Va. Code » Title 58.1. Taxation » Subtitle I. Taxes Administered by the Department of Taxation » Chapter 3. Income Tax » Article 21. Setoff Debt Collection Act
Virginia Code

Va. Code Ann. § 58.1-535 (2026)

Application of funds on deposit

✓ laws through the 2026 session (checked Sept. 2026)
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A. In addition to the collection remedy provided in this article, if a claimant agency has on deposit any funds which are due to the debtor, the claimant agency may apply such funds to the payment of any delinquent debt which the debtor owes to the claimant agency, provided that the claimant agency first provides written notification to the debtor of its intent to apply the funds against the debt.

B. The contents of the written notification to the debtor shall clearly set forth the basis for the claim to the funds on deposit, the intention to apply the funds against the debt to the claimant agency, and the right of the debtor to contest the validity of the claim before the claimant agency.

C. If as the result of an error by the claimant agency a debtor is denied all or a portion of his funds under the provisions of this section, interest shall be paid by the claimant agency to the debtor at the overpayment rate provided in § 58.1-15 for the time such funds were denied, except that a county, city or town shall pay interest in the manner prescribed in § 58.1-3916 or § 58.1-3918.

D. As used in this section:

"Debtor" means any individual, business or group having a delinquent debt or account with any claimant agency which obligation has not been satisfied by court order, set aside by court order, or discharged in bankruptcy.

"Funds on deposit" means any funds of a debtor that a claimant agency may have in its possession, including overpayments of taxes and any funds due to a debtor arising from a contractual agreement with a claimant agency.

1988, cc. 563, 768; 1989, c. 77; 1999, c. 631.

Notes of Decisions
Cited in 1 case, 2006–2006 · leading case: Polytechnic Inst. v. Interactive Return Serv., Inc., 626 S.E.2d 436 (Va. 2006).
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Polytechnic Inst. v. Interactive Return Serv., Inc., 626 S.E.2d 436 (Va. 2006). · cites it 18× “To resolve the question whether this statutory scheme is limited in its application to tax refunds, our focus turns to Code § 58.1-535. In doing so, we note that there is no ambiguity in the language of that statute.”
Va. Code Ann. § 58.1-535(A): 1 case
Polytechnic Inst. v. Interactive Return Serv., Inc., 626 S.E.2d 436 (Va. 2006). “To resolve the question whether this statutory scheme is limited in its application to tax refunds, our focus turns to Code § 58.1-535. In doing so, we note that there is no ambiguity in the language of that statute.”
Va. Code Ann. § 58.1-535(D): 1 case
Polytechnic Inst. v. Interactive Return Serv., Inc., 626 S.E.2d 436 (Va. 2006). “To resolve the question whether this statutory scheme is limited in its application to tax refunds, our focus turns to Code § 58.1-535. In doing so, we note that there is no ambiguity in the language of that statute.”
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