[Federal Register Volume 59, Number 146 (Monday, August 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18305]


[[Page Unknown]]

[Federal Register: August 1, 1994]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 8558]
RIN 1545-AM70

 

Levy and Distraint

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations regarding the 
authority to collect taxes from taxpayers by means of levy and 
distraint under section 6331 of the Internal Revenue Code. The 
Technical and Miscellaneous Revenue Act of 1988 (TAMRA) amended section 
6331 in several respects.

EFFECTIVE DATE: These regulations are effective December 10, 1992.

FOR FURTHER INFORMATION CONTACT: Robert A. Walker, 202-622-3640 (not a 
toll-free call).

SUPPLEMENTARY INFORMATION:

Background

    These final regulations contain changes to Secs. 301.6331-1 and 
301.6331-2, to reflect amendments made to sections 6331 and 6332(c) of 
the Internal Revenue Code (Code) by section 349(a) of TEFRA as well as 
by sections 6236(a), (b) and (d) of TAMRA.
    The IRS published a notice of proposed rulemaking in the Federal 
Register on December 11, 1992, (57 FR 58760) providing proposed rules 
under section 6331 of the Code. No public comments were received and 
accordingly, these final regulations are substantially identical to the 
notice of proposed rulemaking. Certain stylistic changes have been 
made.
    TAMRA increased the 10-day requirement for notification of 
intention to levy to 30 days, required specific types of information to 
be included in the notice, and expanded the reasons for releasing a 
levy on salary or wages to include all the situations described in 
section 6343(a). TAMRA also placed restrictions on levies that are 
uneconomical or that are scheduled to be made on the day a person is 
required to appear in response to a summons issued for the purpose of 
collecting any underpayment of tax by that person. The final 
regulations reflect these changes. In addition, the final regulations 
change the existing regulations with respect to levying on bank 
deposits to conform to section 6332(c), which was enacted by TAMRA. The 
final regulations also reflect two amendments to section 6331 made by 
the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA): extending 
to ``other property'' of a taxpayer the requirement of notification of 
intention to levy that exists for a levy on salary or wages; and 
requiring that any mailing of that notice be done by certified or 
registered mail. Finally, several stylistic changes were made to 
clarify parts of the regulations that were not affected by the 
statutory changes.

Explanation of Provisions

    The final regulations make a number of minor amendments to 
Secs. 301.6331-1 and 301.6331-2. As these amendments have been fully 
described in the notice of proposed rulemaking and have not changed 
(except for certain minor stylistic changes) since that time, this 
explanation will not repeat them here.
    For the most part, the amendments were made to reflect the 
additional protections provided to taxpayers by the Taxpayer Bill of 
Rights contained in TAMRA.

Special Analyses

    It has been determined that this Treasury Decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It has also been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to 
these regulations, and, therefore, a Regulatory Flexibility Analysis is 
not required. Pursuant to section 7805(f) of the Internal Revenue Code, 
the notice of proposed rulemaking preceding these regulations was 
submitted to the Small Business Administration for comment on its 
impact on small business.

Drafting Information

    The principal author of these regulations is Robert A. Walker, 
Office of Assistant Chief Counsel, (General Litigation). However, other 
personnel from the IRS and Treasury Department participated in their 
development.

Lists of Subjects in 26 CFR Part 301

    Employment taxes, Estate tax, Excise taxes, Gift tax, Income taxes, 
Penalties, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 301 is amended as follows:
    Paragraph 1. The authority citation for part 301 continues to read 
in part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 301.6331-1 is amended as follows:
    1. Paragraph (a)(1) is amended as follows:
    a. A sentence is added immediately following the eighth sentence of 
the paragraph.
    b. In the new tenth sentence, the reference ``Sec. 301.6331-2(c)'' 
is removed and ``Sec. 301.6331-1(b)(1)'' is added in its place.
    c. The new thirteenth sentence of paragraph (a)(1) is revised.
    2. Paragraph (a)(2) is revised.
    3. Paragraph (b) is amended as follows:
    a. Paragraph (b) is redesignated (b)(2):
    b. A paragraph heading for new paragraph (b) is added.
    c. A paragraph (b)(1) heading and text are added.
    4. Paragraph (d) is added at the end of the section.
    5. The additions and revisions read as follows:


Sec. 301.6331-1  Levy and distraint.

    (a) * * *
    (1) * * * A levy on a bank reaches any interest that accrues on the 
taxpayer's balance under the terms of the bank's agreement with the 
depositor during the 21-day holding period provided for in section 
6332(c). * * * Similarly, a levy only reaches property in the 
possession of the person levied upon at the time the levy is made 
together with interest that accrues during the 21-day holding period 
provided for in section 6332(c). * * *
    (2) Jeopardy cases. If the district director finds that the 
collection of any tax is in jeopardy, he or she may make notice and 
demand for immediate payment of such tax and, upon failure or refusal 
to pay such tax, collection thereof by levy shall be lawful without 
regard to the 10-day period provided in section 6331(a), the 30-day 
period provided in section 6331(d), or the limitation on levy provided 
in section 6331(g)(1).
* * * * *
    (b) Continuing levies and successive seizures--(1) Continuing 
effect of levy on salary and wages. A levy on salary or wages has 
continuous effect from the time the levy originally is made until the 
levy is released pursuant to section 6343. For this purpose, the term 
salary or wages includes compensation for services paid in the form of 
fees, commissions, bonuses, and similar items. The levy attaches to 
both salary or wages earned but not yet paid at the time of the levy, 
advances on salary or wages made subsequent to the date of the levy, 
and salary or wages earned and becoming payable subsequent to the date 
of the levy, until the levy is released pursuant to section 6343. In 
general, salaries or wages that are the subject of a continuing levy 
and are not exempt from levy under section 6334(a)(8) or (9), are to be 
paid to the district director, the service center director, or the 
compliance center director (director) on the same date the payor would 
otherwise pay over the money to the taxpayer. For example, if an 
individual normally is paid on the Wednesday following the close of 
each work week, a levy made upon his or her employer on any Monday 
would apply to both wages due for the prior work week and wages for 
succeeding work weeks as such wages become payable. In such a case, the 
levy would be satisfied if, on the first Wednesday after the levy and 
on each Wednesday thereafter until the employer receives a notice of 
release from levy described in section 6343, the employer pays over to 
the director wages that would otherwise be paid to the employee on such 
Wednesday (less any exempt amount pursuant to section 6334).
* * * * *
    (d) Effective date. These regulations are effective December 10, 
1992.
    Par. 3. Section 301.6331-2 is revised to read as follows:


