6332 - Code and Regulations

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Actions & Restrictions on Levy
Serving & Releasing Levies
Jeopardy Levy
Bank Levies
Levy on Income
Levy in Special Cases
Automated Levy Programs
6331 Code and Regulations
6332 Code and Regulations
6333 Code and Regulations
6334 Code and Regulations
6335 Code and Regulations
6336 Code and Regulations
6337 Code and Regulations
6338 Code and Regulations
6339 Code and Regulations
6340 Code and Regulations
6341 Code and Regulations
6330 Code and Regulations
6331 Court Order
6331 Damages
6331 Debt
6331 Community Property
6331 Effective Levy
6331 Bankruptcy p1
6331 Bankruptcy p2
6331 Bankruptcy p3
6331 Bankruptcy p4
6331 Bankruptcy p5
6331 Bankruptcy p6
6331 Bail Money
6331 Bank Account
6331 Bank Vault
6331 Alimony Funds
6331 Continuous Levy
Publication 4418 - Levy Program
Pre Seizure Considerations Tax Levy
Pre Approval Post Approval
Actions Prior to sale of seized property
IRS Seizure Sale Procedures
How IRS Conducts a Seizure of  Property
Property acquired and disposed by IRS
Judicial Sale of Levied Property
Understanding your IRS Notice
Releasing Levies and Levied Property
7426 Code and Regulations
Amendment to section 6330 Regulations
6320 Proposed Amendments of Regulations
6332 - Seizure of Property Subject to Distraint
6332 - Annotations- Salary
6332 - Annotations- Savings Account Attachment
6332 - Annotations- Summary Judgment
6332 - Annotations- State Auditor
6332 - Annotations- State Funds
6332 - Annotations-Prior Law
6332 - Annotations- Surety
6332 - Annotations- Title in Dispute
6332 - Annotations- Attorney Fees
6332 - Annotations- Attorney's Liability
6332 - Annotations- Bank Accounts p1
6332 - Annotations- Bank Accounts p2
6332 - Annotations- Bank Accounts p3
6332 - Annotations- Bank Accounts p4
6332 - Annotations- Bank Accounts p5
6332 - Annotations- Commissions
6332 - Annotations- Corporations Obligations
6332 - Annotations- Effect of Honoring Levy p1
6332 - Annotations- Effect of Honoring Levy p2
6332 - Annotations- Effect of Honoring Levy p3
6332 - Annotations- Effect of Honoring Levy p4
6332 - Annotations- Effect of Honoring Levy p5
6332 - Annotations- Effect of payment of tax
6332 - Annotations- Embezzled Funds
6332 - Annotations- Partnership Property
6332 - Annotations- Levy and Demand
Property in Custody of County Commissioner
6332 - Annotations- Property of Another
6332 - Annotations- Property in Custody of State Court
6332 - Annotations- Reasonable Cause
6332 - Annotations- Property Unlawfully Obtained
6333 - Annotations- No Levy Pending
6334 - Annotations- Child Support
6334 - Annotations- Amount of Exemption
6334 - Annotations- Books Furniture tools
6334 - Annotations- Homestead p1
6334 - Annotations- Homestead p2
6334 - Annotations- Homestead p3
6334 - Annotations- Clothing
6334 - Annotations- Disability Benefits
6334 - Annotations- Retirement Accounts p1
6334 - Annotations- Retirement Accounts p2
6334 - Annotations- Military Retirement Benifits
6334 - Annotations- Net Pay
6334 - Annotations- State Exemption Law
6334 - Annotations- Seaman's Wage Statute
6334 - Annotations- Social Security Benfits
6334 - Annotations- Prior Law
6334 - Annotations- Subsequently Receieved Wages
6334 - Annotations- Worker's Compensation
6335 - Annotations- Designation of Proceeds
6335 - Annotations- Bailment Lessor
6335 - Annotations- Damage Suit Against Collector p1
6335 - Annotations- Damage Suit Against Collector p2
6335 - Annotations- Husband and Wife
6335 - Annotations- Effect of Vacating Invalid Sale
6335 - Annotations- Homesteads p1
6335 - Annotations- Homesteads p2
6335 - Annotations- Homesteads p3
6335 - Annotations- Jeopardy Assessments
6335 - Annotations- Injunctive Relief
6335 - Annotations- Interest
6335 - Annotations- Minimum Price
6335 - Annotations- Jurisdiction
6335 - Annotations- Late Payment
6335 - Annotations- Place of Sale
6335 - Annotations- Notice of Adjournment
6335 - Annotations- Notice of Sale or Seizure p1
6335 - Annotations- Notice of Sale or Seizure p2
6335 - Annotations- Notice of Sale or Seizure p3
6335 - Annotations- Notice of Sale or Seizure p4
6335 - Annotations- Third-Party Interest p1
6335 - Annotations- Third-Party Interest p2
6335 - Annotations- Rescission
6335 - Annotations Seized Property Sale Report
6335 - Annotations--Prior Law
6335 - Annotations- Wrongful Sale
6330 Collection Due Process Hearing Requests
6330 - Annotations- Collection Due Process Notice
6330 - Annotations- Forms and Transcripts 1 p1
6330 - Annotations- Forms and Transcripts 1 p2
6330 - Annotations- Forms and Transcripts 1 p3
6330 - Annotations- Froms and Transcripts 1 p4
6330 - Annotations- Forms and Transcripts 1 p5
6330 - Annotations- Froms and Transcripts 2
6330 - Annotations- Hearing Procedures 1 p1
6330 - Annotations- Hearing Procedures 1 p2
6330 - Annotations- Hearing Procedures 1 p3
6330 - Annotations- Hearing Procedures 1 p4
6330 - Annotations- Hearing Procedures 2 p1
6330 - Annotations- Hearing Procedures 2 p2
6330 - Annotations- Hearing Procedures 2 p3
6330 - Annotations- Hearing Procedures 2 p4
6330 - Annotations- Hearing Procedures 3 p1
6330 - Annotations- Hearing Procedures 3 p2
6330 - Annotations- Hearing Procedures 3 p3
6330 - Annotations- Hearing Procedures 3 p4
6330 - Annotations- Hearing Procedures 4 p1
6330 - Annotations- Hearing Procedures 4 p2
6330 - Annotations- Hearing Procedures 4 p3
6330 - Annotations- Hearing Procedures 4 p4
6330 - Annotations- Hearing Procedures 5 p1
6330 - Annotations- Hearing Procedures 5 p2
6330 - Annotations- Hearing Procedures 5 p3
6330 - Annotations- Hearing Procedures 6 p1
6330 - Annotations- Hearing Procedures 6 p2
6330 - Annotations- Hearing Procedures 6 p3
6330 - Annotations- Impartial IRS Appeals Officers p1
6330 - Annotations- Impartial IRS Appeals Officers p2
6330 - Annotations- Issues Raised at Hearings 1 p1
6330 - Annotations- Issues Raised at Hearings 1 p2
6330 - Annotations- Issues Raised at Hearings 1 p3
6330 - Annotations- Issues Raised at Hearings 1 p4
6330 - Annotations- Issues Raised at Hearings 2 p1
6330 - Annotations- Issues Raised at Hearings 2 p2
6330 - Annotations- Issues Raised at Hearings 2 p3
6330 - Annotations- Issues Raised at Hearings 2 p4
6330 - Annotations- Issues Raised at Hearings 2 p5
6330 - Annotations- Issues Raised at Hearings 3 p1
6330 - Annotations- Issues Raised at Hearings 3 p2
6330 - Annotations- Issues Raised at Hearings 3 p3
6330 - Annotations- Issues Raised at Hearings 3 p4
6330 - Annotations- Issues Raised at Hearings 4 p1
6330 - Annotations- Issues Raised at Hearings 4 p2
6330 - Annotations- Issues Raised at Hearings 4 p3
6330 - Annotations- Issues Raised at Hearings 4 p4
Judical Review of Apepeals- Equivalent
Judical Review of Apepeals-District Co (1)
Judicial Review of Appeals-District Court p1
Judicial Review of Appeals-District Court p2
Judicial Review of Appeals-District Court p3
Judicial Review of Appeals-District Court p4
Judical Review of Apepeals-Filed in Wrong
Judicial Review of Appeals-Judicial Rev (1)
Judicial Review of Appeals-Judicial Review p1
Judicial Review of Appeals-Judicial Review p2
Judicial Review of Appeals-Judicial Review p3
Judicial Review of Appeals-Judicial Review p4
Judicial Review of Appeals-Judicial Review p5
Judicial Review of Appeals-Sovereign Immunity
Judicial Review of Appeals-Statute of Limitations
Judicial Review of Appeals-Tax Court 1 p1
Judicial Review of Appeals-Tax Court 1 p2
Judicial Review of Appeals-Tax Court 1 p3
Judicial Review of Appeals-Tax Court 1 p4
Judicial Review of Appeals-Tax Court 1 p5
Judical Review of Apepeals-Tax Court 2 p1
Judicial Review of Appeals-Tax Court 2 p2
Judicial Review of Appeals-Tax Court 2 p3
Judicial Review of Appeals-Timely Filing
6330 - Annotations- Prior Hearings p1
6330 - Annotations- Prior Hearings p2
6336 - Annotations- Injunctive Relief
6336 - Annotations- Value of Property
6337 - Annotations- Assignee
6337 - Annotations- Attempt to Assign
6337 - Annotations- Bankruptcy
6337 - Annotations- Fraud Right of Redemption
6337 - Annotations- Jurisdiction
6337 - Annotations- Periods for Redemption
6337 - Annotations- Proper Party
6337 - Annotations- Property Subject to Redemption
6337 - Annotations- Reaquisition by Prior Owner
6337 - Annotations- Representations
6337 - Annotations- Informal Redemption
6339 - Annotations- Effect of Faulty Transfer
6339 - Annotations- Sale of Taxpayers Real Property p1
6339 - Annotations- Sale of Taxpayers Real Property p2
6340 - Annotations- Purchaser of Property

 

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 LIFE INSURANCE AND ENDOWMENT CONTRACTS. --

 

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 United States . --Notwithstanding subparagraph (1) of this paragraph, if a levy has been made upon property or rights to property subject to levy which a bank engaged in the banking business in the United States or a possession of the United States is in possession of (or obligated with respect to), the Commissioner shall not enforce the levy with respect to any deposits held in an office of the bank outside the United States or a possession of the United States, unless the notice of levy specifies that the district director intends to reach such deposits. The notice of levy shall not specify that the district director intends to reach such deposits unless the district director believes --

 

(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 United States " includes Guam, the Midway Islands, the Panama Canal Zone, the Commonwealth of Puerto Rico, American Samoa, the Virgin Islands, and Wake Island .

 

(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 United States as provided in sections 6343(b) and 7426 of the Internal Revenue Code.

 

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 United States as provided in sections 6343(b) and 7426 of the Internal Revenue Code.

 

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.

301.6332-2., Surrender of property subject to levy in the case of life insurance and endowment contracts

(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 March 5, 19 68, a notice of levy for an unpaid income tax assessment due from A in the amount of $3,000 is served on the X Insurance Company with respect to A's life insurance policy. On March 5, 19 68, the cash loan value of the policy is $1,500. On April 9, 19 68, A does not pay a premium due on the policy in the amount of $200. Under an automatic premium advance provision contained in the policy originally issued in 1960, X advances the premium out of the cash value of the policy. As of June 3, 19 68 (the 90th day after service of the notice of levy), pursuant to the provisions of the policy, the amount of accrued charges upon the automatic premium advance in the amount of $200 for the period April 9, 19 68, through June 3, 19 68, is $2. On June 5, 19 68, the district director gives written notification to X indicating that A's unpaid tax assessment is $2,500. Under this section, X is required to pay to the district director, promptly after receipt of the June 5, 19 68, notification, the sum of $1,298 ($1,500 less $200 less $2), which is the amount A could have had advanced to him by X on June 3, 19 68.

 

Example (2). Assume the same facts as in example (1) except that on May 10, 19 68, A requests and X grants an advance in the amount of $1,000. X has actual notice of the existence of the lien by reason of the service of the notice of levy on March 5, 19 68. This advance is not required to be made automatically under the policy and reduces the amount of the cash value of the policy. For the use of the $1,000 advance during the period May 10, 19 68, through June 3, 19 68, X charges A the sum of $3. Under this section, X is required to pay to the district director, promptly after receipt of the June 5, 19 68, notification, the sum of $1,298. This $1,298 amount is composed of the $295 amount ($1,500 less $200 less $2 less $1,000 less $3) A could have had advanced to him by X on June 3, 19 68, plus the $1,000 advance plus the charges in the amount of $3 with respect thereto.

 

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 April 9, 19 68. After expiration of a grace period to make the premium payment, the X Insurance Company applies the cash loan value of $1,500 to effect the conversion. Since the service of the notice of levy constitutes the exercise of A's right to receive the cash loan value and the amount applied to effect the conversion is not an automatic advance to A to maintain the policy in force, the conversion of the policy is not an event which will release the cash loan value from the effect of the levy. Therefore, X Insurance Company is required to pay to the district director, promptly after receipt of the June 5, 19 68 notification, the sum of $1,500.

 

(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 United States may choose to foreclose the tax lien in any case where it is appropriate, as, for example, to reach the cash surrender value (as distinguished from cash loan value) of a life insurance or endowment contract.

 

(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. 



301.6332-3., The 21-day holding period applicable to property held by banks

(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 April 2, 1992 , a notice of levy for an unpaid income tax assessment due from A in the amount of $10,000 is served on X Bank with respect to A's savings account. At the time the notice of levy is served, X Bank holds $5,000 in A's interest-bearing savings account. On April 24, 1992, (the first business day after the 21-day holding period) X Bank must surrender $5,000 plus any interest that accrued on the account under the terms of A's contract with X Bank up through April 23, 1992 (the last day of the holding period).

 

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 January 4, 1993 , a notice of levy for an unpaid income tax assessment due from A in the amount of $10,000 is served with respect to A's certificate of deposit account. On January 26, 1993, the bank must surrender $5,000 plus the interest which accrued on the account through January 25, 1993, minus the penalty of 30 days of interest as provided in the deposit agreement.

 

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 January 4, 1993 . [Reg. 301.6332-3.]

 

Treasury Decision 8466, filed with the Federal Register on December 31, 1992 ., 1993-1 CB 209, I.R.B. 1993-9,33

 


Estate, gift and generation-skipping transfer taxes: Surrender of property subject to levy in the case of banks: 21-day holding period.--Reg. 301.6332-3, relating to the surrender of property subject to levy in the case of banks, is adopted. BACK REFERENCE: FINH 9793C.

AGENCY: Internal Revenue Service, Treasury.

ACTION: Final Regulation.

SUMMARY: This document contains final regulations regarding the surrender of property subject to levy in the case of banks. Section 6236(e)(1) of the Technical and Miscellaneous Revenue Act of 1988 amended section 6332(c) of the Internal Revenue Code by adding a new paragraph (c), which provides that banks shall surrender deposits in taxpayers' accounts (including interest thereon) only after 21 days after service of a levy. The regulations set forth the rules for compliance by banks, and also contain conforming amendments reflecting the new provision.

DATES: These regulations are effective January 4, 1993, and apply with respect to levies made on or after January 4, 1993.

FOR FURTHER INFORMATION CONTACT: Kevin B. Connelly, 202-622-3640 (not a toll-free call).

SUPPLEMENTAL INFORMATION:

Background

This document contains final regulations amending the Procedure and Administration Regulations (26 CFR part 301) under section 6332 of the Internal Revenue Code (Code). The regulations reflect the amendment of section 6332 by section 6236(e)(1) of the Technical and Miscellaneous Revenue Act of 1988 (Pub. L. No. 100-647, 102 Stat. 3342) (TAMRA).

Explanation of Provisions

The Internal Revenue Service published a notice of proposed rulemaking in the Federal Register on May 1, 1991, (56 FR 19963). Numerous commentators submitted written comments concerning the proposed regulations. However, no request for a hearing was received and no hearing was held. Each of the issues raised in the comments was fully considered during the formulation of the final regulations. The principal comments received by the Internal Revenue Service are discussed below.

Section 6236(e)(1) of TAMRA amended section 6332 of the Code by redesignating paragraphs (c), (d), and (e) as paragraphs (d), (e), and (f), respectively, and by adding new paragraph (c). Under section 6332(c) banks (as defined in section 408(n) of the Code) shall surrender levied deposits, together with the interest accruing thereon, only after 21 days after a levy is made.

The regulations provide that a levy on a bank account applies to those funds on deposit at the time the levy is made, up to the amount of the levy. No withdrawals may be made against the funds reached by the levy during the 21-day holding period. The bank must surrender the deposits on the first business day following the 21st calendar day after the levy is made, unless the bank receives notification from the district director of a release of levy or unless the district director has requested an extension of the holding period. In addition, the bank must surrender any interest which accrued on the deposits under the terms of its agreement with its customer, but in no event must the bank surrender an amount greater than the amount of the levy. Any interest that accrues and is turned over to the Internal Revenue Service is considered to be paid to the bank's depositor. The depositor may waive the 21-day holding period by notifying the bank of his or her intention to do so. However, where more than one depositor is listed as the owner of an account, all of the listed owners must agree to a waiver of the holding period. The regulations set forth examples illustrating the requirements for compliance with section 6332(c) under various circumstances, and define the term "bank" pursuant to section 408(n) of the Code.

The regulations provide further that the bank's depositor may notify the district director to whom the assessment is charged of any errors with respect to the levied account by telephoning the telephone number listed on the face of the notice of levy. The district director may require any supporting documentation necessary to review an alleged error. Notification by telephone does not constitute or substitute for the filing by a third party of a written request for the return of wrongfully levied property.

With respect to imposing liability under section 6332(d) for refusal or failure to surrender property subject to levy, the 21-day rule effectively changes the date of the making of a levy on bank deposits to the date of the expiration of the 21-day holding period or any extension of the period granted by the Internal Revenue Service.

One commentator suggested that the regulations should discharge banks from liability to any third party that claims an interest in an attached account. This is beyond the narrow scope of section 6332(c) and these regulations. A bank's potential liability to the taxpayer or to third parties for surrendering deposits is governed generally by section 6332(e), which provides that any person who surrenders property or rights to property subject to levy to the Internal Revenue Service is discharged from any obligation or liability to the delinquent taxpayer or any other person. That section applies to banks that surrender deposits in accordance with section 6332(c) just as it applies to any other party that surrenders property pursuant to an Internal Revenue Service levy.

The proposed regulations provide that the district director may extend the holding period beyond the initial 21 days if more time is necessary for the district director to resolve alleged errors with respect to attached deposits before the deposits are surrendered. One commentator suggested that extensions of the 21-day holding period should be limited to two 21-day extensions. Although it will be in the best interest of the Internal Revenue Service to resolve as quickly as possible any issues concerning whether deposits should be turned over, the length of extensions of the holding period will vary depending on the issues under consideration. Limiting the length or number of extensions could result in deposits being turned over before the district director has the time to resolve an alleged error, thereby defeating the purpose of section 6332(c).

One commentator suggested that the regulations should include the language that banks must use to indicate that depositors have waived the 21-day holding period. There is no specific language that a bank must use to inform the Internal Revenue Service that depositors have waived the holding period. As long as the bank indicates that each depositor to an account has agreed to a waiver, the waiver is sufficient with respect to that account.

Two commentators submitted questions concerning the effect of section 6332(c) on the terms of a bank's interest agreement with its depositor. The regulations provide that interest must be paid in accordance with the terms of a bank's agreement with its depositor. This provision is based on the fact that the Internal Revenue Service is entitled only to the amount to which the taxpayer would be entitled if the taxpayer withdrew the funds. If the taxpayer would not be entitled to interest, the Internal Revenue Service is not entitled to interest. This provision is illustrated by Examples 5 and 6, which deal with a certificate of deposit, the terms of which provide that the depositor must forfeit thirty days of interest in the event of early withdrawal.

