6334 - Annotations - Seaman's Wage Statute

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Annotations- Seaman's Wage Statute

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6334 Annotations: Seaman’s Wage Statute- Levy

 

Property Exempt from Levy: Seaman's Wage Statute

 

[80-1 USTC ¶9154] United States of America v. Offshore Logistics International, Inc.

U. S. District Court, West. Dist. La., Lafayette-Opelousas Div., Civil Action No. 79-0011, 483 FSupp 1055, 12/20/79

[Code Sec. 6334]

Levy for taxes: Exempt property: Seaman's wage statute: Levy upheld.--The court found that wages owed a master seaman were correctly levied upon for taxes, penalties and interest owed. Although 46 U. S. C. §601 provides that wages owing to a master seaman are not subject to attachment, the court ruled that Code Sec. 6334, which contains a list of property exempt from levy for taxes that does not include seaman's wages, effectively controlled the situation.

Edward L. Shaheen, United States Attorney, Frances O. Allen, Assistant United States Attorney, Shreveport, La. 71161, for plaintiff. James H. Roussel, Phelps, Dunbar, Marks, Claverie & Sims, Hibernia Bank Bldg., New Orleans, La. 70112, for defendant.

Ruling on Cross-Motions for Summary Judgment

DAVIS, District Judge.

The parties filed cross-motions for summary judgment raising the legal issue of whether the IRS may levy on the wages of a seaman to satisfy the seaman's tax liabilities.

FACTS The defendant owns and operates vessels. From March 2, 1977 , through May 21, 1978 , Joseph W. Adair, Jr., was employed by the defendant as a master of various vessels.

On December 7, 1977 , the IRS served the defendant with a notice of levy on Adair's wages for $1,203.40 for taxes, penalties and interest owed by Adair as of the date of the service of the levy.

The defendant-employer declined to honor the IRS levy and paid to Adair wages which were due him in amounts which exceeded the amount of the IRS levy.

DISCUSSION The defendant-employer declined to honor the IRS levy because of 46 U. S. C. §601 which provides:

No wages due or accruing to any master seaman or apprentice shall be subject to attachment or arrestment from any court, and every payment of [such] wages . . . shall be valid in law, notwithstanding . . . any attachment, encumbrance or arrestment thereon . . ..

The Government contends that defendant-employer was not justified in its refusal to withhold wages from Adair because of 26 U. S. C. §6334(a) and (c). 26 U. S. C. §6334(a) contains a list of property exempt from federal tax levies. This list does not include the wages of seamen. Subsection (c) provides:

Notwithstanding any other law of the United States , no property or rights to property shall be exempt from levy other than the property specifically made exempt by subsection (a). (Emphasis added)

For the following reason, I agree with the position taken by IRS and conclude that 26 U. S. C. §6334 must prevail over 46 U. S. C. §601:

(1) Both statutes are "special" statutes. 46 U. S. C. §601 deals with the special circumstance of exempting seamen's wages from attachment. 26 U. S. C. §6334 deals with property which is subject to attachment by the IRS for tax liabilities. I am unable to say that one of these statutes is "general" and the other "special" so that the special statute should be given priority.

(2) The underlined introductory phrase in Section 6334(c) "notwithstanding any other law of the United States . . ." leads me to the conclusion that Congress intended to exempt no property from federal tax levies except property specifically referred to in the previous subsection (a).

(3) In 1966, Congress amended Section 6334 to expand the list of exempt property to include, for example, military retirement pay and military medal of honor pensions. In each instance, the benefits in question were already covered by exemptive language similar to that contained in 46 U. S. C. §601. See 38 U. S. C. §562(a) and 10 U. S. C. §1040. Congress did not elect to amend Section 6334 at that time to include seamen's wages.

(4) I conclude that Congress intended to provide in Section 6334 an exclusive listing of property exempt from federal tax levies; since seamen's wages are not included in that list, this property does not enjoy exempt status.

CONCLUSION The motion for summary judgment filed by defendant is denied; the plaintiff's motion for summary judgment is granted. 

 

 

[85-2 USTC ¶9833]Sea-Land Service, Inc., Plaintiff v. United States of America, Commissioner, Internal Revenue Service, G. Glendenning, Kenneth Kramlich and Nelson Sala, Defendants

U.S. District Court, N.J., Civil Action No. 85-825, 622 FSupp 769, 11/21/85

[Code Secs. 6332 and 6334, 28 USC §2201, and 42 USC §11109]

Levy and distraint: Surrender of property subject to: Seamen's wages: Penalty under shipping laws: Declaratory Judgment Act.--An employer was required to honor IRS levies on the wages of seamen despite a provision in the shipping laws, 46 U.S.C. §11109, that exempts seamen's wages from attachment. Congress did not intend the shipping laws to prohibit the execution of federal tax levies against seamen's wages. Code Sec. 6334 provides an exclusive list of property exempt from federal tax levies and does not include seamen's wages. The court also declared that under Code Sec. 6332 the employer would not be liable for the double wage penalty under the shipping laws with respect to the wages paid over to the IRS. The Declaratory Judgment Act did not bar the employer's suit.

Jeffrey L. Reiner, Geralyn A. Boccher, Meyner and Landis, Gateway One, Newark , N.J. 07102 , for plaintiff. W. Hunt Dumont, United States Attorney, Edward G. Spell, Assistant United States Attorney, Newark , N.J. 07102 , for plaintiff. Robert L. Handros, Department of Justice, Washington , D.C. 20530 , for defendants.

STERN, District Judge:

The Court is presented with a suit for declaratory judgment, brought under the Declaratory Judgment Act, 28 U.S.C. §2201, and the Shipping Laws of the United States, 46 U.S.C. §§ 1 et seq. Plaintiff seeks to prevent the Internal Revenue Service (the "IRS") from attaching the wages of three of its employees, seamen G. Glendenning, Kenneth Kramlich and Nelson Sala.

