Can Hampton Regional Medical Center use South Carolina’s tax-refund setoff and GEAR debt collection programs?

Plain-English summary

The Attorney General concluded that a court would likely find Hampton Regional Medical Center eligible for South Carolina's Setoff Debt Collection and GEAR programs. For setoff, the hospital likely qualified as a “claimant agency” because it acted as a county agent and thus a quasi-governmental entity. The opinion applied the same reasoning to GEAR's “governmental entity” definition.

The conclusion assumed the facts supplied in the request. Those included the county's creation of the nonprofit to take over a public hospital, its continuing ownership interest and oversight, county selection of at least three directors, and the county's right to receive the hospital's assets on dissolution. The opinion expressly said its GEAR conclusion was not free from doubt and mentioned a judicial declaration as a way to obtain a binding answer.

What this means for you

Hampton Regional Medical Center

On the facts presented to the office, the opinion classified the hospital as an agent of Hampton County. It said a court would likely treat it as a quasi-governmental claimant agency for setoff and as a governmental entity for GEAR. The office did not independently find the underlying facts.

Counties and other nonprofit service providers

The opinion cautioned that a contract to provide a public service does not necessarily turn an independent contractor into a governmental or quasi-governmental agency. Its likely-eligibility conclusion rested on the hospital's history, public function, county oversight, and the county's continuing interest in its assets.

Common questions

Q: Can the hospital collect overdue debts through tax-refund setoff?
A: The opinion said a court would likely classify Hampton Regional Medical Center as a quasi-governmental “claimant agency” eligible for the Setoff Debt Collection Program, assuming the request's facts.

Q: Is the hospital eligible for the GEAR collection program too?
A: The office said a court would likely find it a “governmental entity” for GEAR, while warning that this conclusion was not free from doubt.

Q: Does any nonprofit contractor qualify for these programs?
A: No such broad rule appears in the opinion. It distinguishes an agency relationship like the hospital's from a nonprofit that merely contracts with government as an independent contractor.

Background and statutory framework

The opinion described S.C. Code § 12-56-20's definition of “claimant agency,” which includes governmental and quasi-governmental entities, and explained that setoff permits collection from income-tax refunds owed to debtors. It also discussed S.C. Code § 12-4-580's GEAR program, which lets the Department of Revenue contract to collect liabilities owed to governmental entities. The office found the programs' overlapping language supported treating this county hospital alike under both definitions.

Citations and references

The opinion applies S.C. Code § 12-56-20 and S.C. Code § 12-4-580. Its discussion of prior hospital and contractor opinions explains the limited agency reasoning; see the official PDF for those references.

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/opinion-addressing-whether-the-hampton-regional-medical-center-is-eligible-to-participate-in-the-setoff-debt-collection-program-and-the-gear-program/
• Original PDF: https://www.scag.gov/media/tfjbw1ra/02849408.pdf

Original opinion text

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Alan Wilson
Attorney General

December 14, 2021

Mr. Charles H. "Buddy" Phillips
Chairman, Hampton County Council
P.O. Box 34
Hampton, South Carolina 29924

Dear Mr. Phillips,
Attorney General Alan Wilson has referred your letter to the Opinions section.

Your

letter states the following:
I am writing this letter to request an opinion confirming that Hampton

Regional Medical Center ("HRMC") is eligible to participate in the South Carolina Setoff Debt Collection program under Chapter 56, Title 12 of the South

Carolina Code, as amended (the "Setoff Debt Program"), and the Governmental Enterprise Accounts Receivable program under Section 12-4-580 of the South

Carolina Code, as amended (the "GEAR Program"), as a "claimant agency" and a "governmental entity," respectively.

HRMC is a South Carolina public benefit nonprofit corporation that operates a thirty-two (32) bed charitable hospital located in Varnville, Hampton County (the "County") South Carolina, and has participated in the Setoff Debt

and GEAR Programs since their promulgation in 1995 and 1996, respectively. Since the South Carolina General Assembly formed HRMC's predecessor Hampton General Hospital- in 1947 pursuant to Section 25 of Act No. 445, both HRMC's corporate structure, and its operations and administration qualify it for participation in the Setoff Debt and GEAR Programs.

HRMC began as Hampton General Hospital, a public hospital created by

the South Carolina General Assembly in 1947, and governed by a board of directors selected by Hampton County Council.

In 1995, Hampton County

created HRMC as a public benefit nonprofit corporation to take over the

operations and receive the assets, liabilities and obligations of Hampton General Hospital. the

Through the restructuring of Hampton General Hospital into HRMC,

County

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.

retained an ownership

Post Office Box. 11549

interest and oversight in the hospital's

• Columbia, SC 2921 1-1549

<> Telephone 803-734-3970

. Facsimile 803-253-6283

Mr. Charles H. Phillips
Page 2
December 14, 2021

operations, and maintains that interest and oversight today. Specifically, under HRMC's bylaws, Hampton County Council is authorized to select at least three members of HRMC's Board of Directors. Furthermore, if HRMC dissolves, its Articles of Incorporation require that its assets be distributed to the County. Law/Analysis

It is this Office's opinion that a court would likely find HRMC is eligible to participate in the Setoff Debt Program as a "claimant agency," S.C. Code § 12-56-20, and in the GEAR Program as a "governmental entity," S.C. Code § 12-4-580, respectively. In Aiken v. S.C. Department of Revenue, 429 S.C. 414, 421, 839 S.E.2d 96, 100 (2020), the South Carolina Supreme Court described these programs as "vehicle[s] by which the Department is allowed to collect debts owed to various governmental agencies." The Setoff Debt Collection Program allows "'claimant agencies' to seize the South Carolina income tax refunds of taxpayers who owe delinquent debts to the agencies." Gardner v. S.C. Department of Revenue. 353 S.C. 1, 9, 577 S.E.2d 190, 194 (2003). "Claimant agency" is defined, in relevant part, as "a state agency, board, committee, commission, public institution of higher learning, political subdivision, or other governmental or quasi-governmental entity of any state or the United States." S.C. Code § 12-56-20(1) (emphasis added).