Numerous commentators noted that the calculation of interest on levied funds poses a burden on banks and suggested that banks either should not have to pay any interest or that the regulations should set a floor--based on either the amount of interest due, the amount of the depositor's account balance, or the amount of the levy--below which the bank would not have to pay interest. A prescribed floor below which no interest would have to be paid would effectively reduce the amount of the depositor's liability that is satisfied by the levy. In light of the detrimental impact on the interests of the depositor and the Service, together with the statute's explicit reference to the payment of interest, the final regulations do not contain the suggested exceptions.

One commentator also suggested that a bank should be allowed to enforce against levied funds a contractual right to charge the depositor a fee for processing a levy or a garnishment. Again, the Internal Revenue Service is entitled to the amount to which the taxpayer is entitled. If the terms of the account do not allow the bank to charge a levy processing fee on a withdrawal by the depositor, the bank may not deduct such a fee from the amount subject to levy.

One commentator suggested that banks should be given an additional 10 day period after the 21-day period expires in which to turn over levied funds. Once a bank receives a levy the bank knows exactly when the 21-day period will expire and the funds will become due. An extra 10-day period in which to turn over levied funds is unnecessary.

Many comments that were submitted for consideration raise additional substantive issues that are unrelated to the 21-day rule or to procedural issues concerning the implementation of the 21-day rule. For example, a number of commentators submitted comments and questions concerning the types of accounts and deposits that are subject to an Internal Revenue Service levy. One commentator suggested that the regulations should describe the type of information that banks should and can legally divulge without violating financial privacy laws when informing the Service that a levy is unpostable, e.g., the levy is on a closed account. These issues are outside the scope of the regulations. Section 6332(c) and these regulations neither address nor affect the priority of competing claims to a taxpayer's deposits, the type of property to which a levy attaches, the type of financial information that a bank may divulge about a depositor's account, or a bank's responsibilities with respect to deposits (other than to provide that the bank must hold deposits for 21 days). To reflect the limited scope of these regulations, the caption has been changed to "The 21-day holding period applicable to property held by banks."

Finally, one commentator suggested that the rule that interest surrendered to the district director is considered to be paid to the bank's customer and must be reported to the Internal Revenue Service, should be clarified to distinguish between the reporting of interest on IRA accounts and the reporting of interest on non-IRA accounts. While most interest paid to a depositor must be reported as interest, there are situations in which interest must be reported as some other type of payment. The purpose of this provision is to inform banks that the submission to the Internal Revenue Service of interest that accrues prior to and during the holding period should be treated as a payment to the bank's customer. Instead of accounting for each different characterization of interest in the Code and setting forth the different reporting requirements, the final regulation has been changed to provide simply that to the extent interest is accrued and surrendered such interest is considered to be paid to the bank's customer.

Special Analyses

It has been determined that these rules are not major rules as defined in Executive Order 12291. Therefore, a Regulatory Impact Analysis is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to these regulations, and, therefore, a final Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Code, these regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

Drafting Information

The principal author of these proposed regulations is Kevin B. Connelly, Office of the Assistant Chief Counsel (General Litigation), Internal Revenue Service. However, personnel from other offices of the Internal Revenue Service and Treasury Department participated in their development.

 

T.D. 7384, 1975-2 CB 489


Section 6621.--Determination of Rate of Interest
26 CFR 301.6621 : Statutory provisions; determination of interest rate. (Also Sections 6601, 6611; 301.6601 , 301.6611 .)
TITLE 26.--INTERNAL REVENUE.--CHAPTER I, SUBCHAPTER A, PART 1.--INCOME TAX; TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 19 53; SUBCHAPTER B, PART 20.--ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 19 54; PART 25.-- GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 19 54; SUBCHAPTER F, PART 301,--PROCEDURE AND ADMINISTRATION


Determination of Interest rate

DEPARTMENT OF THE TREASURY,
OFFICE OF COMMISSIONER OF INTERNAL REVENUE,
Washington, D.C. 20224.

To Officers and Employees of the Internal Revenue Service and Others Concerned:

Preamble

By a notice of proposed rule making appearing in the Federal Register on August 20, 1975 (40 F.R. 36366) amendments to the Income Tax Regulations (26 CFR Part 1), the Estate Tax Regulations (26 CFR Part 20), the Gift Tax Regulations (26 CFR Part 25), and the Regulations on Procedure and Administration (26 CFR Part 301) were proposed in order to conform such regulations to the changes made by section 7 of the Act of January 3, 1975 (Pub. L. 93-625, 88 Stat. 2115) [1975-1 C.B. 510]. The proposed amendments to the regulations are adopted by this document without change.

The Act increased the rate of interest payable on underpayments and overpayments of tax and increased the additions to tax for failure to pay the estimated tax. The rate shall be 9 percent per annum on amounts outstanding on July 1, 1975, or arising thereafter. The Act also provides for future adjustments of the rate. The first such adjustment may be made effective February 1, 1976.

Pursuant to paragraph 4(a) of Treasury Order 221 published in the Federal Register for June 10, 1972 (37 F.R. 11696), certain regulations of the Internal Revenue Service continue in effect as regulations of the Bureau of Alcohol, Tobacco and Firearms until superseded or revised. The regulations amended by this Treasury decision are among those that continue to apply for purposes of the laws administered by the Bureau in addition to applying for purposes of the laws administered by the Internal Revenue Service. The Director, Bureau of Alcohol, Tobacco and Firearms has, for this reason, joined as a signatory to this Treasury decision.

Adoption of amendments to the regulations

Based on the foregoing, the Income Tax Regulations (26 CFR Part 1), the Estate Tax Regulations (26 CFR Part 20), the Gift Tax Regulations (26 CFR Part 25), and the Regulations on Procedure and Administration (26 CFR Part 301) are hereby amended.

Paragraph 1. Section 1.115-1 is amended by revising paragraph (a)(4) to read as follows:

1.115-1 Bridges to be acquired by State or political subdivisions.

(a) * * *

(4) A statement, verified by a written declaration that it is made under the penalties of perjury, made by or on behalf of the taxpayer that the taxpayer thereby joins with and concurs in the request of the State or political subdivision thereof that a refund of an amount equal to all or a portion of the tax previously paid by such taxpayer be made to such State or political subdivision, that the taxpayer agrees to receive the amounts refunded from the State or political subdivision to which it is paid and immediately to apply the entire amount of such refund in part payment for the acquisition of such bridge, and that if for any reason the contract which is the basis of the claim for refund is not fully executed and performed, the taxpayer will repay to the United States upon its demand the entire amount of the refund with interest at the annual rate referred to in the regulations under section 6621 from the date the refund is made without seeking or claiming the benefit of any statute of limitations which prior thereto may have run against the United States.

* * * * *

Par. 2. Section 1.514(b) is amended by revising section 514(b)(3)(D) and the historical note to read as follows:

1.514(b) Statutory provisions; unrelated debt-financed income; definition of debt-financed property.

Sec. 514. Unrelated debt-financed income. * * *

(b) Definition of debt-financed property. * * *

(3) Special rules when land is acquired for exempt use within 10 years. * * *

(D) Refund of taxes when subparagraph (B) applies. If an organization for any taxable year has not used land in the manner to satisfy the actual use condition of subparagraph (B) before the time prescribed by law (including extensions thereof) for filing the return for such taxable year, the tax for such year shall be computed without regard to the application of subparagraph (B), but if and when such use condition is satisfied, the provision of subparagraph (B) shall then be applied to such taxable year. If the actual use condition of subparagraph (B) is satisfied for any taxable year after such time for filing the return, and if credit or refund of any overpayment for the taxable year resulting from the satisfaction of such use condition is prevented at the close of the taxable year in which the use condition is satisfied, by the operation of any law or rule of law (other than chapter 74, relating to closing agreements and compromises), credit or refund of such overpayment may nevertheless be allowed or made if claim therefor is filed before the expiration of 1 year after the close of the taxable year in which the use condition is satisfied.

* * * * *

[Sec. 514(b) as amended by sec. 121(d), Tax Reform Act 1969 (83 Stat. 543) [Pub. L. 91-172, 1969-3 C.B. 10]; sec. 7(b)(2), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115) [1975-1 C.B. 510]]

Par. 3. Section 1.514(b)-1 is amended by revising paragraph (d)(4)(i) to read as follows:

1.514(b)-1 Definition of debtfinanced property.

* * * * *

(d) Property acquired for prospective exempt use. * * *

(4) Refund of taxes. (i) If an organization has not satisfied the actual use condition of subparagraph (2) of this paragraph or paragraph (e)(3) of this section before the date prescribed by law (including extensions) for filing the return for the taxable year, the tax for such year shall be computed without regard to the application of such actual use condition. However, if--

(a) A credit or refund of any overpayment of taxes is allowable for a prior taxable year as a result of the satisfaction of such actual use condition, and

(b) Such credit or refund is prevented by the operation of any law or rule of law (other than chapter 74, relating to closing agreements and compromises),

such credit or refund may nevertheless be allowed or made, if a claim is filed within 1 year after the close of the taxable year in which such actual use condition is satisfied. For a special rule with respect to the payment of interest at the rate of 4 percent per annum, see section 514(b)(3)(D), prior to its amendment by section 7(b) of the Act of January 3, 1975 (Pub. L. 93-625, 88 Stat. 2115).

* * * * *

Par. 4. Section 1.6654 is amended by revising section 6654(a) and the historical note to read as follows,

1.6654 Statutory provisions; failure by individual to pay estimated income tax.

Sec. 6654. Failure by individual to pay estimated income tax--(a) Addition to the tax. In the case of any underpayment of estimated tax by an individual, except as provided in subsection (d), there shall be added to the tax under chapter 1 and the tax under chapter 2 for the taxable year an amount determined at an annual rate established under section 6621 upon the amount of the underpayment (determined under subsection (b)) for the period of the underpayment (determined under subsection (c)).

* * * * *

[Sec. 6654 as amended by sec. 1(a)(4), Act of Sept. 25, 19 62 (Pub. L. 87-682, 76 Stat. 575) [1962-3 C.B. 68]; secs. 102(b)(1), (2), (3), and 103(a), Tax Adjustment Act 1966 (80 Stat. 62, 64) [Pub. L. 89-368, 1966-1 C.B. 379]; sec. 301(b)(13), Tax Reform Act 1969 (83 Stat. 586) [Pub. L. 91-172, 1969-3 C.B. 10]; sec. 203(b)(7), Act of Mar. 17, 1971 (Pub. L. 92-5, 85 Stat. 7) [1971-1 C.B. 553]; sec. 203(b)(7), Act of July 1, 1972 (Pub. L. 92-336, 86 Stat. 420) [1972-2 C.B. 672]; sec. 203(b)(7) and (d), Act of July 9, 1973 (Pub. L. 93-66, 87 Stat. 153) [1973-2 C.B. 439]; sec. 5(b)(7), Act of Dec. 31, 1973 (Pub. L. 93-233, 87 Stat. 954) [1974-1 C.B. 380]; sec. 7(c), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115) [1975-1 C.B. 510]]

Par. 5. Section 1.6654-1 is amended by revising the first sentence of paragraph (a)(2) to read as follows:

1.6654-1 Addition to the tax in the case of an individual.

(a) In general. * * *

(2) The amount of the addition is determined at the annual rate referred to in the regulations under section 6621 upon the underpayment of any installment of estimated tax for the period from the date such installment is required to be paid until the 15th day of the fourth month following the close of the taxable year, or the date such underpayment is paid, whichever is earlier. * * *

Par. 6. Section 1.6655 is amended by revising sections 6655(a) and (g)(1) and the historical note to read as follows:

1.6655 Statutory provisions; failure by corporation to pay estimated income tax.

Sec. 6655. Failure by corporation to pay estimated income tax--(a) Addition to the tax. In case of any underpayment of estimated tax by a corporation, except as provided in subsection (d), there shall be added to the tax under chapter 1 for the taxable year an amount determined at an annual rate established under section 6621 upon the amount of the underpayment (determined under subsection (b)) for the period of the underpayment (determined under subsection (c)).

* * * * *

(g) Excessive adjustment under section 6425--(1) Addition to tax. If the amount of an adjustment under section 6425 made before the 15th day of the third month following the close of the taxable year is excessive, there shall be added to the tax under chapter 1 for the taxable year an amount determined at an annual rate established under section 6621 upon the excessive amount from the date on which the credit is allowed or the refund is paid to such 15th day.

* * * * *

[Sec. 6655 as amended by sec. 122(c), Rev. Act 1964 (78 Stat. 28) [Pub. L. 88-272, 1964-1 (Part 2) C.B. 6]; sec. 103(c), (d), (e), Revenue and Expenditure Control Act 1968 (82 Stat. 264) [Pub. L. 90-364, C.B. 1968-2 715]; sec. 7(c), Act of January 3, 1975 (Pub. L. 93-625, 88 Stat. 2115) [1975-1 C.B. 510]]

Par. 7. Section 1.6655-1 is amended by revising the first sentence of paragraph (a)(2) to read as follows:

1.6655-1 Addition to the tax in the case of a corporation.

(a) In general. * * *

(2) The amount of the addition is determined at the annual rate referred to in the regulations under section 6621 upon the underpayment of any installment of estimated tax for the period from the date such installment is required to be paid until the 15th day of the third month following the close of the taxable year, or the date such underpayment is paid, whichever is earlier. * * *

Par. 8. Section 1.6655-5 is amended by revising paragraph (a)(2) to read as follows:

1.6655-5 Addition to tax on account of excessive adjustment under section 6425.

(a) In general. * * *

(2) If the amount of an adjustment under section 6425 is excessive, there shall be added to the tax under chapter 1 for the taxable year an amount determined at the annual rate referred to in the regulations under section 6621 upon the excessive amount from the date on which the credit is allowed or the refund paid to the 15th day of the third month following the close of the taxable year. A refund is paid on the date it is allowed under section 6407.

* * * * *

Par. 9. Section 20.6161-1 is amended by deleting example (5) of paragraph (a)(1).

Par. 10. Section 20.6163 is amended by revising section 6163(c) and the historical note to read as follows:

20.6163 Statutory provisions; extension of time for payment of estate tax on value of reversionary or remainder interest in property.

"Sec. 6163. Extension of time for payment of estate tax on value of reversionary or remainder interest in property. * * *

(c) Cross reference. For authority of the Secretary or his delegate to require security in the case of such extension, see section 6165.

* * * * *

[Sec. 6163 as amended by sec. 66(b)(1), Technical Amendments Act 1958 (72 Stat. 1658) [Pub. L. 85-866, 1958-3 C.B. 254]; sec. 240(a), Revenue Act 1964 (78 Stat. 129) [Pub. L. 88-272, 1964-1 (Part 2) C.B. 6]; sec. 7(d)(1), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115) [1975-10 I.R.B. 15]]

Par. 11. Section 20.6163-1 is amended by revising the first sentence of paragraph (d) to read as follows:

20.6163-1 Extension of time for payment of estate tax on value of reversionary or remainder interest in property.

* * * * *

(d) For provisions requiring the payment of interest during the period of the extension occurring before July 1, 1975 , see section 6601(b) prior to its amendment by section 7(d)(1) of the Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115). * * *

Par. 12. Section 20.6166 is amended by revising sections 6166(g) and (k) and the historical note to read as follows:

20.6166 Statutory provisions; extension of time for payment of estate tax where estate consists largely of interest in closely held business.

Sec. 6166. Extension of time for payment of estate tax where estate consists largely of interest in closely held business. * * *

(g) Time for payment of interest. If the time for payment of any amount of tax has been extended under this section, interest payable under section 6601 on any unpaid portion of such amount shall be paid annually at the same time as, and as a part of, each installment payment of the tax. Interest, on that part of a deficiency prorated under this section to any installment the date for payment of which has not arrived, for the period before the date fixed for the last installment preceding the assessment of the deficiency, shall be paid upon notice and demand from the Secretary or his delegate.

* * * * *

(k) Cross references--(1) Security. For authority of the Secretary or his delegate to require security in the case of an extension under this section, see section 6165.

(2) Period of limitation. For extension of the period of limitation in the case of an extension under this section, see section 6503(d).

[Sec. 6166 as added by sec. 206(a) Small Business Tax Revision Act 1958 (72 Stat. 1681) [Pub. L. 85-866, 1958-3 C.B. 324]; as amended by sec. 7(d)(2), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115) [1975-1 C.B. 510]]

Par 13. Section 20.6166-1 is amended by revising the first sentence of paragraph (f) to read as follows:

20.6166-1 Extension of time for payment of estate tax where estate consists largely of interest in closely held business.

* * * * *

(f) Time for paying interest. Under the provisions of section 6601, interest at the annual rate referred to in the regulations under section 6621 shall be paid on the unpaid balance of the estate tax which the executor has elected to pay in installments, and on the unpaid balance of any deficiency prorated to the installments. * * *

Par. 14. Section 20.6601 is amended to read as follows:

20.6601 Statutory provisions; interest on underpayment, nonpayment, or extensions of time for payment, of tax.

Sec. 6601. Interest on underpayment, nonpayment, or extensions of time for payment, of tax--(a) General rule. If any amount of tax imposed by this title (whether required to be shown on a return, or to be paid by stamp or by some other method) is not paid on or before the last date prescribed for payment, interest on such amount at an annual rate established under section 6621 shall be paid for the period from such last date to the date paid.

* * * * *

[Sec. 6601(a) as amended by sec. 7(a)(2), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115) [1975-1 C.B. 510]]

Par. 15. Section 25.6601 is amended to read as follows:

25.6601 Statutory provisions; interest on underpayment, nonpayment, or extension of time for payment, of tax.

Sec. 6601. Interest on underpayment, nonpayment, or extensions of time for payment, of tax--(a) General rule. If any amount of tax imposed by this title (whether required to be shown on a return, or to be paid by stamp or by some other method) is not paid on or before the last date prescribed for payment, interest on such amount at an annual rate established under section 6621 shall be paid for the period from such last date to the date paid.

* * * * *

[Sec. 6601(a) as amended by sec. 7(a)(2), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115)]

Par. 16. Section 301.6163 is amended by revising section 6163(c) and the historical note to read as follows:

301.6163 Statutory provisions; extension of time for payment of estate tax on value of reversionary or remainder interest in property.

Sec. 6163. Extension of time for payment of estate tax on value of reversionary or remainder interest in property. * * *

(c) Cross reference. For authority of the Secretary or his delegate to require security in the case of such extension, see section 6165.

[Sec. 6163 as amended by sec. 66(b)(1), Technical Amendments Act 1958 (72 Stat. 1658) [Pub. L. 85-866, 1958-3 C.B. 254]; sec. 240(a), Revenue Act 1964 (78 Stat. 129) [Pub. L. 88-272, 1964-1 (Part 2) C.B. 6]; sec. 7(d)(1), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115) [1975-1 C.B. 510]]

Par. 17. Section 301.6166 is amended by revising sections 6166(g) and (k) and the historical note to read as follows:

301.6166 Statutory provisions; extension of time for payment of estate tax where estate consists largely of interest in closely held business.

Sec. 6166. Extension of time for payment of estate tax where estate consists largely of interest in closely held business. * * *

(g) Time for payment of interest. If the time for payment of an amount of tax has been extended under this section, interest payable under section 6601 on any unpaid portion of such amount shall be paid annually at the same time as, and as a part of, each installment payment of the tax. Interest, on that part of a deficiency prorated under this section to any installment the date for payment of which has not arrived, for the period before the date fixed for the last installment preceding the assessment of the deficiency, shall be paid upon notice and demand from the Secretary or his delegate.

* * * * *

(k) Cross references--(1) Security. For authority of the Secretary or his delegate to require security in the case of an extension under this section, see section 6165.