Plaintiff and defendants the United States and the IRS Commissioner (the "government") cross-moved for summary judgment, raising the issue of whether the IRS may garnish the wages of seamen to satisfy the seamen's tax liabilities in spite of a provision in the shipping laws exempting seamen's wages from "attachment or arrestment from any court." 46 U.S.C. §11109. The government also moved, as a threshold matter, to dismiss for lack of jurisdiction. 1

The Court heard oral argument on July 22, 1985 . We now deny the government's motion to dismiss for lack of jurisdiction and grant summary judgment upholding the IRS's garnishment power. We also grant plaintiff's motion for summary judgment freeing it from liability for honoring such levies. Our decision on these issues renders moot the remaining issue concerning the Court's power to enjoin the IRS's attachment powers.

Plaintiff Sea-Land Service, Inc. ("Sea-Land") operates vessels in foreign and interstate commerce, maintaining approximately 5,000 seamen on its U.S. vessel payroll. Defendants Glendenning, Kramlich and Sala have been employed as seamen aboard Sea-Land's ships.

Beginning on April 2, 1984 , the IRS served Sea-Land with notices of levy on the wages of defendants Glendenning, Kramlich and Sala for taxes, penalties and interest owed to the federal government by the seamen. In each case Sea-Land informed the IRS that it could not honor the levies because the shipping laws precluded the withholding of seamen's wages. Sea-Land further noted its belief that, in the event it paid over the wages to the IRS, it would be liable for the double wage penalty described in the shipping laws at 46 U.S.C. §10313(g). When the IRS persisted in its demands, Sea-Land filed this action to ascertain whether it must respect the IRS levies.

The complaint contains three counts. Count one seeks a judgment declaring whether Sea-Land must honor the IRS levies. Count two asks the Court to enjoin the IRS from levying on the wages of Sea-Land's seamen and from enforcing the levies, pursuant to 26 U.S.C. §6332(c). Count three seeks a declaration that if Sea-Land must comply with the levies, it will neither violate Title 46, United States Code, Section 11109, nor incur double wage liability under section 10313(g).

The government first moves to dismiss for lack of jurisdiction on counts one and two. Alternatively, it urges the Court to dismiss count one for failure to state a claim upon which relief can be granted. Plaintiff cross-moves for summary judgment, arguing that the levies are invalid under the shipping laws. In the alternative, it seeks summary judgment on count three to bar liability if it is obligated to respect the levies.

DISCUSSION

I. The Government's Motion to Dismiss for Lack of Jurisdiction.

The government offers the threshold argument that plaintiff's claim in count one is barred by the Declaratory Judgment Act, 28 U.S.C. §2201. That statute restricts the court's power to grant declaratory relief by providing that federal courts shall issue declaratory judgments "except with respect to Federal taxes . . .." 28 U.S.C. §2201(a).

It is, however, well-settled that the exception for federal taxes does not bar actions by nontaxpayers who seek neither to restrain the assessment of taxes nor to dispute the taxpayer's ultimate tax liability. Kentucky Welfare Rights Organization v. Simon, 506 F.2d 1278, 1284 (D.C. Cir. 1975), rev'd on other grounds, 426 U.S. 26 (1976); Church of Scientology of Celebrity Centre v. Egger [82-1 USTC ¶9386], 539 F. Supp. 491, 494 (D.D.C. 1982); Henshel v. Guilden [69-1 USTC ¶9255], 330 F. Supp. 470, 472 (S.D.N.Y. 1969); Hoye v. United States, 109 F. Supp. 685, 686 (S.D. Cal. 1953). In Hoye, for example, a city comptroller sought a judgment declaring whether he was required to honor an IRS levy on the wages or pension of a city employee. 109 F.Supp. at 686. The Hoye court recognized that the comptroller faced an intractable conflict between two sets of laws:

[T]he city of Los Angeles merely holds as a trustee the money which is due to the defendant taxpayer, Champion. Furthermore, under the law of the State of California, Sec. 710, Cal. C.C.P., the plaintiff Hoye as City Controller cannot pay money owed by the city of Los Angeles to anyone other then the one to whom the money is due unless and until there is filed with him an authenticated abstract of judgment of a court showing that the person is entitled thereto. If the plaintiff, Hoye, recognized the demand and levy by the Collector and paid the sum of $121.71 therein demanded, the plaintiff, Hoye, would still be liable to pay that same amount to Champion under the terms of Section 710 of the California Code of Civil Procedure.

Id.

The parallel between the Hoye case and the present action is unmistakable. Sea-Land like comptroller Hoye, is not the taxpayer. Like him, Sea-Land does not ask the Court to declare whether any tax is due the United States , or if so, how much, but only whether it must turn over the unchallenged assessment to the IRS.

Moreover, Sea-Land finds itself, like comptroller Hoye, confronted with two laws that makes observance of both impossible. The Internal Revenue Code requires Sea-Land to obey the IRS orders attaching its employees wages, 26 U.S.C. §6332(c), and does not specifically exempt seamen's wages from such levy, 26 U.S.C. §6334(a). But the shipping laws state that Sea-Land may not withhold from seamen any portion of their full wages, excepting only court-ordered spouse and child support payments. 46 U.S.C. §11109(a). Furthermore, if an employer wrongfully delays paying a seaman's wages it faces the imminent threat of double wage liability under 46 U.S.C. §10313(g). Like comptroller Hoye, therefore, Sea-Land is entitled to a declaration proclaiming whether it must honor the IRS levies. We hold that the relief sought in count one is available under Title 28, United States Code, Section 2201. 2

II. The Motions for Summary Judgment.

A. Count One

Although the government styled its motion as one to dismiss for failure to state a claim, we treat the motions on count one as cross-motions for summary judgment because they raise the identical legal issue, and the parties appear to agree that no material facts are in dispute. See Fed. R. Civ. P. 56(c).

