AUGUSTA – The final batch of federal income tax rebates was mailed last week, but at least 5,000 Mainers will not see the checks, which ranged as high as $600. That’s because the intended recipients owed child support, had unpaid state income taxes, or were in arrears on student loans.

Congress allowed the rebate checks to be seized by the states, but only under limited circumstances.

In Maine, most of the seized money will go to the Department of Human Services to pay overdue child support owed by parents.

“We have had $940,000 turned over so far,” said David Winslow, a spokesman for the DHS. “Based on what we have seen, we expect that will total about $1.5 million after we get the final amounts from the IRS.”

About a third of the recovered money will be used to reimburse the state and federal governments for payments made to families under the Temporary Assistance for Needy Families program. But most of the money will go to children and custodial parents.

“Yes, most of this goes to kids, not to the department,” he said.

DHS has been allowed for years to seize income tax refunds. During the last fiscal year, the agency handled more than 60,000 cases and recovered nearly $10 million through the federal income tax match system. In total, more than $92 million was recovered from parents delinquent in child support payments.

Under the rebate diversion program this summer, Winslow said 2,300 checks were intercepted, and that number is expected to grow to 3,700 when all diverted payments from taxpayers are received from the IRS.

Under the federal income tax rebate program, more than 350,000 of Maine’s estimated 610,000 taxpayers got a refund of up to $600. More than 160,000 taxpayers were not eligible for a payment, which really was not a rebate of past taxes, but a payment reflecting the lower tax rates adopted by Congress earlier this year.

Congress set minimums for getting the checks. For example, a couple must have $12,000 in taxable income after all exemptions, deductions and tax credits to qualify. For a single person, the minimum is $6,000. Many low-income families did not qualify for a rebate at all because they had no tax liability.

Besides the deadbeat parents, others who saw their checks diverted by the state were those who owed past state income taxes. More than $250,000 was collected from nearly 700 taxpayers by the first week of September.

“We know the figure will be higher when all the checks are processed,” said Tony Neves, executive director of Maine Revenue Services. “It’s hard to be precise with this.”

Over each of the first eight weeks that rebate checks were being distributed, the amounts the state diverted for past-due income taxes ranged from a low of just over $24,000 to a high of nearly $39,000. Neves said he expects at least another $100,000 will be collected under the diversion program, representing several hundred additional taxpayers.

“We can only use this method of collection when it has been found this tax is owed and there is no dispute it is owed,” he said.

Neves said an estimated $550,000 was collected from federal income tax refunds in the fiscal year that ended June 30, 2001 – the first year the state could divert federal refunds to pay state obligations. That is expected to nearly double during this fiscal year as the state uses broader language allowed in seizing federal income tax refunds.

“There are a lot of areas where people may owe the state a debt: for example, a fine that is owed the courts or a licensing fee that has not been paid,” Neves said.

Neves said just about any debt that is owed the state could be collected through the computer matching agreement between the state and federal governments dealing with income tax refunds.

“If you owe it, and your debt has been legally determined, we will try and collect it,” he said.

Another area where rebate checks was diverted was to pay for defaulted student loans. Greg Gollihur, director of the Education Division of the Finance Authority of Maine, said the agency earlier this year submitted to the IRS a list of 3,113 Mainers who have defaulted on their student loan payments.

“We don’t have a way to break out the payments we have received as a result of the offset of the rebates and those from income tax refunds,” he said, “but we are sure we have received some payments from those offsets.”

Gollihur said that while those in default on their student loans owe more than $22 million, Maine has the best student loan recovery rate in the nation.