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Shapiro v. Albanese

Decided: April 16, 1984.


On appeal from a final decision of George J. Albanese, Commissioner, Department of Human Services.

Ard, Morton I. Greenberg and Trautwein. The opinion of the court was delivered by Ard, P.J.A.D.


[194 NJSuper Page 420] The primary question involved in this appeal is whether Circular Letter No. 82-8-3 sent to county welfare agency directors and county child support and paternity fiscal unit supervisors by the Department of Human Services is in violation of the Administrative Procedure Act (N.J.S.A. 52:14B-1 et seq.).

A corollary to this question is whether 42 U.S.C.A. § 658(a) and the federal regulations implementing this statute prohibit the allocation of intercept monies between the State and the County of Essex. Stated another way, the issue is whether the State of New Jersey has the right to share in child support collection incentive payments heretofore paid to the counties by the federal government based upon the amounts of support which the counties collect from absent parents of recipients of grants paid under the Aid to Families With Dependent Children Program (A.F.D.C.).

Certain background information is essential to an understanding of the issues involved. The A.F.D.C. program is an aid and assistance program established by the Social Security Act of 1935 which is directed towards dependent children who are defined as age-qualified needy children who have been deprived of parental support or care and who are living with any of several listed relatives. Participation in the jointly-funded A.F.D.C. program is dependent on state conformity with the requirements of the Social Security Act (42 U.S.C.A. § 601 et seq.) and the regulations promulgated thereunder by the Department of Health and Human Services (45 C.F.R. § 201 et seq.).

New Jersey elected to participate in the A.F.D.C. program and in 1959 adopted its plan of Assistance for Dependent Children (A.D.C.). N.J.S.A. 44:10-1 et seq. The A.F.D.C. program is administered in New Jersey by the county welfare agencies, N.J.S.A. 44:10-2, subject to supervision by the Commissioner of Human Services, N.J.S.A. 44:10-3, who has adopted general policies, rules and regulations to carry out the purposes of the A.F.D.C. and A.D.C. laws. N.J.A.C. 10:81-1 et seq.

Section 664(a) of Title 42 of the United States Code contains the procedure for collection of past-due support from federal tax refunds. That section provides:

Upon receiving notice from a State agency administering a plan approved under this part that a named individual owes past-due support which has been assigned to such State pursuant to section 602(a)(26) of this title, the Secretary of the Treasury shall determine whether any amounts, as refunds of Federal taxes paid, are payable to such individual (regardless of whether such individual filed a tax return as a married or unmarried individual). If the Secretary of the Treasury finds that any such amount is payable, he shall withhold from such refunds an amount equal to the past-due support, and pay such amount to the State agency (together with notice of the individual's home address) for distribution in accordance with section 657(b)(3) of this title.*fn1

The federal government, interested in recouping monies from the persons ultimately responsible for the support and care of these children, enacted certain laws to provide incentives for recoupment. Thus, to increase support collections, Congress enacted 42 U.S.C.A. § 658(a) which provides an incentive or bonus to the entity doing the collecting and enforcing of A.F.D.C. support cases in state programs. That section provides:

When a political subdivision of a State makes, for the State of which it is a political subdivision, or one State makes, for another State, or a State on its own behalf makes,*fn2 the enforcement and collection of the support rights assigned under section 602(a)(26) of this title (either within or outside of such State), there shall be paid to such political subdivision, such other State, or such State (in the case of a State which on its own behalf makes such enforcement and collection) from amounts which would otherwise represent the Federal share of assistance to the family of the absent parent an amount equal to 15 percent*fn3 of any amount collected and required to be distributed as provided in section 657 of this title to reduce or repay assistance payments.

The tax offset program created under 42 U.S.C.A. § 664 operates in New Jersey as part of the child support and paternity unit (C.S.P.) described by N.J.A.C. 10:81, Appendix D, effective July 1, 1975. As part of the 1975 C.S.P. program a

15% incentive for county efforts was authorized. N.J.A.C. 10:81, Appendix D, Section 241 and 42 U.S.C.A. § 664.

