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6332 Code and Regulations | |
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Internal
Revenue Code - §6332 - SURRENDER OF PROPERTY SUBJECT TO LEVY 6332(a) REQUIREMENT. --Except as otherwise provided in this section, any person in
possession of (or obligated with respect to) property or rights to
property subject to levy upon which a levy has been made shall,
upon demand of the Secretary, surrender such property or rights
(or discharge such obligation) to the Secretary, except such part
of the property or rights as is, at the time of such demand,
subject to an attachment or execution under any judicial process. 6332(b) SPECIAL RULE FOR 6332(b)(1) IN GENERAL. --A levy on an organization with respect to a life insurance or
endowment contract issued by such organization shall, without
necessity for the surrender of the contract document, constitute a
demand by the Secretary for payment of the amount described in
paragraph (2) and the exercise of the right of the person against
whom the tax is assessed to the advance of such amount. Such
organization shall pay over such amount 90 days after service of
notice of levy. Such notice shall include a certification by the
Secretary that a copy of such notice has been mailed to the person
against whom the tax is assessed at his last known address. 6332(b)(2) SATISFACTION OF LEVY. --Such levy shall be deemed to be satisfied if such
organization pays over to the Secretary the amount which the
person against whom the tax is assessed could have had advanced to
him by such organization on the date prescribed in paragraph (1)
for the satisfaction of such levy, increased by the amount of any
advance (including contractual interest thereon) made to such
person on or after the date such organization had actual notice of
knowledge (within the meaning of section 6323(i)(1)) of the
existence of the lien with respect to which such levy is made,
other than an advance (including contractual interest thereon)
made automatically to maintain such contract in force under an
agreement entered into before such organization had such notice or
knowledge. 6332(b)(3) ENFORCEMENT PROCEEDINGS. --The satisfaction of a levy under paragraph (2) shall
be without prejudice to any civil action for the enforcement of
any lien imposed by this title with respect to such contract. 6332(c) SPECIAL RULE FOR BANKS. --Any bank (as defined in section 408(n)) shall
surrender (subject to an attachment or execution under judicial
process) any deposits (including interest thereon) in such bank
only after 21 days after service of levy. 6332(d) ENFORCEMENT OF LEVY. -- 6332(d)(1) EXTENT OF PERSONAL LIABILITY. --Any
person who fails or refuses to surrender any property or rights to
property, subject to levy, upon demand by the Secretary, shall be
liable in his own person and estate to the United States in a sum
equal to the value of the property or rights not so surrendered,
but not exceeding the amount of taxes for the collection of which
such levy has been made, together with costs and interest on such
sum at the underpayment rate established under section 6621 from
the date of such levy (or, in the case of a levy described in
section 6331(d)(3), from the date such person would otherwise have
been obligated to pay over such amounts to the taxpayer). Any
amount (other than costs) recovered under this paragraph shall be
credited against the tax liability for the collection of which
such levy was made. 6332(d)(2) PENALTY FOR VIOLATION. --In addition to the personal liability imposed by
paragraph (1), if any person required to surrender property or
rights to property fails or refuses to surrender such property or
rights to property without reasonable cause, such person shall be
liable for a penalty equal to 50 percent of the amount recoverable
under paragraph (1). No part of such penalty shall be credited
against the tax liability for the collection of which such levy
was made. 6332(e) EFFECT OF HONORING LEVY. --Any person in possession of (or obligated with respect
to) property or rights to property subject to levy upon which a
levy has been made who, upon demand by the Secretary, surrenders
such property or rights to property (or discharges such
obligation) to the Secretary (or who pays a liability under
subsection (d)(1)) shall be discharged from any obligation or
liability to the delinquent taxpayer and any other person with
respect to such property or rights to property arising from such
surrender or payment. 6332(f) PERSON DEFINED. --The term "person," as used in subsection
(a), includes an officer or employee of a corporation or a member
or employee of a partnership, who as such officer, employee, or
member is under a duty to surrender the property or rights to
property, or to discharge §301.6332-1.,
Surrender of property subject to levy (a) Requirement (1) In general. --Except as otherwise provided in §301.6332-2, relating to
levy in the case of life insurance and endowment contracts, and in
§301.6332-3, relating to property held by banks, any person in
possession of (or obligated with respect to) property or rights to
property subject to levy and upon which a levy has been made
shall, upon demand of the district director, surrender the
property or rights (or discharge the obligation) to the district
director, except that part of the property or rights (or
obligation) which, at the time of the demand, is actually or
constructively under the jurisdiction of a court because of an
attachment or execution under any judicial process. (2) Levy on bank deposits held in offices outside the (i)
That
the taxpayer is within the jurisdiction of a United States court
at the time the levy is made and that the bank is in possession of
(or obligated with respect to) deposits of the taxpayer in an
office of the bank outside the United States or a possession of
the United States; or (ii)
That
the taxpayer is not within the jurisdiction of a United States
court at the time the levy is made, that the bank is in possession