Sea-Land has refused to honor the IRS levies as a result of 46 U.S.C. §11109(a), which provides:

Wages due or accruing to a master or seaman are not subject to attachment or arrestment from any court, except for an order of a court about the payment by a master or seamen of any part of the master's or seaman's wages for the support and maintenance of the spouse of minor children of the master or seaman, or both. A payment of wages to a master or seaman is valid, notwithstanding any prior sale or assignment of wages or any attachment, encumbrance, or arrestment of the wages.

The government contends, however, that provisions of the Internal Revenue Code, 26 U.S.C. §§ 6334(a) and (c), take precedence over the Shipping Laws provisions. Subsection (a) lists property exempt from federal levies. Seamen's wages are not included. Subsection (c) states that:

Notwithstanding any other law of the United States (including section 207 of the Social Security Act), no property or right to property shall be exempt from levy other than the property specifically made exempt by subsection (a).

26 U.S.C. §6334(c) (emphasis added).

The cross-motions for summary judgment ask this Court to resolve the apparent conflict between these two laws.

At the outset we note that we find only one case where this issue has been addressed directly: United States v. Offshore Logistics International, Inc. [80-1 USTC ¶9154], 483 F. Supp. 1055 ( W.D. La. 1979). The Offshore court held that section 6334 of the Internal Revenue Code must prevail over the predecessor to section 11109 of the shipping laws. 483 F. Supp. at 1057. It grounded this conclusion in three considerations: (1) as both statutes as "special" statutes, the rule of statutory construction giving "special" statutes priority over "general" statutes does not apply; (2) the plain language of the introductory phrase in section 6334(c)--"notwithstanding any other laws of the United States"--suggests that the list of exempt property enumerated in subsection (a) was intended to be exhaustive; and (3) Congress in 1966 expanded the list of exempt property in subsection (a), but, again, did not include seamen's wages.

Sea-Land urges us to reject this holding, contending that the Offshore court found an inconsistency in the law where none exists. Section 6334(a), argues Sea-Land, enumerates the types of property exempt from IRS levies; section 11109, on the other hand, exempts from such levies a category of person--seamen. The exemption of seamen's wages from the attachment power of the IRS, it is argued, thus does not fun afoul of the exhaustive list of property exemptions contained in section 6334.

The argument is attractive, but it is based on an untenable distinction. Both section 11109 and section 6334 describe their subject matter as a mixture of both person and property. Section 11109 concerns seamen and their wages. Similarly, section 6334 exempts various sorts of persons--Medal of Honor winners, railroad annuity recipients, any unemployed persons, to name a few--and their property--pension, annuities, and unemployment benefits. The conflict between the statutes cannot be resolved by an unconvincing logical distinction between person and property.

Plaintiff asserts that the treatment of state withholding taxes under the shipping laws shows that even tax claims cannot touch seamen's wages. We note, however, that the legislative history of the shipping laws reveals no intention to extend the protection of section 11109 to federal tax assessments.

In 1948, a district court held that defendant state commissioners could not enforce state laws requiring income tax withholding from seamen's wages because the withholding was an "attachment" prohibited by the shipping laws. American Hawaiian S.S. Co. v. Fisher, 82 F. Supp. 193, 196 (D. Or. 1948). A year later, a court in Alaska reached the opposite conclusion. Alaska S.S. Co. v. Mullaney, 84 F. Supp. 561, 567 (D. Alaska 1949), aff'd, 180 F.2d 805 (9th Cir. 1950). Subsequently Congress amended Title 46 to clarify that section 601, the predecessor to section 11109, prohibited withholding state income taxes from seamen's wages.

Describing the need for the amendment, Congress cited the conflict between the federal shipping law and the state tax provisions--a conflict exactly analogous to the conflict before the Court today--which left shipowners "faced with a staggering potential legal and financial liability if they do not withhold as apparently required under state tax law." S. Rep. No. 433, 86th Cong., 1st Sess. 2, reprinted in 1959 U.S. Code Cong. & Ad. News 2531. But Congress did not apply the same reasoning to federal income taxes. As the Senate Report noted:

S. 1958 would relieve the seamen and the steamship companies of the accounting burden enumerated above; it would also clarify the legal conflict between State and Federal law.

It is to be noted, however, that this legislation will not relieve the seaman of his liability to pay taxes properly due, will not effect [sic] the Federal withholding taxes, and will not in any way impair the general tax authority of the States.

Id. at 2532 (emphasis added). Thus Congress adopted the view that withholding wages for state taxes was a type of attachment which encroached on the traditional protection afforded seamen's wages under federal law. 3 But it chose not to prohibit withholding of federal taxes from seamen's wages.

We believe this distinction is significant for the federal tax levies at issue here. An IRS levy, like the withholding of taxes, is a type of attachment which at first blush appears to conflict with the prohibitions of section 11109. The legislative history of this section, however, provides reason to think that Congress did not mean those prohibitions to extend to federal tax collection.

We conclude that Congress did not intend Title 46, United States Code, Section 11109 to prohibit the execution of federal tax levies against seamen's wages. Furthermore, we agree with the Offshore court's conclusion that section 6334(a) of the Internal Revenue Code provides an exclusive list of property exempt from federal tax levies.

The accumulation of these reasons leads the Court to grant the government's motion for summary judgment on count one.

B. Count Three

Plaintiff maintains that, should the government prevail on count one, Sea-Land is entitled to summary judgment on count three declaring that it will not violate the shipping laws, nor be subject to the double wage penalty under 46 U.S.C. §10313(g), nor incur any other obligations with respect to the seamen's wages paid over to the IRS. The government does not oppose this motion, commenting that section 6332(d) of the Internal Revenue Code protects plaintiff against liability. That section provides:

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 or his delegate, surrenders such property or rights to property (or discharges such obligation) to the Secretary or his delegate (or who pays a liability under subsection (c)(1)) shall be 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. . . .

26 U.S.C. §6332(d).

We agree that the language of section 6332(d) relieves Sea-Land of further obligations with respect to the wages it pays over to the IRS due to the notices of levy. Further, it follows from our resolution of count one that Sea-Land does not violate Section 11109 of Title 46 by honoring the levies.

Accordingly, plaintiff's motion for summary judgment on count three is granted.

