[Federal Register Volume 72, Number 139 (Friday, July 20, 2007)]
[Rules and Regulations]
[Pages 39737-39740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-14053]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 9344]
RIN 1545-BG24


Change to Office to Which Notices of Nonjudicial Sale and 
Requests for Return of Wrongfully Levied Property Must Be Sent

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: This document contains final and temporary regulations 
relating to the discharge of liens under section 7425 and return of 
wrongfully levied upon property under section 6343 of the Internal 
Revenue Code (Code) of 1986. These temporary regulations clarify that 
such notices and claims should be sent to the IRS official and office 
specified in the relevant IRS publications. The temporary regulations 
will affect parties seeking to provide the IRS with notice of a 
nonjudicial foreclosure sale and parties making administrative requests 
for return of wrongfully levied property. The text of the temporary 
regulations also serves as the text of the proposed regulations set 
forth in the notice of proposed rulemaking on this subject in the 
Proposed Rules section in this issue of the Federal Register.

[[Page 39738]]


DATES: Effective/applicability Date: These regulations are effective 
August 20, 2007.

FOR FURTHER INFORMATION CONTACT: Robin M. Ferguson, (202) 622-3610 (not 
a toll-free call).

SUPPLEMENTARY INFORMATION:

Background

    This document contains amendments to the Procedure and 
Administration Regulations (26 CFR part 301) relating to the giving of 
notice of nonjudicial sales under section 7425(b) of the Code. Final 
regulations (TD 7430) were published on August 20, 1976, in the Federal 
Register (41 FR 35174). This document also contains amendments to the 
Procedure and Administration Regulations relating to requests for 
return of wrongfully levied property under section 6343(b) of the Code. 
Final regulations (TD 8587) were published on January 3, 1995, in the 
Federal Register (60 FR 33).
    For notices of nonjudicial foreclosure sale under Section 7425(b) 
and requests for return of property wrongfully levied upon under 
Section 6343(b), the existing regulations direct the notices and 
requests to be sent to the ``district director (marked for the 
attention of the Chief, Special Procedures Staff).'' The offices of the 
district director and Special Procedures were eliminated by the IRS 
reorganization implemented pursuant to the IRS Restructuring and Reform 
Act of 1998, Public Law 105-206 (RRA 1998), creating uncertainty as to 
the timeliness of notices and requests under these provisions.

