State Halts Transfer of Tax Refunds to College

The state Franchise Tax Board has stopped diverting income tax refunds belonging to Cal State Northridge students after university officials acknowledged that they submitted the names of hundreds of student debtors who did not owe money to the school, state officials said Monday.

Franchise Tax Board spokesman Jim Sheppard said the names of nearly 7,000 students submitted by the college had been pulled from the system that allows public agencies to collect debts by taking income tax refunds from people who owe money.

Campus officials acknowledge that they mistakenly took nearly $70,000 in 1996 income tax refunds that were owed to more than 700 students. Those students had no campus debts, and the refunds have since been returned.

“It was a human error,” said college spokesman Bruce Erickson. “We regret it and apologize to the students. It is a mistake and we are sorry for it.”

Erickson said officials believe that a computer programmer mistakenly placed hundreds of names on the debtors list. Cal State Northridge sent the state the names of 7,000 students who allegedly owed a total of $3.2 million.

The state controller is authorized to divert state income tax refunds and state lottery winnings from debtors. Last year, the board diverted $44 million in income tax refunds from people owing money to about 170 agencies.

Although the campus was first made aware of the problem in late January or early February, no effort was made to halt the so-called income tax offsets until inquiries by The Times.

As of Monday, Cal State Northridge had received 2,288 income tax refunds totaling $233,740. It will be several weeks before the school can tally the exact number of refunds taken in error.

Sheppard said the university’s mistake will not delay the processing of remaining income tax returns filed by Northridge students.

“If there are any refunds, they will go to the students directly,” he said.

Cal State Northridge mistakenly took refunds ranging from $10 to $316.

There is no penalty for such mistakes, although the state board expects the agencies to alert them immediately to any problems, Sheppard said.

“We will resume the program as soon as they ask,” Sheppard said. “They have to give us a new listing of students. . . . I am sure they will return the money to the rightful owners. I don’t know any agency that would want to keep the money that doesn’t belong to them.”