Order

For the reasons set forth in the Court's opinion filed herewith;

It is on this 21 day of November, 1985,

ORDERED that the motion of defendants United States of America and Commissioner, Internal Revenue Service for summary judgment on count one be, and it hereby is, granted; and it is further

ORDERED that plaintiff's motion for summary judgment on count three be, and it hereby is, granted; and it is further

ORDERED that the Court's ruling on count one renders count two of plaintiff's complaint moot.

1 The three seamen are not represented on these motions. Defendants Kramlich and Sala have defaulted and defendant Glendenning cannot be found for service.

2 We do not need to address the jurisdictional issue the government raises concerning this Court's power to enjoin the IRS from levying on the seamen's wages. Given our disposition of the issues before us, this issue is moot.

3 Currently, a separate provision of the shipping laws, Section 11108 of Title 46, explicitly prevents states from withholding taxes from seamen's wages. 

 

 

 

[97-1 USTC ¶50,408] In re Cheryl Jones, Debtor. Cheryl Jones, Plaintiff v. Internal Revenue Service, Defendant

U.S. Bankruptcy Court, D.C., 94-01296, 3/27/97

[Code Secs. 6321 , 6331 , 6334 and 6871 ]

Bankruptcy: Tax liens: Attachment: Thrift savings plan: Anti-alienation provisions.--

An IRS tax lien attached to a debtor's Thrift Savings Plan (TSP) account. Although the TSP statute (5 U.S.C. §8431, et seq.) contains anti-alienation provisions, it cannot be interpreted as proscribing a tax levy on a TSP account. Since a lien is a less invasive collection measure than, and operates in conjunction with, a levy, Congress probably did not intend to allow a TSP account to be subject to a levy but not to a lien. Thus, the TSP statute was construed as not preventing the attachment of a tax lien. The lien did not transfer the debtor's title, possession, or interest in the account and, therefore, did not result in alienation of the debtor's property. Even though the IRS had not perfected the lien by levy or judgment, it was still enforceable.

Carol Waite, P.O. Box 3223 , Oakton , Va. 22124 , for (Jones, C.).

DECISION RE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

TEEL, JR., Bankruptcy Judge:

On stipulated facts, the defendant Internal Revenue Service ("IRS") seeks summary judgment adjudicating that its tax liens attached to the debtor's Thrift Savings Plan ("TSP") account 1 and that it has an allowed secured claim for the amount of that account despite the anti-alienation provisions of 5 U.S.C. §8437(e)(2) and the failure of the IRS to levy on the account before the debtor filed her bankruptcy case. The motion will be granted.

The plaintiff, Cheryl Jones, filed her bankruptcy petition under chapter 13 of the Bankruptcy Code and later filed this adversary proceeding to determine the amount of the IRS's allowed secured claim. On the date of filing her petition, she was liable to the IRS for $61,347.17 in income taxes and associated interest and penalties. 2 The IRS had previously filed a notice of federal tax liens relating to the assessments of the income taxes. The first issue is whether the liens attached to the debtor's TSP account in the approximate net amount of $8,375.00. 3 The second issue is whether the lien is avoidable as unperfected because the IRS never proceeded against the account.

I

The account is subject to the protections of 5 U.S.C. §8437(e)(2), enacted on June 6, 1986 , which provides, with exceptions inapplicable here, that TSP accounts "may not be assigned or alienated and are not subject to execution, levy, attachment, garnishment, or other legal process." Nevertheless, the court concludes that the account is subject to an enforceable federal tax lien under 26 U.S.C. §6321. As discussed in part A below, general principles counsel against repealing §6321 in the case of TSP accounts unless §6321 and §8437(e)(2) are in irreconcilable conflict. As discussed in part B below, because IRS levies are excepted from §8437(e)(2), Congress implicitly intended that tax liens, which levies serve to enforce and which accord the IRS priority as against other creditors, would continue to attach to TSP accounts. In any event, as discussed in part C below, the definition of alienation ought not be viewed as including the attachment of a tax lien which may be enforced by levy. A holding that the IRS claim may be enforced as a secured claim under the debtor's chapter 13 plan neither effects a prohibited alienation (part D below) nor subjects the TSP account to other creditors' claims (part E below).

A.

Under 26 U.S.C. §6321, the assessment of a tax liability gives rise to a tax lien on all of the taxpayer's property and rights to property. The TSP statute should not lightly be interpreted as repealing §6321 in the case of TSP accounts.

This follows from well settled principles of repeal by implication. See generally Chamber of Commerce v. Reich, 74 F.3d 1322, 1333 (D.C. Cir. 1996). It is a "cardinal rule . . . that repeals by implication are not favored." Posadas v. National City Bank, 296 U.S. 497, 503 (1936). This should particularly be so in the case of federal tax collection remedies because the Supreme Court has recognized that the collection of taxes is the "life-blood of government." Franchise Tax Board v. USPS, 467 U.S. 512, 523 (1984) (quoting Bull v. United States [35-1 USTC ¶9346], 295 U.S. 247, 259-60 (1935)).

Repeal by implication should be allowed here only if the two statutes' provisions are in irreconcilable conflict. Radzanower v. Touche Ross & Co., 426 U.S. 148, 155 (1976). That is to say, the provision of §6321 that the tax lien attaches to all of the debtor's property should be deemed repealed in the case of TSP accounts only if necessary to make the TSP statute work. Radzanower, 426 U.S. at 155. Demonstrably the TSP statute is susceptible to a reasonable and workable interpretation which does not bar the attachment of federal tax liens to TSP accounts.

B.

A TSP account is subject to seizure by levy under 26 U.S.C. §6334(a) because 26 U.S.C. §6334(c) provides that no properties other than those specifically listed in §6334(a) shall be exempt from levy "[n]otwithstanding any other law of the United States . . . ." This plain language bars interpreting 5 U.S.C. §8437(e)(2) as proscribing a §6331 levy on a TSP account. Cf. Shanbaum v. United States [94-2 USTC ¶50,512], 32 F.3d 180, 183 (5th Cir. 1994) (based in part on plain language of §6334(c), ERISA pension benefits subject to IRS levy despite ERISA's requirement that pension plan contain anti-alienation clause).