(2) Period of limitation. For extension of the period of limitation in the case of an extension under this section, see section 6503(d).

[Sec. 6166 as added by sec. 206(a), Small Business Tax Revision Act 1958 (72 Stat. 1681); as amended by sec. 7(d)(2), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115)]

Par. 18. Section 301.6332 is amended by revising section 6332(c)(1) and the historical note to read as follows:

301.6332 Statutory provisions; surrender of property subject to levy.

Sec. 6332. Surrender of property subject to levy. * * *

(c) Enforcement of levy--(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 or his delegate, 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 an annual rate established under section 6621 from the date of such levy. 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.

* * * * *

[Sec. 6332 as amended by sec. 104(b), Federal Tax Lien Act of 1966 (80 Stat. 1135) [Pub. L. 89-719, 1966-2 C.B. 623]; sec. 7(a)(2), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115) [1975-1 C.B. 510]]

Par. 19. Section 301.6332 -1 is amended by revising paragraph (b)(1) to read as follows:

301.6332-1 Surrender of property subject to levy.

* * * * *

(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 under the provisions of section 6332(c)(1) in his own person and estate to the United States in a sum equal to the value of the propertly or rights not so surrendered, but not exceeding the amount of the taxes for the collection of which the levy has been made, together with costs and interest on such sum from the date of the levy at the annual rate referred to in the regulations under section 6621. Any amount, other than costs, recovered under section 6332(c)(1) shall be credited against the tax liability for the collection of which the levy was made.

* * * * *

Par. 20. Section 301.6504 is amended by revising section 6504(15) and the historical note to read as follows:

301.6504 Statutory provisions; cross references.

Sec. 6504. Cross references.

* * * * *

(15) Assessment and collection of interest, see section 6601(g).

[Sec. 6504 as amended by sec. 4(d), Act of Apr. 2, 19 56 (Pub. L. 466, 84th Cong., 70 Stat. 91) [1956-1 C.B. 870]; sec. 208(e)(5), Highway Rev. Act 1956 (70 Stat. 397) [Pub. L. 627, 1956-2 C.B. 1150]; sec. 84(b), Technical Amendments Act 1958 (72 Stat. 1664) [Pub. L. 85-866, 1958-3 C.B. 254]; sec. 112(d), Rev. Act 1964 (78 Stat. 24) [Pub. L. 88-272, 1964-1 (Part 2) C.B. 6]; sec. 213(c), Tax Reform Act 1969 (83 Stat. 572) [Pub. L. 91-172, 1969-3 C.B. 10]; sec. 101(d)(2), Excise, Estate, and Gift Tax Adjustment Act 1970 (84 Stat. 1837) [Pub. L. 91-614, 1971-1 C.B. 533]; sec. 7(d)(4), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115) [1975-1 C.B. 510]]

Par. 21. Section 301.6601 is amended by deleting sections 6601(b) and (j), by redesignating sections 6601(c), (d), (e), (f), (g), (h), (i), (k), and (l) as sections 6601(b), (c), (d), (e), (f), (g), (h), (i), and (j) respectively, and by revising section 6601(a) and the historical note to read as follows:

301.6601 Statutory provisions; interest on underpayment, nonpayment, or extensions of time for payment, of tax.

Sec. 6601. Interest on underpayment, nonpayment, or extensions of time for payment, of tax--(a) General rule. If any amount of tax imposed by this title (whether required to be shown on a return, or to be paid by stamp or by some other method) is not paid on or before the last date prescribed for payment, interest on such amount at an annual rate established under section 6621 shall be paid for the period from such last date to the date paid.

* * * * *

[Sec. 6601 as amended by secs. 66(c), 83(a)(1), 84(a), Technical Amendments Act 1958 (72 Stat. 1658, 1663, 1664) [Pub. L. 85-866, 1958-3 C.B. 254]; sec. 206(e), Small Business Tax Revision Act 1958 (72 Stat. 1685) [Pub. L. 85-866, 1958-3 C.B. 324]; sec. 203(c)(2), Federal-Aid Highway Act 1961 (75 Stat. 126) [Pub. L. 87-61, 1961-2 C.B. 309] sec. 2(e)(3), Rev. Act 1962 (76 Stat. 972) [Pub. L. 87-834, 1962-3 C.B. 111]; sec. 3(d), Act of Sept. 2, 19 64 (Pub. L. 88-571, 78 Stat. 857) [1964-2 C.B. 649]; sec. 1(f), Act of Apr. 8, 19 66 (Pub. L. 89-384, 80 Stat. 104) [1966-1 C.B. 414]; sec. 2(e), Act of Dec. 27, 19 67 (Pub. L. 90-225, 81 Stat. 731) [1968-1 C.B. 640]; sec. 2(e), Act of Aug. 7, 19 69 (Pub. L. 91-53, 83 Stat. 92) [1969-3 C.B. 1]; sec. 512(e)(3), Tax Reform Act 1969 (83 Stat. 641) [Pub. L. 91-172, 1969-3 C.B. 10]; sec. 601(d)(3), Rev. Act 1971 (85 Stat. 558) [Pub. L. 92-178, 1972-1 C.B. 443]; sec. 7(a)(2), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115) [1975-1 C.B. 510]]

Par. 22. Section 301.6601 -1 is amended by revising paragraph (a), so much of paragraph (b) as precedes Example (1) of paragraph (b)(1), paragraph (c)(1), the last sentence of paragraph (c)(2)(i), paragraphs (e)(1) and (2), and by deleting paragraph (b)(2). The amended provisions read as follows:

301.6601-1 Interest on underpayments.

(a) General rule. (1) Interest at the annual rate referred to in the regulations under section 6621 shall be paid on any unpaid amount of tax from the last date prescribed for payment of the tax (determined without regard to any extension of time for payment) to the date on which payment is received.

(2) For provisions requiring the payment of interest during the period occurring before July 1, 1975 , see section 6601(a) prior to its amendment by section 7 of the Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115).

(b) Satisfaction by credits made after December 31, 19 57--(1) In General. If any portion of a tax is satisfied by the credit of an overpayment after December 31, 19 57, interest shall not be imposed under section 6601 on such portion of the tax for any period during which interest on the overpayment would have been allowable if the overpayment had been refunded.

(2) Examples. The provisions of this paragraph may be illustrated by the following examples:

* * * * *

(c) Last date prescribed for payment. (1) In determining the last date prescribed for payment, any extension of time granted for payment of tax (including any postponement elected under section 6163(a)) shall be disregarded. The granting of an extension of time for the payment of tax does not relieve the taxpayer from liability for the payment of interest thereon during the period of the extension. Thus, except as provided in paragraph (b) of this section, interest at the annual rate referred to in the regulations under section 6621 is payable on any unpaid portion of the tax for the period during which such portion remains unpaid by reason of an extension of time for the payment thereof.

(2) * * *

(i) * * * But see section 6601(e)(4).

* * * * *

(e) Income tax reduced by carryback. (1) The carryback of a net operating loss, net capital loss, investment credit, or a work incentive program ( WIN ) credit shall not affect the computation of interest on any income tax for the period commencing with the last day prescribed for the payment of such tax and ending with the last day of the taxable year in which the loss or credit arises. For example, if the carryback of a net operating loss, a net capital loss, an investment credit, or a WIN credit to a prior taxable period eliminates or reduces a deficiency in income tax for that period, the full amount of the deficiency will nevertheless bear interest at the annual rate referred to in the regulations under section 6621 from the last date prescribed for payment of such tax until the last day of the taxable year in which the loss or credit arose. Interest will continue to run beyond such last day on any portion of the deficiency which is not eliminated by the carryback. With respect to any portion of an investment credit carryback or a WIN credit carryback from a taxable year attributable to a net operating loss carryback or a capital loss carryback from a subsequent taxable year, such investment credit carryback or WIN credit carryback shall not affect the computation of interest on any income tax for the period commencing with the last day prescribed for the payment of such tax and ending with the last day of such subsequent taxable year.

(2) Where an extension of time for payment of income tax has been granted under section 6164 to a corporation expecting a net operating loss carryback or a net capital carryback, interest is payable at the annual rate established under section 6621 on the amount of such unpaid tax from the last date prescribed for payment thereof without regard to such extension.

* * * * *

Par. 23. Section 301.6602 is amended to read as follows:

301.6602 Statutory provisions; interest on erroneous refund recoverable by suit.

Sec. 6602. Interest on erroneous refund recoverable by suit. Any portion of an internal revenue tax (or any interest, assessable penalty, additional amount, or addition to tax) which has been erroneously refunded, and which is recoverable by suit pursuant to section 7405, shall bear interest at an annual rate established under section 6621 from the date of the payment of the refund.

[Sec. 6602 as amended by sec. 7(a)(2), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115) [1975-1 C.B. 510]]

Par. 24. Section 301.6602 -1 is amended to read as follows:

301.6602-1 Interest on erroneous refund recoverable by suit.

Any portion of an internal revenue tax (or any interest, assessable penalty, additional amount, or addition to tax) which has been erroneously refunded, and which is recoverable by a civil action pursuant to section 7405, shall bear interest at the annual rate referred to in the regulations under section 6621 from the date of the payment of the refund.

Par. 25. Section 301.6611 is amended by revising section 6611(a) and the historical note to read as follows:

301.6611 Statutory provisions; interest on overpayments.

Sec. 6611. Interest on overpayments--(a) Rate. Interest shall be allowed and paid upon any overpayment in respect of any internal revenue tax at an annual rate established under section 6621.

* * * * *

[Sec. 6611 as amended by secs. 42(b) and 83(b) and (c), Technical Amendments Act 1958 (72 Stat. 1640, 1644) [Pub. L. 85-866, 1958-3 C.B. 254]; sec. 2(e)(4), Rev. Act 1962 (76 Stat. 972) [Pub. L. 87-834, 1962-3 C.B. 111]; sec. 3(e), Act of Sept. 2, 19 64 (Pub. L. 88-571, 78 Stat. 858) [1964-2 C.B. 649]; sec. 1(a), Act of Nov. 2, 19 66 (Pub. L. 89-721, 80 Stat. 1150) [1966-2 C.B. 643]; sec. 2(f), Act of Dec. 27, 19 67 (Pub. L. 90-225, 81 Stat. 732) [1968-1 C.B. 640]; sec. 512(e)(4), Tax Reform Act 1969 (83 Stat. 641) [Pub. L. 91-172, 1969-3 C.B. 10]; sec. 601(d)(4), Rev. Act 1971 (85 Stat. 559) [Pub. L. 92-178, 1972-1 C.B. 443]; sec. 7(a)(2), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115) [1975-1 C.B. 510]]

Par. 26. Section 301.6611 -1 is amended by revising paragraph (a) to read as follows:

301.6611-1 Interest on overpayments.

(a) General rule. Except as otherwise provided, interest shall be allowed on any overpayment of any tax at the annual rate referred to in the regulations under section 6621 from the date of overpayment of the tax.

* * * * *

Par. 27. The following is inserted immediately after 301.6612.

DETERMINATION OF INTEREST RATE

301.6621 Statutory provisions; determination of interest rate.

Sec. 6621. Determination of rate of interest--(a) In general. The rate of interest under sections 6601(a), 6602, 6611(a), 6332(c)(1), and 7426(g) of this title, and under section 2411(a) of title 28 is 9 percent per annum, or such adjusted rate as is established by the Secretary or his delegate under subsection (b).

(b) Adjustment of interest rate. The Secretary or his delegate shall establish an adjusted rate of interest for the purpose of subsection (a) not later than October 15 of any year if the adjusted prime rate charged by banks during September of that year, rounded to the nearest full percent, is at least a full percentage point more or less than the interest rate which is then in effect. Any such adjusted rate of interest shall be equal to the adjusted prime rate charged by banks, rounded to the nearest full percent, and shall become effective on February 1 of the immediately succeeding year. An adjustment provided for under this subsection may not be made prior to the expiration of 23 months following the date of any preceding adjustment under this subsection which changes the rate of interest.

(c) Definition of prime rate. For purposes of subsection (b), the term "adjusted prime rate charged by banks" means 90 percent of the average predominant prime rate quoted by commercial banks to large businesses, as determined by the Board of Governors of the Federal Reserve System.

[Sec. 6621 as added by sec. 7(a)(1), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115)]

301.6621-1 Interest rate.

(a) In general. For purposes of sections 6601(a), 6602, 6611(a), 6332(c)(1), and 7426(g) and the regulations thereunder, and section 2411(a) of Title 28 of the United States Code, the interest rate under section 6621 shall be--

(1) On amounts outstanding before July 1, 1975 , 6 percent per annum (or 4 percent in the case of certain extensions of time for payment of taxes as provided in sections 6601(b) and (j) prior to amendment by section 7(b) of the Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115), and certain overpayments of the unrelated business income tax as provided in section 514(b)(3)(D), prior to its amendment by such Act).

(2) On amounts outstanding on or after July 1, 1975 , 9 percent per annum, or, if an adjusted rate is established by the Commissioner under paragraph (b) of this section, such adjusted rate.

(b) Adjustment of interest rate--(1) In general. The Commissioner shall establish, not later than October 15 of any year, an adjusted rate of interest which shall become effective on February 1 of the immediately succeeding year. Such adjusted interest rate will equal the adjusted prime rate charged by banks (as defined in paragraph (b)(2) of this section) during September of such year rounded to the nearest full percent. However, no adjustment may be made to the interest rate unless--

(i) The adjusted prime rate charged by banks rounded to the nearest full percent during September of such year is at least a full percent more or less than the interest rate then in effect, and

(ii) Not less than 23 months will have expired between the date of the last previous adjustment in the interest rate pursuant to this paragraph and February 1 of the next succeeding year.

(2) Definition of adjusted prime rate charged by banks. For purposes of this section, the adjusted prime rate charged by banks is 90 percent of the average predominant prime rate quoted by banks to large businesses as determined by the Board of Governors of the Federal Reserve System.

(c) Applicability of interest rate--(1) Computation. Interest and additions to tax on any amount outstanding on a specific day shall be computed at the rate applicable on such day.

(2) Addition to tax. The addition to tax under sections 6654 and 6655 shall be computed at the same rate per annum as the interest rate set forth under paragraph (a) of this section.

(d) Examples. The provisions of this section may be illustrated by the following examples:

Example (1). A, an individual, files an income tax return for the calendar year 1974, on April 15, 1975 , showing a tax due of $1,000. A pays the $1,000 on September 1, 1975 . Pursuant to section 6601(a), interest on the underpayment of $1,000 is computed at the rate of 6 percent per annum from April 15, 1975 , to June 30, 1975 , a total of 76 days. Interest for 63 days, from June 30, 1975 , to September 1, 1975 , shall be computed at the rate of 9 percent per annum.

Example (2). An executor of an estate is granted, in accordance with section 6161(a)(2)(A), a two-year extension of time for payment of the estate tax shown on the estate tax return, which tax was otherwise due on January 15, 1974 . The tax is paid on January 15, 1976 . Interest on the underpayment shall be computed at the rate of 4 percent per annum from January 15, 1974 , to June 30, 1975 , and at the rate of 9 percent per annum from June 30, 1975 , to January 15, 1976 .

Example (3). X, a corporation, files its 1973 corporate income tax return, on March 15, 1974 , and pays the balance of tax due shown thereon. On August 1, 1975 , an assessment of a deficiency is made against X with respect to such tax. The deficiency is paid on October 1, 1975 . Interest at the rate of 6 percent per annum is due on the deficiency from March 15, 1974 , the due date of the return, to June 30, 1975 , and at the rate of 9 percent per annum from June 30, 1975 , to October 1, 1975 .

Example (4). Y, an individual, files an amended individual income tax return, on October 1, 1975 , for the refund of an overpayment of income tax Y made on April 15, 1975 . Interest is allowed on the overpayment to December 1, 1975 . Pursuant to section 6611(a), interest is computed at the rate of 6 percent per annum from April 15, 1975 , the date of overpayment, to June 30, 1975 . Interest from June 30, 1975 to December 1, 1975 shall be computed at the rate of 9 percent per annum.

Example (5). A, an individual, is liable for an addition to tax under section 6654 for the underpayment of estimated tax from April 15, 1975 until January 15, 1976 . The addition to tax shall be computed at the annual rate of 6 percent per annum from April 15, 1975 to June 30, 1975 and at the annual rate of 9 percent per annum from June 30, 1975 to January 15, 1976 .

Par. 28. Section 301.6863 -1 is amended by revising the last sentence of paragraph (b) to read as follows:

301.6863-1 Stay of collection of jeopardy assessments; bond to stay collection.

* * * * *

(b) Additional conditions applicable to income, estate, and gift tax assessments. * * * If the bond is given before the taxpayer has filed his petition with the Tax Court, it must contain a further condition that if a petition is not filed before the expiration of the period provided in section 6213(a) for the filing of such petition the amount stayed by the bond will be paid upon notice and demand at any time after the expiration of such period, together with interest thereon at the annual rate referred to in the regulations under section 6621 from the date of the jeopardy notice and demand to the date of the notice and demand made after the expiration of the period for filing petition with the Tax Court.

Par. 29. Section 301.7426 is amended by revising so much of section 7426(g) as precedes section 7426(g)(1), and the historical note to read as follows:

301.7426 Statutory provisions; civil actions by persons other than taxpayers.

Sec. 7426. Civil actions by persons other than taxpayers. * * *

(g) Interest. Interest shall be allowed at an annual rate established under section 6621--

* * * * *

[Sec. 7426 as added by sec. 110(a), Federal Tax Lien Act 1966 (80 Stat. 1142) [Pub. L. 89-719, 1966-2 C.B. 623]; as amended by sec. 7(a)(2), Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115) [1975-1 C.B. 510]]

(This Treasury decision is issued under the authority contained in section 7805 of the Internal Revenue Code of 1954 (68A Stat. 917; 26 U.S.C. 7805).)

REN D. DAVIS ,
Director, Bureau of Alcohol, Tobacco and Firearms.
DONALD C. ALLEXANDER,
Commissioner of Internal Revenue.

Approved October 14, 1975.
CHARLES M. WALTER,
Assistant Secretary of the Treasury.

Federal Register Cite: 40 F.R. 49321
Federal Register Publication Date: October 22, 1975
Federal Register Filing Date: October 21, 1975

 

 

T.D. 6746 1, 1964-2 CB 497

SECTION 6332.--SURRENDER OF PROPERTY SUBJECT TO LEVY (Also Section 7401, 301.7401 -1.)
TITLE 26--INTERNAL REVENUE.--CHAPTER I, SUBCHAPTER F, PART 301.--PROCEDURE AND ADMINISTRATION



Regulations on Procedure and Administration amended to provide rules for the enforcement of a levy or a lien on deposits held in a foreign office of a bank engaged in the banking business in the United States or a possession of the United States.

DEPARTMENT OF THE TREASURY,
OFFICE OF COMMISSIONER OF INTERNAL REVENUE,
Washington , D.C. , 20224

To Officers and Employees of the Internal Revenue Service and Others Concerned:

In order to provide rules for the enforcement of a levy or a lien with respect to deposits held in a foreign office of a bank engaged in the banking business in the United States or a possession of the United States, the Regulations on Procedure and Administration (26 CFR Part 301) are amended as follows:

PARAGRAPH 1. Paragraph (a) of 301.6332-1 is amended to read as follows:

301.6332-1 SURRENDER OF PROPERTY SUBJECT TO LEVY.

(a) Requirement--(1) In general.--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 district director, surrender such property or rights (or discharge such obligation) to the district director, except such part of the property or right as is, at the time of such demand, subject to an attachment or execution under any judicial process.