of (or obligated with respect to) deposits of the taxpayer in an
office outside the United States or a possession of the United
States, and that such deposits consist, in whole or in part, of
funds transferred from the United States or a possession of the
United States in order to hinder or delay the collection of a tax
imposed by the Code. For
purposes of this subparagraph, the term "possession of the (b) Enforcement of levy (1) Extent of personal liability. --Any
person who, upon demand of the district director, fails or refuses
to surrender any property or right to property subject to levy is
liable in his own person and estate in a sum equal to the value of
the property or rights not so surrendered, together with costs and
interest. The liability, however, may not exceed the amount of the
taxes for the collection of which the levy was made. Interest is
to be computed at the annual rate referred to in regulations under
section 6621 from the date of the levy, or, in the case of a
continuing levy on salary or wages (see section 6331(d)(3)), from
the date the person would otherwise have been obligated to pay
over the wages or salary to the taxpayer. Any amount recovered,
other than costs, will be credited against the tax liability for
the collection of which the levy was made. (2) Penalty for violation. --In addition to the personal liability described in
subparagraph (1) of this paragraph, any person who is required to
surrender property or rights to property and who fails or refuses
to surrender them without reasonable cause is liable for a penalty
equal to 50 percent of the amount recoverable under section
6332(d)(1). No part of the penalty described in this subparagraph
shall be credited against the tax liability for the collection of
which the levy was made. The penalty described in this
subparagraph is not applicable in cases where bona fide dispute
exists concerning the amount of the property to be surrendered
pursuant to a levy or concerning the legal effectiveness of the
levy. However, if a court in a later enforcement suit sustains the
levy, then reasonable cause would usually not exist to refuse to
honor a later levy made under similar circumstances. (c) Effect of honoring levy (1) In general. --Any person in possession of, or obligated with respect to,
property or rights to property subject to levy and upon which a
levy has been made who, upon demand by the district director,
surrenders the property or rights to property, or discharges the
obligation, to the district director, or who pays a liability
described in paragraph (b)(1) of this section, is discharged from
any obligation or liability to the delinquent taxpayer and any
other person with respect to the property or rights to property
arising from the surrender or payment. (2) Exception for certain incorrectly surrendered property. --Any
person who surrenders to the Internal Revenue Service property or
rights to property not properly subject to levy in which the
delinquent taxpayer has no apparent interest is not relieved of
liability to a third party who has an interest in the property.
However, if the delinquent taxpayer has an apparent interest in
property or rights to property, a person who makes a good faith
determination that such property or rights to property in his or
her possession has been levied upon by the Internal Revenue
Service and who surrenders the property to the United States in
response to the levy is relieved of liability to a third party who
has an interest in the property or rights to property, even if it
is subsequently determined that the property was not properly
subject to levy. (3) Remedy. --In situations described in paragraphs (c)(1) and (c)(2) of
this section, taxpayers and third parties who have an interest in
property surrendered in response to a levy may secure from the
Internal Revenue Service the administrative relief provided for in
section 6343(b) or may bring suit to recover the property under
section 7426. (4) Examples. --The provisions of this paragraph (c) may be illustrated by
the following examples: Example 1. M
Bank is served with a notice of levy for an unpaid tax liability
due from A in the amount of $2,000. M Bank holds $2,000 in a
checking account in the names of A or B or C. Although all of the
deposits into the account were made by B and C, A has an
unrestricted right to withdraw the funds from the account. M Bank
surrenders the entire account to the district director at the end
of the holding period provided in section 6332(c). Under paragraph
(c)(1) of this section, M Bank is not liable to B or C for any
amount, even if B or C prove that the funds in the account did not
belong to A, because A's unrestricted right to withdraw the funds
is an interest which is subject to levy. B or C may, however, seek
the return of the funds from the Example 2. A
is indebted to B for $400. Unbeknownst to A, B has assigned his
right to receive payment to C. A is served with a notice of levy
for an unpaid tax liability due from B for $400. A, acting with no
knowledge of the assignment to C, surrenders $400 to the district
director. A is discharged from his obligation to pay B, the
taxpayer. Under paragraph (c)(2) of this section, because B had an
apparent interest in the funds that A owed to B, and because A
determined in good faith that those funds had been levied upon, A
is also discharged from any liability to C, even though the money
is not properly subject to levy. C may, however, seek return of
the payment from the Example 3. M
Bank is served with a notice of levy for an unpaid tax liability
due from "John H. Smith, Sr." in the amount of $5,000. M
Bank fails to read the notice of levy carefully. When searching
its records, M Bank finds the name of "John H. Smith,
Jr." and looks no further. M Bank surrenders $5,000 from John
H. Smith, Jr.'s checking account to the district director. M Bank
is not discharged from liability under section 6332(e) of the
Internal Revenue Code because the delinquent taxpayer (John H.
