Annotations- Bank Accounts Page1

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6332 Annotations: Bank Accounts- Levy

 

Penalty for Failure to Surrender Property: Bank Accounts

Rev. Rul. 73-310 ¹, 1973-2 CB 408

Section 6332.--Surrender of Property Subject to Levy

26 CFR 301.6332-1: Surrender of property subject to levy.
(Also Section 6331; 301.6331-1.)

[IRS Headnote] Levy on taxpayer's bank account.--
A bank is required to pay over only the funds actually on hand at the time the levy was served on a delinquent taxpayer's bank account and not the amount indicated in its acknowledgment of service; G.C.M. 4783 superseded.

The purpose of this Revenue Ruling is to update and restate under the current statute and regulations the position set forth in G.C.M. 4783, VII-2 C.B. 183 (1928).

The question presented is whether, under the circumstances described below, a bank is required to pay over to the District Director of Internal Revenue the amount it acknowledged it was holding when a levy was made on a delinquent taxpayer's account or the amount that was actually in the taxpayer's bank account when the levy was served.

In the process of collecting taxes due from a taxpayer, a levy was made on his bank account. The bank accepted the levy, and a statement that $100.00 was in the taxpayer's bank account as of the day the levy was served was acknowledged on the notice of levy and signed by the assistant cashier of the bank. The bank later notified the Internal Revenue Service that on the same day that the levy was served, but prior to the service of levy, the taxpayer had withdrawn $90.00 leaving a balance of $10.00 which was being held subject to the levy.

Section 301.6331-1 of the Regulations on Procedure and Administration provides that levy may be made by serving a notice of levy on any person in possession of, or obligated with respect to, property or rights to property subject to levy, including bank accounts. A levy extends only to property possessed and obligations which exist at the time of the levy. The regulation further provides that if a levy is made on a bank with respect to the account of a delinquent taxpayer and the bank surrenders to the District Director the amount of the taxpayer's balance at the time the levy is made, the levy is satisfied.

Section 6332(a) of the Internal Revenue Code of 1954 provides that any person in possession of 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 to the District Director.

In view of the specific provisions of the regulations cited above, the liability of a bank is limited by the amount of funds on hand at the time the levy was made and is not determined by the amount indicated in the acknowledgment of service. Thus the bank is required to pay over only the $10.00 it held at the time of the service of levy.

G.C.M. 4783 is hereby superseded, since the position stated therein is set forth under the current law in this Revenue Ruling.

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¹ Prepared pursuant to Rev. Proc. 67-6, 1967-1 C.B. 576.

Rev. Rul. 79-38, 1979-1 CB 406

Section 6332.--Surrender of Property Subject to Levy

26 CFR 301.6332-1: Surrender of property subject to levy.
(Also Section 6331; 301.6331-1.)

[IRS Headnote] Levy on taxpayer's bank account.--
A bank is required to treat uncollected funds in a customer's account as subject to levy if, by custom or agreement between the bank and the customer, the customer has a legal, fixed right to draw against uncollected funds; Rev. Rul. 73-310 amplified.

ISSUE

Is a bank required to treat uncollected funds in a checking account of its customer as subject to levy?

FACTS

A owes $5,000 in unpaid federal income taxes, penalties, and interest for the years 1970 and 1971. Notice of levy by the Internal Revenue Service was received on May 3, 1976, by a bank in which A maintains a checking account. On that date, A had a balance of $5,000, which balance represents uncollected funds from a check deposited by A for which payment had not been received by the depositary bank.

By agreement with the bank, the entire amount of the items deposited to A's account, including checks, are immediately credited to that account so that A may draw against them, even though the amounts of these funds may not be collected by the bank for several days. If any of the items deposited by A are dishonored, the bank charges back against the account the amount of the dishonored item. If this chargeback results in an overdraft in A's account, A becomes liable to repay the amount to the bank together with service charges.

Under the applicable state law, section 4-201(1) of the Uniform Commercial Code, the general status of the bank is as an agent of the depositor and not as a creditor. This rule applies regardless of the form of endorsement or lack of endorsement and even though credit given for the item is subject to immediate withdrawal as of right or is in fact withdrawn; but the continuance of ownership of an item by its owner and any rights of the owner of proceeds of the item are subject to rights of a collecting bank such as those resulting from outstanding advances on the item and valid rights of setoff.

LAW AND ANALYSIS

Section 6331 of the Internal Revenue Code of 1954 grants the Secretary or the Secretary's delegate the authority to collect, by levy, taxes owed by a taxpayer who has refused to pay such taxes within 10 days following notice and demand by the Secretary or the Secretary's delegate. Levy may be made on all property or rights to property owned by the taxpayer and not otherwise exempt from levy.

