Can the State of Arkansas keep your tax refund to pay an unpaid driver's license reinstatement fee?

Plain-English summary

Arkansas drivers who had their licenses suspended and then failed to pay the reinstatement fee started receiving "Set-Off Debt Collection" notices from the Department of Finance and Administration warning that their state income tax refund could be withheld to cover the unpaid fee. State Representative Les Eaves asked Attorney General Leslie Rutledge whether a reinstatement fee actually counts as a "debt to the State of Arkansas" for purposes of the setoff statute, and if not, whether DFA could legally take a refund to pay it.

The AG answered yes to the first question, which made the second one moot. The Setoff Against State Income Tax Refund statute (Ark. Code Ann. §§ 26-36-301 et seq.) lets specified "claimant agencies" intercept a taxpayer's state income tax refund to satisfy a "debt." The statutory definition of "debt" at Ark. Code Ann. § 26-36-303(1)(A)(xviii) expressly includes "[f]ees for reinstatement of a driver's license payable to the Office of Driver Services under §§ 5-65-119, 27-16-508, and 27-16-808." So unpaid reinstatement fees imposed under those three statutes fall directly within the setoff regime, and the Office of Driver Services is a recognized claimant agency authorized to pursue collection through tax-refund offset.

What this means for you

If you've received a Set-Off Debt Collection notice for a reinstatement fee

Treat it as real. The fee is a debt the State can collect against your tax refund. Under the setoff procedure, you have 30 days from the invoice date to pay in full, or DFA can withhold your refund. If the underlying suspension or fee assessment is wrong, the time to challenge it is now, not after your refund disappears, because the setoff statute lists "appeal" status as the only thing that takes a debt out of the definition. Get the suspension or fee resolved through DFA (or through DUI/DWI counsel if your suspension was alcohol-related) before the setoff happens.

If you advise drivers (DUI/DWI counsel, public defender, civil legal aid)

This opinion clarifies a lever DFA can pull. If your client is shopping for a moment to negotiate a payment plan or contest the underlying suspension, do it before tax-refund season. Once the setoff goes through, recovering the money requires a more cumbersome refund procedure.

If you work for DFA or a claimant agency

The opinion confirms your statutory authority. Make sure the notice procedure under § 26-36-301 et seq. is followed precisely (notice, opportunity to contest, etc.), since failures there can invalidate a setoff.

If you're a state legislator

The setoff list at § 26-36-303(1)(A) is long and grows by amendment. If a reinstatement-fee policy seems too aggressive (especially for low-income drivers whose suspensions cascade from inability to pay underlying fines), the policy fix is to amend either the underlying fee structure or the setoff list.

Common questions

Q: Which reinstatement fees does this cover?
A: Three Code sections by name: § 5-65-119 (DUI/DWI-related reinstatement), § 27-16-508 (suspensions/revocations under the general driver licensing chapter), and § 27-16-808 (additional reinstatement fee scenarios). The opinion does not address fees imposed under any other Code section.

Q: Can I get my refund back if it's already been taken?
A: The setoff statutes provide a notice-and-contest procedure. Once a setoff is final, recovery requires showing the underlying debt was wrong (for example, the suspension was reversed or the fee was already paid). Talk to DFA or your attorney as soon as you see the notice.

Q: Does the State have to give me notice before it takes my refund?
A: Yes. Under § 26-36-301 et seq., the claimant agency has to notify you of the intent to set off, identify the debt, and give you a chance to contest it within a fixed window (usually 30 days). The notice quoted in the opinion follows that pattern.

Q: What if the reinstatement fee is "under appeal"?
A: § 26-36-303(1)(A) defines "debt" to exclude items "under appeal." If you have a live administrative or court appeal pending, the setoff should not proceed. Documenting the appeal in writing to the claimant agency is the standard move.

Q: Why didn't the AG answer the second question?
A: Because answering "yes" to the first question (the fee is a debt) eliminated the premise of the second question (which was conditioned on the fee not being a debt). AG opinions typically address only what's necessary to resolve the question presented.

Background and statutory framework

Arkansas's Setoff Against State Income Tax Refund procedure is the state-law analog to the federal Treasury Offset Program. It gives state agencies a queue mechanism: an agency owed money by a taxpayer can register the taxpayer's debt with DFA, and when the taxpayer's state income tax refund is processed, DFA withholds the relevant amount and forwards it to the agency.

