[Federal Register Volume 70, Number 43 (Monday, March 7, 2005)]
[Rules and Regulations]
[Pages 10885-10886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-4383]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 9189]
RIN 1545-BA22


Property Exempt From Levy

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains the final regulations relating to 
property exempt from levy, which revise regulations currently published 
under Internal Revenue Code section 6334. The regulation reflects 
changes made by the IRS Restructuring and Reform Act of 1998 (the RRA 
98) and provides guidance regarding: (1) Procedures for obtaining prior 
judicial approval of certain principal residence levies; (2) an 
exemption from levy for certain residences in small deficiency cases 
and for certain business assets in the absence of administrative 
approval or jeopardy; and (3) the applicable dollar amounts for certain 
exemptions. The regulation also reflects changes made by the Taxpayer 
Relief Act of 1997, which permits levy on certain specified payments 
with the prior approval of the Secretary.

DATES: Effective Date: These regulations are effective March 7, 2005.

FOR FURTHER INFORMATION CONTACT: Robin Ferguson at (202) 622-3610 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains a final regulation amending the Procedure 
and Administration Regulations (26 CFR part 301) under section 6334 of 
the Internal Revenue Code of 1986 (Code). The final regulation provides 
guidance reflecting the amendments to section 6334 made by RRA 98 
(Public Law 105-206), and the Taxpayer Relief Act of 1997 (Public Law 
105-34)(TRA 97). A notice of proposed rulemaking (REG-140378-01) was 
published in the Federal Register on August 19, 2003 (68 FR 49729). No 
written comments were received from the public in response to the 
notice of proposed rulemaking. No public hearing was requested, 
scheduled or held. This final regulation adopts the provisions of the 
notice of proposed rulemaking with no changes.

Comments on the Proposed Regulation

    None.

Modifications of the Proposed Regulation

    None.

Special Analyses

    It has been determined that this regulation is not a significant 
regulatory action as defined in Executive Order 12866. Therefore, a 
regulatory assessment is not required. It also has 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 
this regulation, and, therefore, a Regulatory Flexibility Analysis is 
not required. Pursuant to section 7805(f) of the Code, the notice of 
proposed rulemaking preceding this regulation was submitted to the 
Chief Counsel for Advocacy of the Small Business Administration for 
comment on its impact on small business, and no comments were received.

Drafting Information

    The principal author of the final regulation is Robin Ferguson of 
the Office of Associate Chief Counsel, Procedure and Administration 
(Collection, Bankruptcy and Summonses Division).

List of Subjects in 26 CFR Part 301

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

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

0
Paragraph 1. The authority citation for part 301 continues to read, in 
part, as follows:

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


0
Par. 2. Section 301.6334-1 is amended as follows:
0
1. Paragraphs (a)(2), (a)(3), (a)(8), (a)(13), (d), (e), and (f) are 
revised.
0
2. Paragraphs (g) and (h) are added.
    The revisions and additions read as follows:


Sec.  301.6334-1  Property exempt from levy.

    (a) * * *
    (2) Fuel, provisions, furniture, and personal effects. So much of 
the fuel, provisions, furniture, and personal effects in the taxpayer's 
household, and of the arms for personal use, livestock, and poultry of 
the taxpayer, that does not exceed $6,250 in value.
    (3) Books and tools of a trade, business or profession. So many of 
the books and tools necessary for the trade, business, or profession of 
an individual taxpayer as do not exceed in the aggregate $3,125 in 
value.
* * * * *
    (8) Judgments for support of minor children. If the taxpayer is 
required under any type of order or decree (including an interlocutory 
decree or a decree of support pendente lite) of a court of competent 
jurisdiction, entered prior to the date of levy, to contribute to the 
support of that taxpayer's minor children, so much of that taxpayer's 
salary, wages, or other income as is necessary to comply with such 
order or decree. The taxpayer must establish the amount necessary to 
comply with the order or decree. The Service is not required to release 
a levy until such time as it is established that the amount to be 
released from levy actually will be applied in satisfaction of the 
support obligation. The Service may make arrangements with a delinquent 
taxpayer to establish a specific amount of such taxpayer's salary, 
wage, or other income for each pay period that shall be exempt from 
levy, for purposes of complying with a support obligation. If the 
taxpayer has more than one source of income sufficient to satisfy the 
support obligation imposed by the order or decree, the amount exempt 
from levy, at the discretion of the Service, may be allocated entirely 
to one salary, wage or source of other income or be apportioned between 
the several salaries, wages, or other sources of income.
* * * * *
    (13) Residences exempt in small deficiency cases and principal 
residences and certain business assets exempt in absence of certain 
approval or jeopardy--(i) Residences in small deficiency cases. If the 
amount of the levy does not exceed $5,000, any real property used as a 
residence of the taxpayer or any real property of the taxpayer (other 
than real property which is rented) used by any other individual as a 
residence.
    (ii) Principal residences and certain business assets. Except to 
the extent