(2) Property held by banks.--Notwithstanding subparagraph (1) of this paragraph, if a levy has been made upon property or rights to property subject to levy which a bank engaged in the banking business in the United States or a possession of the United States is in possession of (or obligated with respect to), the Commissioner shall not enforce the levy with respect to any deposits held in an office of the bank outside the United States or a possession of the United States, unless the notice of levy specifies that the district director intends to reach such deposits. The notice of levy shall not specify that the district director intends to reach such deposits unless the district director believes--

(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 United States " includes Guam, the Midway Islands, the Panama Canal Zone, the Commonwealth of Puerto Rico, American Samoa, the Virgin Islands, and Wake Island .

PAR . 2. Section 301.7401 -1 is amended to read as follows:

301.7401-1 AUTHORIZATION.

(a) In general.--No civil action for the collection or recovery of taxes, or of any fine, penalty, or forfeiture, shall be commenced unless the Commissioner (or the Director, Alcohol and Tobacco Tax Division, with respect to the provisions of subtitle E of the Code) authorizes or sanctions the proceedings and the Attorney General or his delegate directs that the action be commenced. With respect to forfeitures, the assistant regional commissioner or supervisor in charge (alcohol and tobacco tax) may also authorize or sanction the proceedings.

(b) Property held by banks.--The Commissioner shall not authorize or sanction any civil action for the collection or recovery of taxes, or of any fine, penalty, or forfeiture, from any deposits held in a foreign office of a bank engaged in the banking business in the United States or a possession of the United States unless the Commissioner believes--

(1) That the taxpayer is within the jurisdiction of a United States court at the time the civil action is authorized or sanctioned 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

(2) That the taxpayer is not within the jurisdiction of a United States court at the time the civil action is authorized or sanctioned, 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 paragraph, the term "possession of the United States " includes Guam, the Midway Islands, the Panama Canal Zone, the Commonwealth of Puerto Rico, American Samoa, the Virgin Islands, and Wake Island .

Because this Treasury decision merely amends existing regulations with respect to a matter of procedure and is favorable to taxpayers, it is hereby found that it is unnecessary to issue this Treasury decision with notice and public procedure thereon under section 4(a) of the Administrative Procedure Act, approved June 11, 19 46, or subject to the effective date limitation of section 4(c) of that Act.

(This Treasury decision is issued under the authority contained in section 7805 of the Internal Revenue Code of 1954 (68A Stat. 917; 26 U.S.C. 7805).)

BERTRAND M. HARDING,
Acting Commissioner of Internal Revenue.

Approved July 14, 19 64.

STANLEY S. SURREY ,
Assistant Secretary of the Treasury.

Federal Register Cite: 29 F.R. 9792
Federal Register Publication Date: July 21, 19 64
Federal Register Filing Date: July 20, 19 64

 

T.D. 6119., 1955-1 CB 145


SECTION 6201.--ASSESSMENT AUTHORITY
26 CFR 301.6201 -1: Assessment authority. (Also Sections 6301, 6402, 6404; 26 CFR 301.6301 -1, 301.6402 -1, 301.6404 -1.)
TITLE 26--INTERNAL REVENUE.--CHAPTER I, SUBCHAPTER F, PART 301


Regulations under chapters 63, 64, and 65 of the Internal Revenue Code of 1954, relating to assessment, collection, abatements, credits, and refunds.

TREASURY DEPARTMENT,
OFFICE OF COMMISSIONER OF INTERNAL REVENUE,
Washington 25, D. C.

To Officers and Employees of the Internal Revenue Service and Others Concerned:

On December 11, 19 54, there was published in the Federal Register (19 F. R. 8457) a notice of proposed rule making regarding regulations under chapter 63, relating to assessment, chapter 64 (except section 6316), relating to collection, and chapter 65, relating to abatements, credits, and refunds, of the Internal Revenue Code of 1954. On December 15, 19 54, a correction notice making four changes in the proposed regulations was published in the Federal Register (19 F. R. 8580). After consideration of all relevant matter presented by interested parties regarding the rules proposed, the following regulations are hereby adopted.

Sec.

$BASSESSMENT

                   IN GENERAL


301.6201
           Statutory provisions; assessment authority.


301.6201
-1         Assessment authority.

                   Statutory provisions; establishment by regulations of mode or time


301.6202
           of assessment.


301.6203
           Statutory provisions; method of assessment.


301.6203
-1         Method of assessment.


301.6204
           Statutory provisions; supplemental assessments.


301.6204
-1         Supplemental assessment.

                   Statutory provisions; special rules applicable to certain employment


301.6205
           taxes.


301.6205
-1         Special rules applicable to certain employment taxes.


301.6206
           Statutory provisions; cross references.

$BDEFICIENCY

PROCEDURES


301.6211
           Statutory provisions; definition of a deficiency.


301.6211
-1         Deficiency defined.


301.6212
           Statutory provisions; notice of deficiency.


301.6212
-1         Notice of deficiency.

                   Statutory provisions; restrictions applicable to deficiencies; petition


301.6213
           to Tax Court.


301.6213
-1         Restrictions applicable to deficiencies; petition to Tax Court.


301.6214
           Statutory provisions; determinations by Tax Court.


301.6215
           Statutory provisions; assessment of deficiency found by Tax Court.


301.6215
-1         Assessment of deficiency found by Tax Court.


301.6216
           Statutory provisions; cross references.

$BCOLLECTION

                   GENERAL PROVISIONS


301.6301
           Statutory provisions; collection authority.


301.6301
-1         Collection authority.


301.6302
           Statutory provisions; mode or time of collection.

                   Use of Federal reserve banks and authorized commercial banks in

                   connection with the payment of certain employment and excise


301.6302
-1         taxes.


301.6303
           Statutory provisions; notice and demand for tax.


301.6303
-1         Notice and demand for tax.


301.6304
           Statutory provisions; collection under the Tariff Act.

                   RECEIPT OF PAYMENT


301.6311
           Statutory provisions; payment by check or money order.


301.6311
-1         Payment by check or money order.

                   Statutory provisions; payment by 

United States

 notes and certificates


301.6312
           of indebtedness.

                   Treasury certificates of indebtedness, Treasury notes, and Treasury


301.6312
-1         bills acceptable in payment of internal revenue taxes or stamps.

                   Certain Treasury savings notes acceptable in payment of certain


301.6312
-2         internal revenue taxes.


301.6313
           Statutory provisions; fractional parts of a cent.


301.6313
-1         Fractional parts of a cent.


301.6314
           Statutory provisions; receipt for taxes.


301.6314
-1         Receipt for taxes.


301.6315
           Statutory provisions; payments of estimated income tax.


301.6315
-1         Payments of estimated income tax.


301.6316
           Statutory provisions; payment by foreign currency.

                   LIEN FOR TAXES


301.6321
           Statutory provisions; lien for taxes.


301.6321
-1         Lien for taxes.


301.6322
           Statutory provisions; period of lien.

                   Statutory provisions; validity against mortgagees, pledgees, purchasers,


301.6323
           and judgment creditors.

                   Validity of lien against mortgagees, pledgees, purchasers, and judgment


301.6323
-1         creditors.


301.6324
           Statutory provisions; special liens for estate and gift taxes.

                   Special liens for estate and gift taxes; personal liability of transferees


301.6324
-1         and others.


301.6325
           Statutory provisions; release of lien or partial discharge of property.


301.6325
-1         Release of lien or partial discharge of property.


301.6326
           Statutory provisions; cross references.

                   SEIZURE OF PROPERTY FOR COLLECTION OF TAXES


301.6331
           Statutory provisions; levy and distraint.


301.6331
-1         Levy and distraint.


301.6332
           Statutory provisions; surrender of property subject to levy.


301.6332
-1         Surrender of property subject to levy.


301.6333
           Statutory provisions; production of books.


301.6333
-1         Production of books.


301.6334
           Statutory provisions; property exempt from levy.


301.6334
-1         Property exempt from levy.


301.6335
           Statutory provisions; sale of seized property.


301.6335
-1         

Sale

 of seized property.


301.6336
           Statutory provisions; sale of perishable goods.


301.6336
-1         

Sale

 of perishable goods.


301.6337
           Statutory provisions; redemption of property.


301.6337
-1         Redemption of property.


301.6338
           Statutory provisions; certificate of sale; deed of real property.


301.6338
-1         Certificate of sale; deed of real property.

                   Statutory provisions; legal effect of certificate of sale of personal


301.6339
           property and deed of real property.

                   Legal effect of certificate of sale of personal property and deed of


301.6339
-1         real property.


301.6340
           Statutory provisions; records of sale.


301.6340
-1         Records of sale.


301.6341
           Statutory provisions; expense of levy and sale.


301.6341
-1         Expense of levy and sale.


301.6342
           Statutory provisions; application of proceeds of levy.


301.6342
-1         Application of proceeds of levy.


301.6343
           Statutory provisions; authority to release levy.


301.6343
-1         Authority to release levy.


301.6344
           Statutory provisions; cross references.

$

BAbatements,

Credits and

Refunds

                   PROCEDURE IN GENERAL


301.6401
           Statutory provisions; amounts treated as overpayments.


301.6401
-1         Amounts treated as overpayments.


301.6402
           Statutory provisions; authority to make credits or refunds.


301.6402
-1         Authority to make credits or refunds.


301.6402
-2         Claims for credit or refund.


301.6402
-3         Special rules applicable to income tax.


301.6402
-4         Payments in excess of amounts shown on return.


301.6402
-5         Claim for payment of judgment obtained against district director.

                   Claim for payment of judgment obtained in 

United States

 district


301.6402
-6         court against the 

United States

.

                   Claim for payment of judgment obtained in the Court of Claims


301.6402
-7         against the 

United States

.


301.6403
           Statutory provisions; overpayment of installment.


301.6403
-1         Overpayment of installment.


301.6404
           Statutory provisions; abatements.


301.6404
-1         Abatements.


301.6405
           Statutory provisions; reports of refunds and credits.


301.6405
-1         Reports of refunds and credits.


301.6406
           Statutory provisions; prohibition of administrative review of decisions.


301.6407
           Statutory provisions; date of allowance of refund or credit.


301.6407
-1         Date of allowance of refund or credit.

                   RULES OF SPECIAL APPLICATION


301.6411
           Statutory provisions; tentative carryback adjustments.


301.6411
-1         Tentative carryback adjustments.


301.6412
           Statutory provisions; floor stock refunds.


301.6412
-1         Floor stocks refunds.

                   Statutory provisions; special rules applicable to certain employment


301.6413
           taxes.


301.6413
-1         Special rules applicable to certain employment taxes.


301.6414
           Statutory provisions; income tax withheld.


301.6414
-1         Income tax withheld.

                   Statutory provisions; credits or refunds to persons who collected certain


301.6415
           taxes.


301.6415
-1         Credits or refunds to persons who collected certain taxes.


301.6416
           Statutory provisions; certain taxes on sales and services.


301.6416
-1         Certain taxes on sales and services.


301.6417
           Statutory provisions; coconut and palm oil.


301.6417
-1         Coconut and palm oil.


301.6418
           Statutory provisions; sugar.


301.6418
-1         Sugar.


301.6419
           Statutory provisions; excise tax on wagering.


301.6419
-1         Excise tax on wagering.


301.6420
           Statutory provisions; cross references.

                   EFFECTIVE DATE 
AND
 RELATED PROVISIONS


301.7851
           Statutory provisions; applicability of revenue laws.

 

AUTHORITY: 301.6201 to 301.7851 issued under sec. 7805, 68A Stat. 917; 26 U. S. C. 7805.

ASSESSMENT

IN GENERAL

SEC . 301.6201 . STATUTORY PROVISIONS; ASSESSMENT AUTHORITY.

SEC . 6201. ASSESSMENT AUTHORITY.

(a) Authority of Secretary or delegate. The Secretary or his delegate is authorized and required to make the inquiries, determinations, and assessments of all taxes (including interest, additional amounts, additions to the tax, and assessable penalties) imposed by this title, or accruing under any former internal revenue law, which have not been duly paid by stamp at the time and in the manner provided by law. Such authority shall extend to and include the following:

(1) Taxes shown on return.--The Secretary or his delegate shall assess all taxes determined by the taxpayer or by the Secretary or his delegate as to which returns or lists are made under this title.

(2) Unpaid taxes payable by stamp.

(A) Omitted stamps.--Whenever any article upon which a tax is required to be paid by means of a stamp is sold or removed for sale or use by the manufacturer thereof or whenever any transaction or act upon which a tax is required to be paid by means of a stamp occurs without the use of the proper stamp, it shall be the duty of the Secretary or his delegate, upon such information as he can obtain, to estimate the amount of tax which has been omitted to be paid and to make assessment therefor upon the person or persons the Secretary or his delegate determines to be liable for such tax.

(B) Check or money order not duly paid.--In any case in which a check or money order received under authority of section 6311 as payment for stamps is not duly paid, the unpaid amount may be immediately assessed as if it were a tax imposed by this title, due at the time of such receipt, from the person who tendered such check or money order.

(3) Erroneous income tax prepayment credits.--If on any return or claim for refund of income taxes under subtitle A there is an overstatement of the credit for income tax withheld at the source, or of the amount paid as estimated income tax, the amount so overstated which is allowed against the tax shown on the return or which is allowed as a credit or refund may be assessed by the Secretary or his delegate in the same manner as in the case of a mathematical error appearing upon the return.

(b) Estimated income tax.--No unpaid amount of estimated tax under section 6153 or 6154 shall be assessed.

(c) Compensation of child.--Any income tax under chapter 1 assessed against a child, to the extent attributable to amounts includible in the gross income of the child, and not of the parent, solely by reason of section 73(a), shall, if not paid by the child, for all purposes be considered as having also been properly assessed against the parent.

(d) Deficiency proceedings.--For special rules applicable to deficiencies of income, estate, and gift taxes, see subchapter B.

SEC . 301.6201 -1. ASSESSMENT AUTHORITY--(a) In general.--The District Director is authorized and required to make all inquiries necessary to the determinations and assessments of all taxes imposed by the Internal Revenue Code of 1954 or any prior internal revenue law. He is further authorized and required to make the determinations and the assessments of such taxes. However, certain inquiries and determinations are, by direction of the Commissioner, made by other officials, such as Assistant Regional Commissioners. The term "taxes" includes interest, additional amounts, additions to the taxes, and assessable penalties. The authority of the District Director to make assessments includes the following:

(1) Taxes shown on return.--The District Director shall assess all taxes determined by the taxpayer or by the District Director and disclosed on a return or list.

(2) Unpaid taxes payable by stamp. (i) If without the use of the proper stamp:

(a) Any article upon which a tax is required to be paid by means of a stamp is sold or removed for sale or use by the manufacturer thereof, or

(b) Any transaction or act upon which a tax is required to be paid by means of a stamp occurs:

the District Director, upon such information as he can obtain, must estimate the amount of the tax which has not been paid and must make assessment therefor upon the person the District Director determines to be liable for the tax. However, the District Director may not assess any tax which is payable by stamp unless the taxpayer fails to pay such tax at the time and in the manner provided by law or regulations.

(ii) If a taxpayer gives a check or money order as payment for stamps but the check or money order is not paid upon presentment, then the District Director shall assess the amount of the check or money order against the taxpayer as if it were a tax due at the time the check or money order was received by the District Director.

(3) Erroneous income tax prepayment credits.--If the amount of income tax withheld or the amount of estimated income tax paid is overstated by a taxpayer on a return or on a claim for refund, the amount so overstated which is allowed against the tax shown on the return or which is allowed as a credit or refund shall be assessed by the District Director in the same manner as in the case of a mathematical error on the return. See section 6213(b)(1), relating to exceptions to restrictions on assessment.

(b) Estimated income tax.--The District Director shall not assess any amount of estimated income tax required to be paid under section 6153 or 6154 which is unpaid.

(c) Compensation of child.--Any income tax assessed against a child, to the extent of the amount attributable to income included in the gross income of the child solely by reason of section 73(a) or the corresponding provision of prior law, if not paid by the child, shall, for the purposes of the income tax imposed by chapter 1 (or the corresponding provisions of prior law), be considered as having also been properly assessed against the parent. In any case in which the earnings of the child are included in the gross income of the child solely by reason of section 73(a) or the corresponding provision of prior law, the parent's liability is an amount equal to the amount by which the tax assessed against the child (and not paid by him) has been increased by reason of the inclusion of such earnings in the gross income of the child. Thus, if for the calendar year 1954 the child has income of $1,000 from investments and of $3,000 for services rendered, and the latter amount is includible in the gross income of the child under section 73(a) and the child has no wife or dependents, the tax liability determined under section 3 is $625. If the child had only the investment income of $1,000, his tax liability would be $62. If the tax of $625 is assessed against the child, the difference between $625 and $62, or $563, is the amount of such tax which is considered to have been properly assessed against the parent, if not paid by the child.

SEC . 301.6202 . STATUTORY PROVISIONS; ESTABLISHMENT BY REGULATIONS OF MODE OR TIME OF ASSESSMENT.

SEC . 6202. ESTABLISHMENT BY REGULATIONS OF MODE OR TIME OF ASSESSMENT.

If the mode or time for the assessment of any internal revenue tax (including interest, additional amounts, additions to the tax, and assessable penalties) is not otherwise provided for, the Secretary or his delegate may establish the same by regulations.

SEC . 301.6203 . STATUTORY PROVISIONS; METHOD OF ASSESSMENT.

SEC . 6203. METHOD OF ASSESMENT.

The assessment shall be made by recording the liability of the taxpayer in the office of the Secretary or his delegate in accordance with rules or regulations prescribed by the Secretary or his delegate. Upon request of the taxpayer, the Secretary or his delegate shall furnish the taxpayer a copy of the record of the assessment.

SEC . 301.6203 -1. METHOD OF ASSESSMENT.

The District Director shall appoint one or more assessment officers, and the assessment shall be made by an assessment officer signing the summary record of assessment. The summary record, through supporting records, shall provide identification of the taxpayer, the character of the liability assessed, the taxable period if applicable, and the amount of the assessment. The amount of the assessment shall in the case of tax shown on a return by the taxpayer, be the amount so shown, and in all other cases the amount of the assessment shall be the amount shown on the supporting list or record. The date of the assessment is the date the summary record is signed by an assessment officer. If the taxpayer requests a copy of the record of assessment, the District Director shall furnish the taxpayer a copy of the pertinent parts of the assessment which set forth the name of the taxpayer, the date of assessment, the character of the liability assessed, the taxable period, if applicable, and the amounts assessed.

SEC . 301.6204 . STATUTORY PROVISION; SUPPLEMENTAL ASSESSMENTS.

SEC . 6204. SUPPLEMENTAL ASSESSMENT.

(a) General rule.--The Secretary or his delegate may, at any time within the period prescribed for assessment, make a supplemental assessment whenever it is ascertained that any assessment is imperfect or incomplete in any material respect.

(b) Restrictions on assessment.--For restrictions on assessment of deficiencies in income, estate, and gift taxes, see section 6213.

SEC . 301.6204 -1. SUPPLEMENTAL ASSESSMENT.--If any assessment is incomplete or incorrect in any material respect, the District Director, subject to the restrictions with respect to the assessment of deficiencies in income, estate, and gift taxes, and subject to the applicable period of limitations, may make a supplemental assessment for the purpose of correcting or completing the original assessment.

SEC . 301.6205 . STATUTORY PROVISIONS; SPECIAL RULES APPLICABLE TO CERTAIN EMPLOYMENT TAXES.

SEC . 6205. SPECIAL RULES APPLICABLE TO CERTAIN EMPLOYMENT TAXES.

(a) Adjustment of tax.

(1) General rule.--If less than the correct amount of tax imposed by section 3101, 3111, 3201, 3221, or 3402 is paid with respect to any payment of wages or compensation, proper adjustments, with respect to both the tax and the amount to be deducted, shall be made, without interest, in such manner and at such times as the Secretary or his delegate may by regulations prescribe.