The mechanism only works if the obligation qualifies as a "debt" under the statute. Section 26-36-303(1)(A) lists categories of qualifying debts in eighteen subparagraphs. Subparagraph (xviii), the one that controls here, was added by the General Assembly to bring driver's license reinstatement fees under the umbrella. Without that subparagraph, reinstatement fees might or might not be debts within the meaning of the statute, but the Legislature specifically removed the doubt.

The "claimant agency" definition at § 26-36-307 separately requires that the collecting agency be on the list. The Office of Driver Services is named expressly. Both pieces of the puzzle line up to support the setoff.

Citations and references

Statutes:

• Ark. Code Ann. § 5-65-119 (DUI/DWI license reinstatement fee)
• Ark. Code Ann. § 27-16-508 (general license suspension reinstatement fee)
• Ark. Code Ann. § 27-16-808 (additional reinstatement fees)
• Ark. Code Ann. §§ 26-36-301 to -320 (Setoff Against State Income Tax Refund)
• Ark. Code Ann. § 26-36-303(1)(A)(xviii) (definition of debt)
• Ark. Code Ann. § 26-36-307 (claimant agencies)

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE

Opinion No. 2021-081

January 14, 2022

The Honorable Les Eaves
State Representative
102 Club Cove
Searcy, AR 72143-7440

Dear Representative Eaves:

This is in response to your request for an opinion concerning drivers' license reinstatement fees. As background for your questions, you note that drivers in Arkansas may have their drivers' licenses suspended for various reasons by statute, and you cite Ark. Code Ann. §§ 5-65-119, 27-16-508, and 27-16-808 regarding reinstatement fees associated with license suspensions and revocations. You further note that the Department of Finance and Administration [DFA] is authorized to collect a reinstatement fee before issuing a new license, and you state the following:

Recently, drivers have been receiving "Set-Off Debt Collection" notices from Driver Control, stating that because they owe a debt to DFA their state income tax refund may be garnished to satisfy the debt. The notice states:

Please be advised, you have unpaid reinstatement fee(s) assessed under Arkansas [laws]. Pursuant [sic] Arkansas Code Annotated § 26-36-301 states [sic] if you have a pending claim for a refund with the Revenue Division of the Department of Finance and Administration, it is the intention of this agency to apply the refund to the debt you owe this agency.

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Any state income tax refund due to you from the State of Arkansas may be retained in full or partial satisfaction of this debt unless the amount is paid in full within thirty (30) days of this invoice.

Against this background, you ask:

1. Is a drivers' license reinstatement fee a debt to the State of Arkansas?

2. If a reinstatement fee is not a debt to the State of Arkansas, can DFA retain (garnish) a taxpayer's income tax refund for payment of that fee?

RESPONSE

The answer to your first question is "yes" regarding the fees imposed under Ark. Code Ann. §§ 5-65-119 (Supp. 2021), 27-16-508 (Supp. 2021), and 27-16-808 (Supp. 2021). A response to your second question appears unnecessary in light of this response.

DISCUSSION

Question 1: Is a drivers' license reinstatement fee a debt to the State of Arkansas?

This question requires reference to the provisions for setoffs against state income tax refunds found at Ark. Code Ann. §§ 26-36-301 et seq. (Repl. 2020 and Supp. 2021). This body of law, in relevant part, establishes general procedures for "the withholding of part or all of income tax refunds due individuals who owe debts to the State of Arkansas...." The procedures include submission of claims by "claimant agencies" seeking collection of such "debts."

Specific to your question, "claimant agency" is defined to include "[t]he Office of Driver Services." And "debt," in pertinent part, means:

All of the following that are not under appeal:

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(iii) Fees for reinstatement of a driver's license payable to the Office of Driver Services under §§ 5-65-119, 27-16-508, and 27-16-808.

In response to your question, therefore, the reinstatement fees under Ark. Code Ann. §§ 5-65-119, 27-16-508, and 27-16-808 are plainly debts that are owed to the State of Arkansas, i.e., the Office of Driver Services at DFA, pursuant to the above provisions for setoff against state income tax refunds. The answer to your first question is, therefore, "yes" regarding the fees imposed under those Code sections.

Question 2: If a reinstatement fee is not a debt to the State of Arkansas, can DFA retain (garnish) a taxpayer's income tax refund for payment of that fee?

A response to this second question appears unnecessary in light of my response to Question 1.

Sincerely,

LESLIE RUTLEDGE
Attorney General