[[Page 10886]]

provided in section 6334(e), the principal residence (within the 
meaning of section 121) of the taxpayer and tangible personal property 
or real property (other than real property which is rented) used in the 
trade or business of an individual taxpayer.
* * * * *
    (d) Levy allowed on principal residence. The Service will seek 
approval, in writing, by a judge or magistrate of a district court of 
the United States prior to levy of property that is owned by the 
taxpayer and used as the principal residence of the taxpayer, the 
taxpayer's spouse, the taxpayer's former spouse, or the taxpayer's 
minor child.
    (1) Nature of judicial proceeding. The Government will initiate a 
proceeding for judicial approval of levy on a principal residence by 
filing a petition with the appropriate United States District Court 
demonstrating that the underlying liability has not been satisfied, the 
requirements of any applicable law or administrative procedure relevant 
to the levy have been met, and no reasonable alternative for collection 
of the taxpayer's debt exists. The petition will ask the court to issue 
to the taxpayer an order to show cause why the principal residence 
property should not be levied and will also ask the court to issue a 
notice of hearing.
    (2) The taxpayer will be granted a hearing to rebut the 
Government's prima facie case if the taxpayer files an objection within 
the time period required by the court raising a genuine issue of 
material fact demonstrating that the underlying tax liability has been 
satisfied, that the taxpayer has other assets from which the liability 
can be satisfied, or that the Service did not follow the applicable 
laws or procedures pertaining to the levy. The taxpayer is not 
permitted to challenge the merits underlying the tax liability in the 
proceeding. Unless the taxpayer files a timely and appropriate 
objection, the court would be expected to enter an order approving the 
levy of the principal residence property.
    (3) Notice letter to be issued to certain family members. If the 
property to be levied is owned by the taxpayer but is used as the 
principal residence of the taxpayer's spouse, the taxpayer's former 
spouse, or the taxpayer's minor child, the Government will send a 
letter to each such person providing notice of the commencement of the 
proceeding. The letter will be addressed in the name of the taxpayer's 
spouse or ex-spouse, individually or on behalf of any minor children. 
If it is unclear who is living in the principal residence property and/
or what such person's relationship is to the taxpayer, a letter will be 
addressed to ``Occupant''. The purpose of the letter is to provide 
notice to the family members that the property may be levied. The 
family members may not be joined as parties to the judicial proceeding 
because the levy attaches only to the taxpayer's legal interest in the 
subject property and the family members have no legal standing to 
contest the proposed levy.
    (e) Levy allowed on certain business assets. The property described 
in section 6334(a)(13)(B)(ii) shall not be exempt from levy if--
    (1) An Area Director of the Service personally approves (in 
writing) the levy of such property; or
    (2) The Secretary finds that the collection of tax is in jeopardy. 
An Area Director may not approve a levy under paragraph (e)(1) unless 
the Area Director determines that the taxpayer's other assets subject 
to collection are insufficient to pay the amount due, together with 
expenses of the proceeding. When other assets of an individual taxpayer 
include permits issued by a State and required under State law for the 
harvest of fish or wildlife in the taxpayer's trade or business, the 
taxpayer's other assets also include future income that may be derived 
by such taxpayer from the commercial sale of fish or wildlife under 
such permit.
    (f) Levy allowed on certain specified payments. Any payment 
described in section 6331(h)(2)(B) or (C) shall not be exempt from levy 
if the Secretary approves the levy thereon under section 6331(h).
    (g) Inflation adjustment. For any calendar year beginning after 
1999, each dollar amount referred to in paragraphs (a)(2) and (3) of 
this section will be increased by an amount equal to the dollar amount 
multiplied by the cost-of-living adjustment determined under section 
1(f)(3) for the calendar year (using the language ``calendar year 
1998'' instead of ``calendar year 1992'' in section 1(f)(3)(B)). If any 
dollar amount as adjusted is not a multiple of $10, the dollar amount 
will be rounded to the nearest multiple of $10 (rounding up if the 
amount is a multiple of $5).
    (h) Effective date. This section is generally effective with 
respect to levies made on or after July 1, 1989. However, any 
reasonable attempt by a taxpayer to comply with the statutory 
amendments addressed by the regulations in this section prior to 
February 21, 1995, will be considered as meeting the requirements of 
the regulations in this section. In addition, paragraph (a)(11)(i) of 
this section is applicable with respect to levies issued after December 
31, 1996. Paragraphs (a)(2), (a)(3), (a)(8), (a)(13), (d), (e), (f), 
(g) and (h) of this section apply as of March 7, 2005.

Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
    Approved: February 15, 2005.
Eric Solomon,
Acting Deputy Assistant Secretary of the Treasury.

[FR Doc. 05-4383 Filed 3-4-05; 8:45 am]
BILLING CODE 4830-01-P