Smith, Sr.) had no apparent interest in the account of John H.
Smith, Jr. (Generally, John H. Smith Jr. may seek return of the
payment from the United States as provided in sections 6343 and
7426 of the Internal Revenue Code.) Example 4. M
Bank is served with a notice of levy for an unpaid tax liability
due from "Robert A. Jones" in the amount of $5,000. M
Bank searches its records and identifies four separate accounts of
$1,000 each in the name of "Robert A. Jones." All four
accounts list different addresses and social security
identification numbers. M Bank surrenders all four accounts
totalling $4,000 in response to the levy. M Bank could not in good
faith have determined that all four accounts were levied upon.
Therefore, M Bank is not discharged from liability to any person
other than the taxpayer whose account was levied upon. (5) Effective date. --Paragraph (c) of this section is effective [Insert date
these regulations are filed with the Federal Register].
However, persons surrendering property to the Internal Revenue
Service may rely on the regulations with respect to levies issued
after November 10, 1988. (d) Person defined. --The
term "person," as used in section 6332(a) and this
section, includes an officer or employee of a corporation or a
member or employee of a partnership, who is under a duty to
surrender the property or rights to property or to discharge the
obligation. In the case of a levy upon the salary or wages of an
officer, employee, or elected or appointed official of the United
States, the District of Columbia, or any agency or instrumentality
of either, the term "person" includes the officer or
employee of the United States, of the District of Columbia, or of
such agency or instrumentality who is under a duty to discharge
the obligation. As to the officer or employee who is under such
duty, see paragraph (a)(4)(i) of §301.6331-1. (a) In general. --This section provides special rules relating to the surrender
of property subject to levy in the case of life insurance and
endowment contracts. The provisions of §301.6332-1 which relate
generally to the surrender of property subject to levy apply, to
the extent not inconsistent with the special rules set forth in
this section, to a levy in the case of life insurance and
endowment contracts. (b) Effect of service of notice of levy (1) In general (i)
A
notice of levy served by a district director on an insuring
organization with respect to a life insurance or endowment
contract issued by the organization shall constitute -- (A) A demand
by the district director for the payment of the cash loan value of
the contract adjusted in accordance with paragraph (c) of this
section, and (B) The
exercise of the right of the person against whom the tax is
assessed to the advance of such cash loan value. (ii)
It is
unnecessary for the district director to surrender the contract
document to the insuring organization upon which the levy is made.
However, the notice of levy will include a certification by the
district director that a copy of the notice of levy has been
mailed to the person against whom the tax is assessed at his last
known address. For further guidance regarding the definition of
last known address, see §301.6212-2. At the time of service of
the notice of levy, the levy is effective with respect to the cash
loan value of the insurance contract, subject to the condition
that if the levy is not satisfied or released before the 90th day
after the date of service, the levy can be satisfied only by
payment of the amount described in paragraph (c) of this section.
Other than satisfaction or release of the levy, no event during
the 90-day period subsequent to the date of service of the notice
of levy shall release the cash loan value from the effect of the
levy. For example, the termination of the policy by the taxpayer
or by the death of the insured during such 90-day period shall not
release the levy. For the rules relating to the time when the
insuring organization is to pay over the required amount, see
paragraph (c) of this section. (2) Notification of amount subject to levy (i)
Full payment before the 90th day. --In the event that the unpaid liability to which the
levy relates is satisfied at any time during the 90-day period
subsequent to the date of service of the notice of levy, the
district director will promptly give the insuring organization
written notification that the levy is released. (ii)
Notification after the 90th day. --In the event that notification is not given under
subdivision (i) of this subparagraph, the district director will,
promptly following the 90th day after service of the notice of
levy, give the insuring organization written notification of the
current status of all accounts listed on the notice of levy, and
of the total payments received since service of the notice of
levy. This notification will be given to the insuring organization
whether or not there has been any change in the status of the
accounts. (c) Satisfaction of levy (1) In general. --The levy described in paragraph (b) of this section with
respect to a life insurance or endowment contract shall be deemed
to be satisfied if the insuring organization pays over to the
district director the amount which the person against whom the tax
is assessed could have had advanced to him by the organization on
the 90th day after service of the notice of levy on the
organization. However, this amount is increased by the amount of
any advance (including contractual interest thereon), generally
called a policy loan, made to the person on or after the date the
organization has actual notice or knowledge, within the meaning of
section 6323 (i)(1), of the existence of the tax lien with respect
to which the levy is made. The insuring organization may,
nevertheless, make an advance (including contractual interest
thereon), generally called an automatic premium loan, made
automatically to maintain the contract in force under an agreement
entered into before the organization has such actual notice or
knowledge. In any event, the amount paid to the district director
by the insuring organization is not to exceed the amount of the
unpaid liability shown on the notification described in paragraph
(b)(2) of this section. The amount, determined in accordance with
the provisions of this section, subject to the levy shall be paid
to the district director by the insuring organization promptly
after receipt of the notification described in paragraph (b)(2).