The debtor points to earlier bills in Congress that would have included "debts owed by the individual to the United States " as an additional exception to the proscriptions of 5 U.S.C. §8437(e)(2). See S. 1527, 99th Cong., 1st Sess. (1985) (proposed 5 U.S.C. §8426(d)(1)) and H.R. 3660, 99th Cong., 1st Sess. (1985) (proposed 5 U.S.C. §8434(d)(1)). That language was dropped from the final statute. 4 That deletion is inconsequential. The plain language of 26 U.S.C. §6334(c) made it unnecessary to retain the deleted language (which applied to all claims of the United States) or some modification thereof in order for IRS levies to be excepted from the proscriptions of 5 U.S.C. §843(e)(2).

Having concluded that a federal tax levy is not barred by the proscriptions of 5 U.S.C. §8437(e)(2), it is doubtful that Congress intended that the attaching of a federal tax lien, a much less drastic and invasive collection enforcement measure, is barred by §8437(e)(2). Particularly in light of the adjunct role a levy plays to a tax lien, Congress would not likely have intended that a TSP account could be levied on but could not be subjected to a tax lien under 26 U.S.C. §6321.

Under §6321 the federal tax lien attaches to "all property and rights to property, whether real or personal, belonging to [the taxpayer]." This language "is broad and reveals on its face that Congress meant to reach every interest in property that a taxpayer might have." United States v. Nat'l Bank of Commerce [85-2 USTC ¶9482], 472 U.S. 713, 719-20 (1985) (citation omitted). "A federal tax lien, however, is not self-executing. Affirmative action by the IRS is required to enforce collection of the unpaid taxes." Id. at 720. As observed in United States v. Whiting Pools, Inc. [83-1 USTC ¶9394], 462 U.S. 198, 209-210 (1983), the levy power is a means of enforcement of the tax lien and "[t]he Service's interest in seized property is its lien on that property." Viewing a levy as an adjunct to tax liens, it is implicit that a TSP account's exposure to tax levy includes subjecting the account to the tax lien which the levy enforces.

Concededly, by the terms of §6331 itself, a levy can be made on either property belonging to the taxpayer or on property subject to a tax lien (as in the case of property the debtor has conveyed to another before levy has been attempted). 5 But because Congress wanted to preserve the IRS's right to levy, it surely must have intended to preserve the IRS's right to take steps to assure that the levy power would be enforceable to the hilt.

Two examples of how a tax lien maximizes the effectiveness of a levy suffice. First, consider those instances in which other creditors execute on a TSP account 6 and would defeat a subsequent §6331 levy if no notice of tax lien had been earlier filed under 26 U.S.C. §6323. Second, consider the protection the tax lien would give the IRS if the ownership of the account passed by reason of the death of the taxpayer to someone else. The lien would remain on the funds and the IRS could levy on the funds as subject to the tax lien.

Indeed, some courts have held that a federal tax levy does not serve to accord the IRS any secured status against subsequent lienors, such that the IRS has no priority secured status unless it earlier filed a notice of tax lien. 7 If that is a correct holding, that would only strengthen the case for holding that a federal tax lien attaches to a TSP account. 8 But even if, as other courts have held, 9 a levy can serve to accord the IRS a secured status, Congress would not likely have deprived the levy power of the assistance that would be afforded it by the attaching of an earlier-filed federal tax lien.

Congress did not intend in enacting the TSP statute to diminish the property that a tax levy could reach with a first priority by immunizing a TSP account from the reach of the tax lien itself. Its concern, instead, was to prevent other creditors from taking steps allowing them to collect from TSP accounts.

Concededly, a lien is not a levy. For example, property can be subject to a lien which is exempt from a levy. In re Voelker [95-1 USTC ¶50,028], 42 F.3d 1050, 1052 (9th Cir. 1994); United States v. Barbier [90-1 USTC ¶50,107], 896 F.2d 377, 379 (9th Cir. 1990). It does not follow from this that a TSP account which, in regard to an IRS levy, is expressly excepted by 26 U.S.C. §6334(c) from the TSP statute's anti-alienation provisions, is in the absence of express congressional provision, exempt by reason of those same anti-alienation provisions from being subject to a federal tax lien.

This is because Section 8437(e)(2) addresses a goal of guarding against unwise assignments by the employee beneficiary of a TSP account and safeguarding the account from being subject to attack by creditors in general. The federal tax lien statute "relates to the taxpayer's rights to property and not to his creditors' rights." National Bank of Commerce [85-2 USTC ¶9482], 472 U.S. at 727.

Thus, the IRS is in a different status from ordinary creditors by reason of its right to levy on a TSP account. Unless §8437(e)(2) expressly overrides the tax lien statute, which it does not, the doctrine against implicit repealers requires that tax liens should attach to a TSP account because such accounts are subject to collection-attack by the IRS (via levy) and because the tax lien furthers that right of levy.

It is evident that by providing that TSP accounts are subject to levy under §6331, Congress confirmed the broader presupposition that such accounts are subject to Federal tax liens. Cf. In re Taylor, 81 F.3d 20, 24 (3d Cir. 1996) ("these sections, read together, evidence a congressional concern to preserve the collectability of tax claims"); Seminole Tribe of Florida v. Florida, 116 S.Ct. 1114, 1122 (1996) (although Eleventh Amendment is limited on its face to diversity jurisdiction, it confirms the broader presupposition that "federal jurisdiction over suits against nonconsenting states 'was not contemplated by the Constitution when establishing the judicial power of the United States' " quoting Hans v. Louisiana, 134 U.S. 1, 15 (1890)).