As indicated, this appeal arose when the respondent, the director of the Division of Public Welfare, Department of Human Services initiated a new division of the 15% incentives attributable to the tax setoff programs. Although the duplicate incorporated in appellants' appendix is less than clear, it reads as follows:

August 10, 1982

Circular Letter No. 82-8-3


Subject: Title IV-D Tax Intercept Procedures

In the near future your agency will begin to receive periodic Title IV-D collections from your county probation department and other county probation departments within the State resultant from the tax intercept efforts. In order to facilitate the identification of these amounts, county probation departments have been instructed by the N.J. Administrative Office of the Courts to forward these funds to county welfare agencies separately from regular CSP collections.

Due to the modified procedures relative to the recording of these collections, it is necessary that the fiscal activity be reported to the Bureau of Business Services on the attached Form CSP-106A, "Distribution of Tax Intercept Collections" using the following guidelines:

1. All tax intercept collections shall be applied to arrearage balances and shall not be considered when determining AFDC eligibility. No AFDC case shall be closed as the result of a tax intercept collection.

2. An amount equal to one-half (7 1/2%) of the incentives applicable to tax intercept collections from within New Jersey will be utilized by the State to offset related administrative costs. Therefore, after Form CSP-106A has been completed, a check shall be prepared payable to "Treasurer, State of New Jersey" in the amount shown on line 5.c. and forwarded to the Bureau of Business Services within this Division.

The remaining format and data elements parallel those of Form CSP-106 "Summary of Receipts, Disbursements and Refunds to Assistance." Attached is an initial supply of the Form CSP-106A. Additional copies are to be reproduced locally. This form must be completed and forwarded to the State office no later than the end of the month following the report month. This information is to be brought to the attention of all appropriate staff. Inquiries may be addressed to Ronald Exner, Supervisor, Child Support and Paternity Fiscal Unit, Bureau of Business Services at (609) 890-9500, extension 305.

Sincerely yours,

G. Thomas Riti, Director, Division of Public Welfare

In sum, the director authorized a 7 1/2% incentive to the county from the tax refunds while retaining 7 1/2% for state expenses and a proposed bonus incentive program. It is the retention of 7 1/2% of the tax refund intercepts which the county challenges. Appellants urge that 42 U.S.C.A. § 658(a) does not authorize allocation of intercept monies between the state and its political subdivision where the latter enforces and collects the support monies. Consequently, the appellants argue that the decision of the commissioner to retain 7 1/2% of the incentive payments attributable to the tax setoff programs is in violation of that statute and the federal regulations implementing the same. It is also contended that the circular letter is in violation of the Administrative Procedure Act (N.J.S.A. 52:14B-1 et seq.) since it is in substance a rule or regulation which was not passed in accordance with the requirements of said act.

The entire record in this matter is embodied in appellants' appendix. An action was not instituted below in the agency, and consequently, there is no record or transcript on appeal. Rather, the matter was initiated by filing a notice of appeal with this court pursuant to R. 2:2-3(a)(2) which provides for review of final decisions or actions of any state administrative agency. However, notwithstanding the sparse record, we have reviewed it in its entirety and have considered the arguments of counsel and conclude appellants are correct in both contentions, namely, the circular letter is in violation of the Administrative Procedure Act (N.J.S.A. 52:14B-1 et seq.) and flies in the face of 42 U.S.C.A. § 658(a) which does not authorize the allocation of intercept monies between the State and the county in the circumstances of this case.

The respondent contends that it is not subject to N.J.S.A. 52:14B-1 et seq. in retaining 7 1/2% of the tax refund incentives because the decision contained in the circular letter is not an administrative rule or regulation but rather an intra- or interagency

statement. In addition, the State argues that the retention of 7 1/2% of the tax refund incentives did not amend N.J.A.C. 10:81, Appendix D, Section 241, since the 15% incentives remain payable to the counties which originate from other child support and paternity collections. It contends that the tax intercept monies are kept separate and apart from the other traditional child support and paternity collections, and consequently, the circular letter under review only authorized the State to retain one-half of the tax intercept monies and not the other traditional collections. We disagree. We are satisfied ...

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