(2) United States as employer.--For purposes of this subsection, in the case of remuneration received from the United States or a wholly owned instrumentality thereof during any calendar year, each head of a Federal agency or instrumentality who makes a return pursuant to section 3122 and each agent, designated by the head of a Federal agency or instrumentality, who makes a return pursuant to such section shall be deemed a separate employer.

(b) Underpayments.--If less than the correct amount of tax imposed by section 3101, 3111, 3201, 3221, or 3402 is paid or deducted with respect to any payment of wages or compensation and the underpayment cannot be adjusted under subsection (a) of this section, the amount of the underpayment shall be assessed and collected in such manner and at such times (subject to the statute of limitations properly applicable thereto) as the Secretary or his delegate may by regulations prescribe.

SEC . 301.6205 -1. SPECIAL RULES APPLICABLE TO CERTAIN EMPLOYMENT TAXES. For regulations under this section, see the Employment Tax Regulations (Pt. 31 of this chapter).

SEC . 301.6206 . STATUTORY PROVISIONS; CROSS REFERENCES.

SEC . 6206. CROSS REFERENCES.

(1) For prohibition of suits to restrain assessment of any tax, see section 7421.

(2) For prohibition of assessment of taxes against insolvent banks, see section 7507.

(3) For assessment where property subject to tax has been sold in a distraint proceeding without the tax having been assessed prior to such sale, see section 6342.

(4) For assessment in case of sale or removal of tobacco, snuff, cigars, and cigarettes without the use of proper stamps, see section 5703(d).

(5) For assessment in case of distilled spirits removed from place where disstilled and not deposited in bonded warehouse, see section 5006(c).

(6) For assessment in case of certain spirits subject to excessive leakage, see section 5006(b).

(7) For assessment of deficiencies in production of distilled spirits, see section 5007(e)(1).

(8) For period of limitation upon assessment, see chapter 66.

(9) For assessment under the provisions of the Tariff Act of 1930 of the taxes imposed by section 4501(b), and subchapters A, B, C, D, and E of chapter 38, see sections 4504 and 4601, respectively.

DEFICIENCY PROCEDURES

SEC . 301.6211 . STATUTORY PROVISIONS; DEFINITION OF A DEFICIENCY.

SEC . 6211. DEFINITION OF A DEFICIENCY.

(a) In general. For purposes of this title in the case of income, estate, and gift taxes, imposed by subtitles A and B, the term "deficiency" means the amount by which the tax imposed by subtitles A or B exceeds the excess of:

(1) The sum of:

(A) The amount shown as the tax by the taxpayer upon his return, if a return was made by the taxpayer and an amount was shown as the tax by the taxpayer thereon, plus

(B) The amounts previously assessed (or collected without assessment) as a deficiency, over:

(2) the amount of rebates, as defined in subsection (b)(2), made.

(b) Rules for application of subsection (a). For purposes of this section:

(1) The tax imposed by chapter 1 and the tax shown on the return shall both be determined without regard to payments on account of estimated tax, without regard to the credit under section 31, and without regard to so much of the credit under section 32 as exceeds 2 percent of the interest on obligations described in section 1451.

(2) The term "rebate" means so much of an abatement, credit, refund, or other repayment, as was made on the ground that the tax imposed by subtitles A or B was less than the excess of the amount specified in subsection (a)(1) over the rebates previously made.

(3) The computation by the Secretary or his delegate, pursuant to section 6014, of the tax imposed by chapter 1 shall be considered as having been made by the taxpayer and the tax so computed considered as shown by the taxpayer upon his return.

SEC . 301.6211 -1 DEFICIENCY DEFINED.--(a) In the case of the income tax imposed by subtitle A, the estate tax imposed by chapter 11, or the gift tax imposed by chapter 12, the term "deficiency" means the excess of the tax (income, estate, or gift tax, as the case may be) over the sum of the amount shown as such tax by the taxpayer upon his return and the amounts previously assessed (or collected without assessment) as a deficiency; but such sum shall first be reduced by the amount of rebates made. If no return is made, or if the return (except a return of income tax on Form 1040A pursuant to section 6014) does not show any tax, for the purpose of the definition "the amount shown as the tax by the taxpayer upon his return" shall be considered as zero. Accordingly, in any such case, if no deficiencies with respect to the tax have been assessed, or collected without assessment, and no rebates with respect to the tax have been made, the deficiency is the amount of the tax imposed by subtitle A, chapter 11, or chapter 12. Additional tax shown on an "amended return," so-called, filed after the due date of the return, is a deficiency within the meaning of the Internal Revenue Code.

(b) For purposes of the definition, the income tax imposed by subtitle A and the income tax shown on the return shall both be determined without regard to the credit provided in section 31 for income tax withheld at the source and without regard to so much of the credit provided in section 32 for income taxes withheld at the source as exceeds 2 percent of the interest on tax-free covenant bonds described in section 1451. Payments on account of estimated income tax, like other payments of tax by the taxpayer, shall likewise be disregarded in the determination of a deficiency.

(c) The computation by the District Director, pursuant to section 6014(a), of the income tax imposed by subtitle A shall be considered as having been made by the taxpayer and the tax so computed shall be considered as the tax shown by the taxpayer upon his return.

(d) If so much of the credit claimed on the return for income taxes withheld at the source as exceeds 2 percent of the interest on tax-free covenant bonds is greater than the amount of such credit allowable, the unpaid portion of the tax attributable to such difference will be collected not as a deficiency but as an underpayment of the tax shown on the return.

(e) This section may be illustrated by the following examples:

Example (1). The amount of income tax shown by the taxpayer upon his return for the calendar year 1954 was $1,600. The taxpayer had no amounts previously assessed (or collected without assessment) as a deficiency. He claimed a credit in the amount of $2,050 for tax withheld at source on wages under section 3402 and a refund of $450 (not a rebate under sec. 6211) was made to him as an overpayment of tax for the taxable year. It is later determined that the correct tax for the taxable year is $1,850.

A deficiency of $250 is determined as follows:

Tax imposed by subtitle A ---                                                              $1,850

Tax shown on return ---                                                     $1,600

Tax previously assessed (or collected without assessment) as a

deficiency ---                                                                None

Total ---                                                                    1,600

Amount of rebates made ---                                                    None

Balance ---                                                                                 1,600

Deficiency ---                                                                                250

 

Example (2). The taxpayer made a return for the calendar year 1954 showing a tax of $1,250 before any credits for tax withheld at the source. He claimed a credit in the amount of $800 for tax withheld at source on wages under section 3402 and $60 for tax paid at source under section 1451 upon interest on bonds containing a tax-free covenant. The taxpayer had no amounts previously assessed (or collected without assessment) as a deficiency. The District Director determines that the 2 percent tax paid at the source on tax-free covenant bonds is $40 instead of $60 as claimed by the taxpayer and that the tax imposed by subtitle A is $1,360 (total tax $1,400 less $40 paid at source on tax-free covenant bonds). A deficiency in the amount of $170 is determined as follows:

Tax imposed by subtitle A ($1,400 minus $40) ---                                           $1,360

Tax shown on return ($1,250 minus $60) ---                                  $1,190

Tax previously assessed (or collected without assessment) as a

deficiency ---                                                                None

Total ---                                                                    1,190

Amount of rebates made ---                                                    None

Balance ---                                                                                 1,190

Deficiency ---                                                                                170

 

(f) As used in section 6211, the term "rebate" means so much of an abatement, credit, refund, or other repayment as is made on the ground that the tax imposed by subtitle A or B is less than the excess of (1) the amount shown as the tax by the taxpayer upon his return increased by the amount previously assessed (or collected without assessment) as a deficiency over (2) the amount of rebates previously made. For example, assume that the amount of income tax shown by the taxpayer upon his return for the taxable year is $600 and the amount claimed as a credit under section 31 for income tax withheld at the source is $900. If the District Director determines that the tax imposed by subtitle A is $600 and makes a refund of $300, no part of such refund constitutes a "rebate" since the refund is not made on the ground that the tax imposed by subtitle A is less than the tax shown on the return. If, however, the District Director determines that the tax imposed by subtitle A is $500 and refunds $400, the amount of $100 of such refund would contsitute a rebate since it is made on the ground that the tax imposed by subtitle A ($500) is less than the tax shown on the return ($600). The amount of such rebate ($100) would be taken into account in arriving at the amount of any deficiency subsequently determined.

SEC . 301.6212 . STATUTORY PROVISIONS; NOTICE OF DEFICIENCY.

SEC . 6212. NOTICE OF DEFICIENCY.

(a) In general.--If the Secretary or his delegate determines that there is a deficiency in respect of any tax imposed by subtitles A or B, he is authorized to send notice of such deficiency to the taxpayer by registered mail.

(b) Address for notice of deficiency.

(1) Income and gift taxes.--In the absence of notice to the Secretary or his delegate under section 6903 of the existence of a fiduciary relationship, notice of a deficiency in respect of a tax imposed by chapter 1 or 12, if mailed to the taxpayer at his last known address, shall be sufficient for purposes of such chapter and this chapter even if such taxpayer is deceased, or is under a legal disability, or, in the case of a corporation, has terminated its existence.

(2) Joint income tax return. In the case of a joint income tax return filed by husband and wife, such notice of deficiency may be a single joint notice, except that if the Secretary or his delegate has been notified by either spouse that separate residences have been established, then, in lieu of the single joint notice, a duplicate original of the joint notice shall be sent by registered mail to each spouse at his last known address.

(3) Estate tax.--In the absence of notice to the Secretary or his delegate under section 6903 of the existence of a fiduciary relationship, notice of a deficiency in respect of a tax imposed by chapter 11, if addressed in the name of the decedent or other person subject to liability and mailed to his last known address, shall be sufficient for purposes of chapter 11 and of this chapter.

(c) Further deficiency letters restricted.

(1) General rule.--If the Secretary or his delegate has mailed to the taxpayer a notice of deficiency as provided in subsection (a), and the taxpayer files a petition with the Tax Court within the time prescribed in section 6213(a), the Secretary or his delegate shall have no right to determine any additional deficiency of income tax for the same taxable year, of gift tax for the same calendar year, or of estate tax in respect of the taxable estate of the same decedent, except in the case of fraud, and except as provided in section 6214(a) (relating to assertion of greater deficiencies before the Tax Court), in section 6213(b)(1) (relating to mathematical errors), or in section 6861(c) (relating to the making of jeopardy assessments).

(2) Cross references.--For assessment as a deficiency notwithstanding the prohibition of further deficiency letters, in the case of:

(A) Deficiency attributable to change of election to take standard deduction where taxpayer and his spouse made separate returns, see section 144(b).

(B) Deficiency attributable to gain on involuntary conversion, see section 1033(a)(3)(C) and (D).

(C) Deficiency attributable to gain on sale or exchange of personal residence, see section 1034(j).

(D) Deficiency attributable to war loss recoveries where prior benefit rule is elected, see section 1335.

SEC . 301.6212 -1. NOTICE OF DEFICIENCY--(a) General rule.--If a District Director (or an Assistant Regional Commissioner, Appellate) determines that there is a deficiency in respect of income, estate, or gift tax imposed by subtitle A or B, he is authorized to notify the taxpayer of the deficiency by registered mail.

(b) Address for notice of deficiency--(1) Income and gift taxes.--Unless the District Director for the district in which the return in question was filed has been notified under the provisions of section 6903 as to the existence of a fiduciary relationship, notice of a deficiency in respect of income tax or of gift tax shall be sufficient if mailed to the taxpayer at his last known address, even though such taxpayer is deceased, or is under a legal disability, or, in the case of a corporation, has terminated its existence.

(2) Joint income tax returns.--If a joint income tax return has been filed by husband and wife, the District Director (or Assistant Regional Commissioner, Appellate) may, unless the District Director for the district in which such joint return was filed has been notified by either spouse that a separate residence has been established, send either a joint or separate notice of deficiency to the taxpayers at their last known address. If, however, the proper district Director has been so notified, a separate notice of deficiency, that is, a duplicate original of the joint notice, must be sent by registered mail to each spouse at his or her last known address. The notice of separate residences should be addressed to the District Director for the district in which the joint return was filed.

(3) Estate tax.--In the absence of notice, under the provisions of section 6903 as to the existence of a fiduciary relationship, to the District Director for the district in which the estate tax return was filed, notice of a deficiency in respect of the estate tax imposed by chapter 11 of subtitle B shall be sufficient if addressed in the name of the decedent or other person subject to liability and mailed to his last known address.

(c) Further deficiency letters restricted.--If the District Director (or Assistant Regional Commissioner, Appellate) mails to the taxpayer notice of a deficiency, and the taxpayer files a petition with the Tax Court within the prescribed period, no additional deficiency may be determined with respect to income tax for the same taxable year, gift tax for the same calendar year, or estate tax with respect to the taxable estate of the same decedent. This restriction shall not apply in the case of fraud, assertion of greater deficiencies before the Tax Court as provided in section 6214(a), mathematical errors as provided in section 6213(b)(1), or jeopardy assessments as provided in section 6861(c).

SEC . 301.6213 . STATUTORY PROVISIONS; RESTRICTIONS APPLICABLE TO DEFICIENCIES; PETITION TO TAX COURT.

SEC . 6213. RESTRICTIONS APPLICABLE TO DEFICIENCIES; PETITION TO TAX COURT.

(a) Time for filing petition and restriction on assessment. Within 90 days, or 150 days if the notice is addressed to a person outside the States of the Union and the District of Columbia, after the notice of deficiency authorized in section 6212 is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the last day), the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency. Except as otherwise provided in section 6861 no assessment of a deficiency in respect of any tax imposed by subtitle A or B and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 90-day or 150-day period, as the case may be, nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final. Notwithstanding the provisions of section 7421(a), the making of such assessment or the beginning of such proceeding or levy during the time such prohibition is in force may be enjoined by a proceeding in the proper court.

(b) Exceptions to restrictions on assessment.

(1) Mathematical errors.--If the taxpayer is notified that, on account of a mathematical error appearing upon the return, an amount of tax in excess of that shown upon the return is due, and that an assessment of the tax has been or will be made on the basis of what would have been the correct amount of tax but for the mathematical error, such notice shall not be considered as a notice of deficiency for the purposes of subsection (a) (prohibiting assessment and collection until notice of the deficiency has been mailed), or of section 6212(c)(1) (restricting further deficiency letters), or section 6512(a) (prohibiting credits or refunds after petition to the Tax Court), and the taxpayer shall have no right to file a petition with the Tax Court based on such notice, nor shall such assessment or collection be prohibited by the provisions of subsection (a) of this section.

(2) Assessments arising out of tentative carryback adjustments.--If the Secretary or his delegate determines that the amount applied, credited, or refunded under section 6411 is in excess of the overassessment attributable to the carryback with respect to which such amount was applied, credited, or refunded, he may assess the amount of the excess as a deficiency as if it were due to a mathematical error appearing on the return.

(3) Assessment of amount paid.--Any amount paid as a tax or in respect of a tax may be assessed upon the receipt of such payment notwithstanding the provisions of subsection (a). In any case where such amount is paid after the mailing of a notice of deficiency under section 6212, such payment shall not deprive the Tax Court of jurisdiction over such deficiency determined under section 6211 without regard to such assessment.

(c) Failure to file petition.--If the taxpayer does not file a petition with the Tax Court within the time prescribed in subsection (a), the deficiency, notice of which has been mailed to the taxpayer, shall be assessed, and shall be paid upon notice and demand from the Secretary or his delegate.

(d) Waiver of restrictions.--The taxpayer shall at any time (whether or not a notice of deficiency has been issued) have the right, by a signed notice in writing filed with the Secretary or his delegate, to waive the restrictions provided in subsection (a) on the assessment and collection of the whole or any part of the deficiency.

(e) Cross references.--(1) For assessment as if a mathematical error on the return, in the case of erroneous claims for income tax prepayment credits, see section 6201(a)(3).

(2) For assessments without regard to restrictions imposed by this section in the case of--

(A) Recovery of foreign income taxes, see section 905(c).

(B) Recovery of foreign estate tax, see section 2016.

SEC . 301.6213 -1. RESTRICTIONS APPLICABLE TO DEFICIENCIES; PETITION TO TAX COURT--(a) Time for filing petition and restrictions on assessment--(1) Time for filing petition.--Within 90 days after notice of the deficiency is mailed (or within 150 days after mailing in the case of such notice addressed to a person outside the States of the Union and the District of Columbia), as provided in section 6212, a petition may be filed with the Tax Court of the United States for a redetermination of the deficiency. In determining such 90-day or 150-day period, Saturday, Sunday, or a legal holiday in the District of Columbia is not counted as the 90th or 150th day. The term "States of the Union" referred to in this paragraph does not include the Territories of Alaska and Hawaii .

(2) Restrictions on assessment.--Except as otherwise provided by this section, by section 6861(a) (relating to jeopardy assessments of income, estate, and gift taxes), by section 6871(a) (relating to immediate assessment of claims for income, estate, and gift taxes in bankruptcy and receivership cases), or by section 7485 (in case taxpayer petitions for a review of a Tax Court decision without filing bond), no assessment of a deficiency in respect of a tax imposed by subtitle A or B and no levy or proceeding in court for its collection shall be made until notice of deficiency has been mailed to the taxpayer, nor until the expiration of the 90-day or 150-day period within which a petition may be filed with the Tax Court, nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final. As to the date on which a decision of the Tax Court becomes final, see section 7481. Notwithstanding the provisions of section 7421(a), the making of an assessment or the beginning of a proceeding or levy which is forbidden by this paragraph may be enjoined by a proceeding in the proper court.

(b) Exceptions to restrictions on assessment of deficiencies--(1) Mathematical errors.--If a taxpayer is notified of an additional amount of tax due on account of a mathematical error appearing upon the return, such notice is not deemed a notice of deficiency, and the taxpayer has no right to file a petition with the Tax Court upon the basis of such notice, nor is the assessment of such additional amount prohibited by section 6213(a).

(2) Tentative carryback adjustments.--(i) If the District Director determines that any amount applied, credited, or refunded under section 6411(b) with respect to an application for a tenative carryback adjustment is in excess of the overassessment properly attributable to the carryback upon which such application was based, he may assess the amount of the excess as a deficiency as if such deficiency were due to a mathematical error appearing on the return. That is, the District Director may assess an amount equal to the excess, and such amount may be collected, without regard to the restrictions on assessment and collection imposed by section 6213(a). Thus, the District Director, for example, may assess such amount without regard to whether he has mailed the taxpayer a prior notice of deficiency. Either before or after assessing such an amount, the District Director will notify the taxpayer that he has made, or will make, such assessment. Such notice will not constitute a notice of deficiency, and the taxpayer may not file a petition with the Tax Court of the United States based on such notice. However, the taxpayer within the applicable period of limitation may file a regular claim for credit or refund based on the carryback, if he has not already filed such a claim, and may maintain a suit based on such claim if it is disallowed or if it is not acted upon by the Internal Revenue Service within 6 months from the date the claim was filed.

(ii) The method provided in subdivision (i) of this paragraph to recover any amount applied, credited, or refunded in respect of an application for a tentative carryback adjustment which the District Director later determines should not have been so applied, credited, or refunded is not an exclusive method. Two other methods are available to recover such amount: (a) By way of a deficiency notice under section 6212; or (b) by a suit to recover an erroneous refund under section 7405. The District Director, in his discretion, may proceed by way of any one or more of the three available methods to recover any amount which he determines was improperly applied, credited, or refunded in respect of an application for a tentative carryback adjustment.

