Treasury: States can seize stimulus payments to provide criminal restitution

States can seize third-round stimulus payments from those convicted of crimes in order to provide restitution for victims and their families, according to the Treasury Department.

“To the extent permitted by applicable state and local law, amounts paid in the third round of [economic impact payments] may be subject to garnishment by state governments, local governments, or private creditors, as well as pursuant to a court order (which may include fines related to a crime, administrative court fees, restitution, and other court-ordered debts),” a department official said in a letter to Sens. Maggie Hassan (D-N.H.) and Joe Manchin (D-W.Va.) last month.

The letter is first being made public Monday.

Treasury’s confirmation means law enforcement in the states can seize payments directed to individuals convicted of crimes and redirect them to cover debts or fines.

“We think that’s money that should go to victims, not to inmates who have not been financially impacted at all by the pandemic,” Alabama Attorney General Steve Marshall (R) told local station WKRG last month. 

President Biden enacted a coronavirus relief law in March that provides for direct payments of up to $1,400 per person. This is the third round of stimulus payments that have been authorized by coronavirus relief laws.

Hassan and Manchin urged Treasury last month to provide “clear guidance” on states’ ability to seize payments for purposes of providing criminal restitution.

“We strongly support state efforts to seize criminals’ Economic Impact Payments and to ensure that these payments benefit families victimized by crime rather than incarcerated criminals,” the senators wrote in a letter to Treasury.

The senators noted that the law that created the first round of stimulus payments also allowed states to seize payments for restitution purposes. States were not allowed to seize second-round payments.

Treasury responded to Hassan and Manchin by saying that federal law does not prevent the stimulus payments authorized by Biden’s law from being garnished by states or by creditors. The department said that it intends to communicate this on the IRS’s frequently asked questions webpage for the third round of payments.

As of Monday, the IRS’s FAQ page had not yet been updated to reflect information about garnishment by states. 

The FAQs do note that people will not be denied stimulus payments solely because they’re incarcerated. They also say that third-round stimulus payment amounts won’t be reduced for federal debts or past-due child support.

—Updated 6:03 p.m.