Accordingly, it might be possible to argue that the TSP statute does not alter the federal tax lien statute one whit, namely, to argue that a §6331 levy is an auxiliary to enforcement of a §6321 lien and the exception for tax levies necessarily carries with it tax liens as well, together with all remedies for enforcement of the lien, such as foreclosure. It is not necessary for purposes of this decision to go that far. 10 It suffices to conclude that the tax lien attaches at least to the extent of preserving the right of levy and that the lien is enforceable as a secured claim which assures the priority of any potential exercise of the right of levy, whether the levy power is exercised or not.

C.

A close examination of the anti-alienation provisions of the TSP statute further supports the conclusion that the §6321 lien, in the context of TSP accounts, is at least enforceable as auxiliary to the §6331 levy power that is excepted from the anti-assignment and anti-alienation provisions of the TSP statute. Section 8437(e)(2) bars a federal tax lien from attaching to a TSP account only if the funds in the account would thereby be "assigned or alienated or . . . subject[ed] to execution, levy, attachment, garnishment, or other legal process." A federal tax lien is not a form of "legal process" in the category of the enumerated forms of "legal process." Nor is the attaching of a federal tax lien a form of "assignment." That leaves the question whether the attaching of a federal tax lien is a form of "alienation." The TSP statute does not define the term "alienate."

1. General Definition of Alienation

The definition of "alienate" in Black's Law Dictionary and other dictionaries limits alienation to acts resulting in a change in title. For example, Webster's Third New International Dictionary defines alienate as "to convey or transfer to another (as title, property, or right): part voluntarily with ownership of." Cases interpreting "alienate" in federal pension statutes have looked to this definition. Rodney L. Powell [CCH Dec. 49,431], 101 T.C. 489, 497 (1993); Boggs v. Boggs, 849 F. Supp. 462, 464 n.1 ( E.D. La. 1994). This definition precludes affixing the label "alienation" to the attaching of a tax lien because that act does not result in a change in title. The lien does not transfer the taxpayer's title, possession or interest in the property. United States v. Diemer [94-2 USTC ¶50,420], 859 F. Supp. 126 (D.N.J. 1994). Rather, the attachment of a tax lien merely serves as a charge upon the property securing payment to the United States . In re Voelker [95-1 USTC ¶50,028], 42 F.3d 1050, 1052 (7th Cir. 1994); United States v. Barbier [90-1 USTC ¶50,107], 896 F.2d 377, 379 (9th Cir. 1990); United States v. Sullivan [64-1 USTC ¶9392], 333 F.2d 100 (3d Cir. 1964); United States v. Phillips [59-1 USTC ¶9457], 267 F.2d 374 (5th Cir. 1959). "The inalienability of the pension interests does not destroy their character as property or immunize the interest from the attachment of a federal tax lien." In re Raihl [93-1 USTC ¶50,290], 152 B.R. 615, 618 (9th Cir. BAP 1993). Here the tax lien secures payment to the United States via the right of levy which is expressly not subject to the anti-garnishment provisions of the TSP statute.

2. Comparison to ERISA Anti-Alienation Provisions

The Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, contains an anti-assignment and anti-alienation provision similar to the TSP statute's provision. ERISA pension benefit plans are required by ERISA §206(d)(1), 29 U.S.C. §1056(d)(1), to contain a prohibition against assignment or alienation. The governing regulations define "assignment" and "alienation" as "[a]ny direct or indirect arrangement (whether revocable or irrevocable) whereby a party acquires from a participant or beneficiary a right or interest enforceable against the plan in, or to, all or any part of a plan benefit payment which is, or may become, payable to the participant or beneficiary." 26 C.F.R. §1.401(a)-13(c)(1)(ii). As stated in Guidry v. Sheet Metal Workers National Pension Fund, 39 F.3d 1078, 1082 (10th Cir. 1994), "[t]he terms 'alienation' and 'assignment' are meant only to cover those arrangements that generate a right enforceable against a plan." Because TSP accounts are already subject to the right of collection enforceable by levy, subjecting such accounts to tax liens in aid of the right of levy does not constitute an alienation.

As in the case of TSP accounts, the IRS already has a right enforceable against an ERISA pension benefits plan by means of levy. 26 C.F.R. §1.401(a)-13(b)(2). Although tax liens are not specifically exempted from being affected by an anti-alienation clause in an ERISA plan, the courts have given tax liens effect against such plans based, in part, on the fact that such plans are subject to §6331 levies. In re Reed, 127 B.R. 244, 247-48 (Bankr. D. Ha. 1991); In re Perkins, 134 B.R. 408, 411 (Bankr. E.D. Cal. 1991); In re Jacobs [93-1 USTC ¶50,118], 147 B.R. 106, 108-109 (Bankr. W.D. Pa. 1992); In re Evans, 155 B.R. 234, 235 (Bankr. N.D. Okla. 1993).

Admittedly those cases cite as well cases holding that state law exemptions cannot immunize property from federal tax collection. But the anti-alienation provision an ERISA plan must contain is federally mandated. Indeed, when an ERISA-required anti-alienation provision does not suffice under state law to qualify the trust as a spendthrift trust, the ERISA anti-alienation provision is enforceable as a matter of federal law. See Patterson v. Shumate, 504 U.S. 753 (1992).

It must be further acknowledged that some cases rest as well on the fact that ERISA contains a provision that it shall not be "construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States . . . ." 29 U.S.C. §1144(d). Ameritrust Co., N.A. v. Derakhshan [94-1 USTC ¶50,007], 830 F. Supp. 406, 410 (N.D. Ohio 1993); In re Schreiber [94-1 USTC ¶50,202], 163 B.R. 327, 334 (Bankr. N.D. Ill. 1994). Regardless, there is no evidence that Congress intended to abrogate long-standing federal tax lien law and to make a different result apply in the case of the TSP statute's anti-alienation provision. The exemption of levies from the anti-alienation provision implicitly carries with it attachment of the related lien, just as in the case of ERISA pension benefits. Congress did not need expressly to preserve the reach of the federal tax lien. It sufficed to express that intent by implication.