Section 6332 of the Code, with exceptions not here relevant, requires 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, to surrender such property or rights (or discharge such obligation) to the Secretary or the Secretary's delegate.

Both federal and state courts look to state law to determine whether there is property or a right to property to which a tax levy may attach.

In many situations, the depositary bank acts merely as a collecting agent or sub-agent of the taxpayer-customer with regard to uncollected funds and does not credit the funds to the taxpayer-customer's account or permit the taxpayer-customer to draw against the uncollected funds until final settlement. In such cases, the levy is satisfied by a surrender of the balance in the account at the time of the levy not including uncollected items. See section 301.6331-1(a)(1) of the Regulations on Procedure and Administration and Rev. Rul. 73-310, 1973-2 C.B. 408.

An exception exists, however, when, by agreement or custom, the taxpayer-customer's account is credited by the bank with the amount of the uncollected items and the taxpayer-customer has the legal, fixed right to draw against the entire balance of the account. In such cases, the taxpayer has a property right in the entire balance in the account (including the uncollected funds) at the time of levy. Since the Government's levy attaches to rights to property possessed by the taxpayer, such levy reaches the entire balance in the account, whether or not the uncollected items later reach final settlement. See United States v. Euclid National Bank, 510 F. 2d 461 (6th Cir. 1975).

HOLDING

Accordingly, a bank is required to treat the funds in a customer's account as subject to levy if, by custom or agreement between the bank and the customer, the customer has a legal, fixed right to draw against uncollected funds.

EFFECT ON OTHER DOCUMENTS

Rev. Rul. 73-310 is amplified.

 

[85-2 USTC ¶9482] United States , Petitioner v. National Bank of Commerce

Supreme Court of the United States, No. 84-498, 105 SCt 2919, 472 US 713, 6/26/85, Reversing CA-8, 84-1 USTC ¶9191, 726 F. 2d 1292

On writ of certiorari to the United States Court of Appeals for the Eighth Circuit.

[Code Secs. 6331 and 6332]

Deficiency: Levy and distraint: Bank account: Ownership: Surrender of property.--The U. S. Supereme Court ruled that a bank wrongfully refused to comply with a levy that the IRS placed on a delinquent taxpayer's joint bank accounts and, therefore, held the bank liable for the amount of the delinquent taxes. The court determined that the taxpayer had "property" or "rights to property" in the joint bank accounts because he had an unqualified right to withdraw the full amounts on deposit in the joint accounts without notice to his codepositors pursuant to state law. Because the IRS steps into the taxpayer's shoes and acquires whatever rights the taxpayer himself possesses in a levy proceeding, the court found it inconceivable that Congress intended to prohibit the IRS from levying on bank accounts which were plainly accessible to a delinquent taxpayer. Further, the court noted that a Code Sec. 6331(a) administrative levy is a provisional remedy, which does not determine the rights of third parties until after the levy is made, in postseizure administrative or judicial hearings. One dissent, in which three Justices joined.

Syllabus

Section 6331(a) of the Internal Revenue Code of 1954 provides that the Government may collect taxes of a delinquent taxpayer "by levy upon all property and rights to property . . . belonging to such person." Section 6332(a) then provides that "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 [of the Treasury], surrender such property or rights . . . to the Secretary, except such part of the property or rights as is . . . subject to an attachment or execution." The Internal Revenue Service (IRS) levied on two joint accounts in respondent bank in Arkansas for delinquent income taxes owed by only one of the persons in whose names the accounts stood. When respondent, contending that it did not know how much of the money on deposit belonged to the delinquent taxpayer as opposed to his codepositors, refused to comply with the levy, the United States brought an action in Federal District Court , seeking judgment against respondent for the amount of the delinquent taxes. The District Court granted respondent's motion to dismiss. The Court of Appeals affirmed, holding that because under Arkansas garnishment law a creditor of a bank depositor is not subrogated to the depositor's power to withdraw the account, the IRS, too, could not stand in the depositor's shoes, and that the Government could not make use of the administrative procedure without negating or quantifying the claims that the delinquent taxpayer's codepositors might have to the funds in question. The court reasoned that the delinquent taxpayer did not possess a sufficient property interest in the funds to support the levy, that the codepositors might possess competing claims to the funds, and that an IRS levy is not normally intended for use against property in which third parties have an interest or which bears on its face the names of third parties.