The satisfaction of a levy with respect to a life insurance or
endowment contract will not discharge the contract from the tax
lien. However, see section 6323(b)(9)(C) and the regulations
thereunder concerning the liability of an insurance company after
satisfaction of a levy with respect to a life insurance or
endowment contract. If the person against whom the tax is assessed
so directs, the insuring organization, on a date before the 90th
day after service of the notice of levy, may satisfy the levy by
paying over an amount computed in accordance with the provisions
of this subparagraph substituting such date for the 90th day. In
the event of termination of the policy by the taxpayer or by the
death of the insured on a date before the 90th day after service
of the notice of levy, the amount to be paid over to the district
director by the insuring organization in satisfaction of the levy
shall be an amount computed in accordance with the provisions of
this subparagraph substituting the date of termination of the
policy or the date of death for the 90th day. (2) Examples. --The provisions of this section may be illustrated by the
following examples: Example (1).
On Example (2).
Assume the same facts as in example (1) except that on Example (3).
Assume the same facts as in example (1) except that the insurance
contract does not contain an automatic premium advance provision.
The contract does provide that, upon default in the payment of
premiums, the policy shall automatically be converted to paid-up
term insurance with no cash or loan value. A fails to make the
premium payment of $200 due on (d) Other enforcement proceedings. --The
satisfaction of the levy described in paragraph (b) of this
section by an insuring organization shall be without prejudice to
any civil action for the enforcement of any Federal tax lien with
respect to a life insurance or endowment contract. Thus, this levy
procedure is not the exclusive means of subjecting the life
insurance and endowment contracts of the person against whom a tax
is assessed to the collection of his unpaid assessment. The (e) Cross references (1) For
provisions relating to priority of certain advances with respect
to a life insurance or endowment contract after satisfaction of a
levy pursuant to section 6332(b), see section 6323(b)(9) and the
regulations thereunder. (2) For provisions relating to the issuance of a certificate of discharge of
a life insurance or endowment contract subject to a tax lien, see
section 6325(b) and the regulations thereunder.
(a) In general. --This section provides special rules relating to the
surrender, after 21 days, of deposits subject to levy which are
held by banks. The provisions of §301.6332-1 which relate
generally to the surrender of property subject to levy apply, to
the extent not inconsistent with the special rules set forth in
this section, to a levy on property held by banks. (b) Definition
of bank. --For purposes of this section, the term
"bank" means -- (1) A bank or
trust company or domestic building and loan association
incorporated and doing business under the laws of the United
States (including laws relating to the District of Columbia) or of
any State, a substantial part of the business of which consists of
receiving deposits and making loans and discounts, or of
exercising fiduciary powers similar to those permitted to national
banks under authority of the Comptroller of the Currency, and
which is subject by law to supervision and examination by State or
Federal authority having supervision over banking institutions; (2) Any
credit union the member accounts of which are insured in
accordance with the provisions of title II of the Federal Credit
Union Act, 12 U.S.C. 1781 et seq.; and (3) A
corporation which, under the laws of the State of its
incorporation, is subject to supervision and examination by the
Commissioner of Banking or other officer of such State in charge
of the administration of the banking laws of such State. (c)
21-day holding period (1) In general. --When a levy is made on deposits held by a bank, the bank
shall surrender such deposits (not otherwise subject to an
attachment or execution under judicial process) only after 21
calendar days after the date the levy is made. The district
director may request an extension of the 21-day holding period
pursuant to paragraph (d)(2) of this section. During the
prescribed holding period, or any extension thereof, the levy
shall be released only upon notification to the bank by the
district director of a decision by the Internal Revenue Service to
release the levy. If the bank does not receive such notification
from the district director within the prescribed holding period,
or any extension thereof, the bank must surrender the deposits,
including any interest thereon as determined in accordance with
paragraph (c)(2) of this section (up to the amount of the levy),
on the first business day after the holding period, or any
extension thereof, expires. See §301.6331-1(c) to determine when
a levy served by mail is made. (2) Payment of interest on
deposits. --When a bank surrenders levied deposits at the
end of the 21-day holding period (or at the end of any longer
period that has been requested by the district director), the bank
must include any interest that has accrued on the deposits prior
to and during the holding period, and any extension thereof, under
the terms of the bank's agreement with its depositor, but the bank
must not surrender an amount greater than the amount of the levy.