(3) Assessment of amount paid.--Any payment made after the mailing of a notice of deficiency which is made by the taxpayer as a payment with respect to the proposed deficiency may be assessed without regard to the restrictions on assessment and collection imposed by section 6213(a) even though the taxpayer has not filed a waiver of restrictions on assessment as provided in section 6213(d). A payment of all or part of the deficiency asserted in the notice together with the assessment of the amount so paid will not affect the jurisdiction of the Tax Court. If any payment is made before the mailing of a notice of deficiency, the District Director is not prohibited by section 6213(a) from assessing such amount, and the District Director may assess such amount if he deems such action to be proper. If the District Director assesses such amount, the assessment is taken into account in determining whether or not there is a deficiency for which a notice of deficiency must be issued. Thus, if such a payment satisfies the taxpayer's tax liability, no notice of deficiency will be mailed and the Tax Court will have no jurisdiction over the matter. In any case in which there is a controversy as to the correct amount of the tax liability, the assessment of any amount pursuant to the provisions of section 6213(b)(3) shall in no way be considered to be the acceptance of an offer by the taxpayer to settle such controversy.

(4) Jeopardy.--If the District Director believes that the assessment or collection of a deficiency will be jeopardized by delay, such deficiency shall be assessed immediately, as provided in section 6861(a).

(c) Failure to file petition.--If no petition is filed with the Tax Court within the period prescribed in section 6213(a), the District Director shall assess the amount determined as the deficiency and of which the taxpayer was notified by registered mail and the taxpayer shall pay the same upon notice and demand therefor. In such case the District Director will not be precluded from determining a further deficiency and notifying the taxpayer thereof by registered mail. If a petition is filed with the Tax Court the taxpayer should notify the District Director who issued the notice of deficiency that the petition has been filed in order to prevent an assessment of the amount determined to be the deficiency.

(d) Waiver of restrictions.--The taxpayer may at any time by a signed notice in writing filed with the District Director waive the restrictions on the assessment and collection of the whole or any part of the deficiency. The notice must in all cases be filed with the District Director or other authorized official under whose jurisdiction the audit or other consideration of the return in question is being conducted. The filing of such notice with the Tax Court does not constitute filing with the District Director within the meaning of the International Revenue Code. After such waiver has been acted upon by the District Director and the assessment has been made in accordance with its terms, the waiver cannot be withdrawn.

SEC . 301.6214 . STATUTORY PROVISIONS; DETERMINATIONS BY TAX COURT.

SEC . 6214. DETERMINATIONS BY TAX COURT.

(a) Jurisdiction as to increase of deficiency, additional amounts, or additions to the tax.--The Tax Court shall have jurisdiction to redetermine the correct amount of the deficiency even if the amount so redetermined is greater than the amount of the deficiency, notice of which has been mailed to the taxpayer, and to determine whether any additional amount, or addition to the tax should be assessed, if claim therefor is asserted by the Secretary or his delegate at or before the hearing or a rehearing.

(b) Jurisdiction over other years.--The Tax Court in redetermining a deficiency of income tax for any taxable year or of gift tax for any calendar year shall consider such facts with relation to the taxes for other years as may be necessary correctly to redetermine the amount of such deficiency, but in so doing shall have no jurisdiction to determine whether or not the tax for any other years has been overpaid or underpaid.

(c) Final decisions of Tax Court.--For purposes of this chapter and subtitles A or B the date on which a decision of the Tax Court becomes final shall be determined according to the provisions of section 7481.

SEC . 301.6215 . STATUTORY PROVISIONS; ASSESSMENT OF DEFICIENCY FOUND BY TAX COURT.

SEC . 6215. ASSESSMENT OF DEFICIENCY FOUND BY TAX COURT.

(a) General rule.--If the taxpayer files a petition with the Tax Court, the entire amount redetermined as the deficiency by the decision of the tax Court which has become final shall be assessed and shall be paid upon notice and demand from the Secretary or his delegate. No part of the amount determined as a deficiency by the Secretary or his delegate but disallowed as such by the decision of the Tax Court which has become final shall be assessed or be collected by levy or by proceeding in court with or without assessment.

(b) Cross references.--(1) For assessment or collection of the amount of the deficiency determined by the Tax Court pending appellate court review, see section 7485.

(2) For dismissal of petition by Tax Court as affirmation of deficiency as determined by the Secretary or his delegate, see section 7459(d).

(3) For decision of Tax Court that tax is barred by limitation as its decision that there is no deficiency, see section 7459(e).

(4) For assessment of damages awarded by Tax Court for instituting proceedings merely for delay, see section 6673.

(5) For treatment of certain deficiencies as having been paid, in connection with sale of surplus war-built vessels, see section 9(b)(8) of the Merchant Ship Sales Act of 1946 (60 Stat. 48; 50 U. S. C. App. 1742).

(6) For rules applicable to Tax Court proceedings, see generally subchapter C of chapter 76.

(7) For proration of deficiency to installments, see section 6152(c).

(8) For extension of time for paying amount determined as deficiency, see section 6161(b).

SEC . 301.6215 -1. ASSESSMENT OF DEFICIENCY FOUND BY TAX COURT.--Where a petition has been filed with the Tax Court, the entire amount redetermined as the deficiency by the decision of the Tax Court which has become final shall be assessed by the District Director and the unpaid portion of the amount so assessed shall be paid by the taxpayer upon notice and demand therefor.

SEC . 301.6216 . STATUTORY PROVISIONS; CROSS REFERENCES.

SEC . 6216. CROSS REFERENCES.

(1) For procedures relating to bankruptcy and receivership, see subchapter B of chapter 70.

(2) For procedures relating to jeopardy assessments, see subchapter A of chapter 70.

(3) For procedures relating to claims against transferees and fiduciaries, see chapter 71.

COLLECTION

GENERAL PROVISIONS

SEC . 301.6301 . STATUTORY PROVISIONS; COLLECTION AUTHORITY.

SEC . 6301. COLLECTION AUTHORITY.

The Secretary or his delegate shall collect the taxes imposed by the internal revenue laws.

SEC . 301.6301 -1. COLLECTION AUTHORITY.--The taxes imposed by the internal revenue laws shall be collected by District Directors of internal revenue. See, however, section 6304, relating to the collection of certain taxes under the provisions of the Tariff Act of 1930.

SEC . 301.6302 . STATUTORY PROVISIONS; MODE OR TIME OF COLLECTION.

SEC . 6302. MODE OR TIME OF COLLECTION.

(a) Establishment by regulations. If the mode or time for collecting any tax is not provided for by this title, the Secretary or his delegate may establish the same by regulations.

(b) Discretionary method. Whether or not the method of collecting any tax imposed by chapters 21, 31, 32, 33, sections 4501(a) or 4511 of chapter 37, or sections 4701 or 4721 of chapter 39 is specifically provided for by this title, any such tax may, under regulations prescribed by the Secretary or his delegate, be collected by means of returns, stamps, coupons, tickets, books, or such other reasonable devices or methods as may be necessary or helpful in securing a complete and proper collection of the tax.

(c) Use of Government depositaries. The Secretary or his delegate may authorize Federal Reserve banks, and incorporated banks or trust companies which are depositaries or financial agents of the United States, to receive any tax imposed under the internal revenue laws, in such manner, at such times, and under such conditions as he may prescribe; and he shall prescribe the manner, times, and conditions under which the receipt of such tax by such banks and trust companies is to be treated as payment of such tax to the Secretary or his delegate.

SEC . 301.6302 -1. USE OF FEDERAL RESERVE BANKS AND AUTHORIZED COMMERCIAL BANKS IN CONNECTION WITH THE PAYMENT OF CERTAIN EMPLOYMENT AND EXCISE TAXES.--For regulations under this section--

(a) With respect to employment taxes under the Federal Insurance Contributions Act and the income tax withheld at source on wages, see section 31.6302(c)--1 of this chapter;

(b) With respect to the employer tax and the employee tax under the Railroad Retirement Tax Act, see section 31.6302(c)-2 of this chapter; and

(c) With respect to certain excise taxes, see section 40.6151-1, section 42.0611-1, and section 46.6011-1 of this chapter.

SEC . 301.6303 . STATUTORY PROVISIONS; NOTICE AND DEMAND FOR TAX.

SEC . 6303. NOTICE AND DEMAND FOR TAX.

(a) General rule.--Where it is not otherwise provided by this title, the Secretary or his delegate shall, as soon as practicable, and within 60 days, after the making of an assessment of a tax pursuant to section 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof. Such notice shall be left at the dwelling or usual place of business of such person, or shall be sent by mail to such person's last known address.

(b) Assessment prior to last date for payment.--Except where the Secretary or his delegate believes collection would be jeopardized by delay, if any tax is assessed prior to the last date prescribed for payment of such tax, payment of such tax shall not be demanded under subsection (a) until after such date.

SEC . 301.6303 -1. NOTICE AND DEMAND FOR TAX--(a) General rule.--Where it is not otherwise provided by the Code, the district director shall, after the making of an assessment of a tax pursuant to section 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof. Such notice shall be given as soon as possible and within 60 days. However, the failure to give notice within 60 days does not invalidate the notice. Such notice shall be left at the dwelling or usual place of business of such person, or shall be sent by mail to such person's last known address.

(b) Assessment prior to last date for payment.--If any tax is assessed prior to the last date prescribed for payment of such tax, the District Director will not demand that such tax be paid before such last date, except where the District Director believes collection would be jeopardized by delay.

SEC . 301.6304 . STATUTORY PROVISIONS; COLLECTION UNDER THE TARIFF ACT.

SEC . 6304. COLLECTION UNDER THE TARIFF ACT.

For collection under the provisions of the Tariff Act of 1930 of the taxes imposed by section 4501(b), and subchapters A, B, C, D, and E of chapter 38, see sections 4504 and 4601, respectively.

RECEIPT OF PAYMENT

SEC . 301.6311 . STATUTORY PROVISIONS; PAYMENT BY CHECK OR MONEY ORDER.

SEC . 6311. PAYMENT BY CHECK OR MONEY ORDER.

(a) Authority to receive.--It shall be lawful for the Secretary or his delegate to receive for internal revenue taxes, or in payment for internal revenue stamps, checks or money orders, to the extent and under the conditions provided in regulations prescribed by the Secretary or his delegate.

(b) Check or money order unpaid.

(1) Ultimate liability.--If a check or money order so received is not duly paid, the person by whom such check or money order has been tendered shall remain liable for the payment of the tax or for the stamps, and for all legal penalties and additions, to the same extent as if such check or money order had not been tendered.

(2) Liability of banks and others.--If any certified, treasurer's, or cashier's check or any money order so received is not duly paid, the United States shall, in addition to its right to exact payment from the party originally indebted therefor, have a lien for the amount of such check upon all the assets of the bank or trust company on which drawn or for the amount of such money order upon all the assets of the issuer thereof; and such amount shall be paid out of such assets in preference to any other claims whatsoever against such bank or issuer except the necessary costs and expenses of administration and the reimbursement of the United States for the amount expended in the redemption of the circulating notes of such bank.

SEC . 301.6311 -1. PAYMENT BY CHECK OR MONEY ORDER--(a) Authority to receive--(1) In general.--(i) District Directors may accept checks drawn on any bank or trust company incorporated under the laws of the United States or under the laws of any State, Territory, or possession of the United States or money orders in payment for internal revenue taxes, provided such checks or money orders are collectible in United States currency at par. District Directors may accept such checks or money orders in payment for internal revenue stamps, or for the prepayment of the taxes on wines as authorized by the Wine Regulations prescribed under chapter 51 (pt. 240 of this chapter), to the extent and under the conditions prescribed in subparagraph (2) of this paragraph. A check or money order is payable at par only if the full amount thereof is payable without any deduction for exchange or other charges. As used in this section, the term "money order" means: (a) United States postal, bank, express, or telegraph money order; (b) money order issued by a domestic building and loan association (as defined in section 7701(a)(19)) or by a similar association incorporated under the laws of a possession of the United States; (c) a money order issued by such other organization as the Commissioner may designate; and (d) a money order described in subdivision (ii) of this subparagraph in cases therein described. However, the District Director may refuse to accept any personal check whenever he has good reason to believe that such check will not be honored upon presentment.

(ii) An American citizen residing in a country with which the United States maintains direct exchange of money orders on a domestic basis may pay his tax by postal money order of such country. Such countries presently are: Antigua, the Bahamas , Barbados , Bermuda, British Guiana, British Honduras, British Virgin Islands , Canada , Canal Zone , Cuba , Dominica , Grenada , Jamaica , Montserrat, Nevis, St. Kitts , St. Lucia , St. Vincent, and Trinidad and Tobago .

(iii) If one check or money order is remitted to cover two or more persons' taxes, the remittance should be accompanied by a letter of transmittal clearly identifying--

(a) Each person whose tax is to be paid by the remittance;

(b) The amount of the payment on account of each such person; and

(c) The kind of tax paid.

(2) Payment for internal revenue stamps; prepayment of wine tax.--The District Director may accept checks and money orders described in subparagraph (1) of this paragraph in payment for internal revenue stamps other than stamps for taxes imposed under subchapter F of chapter 39 (relating to silver bullion), stamps for taxes imposed under chapter 34 (relating to documentary stamps), stamps for taxes on distilled spirits imposed under chapter 51, including the rectification tax, and stamps for taxes imposed under chapter 52 (relating to tobacco and manufactures), and in prepayment of the taxes on wines as authorized by the Wine Regulations prescribed under chapter 51 (pt. 240 of this chapter). The District Director may accept in payment for such taxes certified, cashiers' or treasurers' checks drawn on any bank or trust company incorporated under the laws of the United States or under the laws of any State, Territory, or possession of the United States or money orders described in subparagraph (1) of this paragraph. However, if an application has been submitted by a person desiring to tender personal checks for such taxes or in prepayment of wine taxes, and the application has been approved by the District Director, the District Director may accept such personal checks as are described in subdivision (i) of subparagraph (1) of this paragraph. The application shall be made to the District Director and shall contain the applicant's name, address, firm name (if any), such financial information as will enable the District Director to determine the amount of the credit to be extended to the applicant, and the approximate value of stamps to be purchased or the amount of wine taxes to be prepaid during the period fixed by the District Director. The District Director is authorized to approve or disapprove such application and, if the application is approved, to fix the maximum amount of the value of the internal revenue stamps or of the prepayment of the taxes on wines for which personal checks will be accepted and to prescribe such other limitations and conditions as he deems appropriate. The District Director may, for good cause, discontinue at any time the acceptance of personal checks under the provisions of this subparagraph.

(b) Checks or money orders not paid--(1) Ultimate liability.--The person who tenders any check (whether certified or uncertified, cashier's, treasurer's, or other form of check) or money order in payment for taxes or stamps is not released from his liability until the check or money order is paid; and, if the check or money order is not duly paid, he shall also be liable for all legal penalties and additions, to the same extent as if such check or money order had not been tendered. For the penalty in case a check or money order is not duly paid, see section 6657 and the regulations thereunder. For assessment of the amount of a check or money order not duly paid, see section 6201(a)(2)(B) and the regulations thereunder.

(2) Liability of banks and others.--If any certified treasurer's or cashier's check or money order is not duly paid, the United States shall have a lien for the amount of such check upon all assets of the bank or trust company on which drawn or for the amount of such money order upon the assets of the issuer thereof. The unpaid amount shall be paid out of such assets in preference to any other claims against such bank or issuer except the necessary costs and expenses of administration and the reimbursement of the United States for the amount expended in the redemption of the circulating of the United States for the addition, the Government has the right to exact payment from the person required to make the payment.

SEC . 301.6312 . STATUTORY PROVISIONS; PAYMENT BY UNITED STATES NOTES AND CERTIFICATES OF INDEBTEDNESS.

SEC . 6312. PAYMENT BY UNITED STATES NOTES AND CERTIFICATES OF INDEBTEDNESS

(a) General rule.--It shall be lawful for the Secretary or his delegate to receive, at par with an adjustment for accrued interest, Treasury bills, notes and certificates of indebtedness issued by the United States in payment of any internal revenue taxes, or in payment for internal revenue stamps, to the extent and under the conditions provided in regulations prescribed by the Secretary or his delegate.

(b) Cross references.--(1) For authority to receive silver certificates, see section 5 of the act of June 19, 19 34 (48 Stat. 1178; 31 U. S. C. 405a).

(2) For full legal tender status of all coins and currencies of the United States, see section 43(b)(1) of the Agricultural Adjustment Act, as amended (48 Stat. 52, 113; 31 U. S. C. 462).

(3) For authority to receive obligations under the Second Liberty Bond Act, see section 20(b) of that act, as amended (56 Stat. 189; 31 U. S. C. 754b).

SEC . 301.6312 -1. TREASURY CERTIFICATES OF INDEBTEDNESS, TREASURY NOTES, AND TREASURY BILLS ACCEPTABLE IN PAYMENT OF INTERNAL REVENUE TAXES OR STAMPS.--(a) Treasury certificates of indebtedness. Treasury notes or Treasury bills of any series (not including interim receipts issued by Federal reserve banks in lieu of definitive certificates, notes, or bills) may be tendered at or before maturity in payment of internal revenue taxes due on the date (or in payment for stamps purchased on the date), on which the certificates, notes, or bills mature, or in payment of internal revenue taxes due on a specified prior date, but only if such certificates, notes, or bills, according to the express terms of their issue, are made acceptable in payment of such taxes or for the purchase of stamps. If the taxes for which the certificates, notes, or bills are tendered in payment become due, or the stamps are purchased, on the same date as that on which such certificates, notes, or bills mature, they will be accepted at par plus accrued interest, if any, payable with the principal (not represented by coupons attached) in payment of such taxes or stamps. If the taxes for which the certifcates, notes, or bills are tendered in payment become due, or the stamps are purchased, on a date prior to that on which the certificates, notes, or bills mature, they will be accepted at the value specified in the terms under which such certificates, notes, or bills were issued. All interest coupons attached to Treasury certificates of indebtedness or Treasury notes shall be detached by the taxpayer before such certificates or notes are tendered in payment of taxes or stamps.

(b) Receipts given by a District Director for Treasury certificates of indebtedness, Treasury notes, or Treasury bills received in payment of internal revenue taxes or for stamps as provided in this section shall contain an adequate description of such certificates, notes, or bills, and a statement of the value, including accrued interest, if any, payable with the principal (not represented by coupons attached), at which accepted, and shall show that the certificates, notes, or bills are tendered by the taxpayer and received by the District Director, subject to no condition, qualification, or reservation whatsoever, in payment of an amount of taxes or for stamps no greater than such value. Any certificate, note, or bill offered in payment of internal revenue taxes or for stamps subject to any condition, qualification, or reservation, or for any greater amount than the value at which acceptable in payment of taxes or stamps, as specified in the terms under which such certificate, note, or bill was issued, shall not be deemed to be duly tendered and shall be returned to the taxpayer.

(c) For the purpose of saving taxpayers the expense of transmitting Treasury certificates of indebtedness, Treasury notes, or Treasury bills to the office of the District Director in whose district the taxes are payable, or stamps are to be purchased, taxpayers desiring to pay taxes, or purchase stamps, with such certificates, notes, or bills acceptable in payment of taxes or for the purchase of stamps may deposit such certificates, notes, or bills with a Federal reserve bank or branch. In such cases, the Federal reserve bank or branch shall issue a receipt in the name of the District Director, describing the certificates, notes, or bills by par or dollar face amount and stating on the face of the receipt that the certificates, notes, or bills represented thereby are held by the bank or branch for redemption at the value specified in the terms under which the certificates, notes, or bills were issued, and for application of the proceeds in payment of taxes due or for the purchase of stamps on a specified date by the taxpayer named therein.

SEC . 301.6312 -2. CERTAIN TREASURY SAVINGS NOTES ACCEPTABLE IN PAYMENT OF CERTAIN INTERNAL REVENUE TAXES.--According to the express terms of their issue, the following series of Treasury savings notes are presently acceptable in payment of income taxes (current and back, personal and corporation taxes, and excess profits taxes) and estate and gift taxes (current and back):

(a) Treasury Savings Notes, Series A,

(b) Treasury Savings Notes, Series B,

(c) Treasury Savings Notes, Series C.