Held: The IRS had a right to levy on the joint accounts in question. Pp. 6-20.

(a) A bank served with an IRS notice of levy has only two defenses for failure to comply with the demand: that it is neither "in possession of" nor "obligated with respect to" property or rights to property belonging to the delinquent taxpayer, or that the taxpayer's property is "subject to a prior judicial attachment or execution." Here, the latter defense was not available, and so respondent's only defense was that the joint accounts did not constitute "property or rights to property" of the delinquent taxpayer. P. 8.

(b) In applying the Internal Revenue Code, state law controls in determining the nature of the legal interest which the taxpayer has in property. In this case, the delinquent taxpayer had an absolute right under state law to withdraw from the joint accounts, and such state-law right constitutes "property [or] rights to property" belonging to him within the meaning of §6331(a). Respondent, in its turn, was "obligated with respect to" the taxpayer's right to that property under §6332(a), since state law required it to honor any withdrawal request he might make. Respondent thus had no basis for refusing to honor the levy. In a levy proceeding, the IRS acquires whatever right the taxpayer himself possesses. Pp. 9-13.

(c) The question whether a state-law right constitutes "property" or "right to property" is a matter of federal law. Thus, the facts that under Arkansas law the delinquent taxpayer's creditors could not exercise his right to withdrawal in their favor, and in a garnishment proceeding would have to join his codepositors, are irrelevant. That other parties may have competing claims to the account is not a legitimate statutory defense to the levy. A §6331(a) administrative levy is only a provisional remedy, which does not determine the rights of third parties until after the levy is made, in postseizure administrative or judicial hearings. Pp. 13-20.

[84-1 USTC ¶9191] 726 F. 2d 1292, reversed.

BLACKMUN, J., delivered the opinion of the Court, in which BURGER, C. J., and WHITE, REHNQUIST, and O'CONNOR, JJ., joined. POWELL, J., filed a dissenting opinion, in which BRENNAN, MARSHALL , and STEVENS, JJ., joined.

JUSTICE BLACKMUN delivered the opinion of the Court: Section 6331(a) of the Internal Revenue Code of 1954, as amended, 26 U. S. C. §6331(a), provides that the Government may collect taxes of a delinquent taxpayer "by levy upon all property and rights to property . . . belonging to such person." ¹ Section 6332(a) of the Code, 26 U. S. C. §6332(a), then provides that "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 . . . to the Secretary." ²

The controversy in this case concerns two joint accounts in a bank in Arkansas . ³ The issue is whether the Internal Revenue Service (IRS) has a right to levy on those accounts for delinquent federal income taxes owed by only one of the persons in whose names the joint accounts stand in order that the IRS may obtain provisional control over the amount in question.

I

A

The relevant facts are stipulated. On December 10, 1979, the IRS assessed against Roy J. Reeves federal income taxes, penalties, and interest for the taxable year 1977 in the total amount of $3,607.45. As a result of payments and credits, the amount owing on the assessment was reduced to $856.61. App. 11.

On June 13, 1980, there were on deposit with respondent National Bank of Commerce, at Pine Bluff , Ark. , the sum of $321.66 in a checking account and the sum of $1,241.60 in a savings account, each in the names of "Roy Reeves or Ruby Reeves or Neva R. Reeves." Id. , at 11-12. ⁴ Each of the persons named, Roy Reeves, Ruby Reeves, and Neva R. Reeves, was authorized by contract with the bank to make withdrawals from each of these joint accounts. Id. , at 12.

On the same date, that is, on June 13, 1980, a notice of levy was served on the respondent bank pursuant to §6331(d) of the Code, 26 U. S. C. §6331(d), demanding that the bank pay over to the United States all sums the bank owed to Roy J. Reeves up to a total of $1,302.56. Subsequently, there was a Partial Release of Levy for the amount in excess of $856.61. On October 10, a final demand for payment was served on the bank.

The bank, contending that it did not know how much of the money on deposit belonged to Roy as opposed to Ruby and Neva , refused to comply with the levy. Ibid. The United States thereupon instituted this action in the United States District Court for the Eastern District of Arkansas, pursuant to §6332(c)(1) of the Code, 26 U. S. C. §6332(c)(1), seeking judgment against the bank in the amount of $856.61. ⁵

By way of a supplement to the stipulation of facts, it was agreed that "[n]o further evidence as to the ownership of the monies in the subject bank accounts will be submitted." App. 17. As a consequence, we do not know which of the three codepositors, as a matter of state law, owned the funds in the two accounts, or in what proportion. The facts thus come to us in very bare form. We are not confronted with any dispute as to who owns what share of the accounts. We deal simply with two joint accounts in the names of three persons, with each of the three entitled to draw out all the money in each of the accounts.

