall be
the department's representative at the tax setoff
hearing, if a PPDO representative is not requested.
[Eff 08/01/94 	] 	(Auth: 	HRS §346-14) 	(Imp: 	HRS
§§231-51 to 231-59)
§17-1706-11 	Responsibility of the administrative
appeals office. 	(a) 	The administrative appeals office
shall accept:
(1) 	Any request directly at the administrative
appeals office; and
(2) 	All requests cleared through the department.
(b) 	All parties shall be given written notice of
hearing by registered or certified mail with return
receipt requested at least fifteen calendar days before
the hearing. 	The notice shall include a statement of:
(1) 	The date, time, place, and nature of hearing;
(2) 	The legal authority under which the hearing
is held;
(3) 	The particular sections of the statutes and
rules involved;
(4) 	The issues involved and the basis for the
department's action;
(5) 	The claimant's right to retain legal counsel;
(6) 	The claimant's right to prompt administrative
action; and
(7) 	The administrative hearing decision shall be
rendered within one hundred twenty calendar
days of the date of request.
[Eff 08/01/94 	] 	(Auth: 	HRS §346-14)
(Imp: 	HRS §§231-51 to 231-59)

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§17-1706-12 	Denial of request for administrative
hearing. 	(a) 	An administrative hearing shall not be
granted by the department when the claimant has
withdrawn the request in writing. 	Where the claimant
verbally reports a desire to withdraw the
administrative hearing request, the claimant shall be
advised that the withdrawal shall be submitted in
writing. 	If the claimant prefers, the department shall
confirm the claimant's request to withdraw in writing
to the claimant.
(b) 	An administrative hearing shall not be
granted by the department when the department decides
not to complete a tax setoff or refunds the tax setoff
before a hearing is scheduled.
(c) 	An administrative hearing shall not be
granted by the hearing officer when the claimant has
abandoned the request. 	Abandonment occurs when the
claimant or the authorized representative, without good
cause, fails to appear at the administrative hearing
scheduled for the claimant.
(1) 	The hearing officer shall send the claimant a
letter stating that the appeal is considered
abandoned unless there was good cause for the
claimant's failure to appear. 	The claimant
shall be notified that the request shall
continue only if the claimant presents good
cause for the failure to appear and contacts
the agency within ten calendar days of the
notice. 	If no reply is received within the
ten calendar days, the administrative hearing
request shall be considered abandoned. 	If
the tenth day falls on a weekend or holiday,
the tenth day shall then be the working day
after the weekend or the holiday.
(2) 	Good cause may be established on the basis of
one of the following factors:
(A) 	Death in the family;
(B) 	Personal injury or illness which
reasonably prohibits the claimant from
attending the administrative hearing; or
(C) 	Sudden and unexpected emergencies.
(d) 	An administrative hearing shall not be
granted if the administrative hearing request is not
received within the timeframes specified in section
17-1706-7(a).
(e) 	When a request for an administrative hearing
is denied or dismissed, the department shall inform the
claimant in writing, stating the reasons for the denial

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or dismissal. 	Written notice shall be provided the
claimant within one hundred twenty calendar days of the
date of administrative hearing request.
[Eff 08/01/94 	] 	(Auth: 	HRS §346-14) 	(Imp: 	HRS
§§231-51 to 231-59)
§17-1706-13 	The administrative hearing. 	(a) 	The
administrative hearing shall include consideration of:
(1) 	Evidence received, including oral testimony
and exhibits; and
(2) 	Proposed findings and exceptions.
(b) 	The claimant shall be required to appear in
person at the administrative hearing unless
authorization for an authorized representative was
received by the department. 	When mutually agreed upon
by the claimant and the department, a hearing may be
conducted over the telephone. 	Unless both the
department and the claimant agree to the presence of
other individuals, the hearing officer or other person
conducting the administrative hearing shall limit
attendance to the following individuals necessary for
the conduct of the hearing:
(1) 	The claimant, the authorized representative,
or both, interpreter, if any, legal counsel,
and witnesses;
(2) 	Representatives of the state med-QUEST
division; and
(3) 	Hearing officer and members of the
administrative appeals office staff.
(c) 	An interpreter shall be provided by the
department when requested by the claimant.
(d) 	The claimant or the authorized representative
shall, upon request, be able to examine the case record
as well as all available documentary evidence that
shall be used by the department at the administrative
hearing as specified in section 17-1706-8.
(e) 	The administrative hearing shall be conducted
at a reasonable time, date, and place and shall
generally be held in the jurisdiction of the branch in
which the claimant is living at the time of the
administrative hearing. 	The administrative hearing
shall be conducted at a location specified by the
hearing officer unless the claimant is unable to travel
to the site because of health or transportation
problems.
(f) 	The decision of the hearing officer shall be
based exclusively on evidence and other material

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introduced at the administrative hearing. 	If, after an
administrative hearing has begun, additional evidence
is necessary for the proper determination of the case,
the hearing officer may:
(1) 	Continue the administrative hearing at a
later date. 	The hearing officer may order
further investigation and may direct either
party to produce additional evidence; or
(2) 	Close the administrative hearing and hold the
record open for a period not to exceed thirty
days to permit the receipt of additional
documentary evidence. 	[Eff 08/01/94 	]
(Auth: 	HRS §346-14) 	(Imp: 	HRS §§231-51 to
231-59)
§17-1706-14 	Administrative hearing decision.
(a) 	All matters relating to the administrative hearing
shall be heard and disposed of within one hundred
twenty calendar days from the date of request for an
administrative hearing except when the hearing is
continued or the record is held open as specified in
section 17-1706-13(f). 	The time limit shall be
extended only for the period of the continuance.
(b) 	Unless the record is held open for additional
documentary evidence, after closing the administrative
hearing, the hearing officer shall prepare the decision
in writing. 	The decision shall contain a statement
concerning the claimant's right to judicial review, the
reasons for the decision, the evidence, and the rules
supporting the decision. 	A copy of the written
decision shall be provided the claimant or the
authorized representative and the department.
(c) 	The transcript, recording, or an official
record containing the substance of the administrative
hearing proceedings, together with all papers filed in
the proceeding and the hearing officer's decision shall
constitute the exclusive record and shall be maintained
in the administrative appeals office. 	The record shall
be made available to the claimant or the authorized
representative during normal business hours through the
administrative appeals office.
(d) 	The department shall comply with the
administrative hearing decision immediately upon
receipt of the decision.
(1) 	When the pretax setoff administrative hearing
is favorable to the department, the
department shall refer the claimant's name to

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the comptroller, department of accounting and
general services, as a debtor. 	A circuit
court appeal shall not stay the referral.
(2) 	When the tax setoff administrative hearing is
in favor of the claimant, the claimant shall
receive that portion of the claimant's state
income tax refund that was setoff.
(e) 	All administrative hearing decisions shall be
accessible to the public, subject to the provision of
safeguarding public assistance information stated in
section 346-10, HRS, and the department's
confidentiality provisions specified in chapter
17-1702. 	[Eff 08/01/94 	] 	(Auth: 	HRS §346-14)
(Imp: 	HRS §§231-51 to 231-59)
§17-1706-15 	Appeal rights of the claimant. 	The
claimant may appeal an adverse administrative hearing
decision to the state circuit court. 	At the time of
the hearing decision which upholds the department's
action, the claimant shall be notified of the right to
pursue judicial review with the circuit court.
[Eff 08/01/94 	] 	(Auth: 	HRS §346-14) 	(Imp: 	HRS
§§231-51 to 231-59)