For sound reasons, the fact that a tax claim is already enforceable by levy against either ERISA pension benefits or a TSP account ought to preclude labeling the attachment of a tax lien under 26 U.S.C. §6321 as an alienation of the property. It is the levy which allows the account to be seized and an alienation to be accomplished. 11 The attachment of the lien to the account is merely a prelude to undertaking levy itself and does not effect an alienation. The lien, which is not self-executing, merely encumbers the TSP account for eventual enforcement via levy and can be viewed as a step in the levy process. It is an auxiliary to the right of eventual levy and collection of the tax. The lien (along with the filing of notice of tax lien) assures that the levy will take priority against any other creditor who obtains a lien against the funds in the account before an IRS levy is made and against any donee of funds withdrawn from the account.

D.

Enforcing the lien in the debtor's chapter 13 bankruptcy case is similarly not barred by §8437(e)(2). That enforcement would be via allowing the IRS a secured claim under 11 U.S.C. §506(a) and according that secured claim the payments to which it is entitled under 11 U.S.C. §1325(a)(5) if the debtor chooses to provide for the claim under her plan. Such enforcement is not one of the acts proscribed by §8437(e)(2). Rather, it is simply a recognition of the enforceable non-bankruptcy law rights the IRS holds against the account.

The lien acts to hold the IRS's claims to the account in place until the levy itself can be made. When, as here, the lien itself is enforced, it is but in recognition of the rights the IRS would have upon a levy being served. That is no different than recognizing the amounts that a mortgagee would realize by foreclosure sale as a secured claim even though bankruptcy stays the creditor from undertaking the act of foreclosure.

E.

This interpretation of the statutes does not create the result, probably unintended by Congress, of subjecting a TSP account to enforcement under 11 U.S.C. §506(a) of state-created statutory liens. Section 506 only applies to property of the estate. A TSP account becomes property of the estate only to the extent that the account is not beyond the reach of creditors outside bankruptcy. Under 11 U.S.C. §541(c)(2) "[a] restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title." This is an exception to the general rule under 11 U.S.C. §541(c)(1) that an interest of the debtor in property becomes property of the estate notwithstanding nonbankruptcy law restrictions against transfer. See Patterson v. Shumate, 504 U.S. at 753 (ERISA anti-alienation provisions required exclusion of ERISA pension benefits from bankruptcy estate). Accordingly, as regards state-created statutory liens, a TSP account would not be property of the estate and, accordingly, 11 U.S.C. §506(a) would be inapplicable to such liens. 12

Nevertheless, as this court has held on slightly different facts, the TSP account would in effect have a split personality by remaining property of the estate for purposes of federal tax claims even though it is not property of the estate for purposes of other creditors' claims. 13 In re Lyons , 148 B.R. 88 (Bankr. D.D.C. 1992). See also In re Carlson, 180 B.R. 593 (Bankr. E.D. Cal. 1995). Because the TSP account would be estate property only as to the IRS, any plan provision for the IRS's claim must take account of its secured status. 11 U.S.C. §1325(a)(5). 14

II

The debtor's second argument is that the anti-alienation clause renders the IRS lien inchoate because the IRS has not perfected its lien by levy or judgment, citing In re Taylor, 91-2 U.S. Tax Cas. (CCH) ¶50,354 (Bankr. D. Md. 1991). In Taylor , the IRS claimed to have a lien on the debtor's ERISA-qualified pension benefit accounts. As discussed in part I(C)(2) of this decision, 26 C.F.R. §1.401(a)-13(b)(2) provides that tax levies and judgments can be enforced against ERISA pension benefits but is silent as to whether tax liens attach. The bankruptcy court concluded that due to the regulation the only way the IRS could enforce its tax claim was by obtaining a prepetition levy or judgment. Having done neither, the court concluded that "the mere filing of tax liens effected no transfer of interests in a qualified plan" and thus that the IRS "lien is inchoate, vis a vis the accounts."

To the extent that Taylor rests on an assumption that federal tax liens do not attach to ERISA accounts, it is in error for the reasons discussed in part I(C)(2) of this decision and has been expressly criticized on this score by Schreiber [94-1 USTC ¶50,202], 163 B.R. at 333-34. To the extent that Taylor rests on the assumption that levy or judgment is necessary to make a federal tax lien choate, it is similarly in error. United States v. City of New Britain [54-1 USTC ¶9191], 347 U.S. 81, 84 (1954) (lien is choate "when the identity of the lienor, the property subject to the lien, and the amount of the lien are established" and the federal tax lien, as a general lien which attached at the time of assessment to all of the taxpayer's property, was thus perfected).

Conclusion

For all of these reasons, the court will grant summary judgment in favor of the IRS. Within 21 days of entry of this decision, the parties shall submit an order reflecting the court's ruling and their stipulations (see nn. 2 and 3, supra).

1 The statute under which the debtor holds the account as an employee of the federal government--5 U.S.C. §8431, et seq.--refers to such accounts as Thrift Savings Fund accounts, but they are more commonly known as Thrift Savings Plan accounts.

2 Assessed in 1991 and early 1993 for the years 1989 through 1990, these taxes are of a non-priority character in her bankruptcy case (that is, not of a character entitled to priority under 11 U.S.C. §507(a)) and hence not accorded the protection of 11 U.S.C. §1322(a)(2) (requiring full payment of priority claims). The debtor's confirmed plan, without objection, did not provide for payment of any general unsecured claims of the IRS to the extent of the value of the TSP account. (There was an objection the IRS could have raised as a fall-back position, see n.14, infra, but the IRS did not raise it.) Accordingly, only if the IRS claims are secured claims are they entitled to payment to the extent of the value of the TSP account, and that is what gives rise to this dispute. The plaintiff has conceded that the IRS has an allowed secured claim against $1,701.00 of miscellaneous personal property and $22,000 of the debtor's equity in a cooperative housing unit.