B

The case was submitted to the District Court on cross motions for summmary judgment and on the respondent bank's motion to dismiss the complaint. Id. , at 18-24. The District Court granted the motion to dismiss, holding the case procedurally "immature." 554 F. Supp. 110, 117 (1982). The court concluded that due process mandates "something more than the post-seizure lawsuit allowed" by the Code's levy procedures. Id. , at 114. In its view, "the minimum due process required in distraint actions against joint bank accounts," ibid., compelled the IRS to identify the codepositors of the delinquent taxpayer and to provide them with notice and an opportunity to be heard. Id. , at 114-115. The court then outlined the procedures it believed the Constitution requires the IRS to follow when levying on a joint account. Specifically, it ruled that a bank, upon receiving a notice of levy, should freeze the assets in the account and provide the IRS with the names of the co-depositors. Id. , at 114. The IRS then should notify the codepositors and give them a reasonable time "in which to respond both to the government and to the bank by affidavit or other appropriate means, specifically setting out any ownership interest in the joint account which they claim and the factual and legal basis for that claim." Id. , at 115. If the bank, on the basis of such information, "believes that a genuine dispute exists as to the legality of any ownership claim made by" the codepositors, "it may refuse to surrender any portion of the funds so claimed." Id. , at 116. At that point, "the government may bring suit to enforce the levy on the contested funds," ibid., but it must name the codepositors as defendants along with the bank.

The United States Court of Appeals for the Eighth Circuit affimed. [84-1 USTC ¶9191] 726 F. 2d 1292 (1984). It expressed no opinion on the District Court's constitutional analysis. Id. , at 1293, 1300. It reached essentially the same result, however, as a matter of statutory construction. It ruled that the IRS, when levying on a joint bank account, has the burden of proving "the actual value of the delinquent taxpayer's interest in jointly owned property." Id. , at 1293. It observed that here "the rights of the various parties," id., at 1300, had not been determined. Therefore, the Government had not shown the bank to be in possession of property or rights to property belonging to the delinquent taxpayer, Roy J. Reeves, at §6331(a) required.

The Court of Appeals acknowledged that " Roy could have withdrawn any amount he wished from the accounts and used it to pay his debts, including federal income taxes. . . ." Id. , at 1295. It rejected, however, the Government's contention that it stood "in Roy's shoes and could do anything Roy could do, subject to whatever duties Roy owes to Ruby or Neva," id., at 1295-1296, for it observed that "at least as to ordinary creditors, [that] is not the law of Arkansas." Id. , at 1296. Under state garnishment law, the court noted, a creditor of a codepositor is not "subrogated to that co-owner's power to withdraw the entire account." Instead, a creditor must join both co-owners as defendants and permit them to "show by parol or otherwise the extent of his or her interest in the account." Ibid.

The Court of Appeals then concluded that a similar precept should apply in administrative levy proceedings under the Internal Revenue Code. It accordingly ruled that the Government could not prevail without negating or quantifying the claims that Ruby or Neva might have to the funds in question. It expressed the belief that an IRS administrative levy "is not normally intended for use as against property in which third parties have an interest" or as "against property bearing on its face the names of third parties." Id. , at 1300. In such a situation, the Government was free to "brin[g] suit to foreclose its lien under Section 7403," joining the codepositors as defendants. Ibid.

Because the opinion of the Court of Appeals appeared to us to conflict, directly or in principle, with decisions of other Courts of Appeals, ⁶ we granted certiorari. -- U. S. -- (1985).

II

A

Section 6321 of the Code, 26 U. S. C. §6321, provides: "If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount . . . 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." Under the succeeding §6322, the lien generally arises when an assessment is made, and it continues until the taxpayer's liability "is satisfied or becomes unenforceable by reason of lapse of time."

The statutory language "all property and rights to property," appearing in §6321 (and, as well, in §§ 6331(a) and 6332(a), see nn. 1 and 2, supra), is broad and reveals on its face that Congress meant to reach every interest in property that a taxpayer might have. See 4 B. Bittker, Federal Taxation of Income, Estates and Gifts ¶111.5.4, p. 111-100 (1981) (Bittker). "Stronger language could hardly have been selected to reveal a purpose to assure the collection of taxes." Glass City Bank v. United States [45-2 USTC ¶9449], 326 U. S. 265, 267 (1945).