SEC . 301.6313 . STATUTORY PROVISIONS; FRACTIONAL PARTS OF A CENT .

SEC . 6313. FRACTIONAL PARTS OF A CENT .

In the payment of any tax imposed by this title not payable by stamp, a fractional part of a cent shall be disregarded unless it amounts to one-half cent or more, in which case it shall be increased to 1 cent.

SEC . 301.6313 -1. FRACTIONAL PARTS OF A CENT .--In the payment of any tax not payable by stamp, a fractional part of a cent shall be disregarded unless it amounts to one-half cent or more, in which case it shall be increased to one cent. Fractional parts of a cent shall not be disregarded in the computation of taxes.

SEC . 301.6314 . STATUTORY PROVISIONS; RECEIPT FOR TAXES.

SEC . 6314. RECEIPT FOR TAXES.

(a) General rule.--The Secretary or his delegate shall, upon request, give receipts for all sums collected by him, excepting only when the same are in payment for stamps sold and delivered; but no receipts shall be issued in lieu of a stamp representing a tax.

(b) Duplicate receipts for payment of estate taxes.--The Secretary or his delegate shall, upon request, give to the person paying the tax under chapter 11 (relating to the estate tax) duplicate receipts, either of which shall be sufficient evidence of such payment, and shall entitle the executor to be credited and allowed the amount thereof by any court having jurisdiction to audit or settle his accounts.

(c) Cross references.--(1) For receipt required to be furnished by employer to employee with respect to employment taxes, see section 6051.

(2) For receipt of discharge of executor from personal liability, see section 2204.

SEC . 301.6314 -1. RECEIPT FOR TAXES--(a) In general.--The District Director shall issue a receipt for each tax payment made in cash (other than a payment for stamps sold and delivered). In the case of payments made by check, the canceled check is usually a sufficient receipt. However, upon request, the District Director shall issue a receipt for such payment (other than a payment for stamps sold and delivered). No receipt shall be issued in lieu of a stamp representing a tax, whether the payment is in cash or otherwise.

(b) Duplicate receipt for payment of estate taxes. Upon request, the District Director will issue duplicate receipts to the person paying the estate tax, either of which will be sufficient evidence of such payment and entitle the executor to be credited with the amount by any court having jurisdiction to audit or settle his accounts. For definition of the term "executor," see section 2203.

SEC . 301.6315 . STATUTORY PROVISIONS; PAYMENTS OF ESTIMATED INCOME TAX.

SEC . 6315. PAYMENTS OF ESTIMATE INCOME TAX.

Payment of the estimated income tax, or any installment thereof, shall be considered payment on account of the income taxes imposed by subtitle A for the taxable year.

SEC . 301.6315 -1. PAYMENTS OF ESTIMATED INCOME TAX.--The payment of any installment of the estimated income tax (see sections 6015 and 6016) shall be considered payment on account of the income tax for the taxable year for which the estimate is made. The aggregate amount of the payments of estimated tax should be entered upon the income tax return for such taxable year as payments to be applied against the tax shown on such return.

SEC . 301.6316 . STATUTORY PROVISIONS; PAYMENT BY FOREIGN CURRENCY.

SEC . 6316. PAYMENT BY FOREIGN CURRENCY.

The Secretary or his delegate is authorized in his discretion to allow payment of taxes in the currency of a foreign country under such circumstances and subject to such conditions as the Secretary or his delegate may by regulations prescribe.

LIEN FOR TAXES

SEC . 301.6321 . STATUTORY PROVISIONS; LIEN FOR TAXES.

SEC . 6321. LIEN FOR TAXES.

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.

SEC . 301.6321 -1. LIEN FOR TAXES.--If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or pensonal, tangible or intangible, belonging to such person. The lien attaches to all property and rights to property belonging to such person at any time during the period of the lien, including any property or rights to property acquired by such person after the lien arises. For the special lien for estate and gift taxes, see section 6324 and section 301.6324 -1.

SEC . 301.6322 . STATUTORY PROVISIONS; PERIOD OF LIEN.

SEC . 6322. PERIOD OF LIEN.

Unless another date is specifically fixed by law, the lien imposed by section 6321 shall arise at the time the assessment is made and shall continue until the liability for the amount so assessed is satisfied or becomes unenforceable by reason of lapse of time.

SEC . 301.6323 . STATUTORY PROVISIONS; VALIDITY AGAINST MORTGAGEES, PLEDGEES, PURCHASERS, AND JUDGMENT CREDITORS.

SEC . 6323. VALIDITY AGAINST MORTGAGEES, PLEDGEES, PURCHASERS, AND JUDGMENT CREDITORS.

(a) Invalidity of lien without notice.--Except as otherwise provided in subsection (c), the lien imposed by section 6321 shall not be valid as against any mortgagee, pledgee, purchaser, or judgment creditor until notice thereof has been filed by the Secretary or his delegate.

(1) Under State or territorial laws.--In the office designated by the law of the State or Territory in which the property subject to the lien is situated, whenever the State or Territory has by law designated an office within the State or Territory for the filing of such notice; or

(2) With clerk of district court.--In the office of the clerk of the United States district court for the judicial district in which the property subject to the lien is situated, whenever the State or Territory has not by law designated an office within the State or Territory for the filing of such notice; or

(3) With clerk of district court for District of Columbia.--In the office of the clerk of the United States District Court for the District of Columbia, if the property subject to the lien is situated in the District of Columbia.

(b) Form of notice.--If the notice filed pursuant to subsection (a)(1) is in such form as would be valid if filed with the clerk of the United States district court pursuant to subsection (a)(2), such notice shall be valid notwithstanding any law of the State or Territory regarding the form or content of a notice of lien.

(c) Exception in case of securities.

(1) Exception.--Even though notice of a lien provided in section 6321 has been filed in the manner prescribed in subsection (a) of this section, the lien shall not be valid with respect to a security, as defined in paragraph (2) of this subsection, as against any mortgagee, pledgee, or purchaser of such security, for an adequate and full consideration in money or money's worth, if at the time of such mortgage, pledge, or purchase such mortgagee, pledgee, or purchaser is without notice or knowledge of the existence of such lien.

(2) Definition of security.--As used in this subsection, the term "security" means any bond, debenture, note, or certificate or other evidence of indebtedness, issued by any corporation (including one issued by a government or political subdivision thereof), with interest coupons or in registered form, share of stock, voting trust certificate, or any certificate of interest or participation in, certificate of deposit or receipt for, temporary or interim certificate for, or warrant or right to subscribe to or purchase, any of the foregoing; negotiable instrument; or money.

(d) Disclosure of amount of outstanding lien.--If a notice of lien has been filed under subsection (a), the Secretary or his delegate is authorized to provide by rules or regulations the extent to which, and the conditions under which, information as to the amount of the outstanding obligation secured by the lien may be disclosed.

SEC . 301.6323 -1. VALIDITY OF LIEN AGAINST MORTGAGEES, PLEDGEES, PURCHASERS, AND JUDGMENT CREDITORS.--(a) Invalidity of lien without notice--(1) Filing of notice. The lien imposed by section 6321 shall not be valid as against any mortgagee, pledgee, purchaser, or judgment creditor until notice of lien has been filed. (See, however, section 6323(c) and paragraph (b) of this section, relating to the circumstances under which the lien is not valid with respect to a security even though notice thereof is duly filed.) The place for the filing of the notice of lien is--

(i) The office designated by the law of the State or Territory in which the property subject to the lien is situated, whenever the State or Territory has designated an office within the State or Territory for the filing of such notice;

(ii) The office of the clerk of the United States district court for the judicial district in which the property subject to the lien is situated, whenever the State or Territory has not by law designated an office within the State or Territory for the filing of such notice; or

(iii) The office of the clerk of the United States District Court for the District of Columbia if the property subject to the lien is situated in the District of Columbia.

(2) Meaning of terms. (i) As used in section 6323 and this section--

(a) The term "purchaser" means a person who, for a valuable present consideration, acquires property or an interest in property.

(b) The term "judgment creditor" means a person who has obtained a valid judgment in a court of record and of competent jurisdiction for the recovery of specifically designated property or for, a certain sum of money and, in the case of a judgment for the recovery of a certain sum of money, who has a perfected lien under such judgment on the property involved. The term "judgment" does not include an inchoate lien, such as an attachment lien, unless and until such lien has ripened into a judgment. United States v. Security Trust and Savings Bank (1950) 340 U. S. 47. Nor does the term "judgment" include the determination of a quasi-judicial body or of an individual acting in a quasi-judicial capacity, such as, for example, the action of State taxing authorities. United States v. Gilbert Associates (1953) 345 U. S. 361; and United States v. City of New Britain (1954) 347 U. S. 81.

(ii) The determination whether a person is a mortgagee, pledgee, purchaser, or judgment creditor, entitled to the protection of section 6323(a), shall be made by reference to the realities and the facts in a given case rather than to the technical form or terminology used to designate such person. Thus, a person who is in fact and in law a mortgagee, pledgee, or purchaser will be entitled as such to the protection of section 6323(a) even though such person is otherwise designated under the law of a State, such as the Uniform Commercial Code.

(3) Form of notice. The form to be used for filing the notice of lien shall be Form 668, "Notice of Federal Tax Lien under Internal Revenue Laws." Such notice, filed in the office designated by the law of a State or Territory, shall be valid notwithstanding any law of the State or Territory regarding the form or content of a notice of lien. For example, the omission from the notice of lien of a description of the property subject to the lien will not affect the validity thereof, even though the law of the State or Territory requires that the notice of lien contain a description of the property subject to the lien.

(b) Exception in case of securities--(1) Exception.--Even though a notice of lien provided for in section 6321 has been filed in the manner prescribed in section 6323(a), the lien shall not be valid with respect to a security, as defined in section 6323(c)(2), as against any mortgagee, pledgee, or purchaser of such security, for an adequate and full consideration in money or money's worth, if at the time of such mortgage, pledge, or purchase such mortgagee, pledgee, or purchaser is without notice or knowledge of the existence of such lien. An adequate and full consideration in money or money's worth, as used in section 6323(c), means that the consideration must have been an adequate and full equivalent reducible to a money value. A purchase of property made in the ordinary course of business (that is, a transaction which is bona fide and made at arm's length) will be considered as made for an adequate and full consideration in money or money's worth. A relinquishing or promised relinquishment of dower, curtesy, or of a statutory estate created in lieu of dower or curtesy, or of other marital rights is not a consideration in money or money's worth. Nor is love and affection, promise of marriage, or any other consideration not reducible to a money value a consideration in money or money's worth.

(2) Definition of security.--As used in section 6323(c), the term "security" means: Any bond, debenture, note or certificate or other evidence of indebtedness, issued by any corporation (including one issued by a government or political subdivision thereof), with interest coupons or in registered form, share of stock, voting trust certificate, or any certificate of interest or participation in, certificate of deposit or receipt for, temporary or interim certificate for, or warrant or right to subscribe to or purchase, any of the foregoing; negotiable instrument; or money.

(c) Disclosure of amount of outstanding lien.--(1) If a notice of lien has been filed, the District Director to whom the assessment which gave rise to the lien is charged is authoribed to disclose information as to the amount of the outstanding obligation secured by the lien to any person who has a proper interest in determining the amount of the outstanding obligation. Any person desiring such information should present to the District Director a written request. Such request should clearly describe the property subject to the lien, identify the applicable lien, and give the reasons for requesting such information. Any person who has a right in the property or intends to obtain a right in the property by purchase or otherwise will, upon satisfactory proof of such right or of the intention to obtain such right, be considered to have a proper interest.

(2) If the District Director determines that the applicant is entitled to the information requested, he will disclose to such applicant the total amount of the outstanding obligation secured by the lien.

(3) The Commissioner may disclose the amount of any outstanding obligation secured by the lien if he determines such action is warranted under the facts and circumstances in the particular case.

(4) The provisions of this paragraph apply to any notice of lien filed under section 6323 or corresponding provisions of prior internal revenue laws.

(d) Application of section 6323 to liens imposed under section 3670 of the Internal Revenue Code of 1939.--In the case of any lien arising under section 3670 of the Internal Revenue Code of 1939 or the corresponding provisions of prior law (relating to the general tax lien) which is in effect on January 1, 19 55, the provisions of section 6323 shall be applicable to such lien on and after such date in lieu of the provisions of section 3672 of the Internal Revenue Code of 1939 or the corresponding provisions of prior law.

SEC . 301.6324 STATUTORY PROVISIONS; SPECIAL LIENS FOR ESTATE AND GIFT TAXES.

SEC . 6324. SPECIAL LIENS FOR ESTATE AND GIFT TAXES.

(a) Liens for estate tax. Except as otherwise provided in subsection (c) (relating to transfers of securities).

(1) Upon gross estate.--Unless the estate tax imposed by chapter 11 is sooner paid in full, it shall be a lien for 10 years upon the gross estate of the decedent, except that such part of the gross estate as is used for the payment of charges against the estate and expenses of its administration, allowed by any court having jurisdiction thereof, shall be divested of such lien.

(2) Liability of transferees and others.--If the estate tax imposed by chapter 11 is not paid when due, then the spouse, transferee, trustee (except the trustee of an employee's trust which meets the requirements of section 401(a)), surviving tenant, person in possession of the property by reason of the exercise, nonexercise, or release of a power of appointment, or beneficiary, who receives, or has on the date of the decedents' death, property included in the gross estate under sections 2034 to 2042, inclusive, to the extent of the value, at the time of the decedent's death, of such property, shall be personally liable for such tax. Any part of such property transferred by (or transferred by a transferee of) such spouse, transferee, trustee, surviving tenant, person in possession of property by reason of the exercise, nonexercise, or release of a power of appointment, or beneficiary, to a bona fide purchaser, mortgagee, or pledgee, for an adequate and full consideration in money or money's worth shall be divested of the lien provided in paragraph (1) and a like lien shall then attach to all the property of such spouse, transferee, trustee, surviving tenant, person in possession, beneficiary, or transferee of any such person, except any part transferred to a bona fide purchaser, mortgagee, or pledgee for an adequate and full consideration in money or money's worth.

(3) Continuance after discharge of executor.--The provisions of section 2204 (relating to discharge of executor from personal liability) shall not operate as a release of any part of the gross estate from the lien for any deficiency that may thereafter be determined to be due, unless such part of the gross estate (or any interest therein) has been transferred to a bona fide purchaser, mortgagee, or pledgee for an adequate and full consideration in money, or money's worth, in which case such part (or such interest) shall not be subject to a lien or to any claim or demand for any such deficiency, but the lien shall attach to the consideration received from such purchaser, mortgagee, or pledgee by the heirs, legatees, devisees, or distributees.

(b) Lien for gift tax.--Except as otherwise provided in subsection (c) (relating to transfers of securities), the gift tax imposed by chapter 12 shall be a lien upon all gifts made during the calendar year, for 10 years from the time the gifts are made. If the tax is not paid when due, the donee of any gift shall be personally liable for such tax to the extent of the value of such gift. Any part of the property comprised in the gift transferred by the donee (or by a transferee of the donee) to a bona fide purchaser, mortgagee, or pledgee for an adequate and full consideration in money or money's worth shall be divested of the lien herein imposed and the lien, to the extent of the value of such gift, shall attach to all the property (including after-acquired property) of the donee (or the transferee) except any part transferred to a bona fide purchaser, mortgagee, or pledgee for an adequate and full consideration in money or money's worth.

(c) Exception in case of securities. The lien imposed by subsection (a) or (b) shall not be valid with respect to a security, as defined in section 6323(c)(2), as against any mortgagee, pledgee, or purchaser of any such security, for an adequate and full consideration in money or money's worth, if at the time of such mortgage, pledge, or purchase such mortgagee, pledgee, or purchaser is without notice or knowledge of the existence of such lien.

SEC . 301.6324 -1. SPECIAL LIENS FOR ESTATE AND GIFT TAXES; PERSONAL LIABILITY OF TRANSFEREES AND OTHERS.--(a) Estate tax. (1) The lien imposed by section 6324(a) attaches at the date of the decedent's death to every part of the gross estate, whether or not the property comes into the possession of the duly qualified executor or administrator. It attaches to the extent of the tax shown to be due by the return and of any deficiency in tax found to be due upon review and audit. If the estate tax is not paid when due, then the spouse, transferee, trustee (except the trustee of an employee's trust which meets the requirements of section 401(a)), surviving tenant, person in possession of the property by reason of the exercise, nonexercise, or release of a power of appointment, or beneficiary, who receives, or has on the date of the decedent's death, property included in the gross estate under sections 2034 to 2042, inclusive, shall be personally liable for such tax to the extent of the value, at the time of the decedent's death, of such property.

(2) Unless the tax is paid in full, and except as otherwise provided in section 6324(c) (relating to transfers of securities), the lien upon the entire property constituting the gross estate continues for a period of 10 years after the decedent's death, except that such lien shall be divested with respect to:

(i) Such portion of the gross estate as is used for the payment of charges against the estate and expenses of its administration allowed by any court having jurisdiction thereof;

(ii) Such property as is transferred to a bona fide purchaser, mortgagee, or pledgee, for an adequate and full consideration in money or money's worth, by the spouse, transferee, trustee, surviving tenant, person in possession of the property by reason of the exercise, nonexercise, or release of a power of appointment, or beneficiary, who receives, or has on the date of the decedent's death, property included in the gross estate under sections 2034 to 2042, inclusive (or the corresponding provisions of the Internal Revenue Code of 1939), or such property as is transferred by the transferee of such person. In such case, a like lien attaches to all the property of such spouse, transferee, trustee, surviving tenant, person in possession, beneficiary, or transferee of any such person, except such part thereof as may be transferred to a bona fide purchaser, mortgagee, or pledgee for an adequate and full consideration in money or money's worth. See paragraph (b)(1) of section 301.6323 -1 for the meaning of the term "an adequate and full consideration in money or money's worth";

(iii) Such portion of the gross estate (or any interest therein) as has been transferred to a bona fide purchaser, mortgagee, or pledgee for an adequate and full consideration in money or money's worth, if payment is made of the full amount of tax determined by the District Director pursuant to a request of the executor for discharge from personal liability as authorized by section 2204 (relating to discharge of executor from personal liability), but there is substituted a like lien upon the consideration received from such purchaser, mortgagee, or pledgee by the heirs, legatees, devisees, or distributees; and

(iv) Such property as to which the District Director has issued a certificate releasing the lien pursuant to section 6325.

(b) Lien for gift tax.--Except as provided in section 6324(c) (relating to securities), a lien attaches upon all gifts made during the calendar year for the amount of the tax imposed upon the gifts made during such year. The lien extends for a period of 10 years from the time the gifts were made, unless the tax is sooner paid. If the tax is not paid when due, the donee of any gift becomes personally liable for the tax to the extent of the value of his gift. Any part of the property comprised in the gift which is transferred by the donee (or by a transferee of the donee) to a bona fide purchaser, mortgagee, or pledgee, for an adequate and full consideration in money or money's worth, is divested of the lien, but a like lien to the extent of the value of such gift attaches to all the property (including after-acquired property) of the donee (or the transferee), except any part transferred to a bona fide purchaser, mortgagee, or pledgee, for an adequate and full consideration in money or money's worth. See paragraph (b)(1) of section 301.6323 -1 for the meaning of the term "an adequate and full consideration in money or money's worth."

(c) Application of lien imposed by section 6321.--The general lien under section 6321 and the special lien under subsection (a) or (b) of section 6324 for the estate or gift tax are not exclusive of each other, but are cumulative. Each lien will arise when the conditions precedent to the creation of such lien are met and will continue in accordance with the provisions applicable to the particular lien. Thus, the special lien may exist without the general lien being in force, or the general lien may exist without the special lien being in force, or the general lien and the special lien may exist simultaneously, depending upon the facts and pertinent statutory provisions applicable to the respective liens.