If the deposits are held in a non-interest bearing account at the
time the levy is made, the bank need not include any interest on
the deposits at the end of the holding period, or any extension
thereof, under this paragraph. Interest that accrues on deposits
and is surrendered to the district director at the end of the
holding period, or any extension thereof, is treated as a payment
to the bank's customer. (3) Transactions affecting accounts. --A
levy on deposits held by a bank applies to those funds on deposit
at the time the levy is made, up to the amount of the levy, and is
effective as of the time the levy is made. No withdrawals may be
made on levied upon deposits during the 21-day holding period, or
any extension thereof. (4) Waiver of 21-day holding period.
--A depositor may waive the 21-day holding period by notifying
the bank of the depositor's intention to do so. Where more than
one depositor is listed as the owner of a levied account, all
depositors listed as owners of the account must agree to a waiver
of the 21-day holding period. If the 21-day holding period is
waived, the bank must include with the surrendered deposits a
notification to the district director of the waiver. (5) Examples. --The provisions of this paragraph (c) may be illustrated by
the following examples: Example 1. On
Example 2.
The facts are the same as in Example 1 except that on April
3, 1992, A deposits an additional $5,000 into the account. On
April 24, 1992, X Bank must still surrender only $5,000 plus the
interest which accrued thereon until the end of the holding
period, because the notice of levy served on April 2, 1992,
attached only to those funds on deposit at the time the notice was
served and not to any subsequent deposits. Example 3.
The facts are the same as in Example 1 except that at the
time the notice of levy is served on X Bank, A's savings account
contains $50,000. On April 24, 1992, X Bank must surrender
$10,000, which is the amount of the levy. The levy will not apply
to any interest that accrues on the deposit during the 21-day
holding period, because the entire amount of the levy is satisfied
by the deposits existing at the time the levy is served. Example 4.
The facts are the same as in Example 1 except that the
amount of the levy is $5,002. Under the terms of A's contract with
the bank, the account will earn more than $2 of interest during
the 21-day holding period. On April 24, 1992, X Bank must
surrender $5,002 to the district director. The remaining interest
which accrued during the 21-day holding period is not subject to
the levy. Example 5. On
September 3, 1992, A opens a $5,000 six-month certificate of
deposit account with X Bank. Under the terms of the account, the
depositor must forfeit up to 30 days of interest on the account in
the event of early withdrawal. On Example 6.
Same facts as in Example 5 except that the notice of levy
is served on X Bank on February 15, 1993. The certificate matures
on March 2, 1993. On March 8, X Bank must surrender $5,000 plus
the interest that accrued on the certificate without any reduction
for penalties. (d)
Notification to the district director of errors with respect to
levied upon bank accounts (1) In general. --If a depositor believes that there is an error with respect
to the levied upon account which the depositor wishes to have
corrected, the depositor shall notify the district director to
whom the assessment is charged by telephone to the telephone
number listed on the face of the notice of levy in order to enable
the district director to conduct an expeditious review of the
alleged error. The district director may require any supporting
documentation necessary to the review of the alleged error. The
notification by telephone provided for in this section does not
constitute or substitute for the filing by a third party of a
written request under §301.6343-1(b)(2) for the return of
property wrongfully levied upon. (2) Disputes regarding the merits of the underlying assessment. --This
section does not constitute an additional procedure for an appeal
regarding the merits of an underlying assessment. However, if in
the judgment of the district director a genuine dispute regarding
the merits of an underlying assessment appears to exist, the
district director may request an extension of the 21-day holding
period. (3) Notification of errors from sources other than the depositor.
--The
district director may take action to release the levy on the bank
account based on information obtained from a source other than the
depositor, including the bank in which the account is maintained. (e) Effective date. --These provisions are effective with respect to levies issued
on or after Treasury Decision 8466, filed with the Federal Register
on |