A federal tax lien, however, is not self-executing. Affirmative action by the IRS is required to enforce collection of the unpaid taxes. The Internal Revenue Code provides two principal tools for that purpose. The first is the lien-foreclosure suit. Section 7403(a) authorizes the institution of a civil action in federal district court to enforce a lien "to subject any property, of whatever nature, of the delinquent, or in which he has any right, title, or interest, to the payment of such tax." Section 7403(b) provides: "All persons having liens upon or claiming any interest in the property involved in such action shall be made parties thereto." The suit is a plenary action in which the court "shall . . . adjudicate all matters involved therein and finally determine the merits of all claims to and liens upon the property." §7403(c). See generally United States v. Rodgers [83-1 USTC ¶9536], 461 U. S. 677, 680-682 (1983). The second tool is the collection of the unpaid tax by administrative levy. The levy is a provisional remedy and typically "does not require any judicial intervention." Id. , at 682. The governing statute is §6331(a). See n. 1, supra. It authorizes collection of the tax by levy which, by §6331(b), "includes the power of distraint and seizure by any means."

In the situation where a taxpayer's property is held by another, a notice of levy upon the custodian is customarily served pursuant to §6332(a). This notice gives the IRS the right to all property levied upon, United States v. Eiland [55-1 USTC ¶9487], 223 F. 2d 118, 121 (CA4 1955), and creates a custodial relationship between the person holding the property and the IRS so that the property comes into the constructive possession of the Government. Phelps v. United States [75-1 USTC ¶9467], 421 U. S. 330, 334 (1975). If the custodian honors the levy, he is "discharged from any obligation or liability to the delinquent taxpayer with respect to such property or rights to property arising from such surrender or payment." §6332(d). If, on the other hand, the custodian refuses to honor a levy, he incurs liability to the Government for his refusal. §6332(c)(1).

The administrative levy has been aptly described as a "provisional remedy." 4 Bittker, at ¶111.5.5, p. 111-108. In contrast to the lien-foreclosure suit, the levy does not determine whether the Government's rights to the seized property are superior to those of other claimants; it, however, does protect the Government against diversion or loss while such claims are being resolved. "The underlying principle" justifying the administrative levy is "the need of the government promptly to secure its revenues." Phillips v. Commissioner [2 USTC ¶743], 283 U. S. 589, 596 (1931). "Indeed, one may readily acknowledge that the existence of the levy power is an essential part of our self-assessment tax system," for it "enhances voluntary compliance in the collection of taxes." G. M. Leasing Corp. v. United States [77-1 USTC ¶9140], 429 U. S. 338, 350 (1977). "Among the advantages of administrative levy is that it is quick and relatively inexpensive." United States v. Rodgers, 461 U. S. , at 699.

The constitutionality of the levy procedure, of course, "has long been settled." Phillips v. Commissioner, 283 U. S. , at 595. See G. M. Leasing Corp. v. United States , 429 U. S. , at 352, n. 18.

B

It is well established that a bank account is a species of property "subject to levy," within the meaning of §§ 6331 and 6332. A levy on a bank account has been permitted since the Revenue Act of 1924, §1016, 43 Stat. 343, and the Treasury Regulations explicitly authorize such levies. Treas. Reg. §301.6331-1(a)(1), 26 CFR §301.6331-1(a)(1) (1984).

The courts uniformly have held that a bank served with an IRS notice of levy "has only two defenses for a failure to comply with the demand." United States v. Sterling National Bank & Trust Co. of New York [74-1 USTC ¶9336], 494 F. 2d 919, 921 (CA2 1974), and cases cited. One defense is that the bank, in the words of §6332(a), is neither "in possession of" nor "obligated with respect to" property or rights to property belonging to the delinquent taxpayer. The other defense, again with reference to §6332(a), is that the taxpayer's property is "subject to a prior judicial attachment or execution." 494 F. 2d, at 821. Accord, Bank of Nevada v. United States [58-1 USTC ¶9228], 251 F. 2d 820, 824 (CA9 1957), cert. denied, 356 U. S. 938 (1958).

There is no suggestion here that the Reeves accounts were subject to a prior judicial attachment or execution. Nor is there any doubt that the bank was "obligated with respect to" the accounts because, as it concedes, "Roy Reeves did have a right under Arkansas law to make withdrawals from the bank accounts in question." Brief for Respondent 2. The bank's only defense, therefore, is that the joint accounts did not constitute "property or rights to property" of Roy J. Reeves. See §6331(a).