3 The balance in the account on the petition date was $19,375.00, but the debtor had a loan charge against the account of approximately $11,000 pursuant to 5 U.S.C. §8433(I). Counsel for the IRS announced at oral argument that the IRS does not wish to press any argument that $19,375.00 is the amount of its allowed secured claim. The IRS recognizes that the debtor is entitled to recover $19,375.00 only if she repays the $11,000. IRS Brief at 15 n.8. That $11,000 would be repaid out of post-petition assets which are not subject to the IRS lien. During the pendency of this chapter 13 case, the federal tax liens do not attach to such post-petition property (or, perhaps more accurately, are not given effect with respect to such property by reason of the automatic stay of 11 U.S.C. §362(a)). Once the debtor receives a chapter 13 discharge, the underlying tax liabilities will be discharged and post-petition assets will not become subject to the tax liens. Thus, for purposes of this chapter 13 case, the tax lien is not enforceable against any contributions to the TSP account made with post-petition property, In re Anderson, 149 B.R. 591, 595 (9th Cir. BAP 1992), and this would include any amounts used to pay off the TSP loan.

4 The debtor's counsel was unable to uncover any committee reports or floor statements explaining this change.

5 26 U.S.C. §6331(a) provides in relevant part:

(a) Authority of Secretary.--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 or on which there is a lien provided in this chapter for the payment of such tax. . . .

6 TSP account can be executed upon, for example, to enforce an employee's obligations to provide certain child support or make certain alimony payments. 5 U.S.C. §8437(e)(3).

7 International Fidelity Insurance Co. V. United States [92-1 USTC ¶50,004], 949 F.2d 1042, 1047 (8th Cir. 1991); Southern Rock. Inc. v. B & B Auto Supply [83-2 USTC ¶9529], 711 F.2d 683, 686-88 (5th Cir. 1983); United States v. Jenison [80-1 USTC ¶9195], 484 F. Supp. 747 (D.R.I. 1980).

8 If the IRS seized a TSP account by levy and the debtor filed bankruptcy before the TSP account was paid over to the IRS, the TSP account would remain property of the estate. In re Wolensky's Ltd. Partnership, 163 B.R. 629, 635-36 (Bankr. D.D.C. 1994). If the levy by itself does not serve to give the IRS a secured status, and the federal tax lien is held not to have attached to the TSP account, then the levy would entitle the IRS to no special treatment in the bankruptcy case. The court thinks it highly unlikely, given the express exemption of federal tax levies from the reach of the TSP anti-alienation provisions, that Congress intended that a taxpayer could defeat the IRS levy by the expedient of filing a bankruptcy case before the funds were paid to the IRS.

9 American Acceptance Corp. v. Glendora Better Builders, Inc. [77-1 USTC ¶9348], 550 F.2d 1220, 1222 (9th Cir. 1977); First National Bank of Norfolk v. Norfolk & Western Ry. [71-1 USTC ¶9458], 327 F. Supp. 196, 199 (E.D. Va. 1971). A tax levy is tantamount to a judgment execution, reducing the seized property to the IRS's constructive possession, and turning the obligor into a custodian on behalf of the IRS. United States v. National Bank of Commerce [85-2 USTC ¶9482], 472 U.S. at 720; United States v. Hemmen [95-1 USTC ¶50,210], 51 F.3d 883, 891 (9th Cir. 1994). That raises an issue whether any creditor can obtain a possessory lien after service of a notice of levy. Moreover, under 26 U.S.C. §6332(d), an obligor's payment to the IRS pursuant to a levy discharges any obligation owed the IRS. If a judgment lienor's rights can rise no higher than the taxpayer's rights in the obligation, then a levy may well render any subsequent judgment execution ineffective against the IRS levy. So the IRS may enjoy a limited secured status by reason of a notice of levy. But at least one case holds that the IRS levy does not accord the IRS priority against even a judgment lien. Jenison [80-1 USTC ¶9195], 484 F. Supp. at 755-57.

10 See footnote 11, infra.

11 Arguably the TSP statute only allows the federal tax lien to attach in aid of levy, the only form of alienation via tax collection specifically excepted from the TSP statute's antialienation provision, and not as an independent vehicle for effecting an alienation. But once it is concluded that the tax lien does attach to the TSP account to encumber it as an auxiliary to the right of eventual levy, the lien itself may be enforced at the very least to the extent of the potential right of levy that is preserved by the lien. Here a levy would be fully enforceable: no exemption under 26 U.S.C. §6334(a) applies here. Accordingly, whether the TSP statute is viewed as not repealing the lien statute at all (see part I(B) of this decision) or as repealing it to the extent that independent lien enforcement rights would be greater than rights pursuant to levy, the result here would be the same.

12 It suffices for purposes of this decision to note that a state-created lien cannot be presently enforced against funds in the TSP account. It is unnecessary to address what would happen outside bankruptcy once the funds in the account are paid to the employee and arguably lose their execution-immune TSP account status. That is to say, it is unnecessary to address whether the state-created lien would never even attach to the funds while they are in the TSP account because such a lien would be unenforceable. See General Motors Corp. v. Buha, 623 F.2d 455, 460 (6th Cir. 1980) (ERISA anti-alienation and anti-assignment provisions reach all encroachments, both voluntary and involuntary).

13 Treating the property as non-estate property would have the unintended result, for example, of depriving a chapter 7 trustee of resort to the lien under 11 U.S.C. §724(b).

14 Indeed, even if the IRS were not secured, any plan arguably would have to assure that the IRS would be paid to the extent of its right to proceed against the TSP account. The account would be estate property as to it because of its unique power to reach the account by levy. In a chapter 7 case, the IRS could receive payment from the TSP account (for example, by way of the trustee's consenting to relief from the automatic stay of 11 U.S.C. §362(a) to permit levy in order to maximize distributions to other creditors). Thus, any chapter 13 plan would arguably have to provide for the IRS to be paid to the extent of its right to levy. See 11 U.S.C. §1325(a)(4). If the argument is a valid one, that does not render academic the issue whether the IRS claim is secured: the IRS would be entitled to interest under 11 U.S.C. §506(b) if over-secured and there might be lien priority disputes.

 

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