McCoy v. Albin

Citation: 298 Neb. 297Docket: S-17-057

Court: Nebraska Supreme Court; November 30, 2017; Nebraska; State Supreme Court

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Troy McCoy appealed against the Nebraska Department of Labor's interception of his tax refund to recover an unemployment benefits overpayment of $850 determined in 1995. In 2016, McCoy's tax refund of $293 was intercepted, prompting his appeal. An appeal tribunal ruled that the interception was barred by a four-year statute of limitations. The Department contested this decision in the Sarpy County District Court, asserting that the statute allowing interception (Neb. Rev. Stat. 48-665(1)(c)) did not impose a time limit and that the statute of limitations claimed by McCoy was an affirmative defense not properly raised. The district court upheld the tribunal’s ruling. However, the higher court concluded that no statute of limitations applies to the interception of state tax refunds under the relevant statute, reversing the district court's decision and directing it to overturn the tribunal's ruling. The case highlights the legal principles surrounding administrative law, statutory interpretation, and the initiation of civil actions.

The district court's judgment or final order may be reversed, vacated, or modified for errors on the record. Under the Administrative Procedure Act, the appellate review examines whether the district court's decision aligns with the law, is backed by competent evidence, and is not arbitrary or capricious. The appeal addresses whether the Department's interception of a state income tax refund for repaying an unemployment benefit overpayment is constrained by a statute of limitations. The statutes governing this right to setoff do not specify a limitations period. 

The appeal tribunal and district court determined that a four-year limitation under Neb. Rev. Stat. 25-206, in conjunction with 25-218, barred recovery. Additionally, Neb. Rev. Stat. 25-1515, which limits judgment execution to five years, further prohibits the intercept as it had been over five years since McCoy's 1997 refund was intercepted. The Department contends that these statutes do not apply and argue that their plain reading suggests no statute of limitations was intended, paralleling the federal tax refund setoff availability.

Section 48-665(1) establishes liability for repayment of unjustly received unemployment benefits and outlines four recovery methods, including setoff against state and federal income tax refunds. The procedure for recovery is detailed in Neb. Rev. Stat. 77-27,197 to 77-27,209, indicating legislative intent to enable tax refund setoffs for debts owed to the Department due to unemployment benefit overpayments. This state collection remedy complements, rather than replaces, other legal remedies and mirrors federal law, which has no time limitation for similar offsets. Furthermore, Section 25-206 and Section 25-218 outline relevant statutes of limitations, with the latter stating claims against the state are barred unless acted upon within two years.

Section 25-1515 establishes a five-year limitation for executing judgments in court, stating that judgments become dormant and lose their lien on the debtor's estate if execution is not pursued within five years of judgment entry or the last execution issued. Courts interpreting statutes must discern legislative intent from the statute's language, considering the statute's objectives and purposes. 

Section 48-665 outlines methods for the Department to collect overpayments, including a three-year limitation for offsetting future unemployment benefits, as well as recovery through civil action, adhering to the statute of limitations in chapter 25 of the Nebraska Revised Statutes. However, offsets against federal or state income tax refunds do not specify a limitations period. Previously, a 10-year limitation for federal tax refund offsets existed but was removed in 2010. 

Analyzing the statutory language of 48-665 indicates that the Legislature did not intend for the time limitations in 25-206 and 25-218 to restrict the Department's collection of overpayments via setoff. The absence of a time limitation for state tax refunds is significant and reflects legislative intent to allow such offsets without restriction. The definition of 'refund' in section 77-27,199(2) supports this interpretation, affirming that the Legislature aimed to maintain a procedure enabling the Department to offset any debt related to overpayment of unemployment benefits against a debtor’s income tax refund. Furthermore, since a setoff does not constitute a traditional civil action, applying the limitations from 25-206 and 25-218 to it would be redundant with the civil collection methods outlined in 48-665(1)(a).

Federal law no longer imposes a 10-year limitations period for refund offsets, suggesting that both federal and state refund offset procedures, specifically under 48-665(1)(c), should have the same limitations or none at all. The Department can recover a setoff from federal refunds regardless of the outcome concerning McCoy’s state income tax refund. The appeal tribunal’s reliance on section 25-1515, which pertains to dormant judgments, is rejected, as the notice of overpayment issued by an administrative agency does not qualify as a judgment under this section. Consequently, there is no applicable statute of limitations preventing the Department from intercepting McCoy’s state tax refund to address his unemployment benefit overpayment. The district court's decision is reversed with instructions to overturn the appeal tribunal's ruling. Wright, J. did not participate in the decision.