C

`[I]n the application of a federal revenue act, state law controls in determining the nature of the legal interest which the taxpayer had in the property.'" Aquilino v. United States [60-2 USTC ¶9538], 363 U. S. 509, 513 (1960), quoting Morgan v. Commissioner [40-1 USTC ¶9210], 309 U. S. 78, 82 (1940). See also Sterling National Bank, 494 F. 2d, at 921. This follows from the fact that the federal statute "creates no property rights but merely attaches consequences, federally defined, to rights created under state law." United States v. Bess [58-2 USTC ¶9595], 357 U. S. 51, 55 (1958). And those consequences are "a matter left to federal law." United States v. Rodgers, 461 U. S. at 683. "[O]nce it has been determined that state law creates sufficient interests in the [taxpayer] to satisfy the requirements of [the statute], state law is inoperative," and the tax consequences thenceforth are dictated by federal law. United States v. Bess, 357 U. S. , at 56-57. See also Fidelity & Deposit Co. of Maryland v. New York City Housing Authority [57-1 USTC ¶9410], 241 F. 2d 142, 144 (CA2 1957); Note, Property Subject to the Federal Tax Lien, 77 Harv. L. Rev. 1485, 1486-1487 (1964).

In the Bess case, the Court held that a delinquent taxpayer, who had purchased life insurance policies, did not have "property or rights to property" in the death proceeds of the policies, but that he did have such rights in their cash surrender value. 357 U. S. , at 55-56. The latter conclusion, it was said, followed from the fact that the taxpayer insured had "the right under the policy contract to compel the insurer to pay him this sum." Id. , at 56. Thus, the insured's interest in the cash surrender value was subject to the federal tax lien. The fact that "under State law the insured's property right represented by the cash surrender value is not subject to creditors' liens" was irrelevant. Id. , at 56-57. State law defined the nature of the taxpayer's interest in the property, but the state law consequences of that definition are of no concern to the operation of the federal tax law.

As noted above, it is stipulated that Roy J. Reeves had the unqualified right to withdraw the full amounts on deposit in the joint accounts without notice to his co-depositors. In any event, wholly apart from the stipulation, Roy 's right of withdrawal is secured by his contract with the bank, as well as by the relevant Arkansas statutory provisions. See Ark. Stat. Ann. §§ 67-521 and 67-552 (1980). ⁷ On its part, the bank was obligated to honor any withdrawal requests Roy might make, even up to the full amounts of the accounts. The Court of Appeals thus correctly concluded that, under Arkansas law, " Roy could have withdrawn any amount he wished from the account and used it to pay his debts, including federal income taxes, and his co-owners would have had no lawful complaint against the bank." 726 F. 2d, at 1295.

Roy , then, had the absolute right under state law and under his contract with the bank to compel the payment of the outstanding balances in the two accounts. This, it seems to us, should have been an end to the case, for we agree with the Government that such a state-law right constituted "property [or] rights to property . . . belonging to" Roy , within the meaning of §6331(a). The bank, in its return, was "obligated with respect to" Roy 's rights to that property, §6332(a), since state law required it to honor any withdrawal request he might make. The bank had no basis for refusing to honor the levy. ⁸

The overwhelming majority of courts that have considered the issue has held that a delinquent taxpayer's unrestricted right to withdraw constitutes "property" or "rights to property" subject to provisional IRS levy, regardless of the facts that other claims to the funds may exist and that the question of ultimate ownership may be unresolved at the time. See, e. g., United States v. Sterling National Bank & Trust Co. of New York, 494 F. 2d, at 921-922; United States v. Citizens & Southern National Bank [76-2 USTC ¶9665], 538 F. 2d 1101, 1105-1107 (CA5 1976), cert. denied, 430 U. S. 945 (1977); Citizens & Peoples National Bank of Pensacola, Fla. v. United States [78-1 USTC ¶9365], 570 F. 2d 1279, 1282-1284 (CA5 1978); Babb v. Schmidt [74-1 USTC ¶9476], 496 F. 2d 957, 958-960 (CA9 1974); Bank of Nevada v. United States, 251 F. 2d, at 824-826; United States v. First National Bank of Arizona, 348 F. Supp. 388, 389 (Ariz. 1970), aff'd [72-2 USTC ¶9655], 458 F. 2d 513 (CA9 1972); United States v. Equitable Trust Co., 49 AFTR2d ¶82-428 (Md. 1982); Sebel v. Lytton, Savings & Loan Ass'n, 65-1 USTC ¶9343 (SD Cal. 1965); Tyson v. United States, 63-1 USTC ¶9300 (Mass. 1962); United States v. Third Nat. Bank & Trust Co. [53-1 USTC ¶9255], 111 F. Supp. 152, 155-156 (MD Pa. 1953). And the Eighth Circuit itself has observed that the "unqualified contractual right to receive property is itself a property right subject to seizure by levy." St. Louis Union Trust Co. v. United States [80-1 USTC ¶9282], 617 F. 2d 1293, 1302 (1980). ⁹