This Office's August 3, 2001 opinion found a regional hospital fit within the definition of claimant agency. See Op. S.C. Att'v Gen.. 2001 WL 957736 (August 3, 2001). Therein, we considered whether the Williamsburg County Memorial Hospital, a hospital public service district created by the General Assembly, would remain eligible to participate in the Setoff Debt Collection Program after it transferred its assets and responsibilities to a public benefit nonprofit The opinion corporation, Williamsburg Regional Hospital ("Hospital Corporation"). Id. described how the Hospital Corporation was "formed for the sole purpose of receiving these assets and obligations of the Hospital District," that the members of the corporation's board of directors would be appointed by the Governor, and that the corporation would function as the county's regional hospital. Id. The opinion concluded that, "[g]iven the courts' well established approval of the agency relationship between nonprofit public benefit hospitals and public

bodies,"1 the Hospital Corporation would qualify as a claimant agency because it would operate as an agent of the county performing a public function. Id. at 2. Please note, however, this Office subsequently clarified that not all entities that contract with a public body to perform a public function will necessarily qualify as a claimant agency.

[T]he courts have made a distinction between independent contractors and the treatment of such as governmental or quasi-governmental agencies. As a result, in the opinion of this office an independent contractors who contract with a See e.g. Bolt v. Cobb. 225 S.C. 408, 415, 82 S.E.2d 789, 793 (1954) ("Anderson County is providing for the performance of a public, corporate function through the agency of the existing non-profit and nonsectarian hospital... It is common knowledge that there are other counties in the State which are without publicly-owned and operated hospitals and they aid other existing hospitals.").

Mr. Charles H. Phillips
Page 3

December 14, 2021

government to perform a particular service should not necessarily be considered

governmental or quasi-governmental entities.
Op. S.C. Att'v Gen., 2009 WL 580550 (February 5, 2009) (Opining that a non-profit emergency medical service that contracted to provided EMS coverage to a county was an independent contractor and, therefore, should not be considered a claimant agency.).

Based on the opinions discussed above, it is this Office's opinion that a court would likely hold HRMC falls within the definition of a claimant agency as a quasi-governmental

entity.2

As described in the request letter, Hampton County created HRMC to operate the

Hampton General Hospital, a public hospital created by the General Assembly. The County retains an ownership interest and oversight of HRMC. Moreover, the County would receive HRMC's assets upon its dissolution. Given that HRMC provides a public service through the continued operation of Hampton General Hospital and its ongoing relationship with the County, it is this Office's opinion that HRMC is appropriately classified as an agent of the County. Therefore, as an agent of a political subdivision, HRMC would likely be classified as a quasi-

governmental entity and qualify as a "claimant agency" in section 12-56-20. Similarly, it is this Office's opinion that a court would likely hold HRMC falls within the statutory definition of a "governmental entity," S.C. Code § 12-4-5 80(D)(1), as used in the

GEAR Program. The GEAR Program allows the Department of Revenue to contract to collect an outstanding liability owed to another governmental entity. See S.C. Code § 12-4-580(A). "Governmental entity" is defined as the State and a state agency, board, committee, department, or public institution of higher learning; all political subdivisions of the State; all federal agencies, boards, and commissions; and a federal, state, county, or local governmental or quasigovernmental entity. "Political subdivision" includes the Municipal Association

of South Carolina and the South Carolina Association of Counties when these organizations submit claims on behalf of a county or local governmental or quasigovernmental entity.

S.C. Code § 12-4-580(D)(l) (emphasis added). This Office has not identified an order from our state courts or other authority construing this statutory definition of governmental entity. As a matter of first impression, this opinion will apply the rules of statutory construction to ascertain

its meaning. The primary rule of statutory construction is to "ascertain and effectuate the legislative intent whenever possible." Mitchell v. City of Greenville. 411 S.C. 632, 634, 770 S.E.2d 391, 392 (2015). Because both the Setoff Debt Program and GEAR Program statutes use overlapping terminology to describe a participant's eligibility, the Legislature likely intended for 2 Because this Office cannot find facts in an opinion, for purposes of analysis, we will assume the facts as presented in the request letter. See Op. S.C. Att'v Gen.. 2006 WL 1207271 (April 4, 2006) ("Because this Office does not have the authority of a court or other fact-finding body, we are not able to adjudicate or investigate factual questions").

Mr. Charles H. Phillips
Page 4

December 14, 2021

those bodies that qualified as a "quasi-governmental entity" under one program to similarly

qualify to participate under the other. Therefore, it is this Office's opinion that HRMC qualifies as a "governmental entity" under section 12-4-580(D)(l).

However, this conclusion is not free

from doubt and you may wish to seek a judicial declaration to obtain a binding decision from our

state courts.

Alternatively, further legislative clarification may be warranted to explain which

bodies qualify as claimant agencies and governmental entities under the Setoff Debt Program and in the GEAR Program, respectively. Conclusion

As is discussed more fully above, it is this Office's opinion that a court would likely find HRMC is eligible to participate in the Setoff Debt Program as a "claimant agency," S.C. Code § 12-56-20, and in the GEAR Program as a "governmental entity," S.C. Code § respectively.

Sincerely,

Matthew Houck
Assistant Attorney General

REVIEWED AND APPROVED BY:

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obcrt D. Cook

Solicitor General

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