Sec. 301.6331-2  Procedures and restrictions on levies.

    (a) Notice of intent to levy--(1) In general. Levy may be made upon 
the salary, wages, or other property of a taxpayer for any unpaid tax 
no less than 30 days after the district director, the service center 
director, or the compliance center director (director) has notified the 
taxpayer in writing of the intent to levy. The notice must be given in 
person, be left at the dwelling or usual place of business of the 
taxpayer, or be sent by registered or certified mail to the taxpayer's 
last known address. The notice of intent to levy is separate from, but 
may be given at the same time as, the notice and demand described in 
Sec. 301.6331-1.
    (2) Content of Notice. The notice of intent to levy is to contain a 
brief statement in nontechnical terms including the following 
information--
    (i) The Internal Revenue Code provisions and the procedures 
relating to levy and sale of property;
    (ii) The administrative appeals available with respect to the levy 
and sale of property and the procedures relating to such appeals;
    (iii) The alternatives available that could prevent levy on the 
property (including the use of an installment agreement under section 
6159); and
    (iv) The Internal Revenue Code provisions and the procedures 
relating to redemption of property and release of liens on property.
    (b) Uneconomical levy--(1) In general. No levy may be made on 
property if the director estimates that the anticipated expenses with 
respect to the levy and sale will exceed the fair market value of the 
property. The estimate is to be made on an aggregate basis for all of 
the items that are anticipated to be seized pursuant to the levy. 
Generally, no levy should be made on individual items of insignificant 
monetary value. For the definition of fair market value, see 
Sec. 301.6325-1(b)(1)(i). See Sec. 301.6341-1 concerning the expenses 
of levy and sale.
    (2) Time of estimate. The estimate, which may be formal or 
informal, is to be made at the time of the seizure or within a 
reasonable period of time prior to a seizure. The estimate may be based 
on earlier estimates of fair market value and anticipated expenses of 
the same or similar property.
    (3) Examples. The following examples illustrate the application of 
this paragraph (b):

    Example 1. A director anticipates that the taxpayer has only one 
item of property that can be seized and sold. This item is estimated 
to have a fair market value of $250.00. The director also estimates 
that the costs of seizure and sale will total $300.00 if this item 
is seized. The director is prohibited from levying on this one item 
of the taxpayer's property because the costs of seizure and sale are 
estimated to exceed the property's fair market value.
    Example 2. The facts are the same as in Example 1 except that 
the director anticipates that the taxpayer has 10 items of property 
that can be seized and sold. Each of those items is estimated to 
have a fair market value of $250.00. The director also estimates 
that the costs of seizure and sale will total $300.00 regardless of 
how many of those items are seized. The director is prohibited from 
levying on only one item of the taxpayer's property because the 
costs of seizure and sale are estimated to exceed the fair market 
value of the single item of property. The director, however, would 
not be prohibited from levying on two or more items of the 
taxpayer's property because the aggregate fair market value of the 
seized property would exceed the estimated costs of seizure and 
sale.
    Example 3. The taxpayer has three items of property, A, B, and 
C. The director anticipates that the value of items A, B, and C 
depends on their being sold as a unit. The director estimates that 
due to high anticipated costs of storing or maintaining item B prior 
to the sale, the aggregate fair market value of items A, B, and C 
will not exceed the anticipated expenses of seizure and sale if all 
three items are seized. Accordingly, the director is prohibited from 
levying on items A, B, and C.
    Example 4. The facts are the same as in Example 3 except that 
the director does not anticipate that the value of items A, B, and C 
depends on those items being sold as a unit. If the director 
estimates that the aggregate fair market value of items A and C 
exceeds the aggregate anticipated costs of the seizure and sale of 
those two items, items A and C can be seized and sold. The director 
is prohibited from levying on item B because the high cost of 
storing or maintaining item B is estimated to exceed the fair market 
value of item B.

    (c) Restriction on levy on date of appearance. Except for 
continuing levies on salaries or wages described in Sec. 301.6331-
1(b)(1), no levy may be made on any property of a person on the day 
that person, or an officer or employee of that person, is required to 
appear in response to a summons served for the purpose of collecting 
any underpayment of tax from that person. For purposes of this 
paragraph (c), the date on which an appearance is required is the date 
fixed by an officer or employee of the Internal Revenue Service 
pursuant to section 7605 or the date (if any) fixed as the result of a 
judicial proceeding instituted under sections 7604 and 7402(b) seeking 
the enforcement of the summons.
    (d) Jeopardy. Paragraphs (a) and (c) of this section do not apply 
to a levy if the director finds, for purposes of Sec. 301.6331-1(a)(2), 
that the collection of tax is in jeopardy.
    (e) Effective date. These regulations are effective December 10, 
1992.
Margaret Milner Richardson,
Commissioner of Internal Revenue.

    Approved: June 24, 1994.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 94-18305 Filed 7-29-94; 8:45 am]
BILLING CODE 4830-01-U