Common sense dictates that a right to withdraw qualifies as a right to property for purposes of §§ 6331 and 6332. In a levy proceeding, the IRS `steps into the taxpayer's shoes,'" United States v. Rodgers, 461 U. S., at 691, n. 16, quoting 4 Bittker, at ¶111.5.4, p. 111-102; M. Saltzman, IRS Practice and Procedure ¶14.08, p. 14-32 (1981); Brief for Respondent 8. The IRS acquires whatever rights the taxpayer himself possesses. And in such circumstances, where, under state law, a taxpayer has the unrestricted right to withdraw funds from the account, "it is inconceivable that Congress . . . intended to prohibit the Government from levying on that which is plainly accessible to the delinquent taxpayer-depositor." United States v. First National Bank of Arizona , 348 F. Supp., at 389. Accord , United States v. Citizens & Southern National Bank, 538 F. 2d, at 1107. ¹⁰ The taxpayer's right to withdraw is analogous in this sense to the IRS' right to levy on the property and secure the funds. Both actions are similarly provisional and subject to a later claim by a codepositor that the money in fact belongs to him or her.

III

The Court of Appeals, however, applied state law beyond the point of that law's specification of the nature of the property right, and bound the IRS to certain consequences of state property law. Because under Arkansas garnishment law, a creditor of a depositor is not subrogated to the depositor's power to withdraw the account, the court reasoned that the IRS, too, could not stand in the depositor's shoes. This gloss, it seems to us, is contrary to the analysis and holding in United States v. Bess, supra. The Court of Appeals adduced three principal justifications for its result. The first was its belief that under Arkansas law Roy did not have a sufficient property interest in the funds to support the levy. The second was its concern that Ruby and Neva might possess competing claims to the funds on deposit, and that the bank might be subject to claims asserted by them. The third was its stated conclusion that "levy is not normally intended for use as against property . . . bearing on its face the names of third parties, and in which those third parties likely have a property interest." 726 F. 2d, at 1300.

We are not persuaded by any of these asserted justifications.

The Court of Appeals' conclusion that Roy did not possess "property [or] rights to property" on which the IRS could levy rested heavily on its understanding of the Arkansas law of creditors' rights, particularly those in garnishment. Id. , at 1295-1296. See Hayden v. Gardner, 238 Ark. 351, 381 S. W. 2d 752 (1964). As we have suggested, this misconceives the role properly played by state law in federal tax-collection matters. The question whether a state-law right constitutes "property" or "rights to property" is a matter of federal law. United States v. Bess, 357 U. S. , at 56-57. Thus, the facts that under Arkansas law Roy's creditors, unlike Roy himself, could not exercise his right of withdrawal in their favor and in a garnishment proceeding would have to join his codepositors are irrelevant. The federal statute relates to the taxpayer's rights to property and not to his creditors' rights. The Court of Appeals would remit the IRS to the rights only an ordinary creditor would have under state law. That result "compare[s] the government to a class of creditors to which it is superior." Randall v. H. Nakashima & Co. [76-2 USTC ¶9770], 542 F. 2d 270, 274, n. 8 (CA5 1976).

The Court of Appeals also was concerned that Ruby and Neva might have rights that are affected if the levy were honored. 726 F. 2d, at 1297-1300. This reasoning, however, runs counter to the observation above that a bank served with a notice of levy has two, and only two, possible defenses for failure to comply with the demand: that it is not in possession of property of the taxpayer, or that the property is subject to a prior judicial attachment or execution. As we have stated, neither defense is applicable here. That another party or parties may have competing claims to the accounts is not a legitimate statutory defense.