(d) Application of section 6324 to estate and gift tax liens imposed under the Internal Revenue Code of 1939.--In the case of any lien arising under section 827 or 1009 of the Internal Revenue Code of 1939 (relating to liens for estate and gift taxes, respectively) which is in effect on January 1, 19 55, the provisions of section 6324 shall be applicable to such lien on and after such date in lieu of the provisions of section 827 or 1009 of the 1939 Code.

SEC . 301.6325 . STATUTORY PROVISIONS; RELEASE OF LIEN OR PARTIAL DISCHARGE OF PROPERTY.

SEC . 6325. RELEASE OF LIEN OR PARTIAL DISCHARGE OF PROPERTY.

(a) Release of lien.--Subject to such rules or regulations as the Secretary or his delegate may prescribe, the Secretary or his delegate may issue a certificate of release of any lien imposed with respect to any internal revenue tax if--

(1) Liability satisfied or unenforceable.--The Secretary or his delegate finds that the liability for the amount assessed, together with all interest in respect thereof, has been fully satisfied, has become legally unenforceable, or, in the case of the estate tax imposed by chapter 11 or the gift tax imposed by chapter 12, has been fully satisfied or provided for; or

(2) Bond accepted.--There is furnished to the Secretary or his delegate and accepted by him a bond that is conditioned upon the payment of the amount assessed, together with all interest in respect thereof, within the time prescribed by law (including any extension of such time), and that is in accordance with such requirements relating to terms, conditions, and form of the bond and sureties thereon, as may be specified by such rules or regulations.

(b) Partial discharge of property.

(1) Property double the amount of the liability.--Subject to such rules or regulations as the Secretary or his delegate may prescribe, the Secretary or his delegate may issue a certificate of discharge of any part of the property subject to any lien imposed under this chapter if the Secretary or his delegate finds that the fair market value of that part of such property remaining subject to the lien is at least double the amount of the unsatisfied liability secured by such lien and the amount of all other liens upon such property which have priority to such lien.

(2) Part payment or interest of United States valueless.--Subject to such rules or regulations as the Secretary or his delegate may prescribe, the Secretary or his delegate may issue a certificate of discharge of any part of the property subject to the lien if--

(A) There is paid over to the Secretary or his delegate in part satisfaction of the liability secured by the lien an amount determined by the Secretary or his delegate, which shall not be less than the value, as determined by the Secretary or his delegate, of the interest of the United States in the part to be so discharged, or

(B) The Secretary or his delegate determines at any time that the interest of the United States in the part to be so discharged has no value.

In determining the value of the interest of the United States in the part to be so discharged, the Secretary or his delegate shall give consideration to the fair market value of such part and to such liens thereon as have priority to the lien of the United States .

(c) Effect of certificate of release or partial discharge.--A certificate of release or of partial discharge issued under this section shall be held conclusive that the lien upon the property covered by the certificate is extinguished.

(d) Cross references.--(1) For single bond complying with the requirements of both subsection (a)(2) and section 6165, see section 7102.

(2) For other provisions relating to bonds, see generally chapter 73.

(3) For provisions relating to suits to enforce lien, see section 7403.

(4) For provisions relating to suits to clear title to realty, see section 7424.

SEC . 301.6325 -1. RELEASE OF LIEN OR PARTIAL DISCHARGE OF PROPERTY--(a) Release of lien--(1) Liability satisfied or unenforceable. The District Director to whom is charged an assessment in respect of any internal revenue tax shall issue a certificate of release of any lien imposed with respect to such tax, whenever he finds that the liability for the amount assessed (together with all interest in respect thereof) has been satisfied or has become unenforceable as a matter of law (and not merely uncollectible or unenforceable as a matter of fact). Tax liabilities frequently are unenforceable in fact for the time being, due to the temporary nonpossession by the taxpayer of discoverable property or property rights. In all cases the liability for the payment of the tax continues until satisfaction of the tax in full or until the expiration of the statutory period for collection, including such extension of the period for collection as may be agreed upon in writing by the taxpayer and the District Director. The form to be used by the District Director is Form 669, "Certificate of Release of Federal Tax Lien."

(2) Estate or gift tax liability fully satisfied or provided for.--(i) If the District Director determines that the tax liability for estate or gift tax has been fully satisfied, he may issue his certificate releasing any or all property from the lien imposed thereon. If the District Director determines that the tax liability for estate or gift tax has been adequately provided for, he may issue his certificate releasing particular items of property from the lien. The issuance of such a certificate is a matter resting within the discretion of the District Director, and a certificate will be issued only in case there is actual need therefor. The primary purpose of such release is not to evidence payment or satisfaction of the tax, but to permit the transfer of property free from the lien in case it is necessary to clear title. The tax will be considered fully satisfied only when investigation has been completed and payment of the tax, including any deficiency determined, has been made.

(ii) An application for a release of the lien for estate or gift tax should be filed with the District Director charged with the assessment in respect of the tax. It should be made in writing under penalties of perjury and should explain the circumstances that require the release, and should fully describe the particular items for which the release is desired. In the case of an estate tax lien, the application should show the applicant's relationship to the estate, such as executor, heir, devisee, legatee, beneficiary, transferee, or purchaser. If the estate or gift tax return has not been filed, a statement under penalties of perjury may be required showing (a) the value of the property to be released, (b) the basis for such valuation, (c) in the case of the estate tax, the approximate value of the gross estate and the approximate value of the total real property included in the gross estate, and (d) in the case of the gift tax, the total amount of gifts made during the calendar year and the prior calendar years subsequent to the enactment of the Revenue Act of 1932 and the approximate value of all real estate subject to the gift tax lien, and (e) if the property is to be sold or otherwise transferred, the name and address of the purchaser or transferee and the consideration, if any, paid or to be paid by him.

(3) Bond accepted.--The District Director may, in his discretion, issue a certificate of release of any tax lien if he is furnished and accepts a bond that is conditioned upon the payment of the amount assessed (together with all interest in respect thereof), within the time agreed upon in the bond, but not later than 6 months before the expiration of the statutory period for collection, including any period for collection agreed upon in writing by the District Director and the taxpayer. For provisions relating to bonds, see sections 7101 and 7102 and the regulations thereunder.

(b) Discharge of specific property from the lien--(1) Property double the amount of the liability.--(i) The District Director may, in his discretion, issue a certificate of discharge of any part of the property subject to any tax lien if he determines that the fair market value of that part of the property remaining subject to the lien is at least double the sum of the amount of the unsatisfied liability secured by such lien and of the amount of all other liens upon such property which have priority to such lien. In general, fair market value is that amount which one ready and willing but not compelled to buy would pay to another ready and willing but not compelled to sell the property. The form to be used by the District Director is Form 669-A, "Certificate of Discharge of Property from Federal Tax Lien." For information required to be submitted in an application for a certificate of discharge, see subparagraph (4) of this paragraph.

(ii) The following example illustrates a case in which a certificate of discharge may not be given under this subparagraph:

Example: The Federal tax liability secured by a lien is $1,000. The fair market value of all property which after the discharge will continue to be subject to the Federal tax lien is $10,000. There is a prior mortgage on the property of $5,000, including interest, and the property is subject to a prior lien of $100 for real estate taxes. Accordingly, the taxpayer's equity in the property over and above the amount of the mortgage and real estate taxes is $4,900, or nearly five times the amount required to pay the assessed tax on which the Federal tax lien is based. Nevertheless, a discharge under this subparagraph is not permissible. In the illustration, the sum of the amount of the Federal tax liability ($1,000) and of the amount of the prior mortgage and the lien for real estate taxes ($5,000$100=$5,100) is $6,100. Double this sum is $12,200, but the fair market value of the remaining property is only $10,000. Hence, a discharge of the property is not permissible under this subparagraph, since the Code requires that the fair market value of the remaining property be at least double the sum of two amounts, one amount being the outstanding Federal tax liability and the other amount being all prior liens upon such property. In order that the discharge may be issued, it would be necessary that the remaining property be worth not less than $12,200.

(2) Part payment.--The District Director may, in his discretion, issue a certificate of discharge of any part of the property subject to the lien if there is paid over to him in part satisfaction of the liability secured by the lien an amount determined by him to be not less than the value of the interest of the United States in the property to be so discharged. In determining the amount to be paid, the District Director will take into consideration all the facts and circumstances of the case, including the expenses to which the Government has been put in the matter. In no case shall the amount to be paid be less than the value of the interest of the United States in the property with respect to which the certificate of discharge is to be issued, as such value has been determined by the District Director in the light of the fair market value of the property and the amount of all liens and encumberances thereon having priority over the Federal tax lien. The form to be used by the District Director is Form 669-B, "Certificate of Discharge of Property from Federal Tax Lien." For information required to be submitted in an application for a certificate of discharge, see subparagraph (4) of this paragraph.

(3) Interest of United States valueless.--The District Director may, in his discretion, issue a certificate of discharge of any part of the property subject to the lien if he determines that the interest of the United States in the property to be so discharged has no value. The form to be used by the District Director is Form 669-C, "Certificate of Discharge of Property from Federal Tax Lien." For information required to be submitted in an application for a certificate of discharge, see subparagraph (4) of this paragraph.

(4) Application for certificate of discharge.--Any person desiring a certificate of discharge of property from a Federal tax lien shall submit to the District Director to whom the assessment is charged a written application in triplicate, under penalties of perjury, requesting that the certificate be issued. The application shall contain the following information:

(i) A clear description of the property with respect to which the discharge is desired and, where applicable, of the property remaining subject to the lien;

(ii) The reason the discharge is sought;

(iii) A description of the Federal tax lien in respect of which the certificate of discharge is sought, including the amount, nature of the tax, the dates of assessment, and, if applicable, an appropriate reference to the registry and the page and volume of the book in which the notice of Federal tax lien is filed, indexed, or recorded, and the date of the filling of the notice;

(iv) A statement in numbered paragraphs of all facts material to the application, including the amount, character, and dates (both of execution and of record) of all encumbrances of record prior to the Federal lien, with an appropriate reference to the registry and the page and volume of the book in which each such encumbrance is recorded;

(v) The amounts, character, and dates of execution of any unrecorded encumbrances believed to be prior to the Federal tax lien, including information as to how and when such encumbrances arose;

(vi) In support of the application, the applicant must furnish proof sufficient to establish the fair market value of the property with respect to which the discharge is sought, and where applicable, proof sufficient to establish the fair market value of the property which will remain subject to the lien; and

(vii) Any other information which in the opinion of the applicant might have a bearing upon the determination to be made.

Applications submitted under subparagraph (1) or (3) of this paragraph do not require the submission of any sum of money for the discharge of the property from a tax lien. Since the amount to be paid for the issuance, under subparagraph (2) of this paragraph, of a certificate of discharge of property from a Federal tax lien is a matter for the determination of the District Director after consideration of the facts and law involved, no sum of money or check should be submitted with the application. The District Director shall cause a thorough investigation to be made as to the proof and accuracy of all material statements made in the application. Upon completion of such investigation the District Director will make his determination and advise the applicant of the decision reached.

 

Treasury Decision 8466, filed with the Federal Register on December 31, 1992 ., 1993-1 CB 209, I.R.B. 1993-9,33

Estate, gift and generation-skipping transfer taxes: Surrender of property subject to levy in the case of banks: 21-day holding period.--Reg. 301.6332-3, relating to the surrender of property subject to levy in the case of banks, is adopted. .

AGENCY: Internal Revenue Service, Treasury.

ACTION: Final Regulation.

SUMMARY: This document contains final regulations regarding the surrender of property subject to levy in the case of banks. Section 6236(e)(1) of the Technical and Miscellaneous Revenue Act of 1988 amended section 6332(c) of the Internal Revenue Code by adding a new paragraph (c), which provides that banks shall surrender deposits in taxpayers' accounts (including interest thereon) only after 21 days after service of a levy. The regulations set forth the rules for compliance by banks, and also contain conforming amendments reflecting the new provision.

DATES: These regulations are effective January 4, 1993 , and apply with respect to levies made on or after January 4, 1993 .

FOR FURTHER INFORMATION CONTACT: Kevin B. Connelly, 202-622-3640 (not a toll-free call).

SUPPLEMENTAL INFORMATION:

Background

This document contains final regulations amending the Procedure and Administration Regulations (26 CFR part 301) under section 6332 of the Internal Revenue Code (Code). The regulations reflect the amendment of section 6332 by section 6236(e)(1) of the Technical and Miscellaneous Revenue Act of 1988 (Pub. L. No. 100-647, 102 Stat. 3342) (TAMRA).

Explanation of Provisions

The Internal Revenue Service published a notice of proposed rulemaking in the Federal Register on May 1, 1991 , (56 FR 19963). Numerous commentators submitted written comments concerning the proposed regulations. However, no request for a hearing was received and no hearing was held. Each of the issues raised in the comments was fully considered during the formulation of the final regulations. The principal comments received by the Internal Revenue Service are discussed below.

Section 6236(e)(1) of TAMRA amended section 6332 of the Code by redesignating paragraphs (c), (d), and (e) as paragraphs (d), (e), and (f), respectively, and by adding new paragraph (c). Under section 6332(c) banks (as defined in section 408(n) of the Code) shall surrender levied deposits, together with the interest accruing thereon, only after 21 days after a levy is made.

The regulations provide that a levy on a bank account applies to those funds on deposit at the time the levy is made, up to the amount of the levy. No withdrawals may be made against the funds reached by the levy during the 21-day holding period. The bank must surrender the deposits on the first business day following the 21st calendar day after the levy is made, unless the bank receives notification from the district director of a release of levy or unless the district director has requested an extension of the holding period. In addition, the bank must surrender any interest which accrued on the deposits under the terms of its agreement with its customer, but in no event must the bank surrender an amount greater than the amount of the levy. Any interest that accrues and is turned over to the Internal Revenue Service is considered to be paid to the bank's depositor. The depositor may waive the 21-day holding period by notifying the bank of his or her intention to do so. However, where more than one depositor is listed as the owner of an account, all of the listed owners must agree to a waiver of the holding period. The regulations set forth examples illustrating the requirements for compliance with section 6332(c) under various circumstances, and define the term "bank" pursuant to section 408(n) of the Code.

The regulations provide further that the bank's depositor may notify the district director to whom the assessment is charged of any errors with respect to the levied account by telephoning the telephone number listed on the face of the notice of levy. The district director may require any supporting documentation necessary to review an alleged error. Notification by telephone does not constitute or substitute for the filing by a third party of a written request for the return of wrongfully levied property.

With respect to imposing liability under section 6332(d) for refusal or failure to surrender property subject to levy, the 21-day rule effectively changes the date of the making of a levy on bank deposits to the date of the expiration of the 21-day holding period or any extension of the period granted by the Internal Revenue Service.

One commentator suggested that the regulations should discharge banks from liability to any third party that claims an interest in an attached account. This is beyond the narrow scope of section 6332(c) and these regulations. A bank's potential liability to the taxpayer or to third parties for surrendering deposits is governed generally by section 6332(e), which provides that any person who surrenders property or rights to property subject to levy to the Internal Revenue Service is discharged from any obligation or liability to the delinquent taxpayer or any other person. That section applies to banks that surrender deposits in accordance with section 6332(c) just as it applies to any other party that surrenders property pursuant to an Internal Revenue Service levy.

The proposed regulations provide that the district director may extend the holding period beyond the initial 21 days if more time is necessary for the district director to resolve alleged errors with respect to attached deposits before the deposits are surrendered. One commentator suggested that extensions of the 21-day holding period should be limited to two 21-day extensions. Although it will be in the best interest of the Internal Revenue Service to resolve as quickly as possible any issues concerning whether deposits should be turned over, the length of extensions of the holding period will vary depending on the issues under consideration. Limiting the length or number of extensions could result in deposits being turned over before the district director has the time to resolve an alleged error, thereby defeating the purpose of section 6332(c).

One commentator suggested that the regulations should include the language that banks must use to indicate that depositors have waived the 21-day holding period. There is no specific language that a bank must use to inform the Internal Revenue Service that depositors have waived the holding period. As long as the bank indicates that each depositor to an account has agreed to a waiver, the waiver is sufficient with respect to that account.

Two commentators submitted questions concerning the effect of section 6332(c) on the terms of a bank's interest agreement with its depositor. The regulations provide that interest must be paid in accordance with the terms of a bank's agreement with its depositor. This provision is based on the fact that the Internal Revenue Service is entitled only to the amount to which the taxpayer would be entitled if the taxpayer withdrew the funds. If the taxpayer would not be entitled to interest, the Internal Revenue Service is not entitled to interest. This provision is illustrated by Examples 5 and 6, which deal with a certificate of deposit, the terms of which provide that the depositor must forfeit thirty days of interest in the event of early withdrawal.

Numerous commentators noted that the calculation of interest on levied funds poses a burden on banks and suggested that banks either should not have to pay any interest or that the regulations should set a floor--based on either the amount of interest due, the amount of the depositor's account balance, or the amount of the levy--below which the bank would not have to pay interest. A prescribed floor below which no interest would have to be paid would effectively reduce the amount of the depositor's liability that is satisfied by the levy. In light of the detrimental impact on the interests of the depositor and the Service, together with the statute's explicit reference to the payment of interest, the final regulations do not contain the suggested exceptions.

One commentator also suggested that a bank should be allowed to enforce against levied funds a contractual right to charge the depositor a fee for processing a levy or a garnishment. Again, the Internal Revenue Service is entitled to the amount to which the taxpayer is entitled. If the terms of the account do not allow the bank to charge a levy processing fee on a withdrawal by the depositor, the bank may not deduct such a fee from the amount subject to levy.

One commentator suggested that banks should be given an additional 10 day period after the 21-day period expires in which to turn over levied funds. Once a bank receives a levy the bank knows exactly when the 21-day period will expire and the funds will become due. An extra 10-day period in which to turn over levied funds is unnecessary.

Many comments that were submitted for consideration raise additional substantive issues that are unrelated to the 21-day rule or to procedural issues concerning the implementation of the 21-day rule. For example, a number of commentators submitted comments and questions concerning the types of accounts and deposits that are subject to an Internal Revenue Service levy. One commentator suggested that the regulations should describe the type of information that banks should and can legally divulge without violating financial privacy laws when informing the Service that a levy is unpostable, e.g., the levy is on a closed account. These issues are outside the scope of the regulations. Section 6332(c) and these regulations neither address nor affect the priority of competing claims to a taxpayer's deposits, the type of property to which a levy attaches, the type of financial information that a bank may divulge about a depositor's account, or a bank's responsibilities with respect to deposits (other than to provide that the bank must hold deposits for 21 days). To reflect the limited scope of these regulations, the caption has been changed to "The 21-day holding period applicable to property held by banks."

Finally, one commentator suggested that the rule that interest surrendered to the district director is considered to be paid to the bank's customer and must be reported to the Internal Revenue Service, should be clarified to distinguish between the reporting of interest on IRA accounts and the reporting of interest on non-IRA accounts. While most interest paid to a depositor must be reported as interest, there are situations in which interest must be reported as some other type of payment. The purpose of this provision is to inform banks that the submission to the Internal Revenue Service of interest that accrues prior to and during the holding period should be treated as a payment to the bank's customer. Instead of accounting for each different characterization of interest in the Code and setting forth the different reporting requirements, the final regulation has been changed to provide simply that to the extent interest is accrued and surrendered such interest is considered to be paid to the bank's customer.

Special Analyses

It has been determined that these rules are not major rules as defined in Executive Order 12291. Therefore, a Regulatory Impact Analysis is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to these regulations, and, therefore, a final Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Code, these regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

Drafting Information

The principal author of these proposed regulations is Kevin B. Connelly, Office of the Assistant Chief Counsel (General Litigation), Internal Revenue Service. However, personnel from other offices of the Internal Revenue Service and Treasury Department participated in their development.

 

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