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HomeMy WebLinkAboutMINUTES - 01222008 - C.8 ESE _L TO: BOARD OF SUPERVISORS ,-��=��' Con ra FROM: Silvano B. Marchesi, County Counsel x - ,;�,;,ir' =,rz Costa DATE: January 22, 2008 STq �oUn County SUBJECT: Authorization to Institute Interpleader Action and Request for Declaratory Relief Concerning Disbursement of Group Home Payment Amounts SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATION: AUTHORIZE County Counsel to file an interpleader action and request for declaratory relief against the United States Department of the Treasury (Internal Revenue Service), Our Home, Inc., and the California Department of Social Services for a determination of the party to whom group home payments should be made. FISCAL IMPACT: No impact on the general fund. BACKGROUND: During 2007, the Employment & Human Services Department (EHSD) placed children at the group home run by Our Home, Inc. located in Antioch. According to standard practice, Our Home, Inc. sought reimbursement from the County for the services it had provided to the children placed at its facility. Under regular circumstances, EHSD would reimburse Our Home, Inc. for the services it provided, and EHSD would then submit a request for reimbursement to the California Department of Social Services (CDSS) for reimbursement of the amount paid to Our Home, Inc. On June 5, 2007 the Internal Revenue Service (IRS) served EHSD with a Notice of Levy in the amount of $45,247.30 (the "Levy") for Our Home Inc.'s failure to withhold employee income taxes and social security taxes and remit them to the U.S. Treasury. The levy advises EHSD that any amounts owed to Our Home, Inc. must be paid to the IRS due to Our Home, Inc.'s failure to withhold and remit social security and income taxes. The relevant Federal statutes governing the IRS' levy of property owed to taxpayer's impose significant penalties on parties failing to turn over property belonging to a taxpayer to the IRS in response to a levy. CONTINUED ON ATTACHMENT: x YES SIGNATU RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF Bb-)(RD COMMITTEE APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ON e2.2 APPROVED AS RECOMMENDED k-----OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE AND CORRECT COPY OF AN ACTION TAKEN AND ENTERED ON MINUTES OF UNANIMOUS(ABSENT THE BOARD OF SUPERVISORS ON THE DATE SHOWN. /y�7'7.�i ) AYES: NOES: ABSENT: ABSTAIN: Contact: Eric Gelston (335-1812) nn cc: Employment&Human Services ATTESTED -21 D.Sansoe,County Administration JQRN CULLEN,CLEX<OF THE BOARD OFSUPERVISORS BY: DEPUTY SUMECT: .Authorization to Institute Interpleader Action and Request for Declaratory Relief Concerning Disbursement of Group Home Payment Amounts DATE: January 22, 2008 PAGE: 2 The amount owed to Our Home, Inc. for group home services provided in June and July 2007 is approximately $15,870.00 (the "Levy Amount"). The CDSS has advised County staff that it will not reimburse the County if the County pays the Levy Amount to the IRS. The CDSS has not provided any legal authority authorizing the County to disregard the IRS levy and pay the Levy Amount to Our Home, Inc. The position of the CDSS is that the Levy Amount is a payment on behalf of the children who received services from Our Home, Inc. The County has not had a child in placement with Our Home, Inc. since July 2, 2007. The IRS has advised the County that it will institute legal action against the County for the turnover of the Levy Amount pursuant to the Levy if it does not receive payment of the Levy Amount. An interpleader action is a procedural device used to resolve conflicting claims over money or property. In most instances the party holding the money makes no claim to the money but is faced with conflicting claims to the money. This is the situation in which the County finds itself with regard to the Levy Amount. By instituting an interpleader action, the County asks the court to make a determination to whom the County should pay the Levy Amount and whether the CDSS should reimburse the County if the County is ordered to pay the Levy Amount to the IRS. CONSEQUENCES OF NEGATIVE ACTION: The County will have to defend an action by the IRS for collection of the Levy Amount and likely incur penalties for its failure to observe the Levy.