In its understandable concern for Ruby's and Neva 's property interests, the Court of Appeals has ignored the statutory scheme established by Congress to protect those rights. Crucially, the administrative levy, as has been noted, is only a provisional remedy. "The final judgment in [a levy] action settles no rights in the property subject to seizure." United States v. New England Merchants National Bank [79-1 USTC 9250], 465 F. Supp. 83, 87 ( Mass. 1979). Other claimants, if they have rights, may assert them. Congress recognized this when the Code's summary-collection procedures were enacted, S. Rep. No. 1708, 89th Cong., 2nd Sess., 29 (1966), and when it provided in §7426 of the Code, 26 U. S. C. §7426, that one claiming an interest in property seized for another's taxes may bring a civil action against the United States to have the property or the proceeds of its sale returned. ¹¹ Congress also has provided, by §6343(b), an effective and inexpensive administrative remedy for the return of the property. See Treas. Reg. §301.6343-1(b)(2), 26 CFR §301.6343-1(b)(2) (1984). ¹²

Congress thus balanced the interest of the Government in the speedy collection of taxes against the interests of any claimants to the property, and reconciled those interests by permitting the IRS to levy on the assets at once, leaving ownership disputes to be resolved in a post-seizure administrative or judicial proceeding. See United Sand & Gravel Contractors, Inc. v. United States [80-2 USTC ¶9626], 624 F. 2d 733, 739 (CA5 1980); Valley Finance Inc. v. United States [80-2 USTC ¶9554], 203 U. S. App. D. C. 128, 136-137, 629 F. 2d 162, 170-171 (1980), cert. denied, 451 U. S. 1018 (1981). Its decision that certain property rights must yield provisionally to governmental need should not have been disregarded by the Court of Appeals. Nor would the bank be exposed to double liability were it to honor the IRS levy. The Code provides administrative and judicial remedies for codepositors against the Government, and any attempt to secure payment in this situation from the bank itself would be contrary to the federal enforcement scheme. ¹³

The Court of Appeals' final justification for its holding was its belief that an IRS levy "is not normally intended for use as against property in which third parties have an interest" or "as against property bearing on its face the names of third parties, and in which those third parties likely have a property interest." 726 F. 2d, at 1300. The court acknowledged the existence of §7426 but felt that that statute was designed to protect only those third parties "whose property has been seized 'inadvertently.'" 726 F. 2d, at 1300.

We disagree. The IRS' understanding of the terms of the Code is entitled to considerable deference. Here, moreover, collection provisions plainly contemplate that a taxpayer's interest in property may be less than full ownership. The tax lien attaches not only to "property" but also to "rights to property." See S. Rep. No. 1708, at 29. Further, we see nothing in the language of §7426 that distinguishes among various species of third-party claimants. The language of the statute encompasses advertent seizures as well as inadvertent ones. ¹⁴ There is nothing express or implied in United States v. Rodgers, supra, to the contrary.

Rodgers held that §7403 empowers a District Court to order the sale of a family house in which a delinquent taxpayer has an interest, even though a nondelinquent spouse also has a homestead interest in the house under state law. 461 U. S. , at 698-700. In so ruling, the Court contrasted the operation of §7403 with that of §6331. See 461 U. S. , at 696. The Court noted that §6331, unlike §7403, does not "implicate the rights of third parties," because an administrative levy, unlike a judicial lien-foreclosure action, does not determine the ownership rights to the property. Instead, third parties whose property is seized in an administrative levy "are entitled to claim that the property has been 'wrongfully levied upon,' and may apply for its return either through administrative channels . . . or through a civil action." Id. , at 696. The Court, in other words, recognized what we now make explicit: that §6331 is a provisional remedy, which does not determine the rights of third parties until after the levy is made, in postseizure administrative or judicial hearings. ¹⁵

The Court of Appeals' result would force the IRS, if it wished to pursue a delinquent taxpayer's interest in a joint bank account, to institute a lien-foreclosure suit under §7403, joining all codepositors as defendants. The practical effect of this would be to eliminate the alternative procedure for administrative levy under §§ 6331 and 6332. We do not lightly discard this alternative relief that Congress so clearly has provided for the Government. If the IRS were required to bring a lien-foreclosure suit each time it wished to execute a tax lien on funds in a joint bank account, it would be uneconomical, as a practical matter, to do so on small sums of money such as those at issue here. And it would be easy for a delinquent taxpayer to evade, or at least defer, his obligations by placing his funds in joint bank accounts. While one might not be enthusiastic about paying taxes, it is still true that "taxes are the life-blood of government, and their prompt and certain availability an imperious need." Bull v. United States [35-1 USTC ¶9346], 295 U. S. 247, 259 (1935).

The judgment of the Court of Appeals is reversed.

It is so ordered.

¹ Section 6331(a) reads in pertinent part:

"If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax . . . by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person. . . ."

Section 7701(a)(11)(B) of the Code reads:

"The term 'Secretary' means the Secretary of the Treasury or his delegate."

² Section 6332(a) reads:

"Except as otherwise provided in subsection (b), 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 righ