Explanation of Provisions

    Section 7425(b) provides for the discharge of a junior federal tax 
lien by a nonjudicial sale, if proper notice is provided to the IRS. 
Treas. Reg. Sec.  301.7425-2(a). Notice of a nonjudicial sale is 
required if notice of the federal tax lien has been properly filed more 
than 30 days before the nonjudicial sale. Section 7425(b)(1). A party 
holding a nonjudicial sale must provide written notification to the IRS 
at least 25 days prior to the scheduled sale of the property or the 
federal tax lien remains on the property after the sale. Section 
7425(c)(1). When the notice is properly sent, and the federal tax lien 
discharged, the IRS may redeem the property within 120 days from the 
date of sale or any longer period allowed under state law. Section 
7425(d). If the notice is not properly sent, the nonjudicial sale is 
made subject to and without disturbing the federal tax lien. Section 
7425(b); Treas. Reg. Sec.  301.7425-2(a); Tompkins v. United States, 
946 F.2d 817, 820 (11th Cir. 1991); Simon v. United States, 756 F.2d 
696, 697-98 (9th Cir. 1985).
    Treas. Reg. Sec.  301.7425-3(a)(1) specifies that notice ``shall be 
given, in writing by registered or certified mail or by personal 
service * * * to the district director (marked for the attention of the 
chief, special procedures staff) for the Internal Revenue district in 
which the sale is to be conducted.'' The regulation further provides 
that such notice of sale is not effective if given to a district 
director other than the district director for the Internal Revenue 
district in which the sale is to be conducted.
    In light of the IRS reorganization subsequent to RRA 1998, the 
district and special procedures offices referenced in the regulations 
no longer exist. Notices of sale, if addressed to an office other than 
that stated in the regulation, may be misdirected. As a result, the IRS 
office responsible for evaluating notices of nonjudicial sale may not 
receive notice of the sale and the IRS may not have the opportunity to 
timely redeem. In Glasgow Realty, LLC v. Withington, 345 F. Supp. 2d 
1025 (E.D. Mo. 2004), the court held that the federal tax lien was 
discharged by a nonjudicial sale under section 7425(b) where the notice 
of sale was addressed to a local IRS taxpayer assistance center rather 
than the district director's office. Glasgow Realty demonstrates the 
confusion that resulted from attempts to comply with the current 
regulation in light of the IRS reorganization. An amendment is 
necessary to both assist the public so as to prevent further confusion 
on where to send notices of nonjudicial foreclosure sales, and to 
prevent the possible loss of proceeds that the IRS could acquire from 
redemptions if the proper office has timely notice of the sale.
    Similar problems arise with respect to requests for return of 
wrongfully levied property under section 6343(b). Requests for the 
return of the amount of money levied upon or received from the sale of 
property must be filed within nine months from the date of the levy. 
Treas. Reg. Sec.  301.6343-2(a)(2). The nine month period for filing a 
wrongful levy suit is extended by the filing of a timely administrative 
claim. Section 6532(c).
    As is the case with notices of nonjudicial sale, the regulations 
specify that the request for return of wrongfully levied property be 
addressed to the district director (marked for the attention of the 
Chief, Special Procedures Staff) for the Internal Revenue district in 
which the levy is made. Treas. Reg. Sec.  301.6343-2(b). The 
elimination of these offices by the IRS reorganization can similarly 
result in misdirected requests. An amendment is necessary to assist the 
public in filing timely requests with the proper office.
    In order to account for the IRS's current organizational structure 
and to allow for future reorganizations of the IRS, the temporary 
regulations remove the title ``district director'' throughout Treas. 
Reg. Sec. Sec.  301.7425-3 and 301.6343-2. The title is not replaced 
with any specific official or office. Instead, the public is directed 
to refer to the current relevant IRS publications or their successor 
publications for where to send notices or claims. The temporary 
regulations provide the web address for the IRS Internet site which may 
be used to obtain copies of IRS publications. The current publications 
for nonjudicial foreclosure sales are IRS Publication 786, 
``Instructions for Preparing a Notice of Nonjudicial Sale of Property 
and Application for Consent to Sale,'' and IRS Publication 4235, 
``Technical Services (Advisory) Group Addresses.'' According to 
Publication 786, the application or notice should be addressed to the 
Technical Services Group Manager for the area in which the notice of 
federal tax lien was filed. Publication 786 then instructs the reader 
to use Publication 4235 to determine where to mail the request. 
Publication 4235 lists the addresses for the Technical Services 
offices. The current publication for requests for return of wrongfully 
levied property is IRS Publication 4528, ``Making an Administrative 
Wrongful Levy Claim Under Internal Revenue Code (IRC) Section 
6343(b).'' According to Publication 4528, the claim should be marked 
for the attention of the Advisory Territory Manager for the area where 
the taxpayer whose tax liability was the basis for the levy or seizure 
resides. Publication 4528 then instructs the reader to use Publication 
4235 to locate the mailing address for the appropriate Advisory 
Territory Manager.

Effective Date

    These temporary regulations apply to any notice of sale filed or 
request for return of property made after August 20, 2007.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. For applicability 
of the Regulatory Flexibility Act, please refer to the cross-reference 
notice of proposed rulemaking published elsewhere in this Federal 
Register. Pursuant to section 7805(f) of the Internal Revenue Code, 
these regulations have been submitted to the

[[Page 39739]]

Chief Counsel for Advocacy of the Small Business Administration for 
comment on its impact on small business.

Drafting Information

    The principal author of these regulations is Robin M. Ferguson, 
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.

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 301.6343-2 is amended as follows:
0
1. Paragraphs (a)(1) introductory text and (b) introductory text are 
revised.
0
2. Paragraphs (a)(4), (c), (d)(1), and (d)(2) are amended by removing 
the language ``director'' and adding the language ``IRS'' in its place 
wherever it appears.
0
3. Paragraph (b)(4), is amended by removing the language ``Internal 
Revenue district'' and adding the language ``IRS office'' in its place.
0
4. Paragraph (e) is revised.
    The revisions and addition read as follows:


Sec.  301.6343-2  Return of wrongfully levied upon property.

    (a) * * * (1) [Reserved]. For further guidance, See Sec.  301.6343-
2T(a) introductory text.
* * * * *
    (b) [Reserved]. For further guidance, See Sec.  301.6343-2T(b) 
introductory text.
* * * * *
    (e) [Reserved]. For further guidance, See Sec.  301.6343-2T(e).
0
Par. 3. Section 301.6343-2T is added to read as follows:


Sec.  301.6343-2T  Return of wrongfully levied upon property.

    (a) Return of property-- (1) General rule. If the Internal Revenue 
Service (IRS) determines that property has been wrongfully levied upon, 
the IRS may return--
    (a)(1)(i) through (a)(4) [Reserved]. For further guidance, see 
Sec.  301.6343-2(a)(1)(i) through (a)(4).
    (b) Request for return of property. A written request for the 
return of property wrongfully levied upon must be given to the IRS 
official, office and address specified in IRS Publication 4528, 
``Making an Administrative Wrongful Levy Claim Under Internal Revenue 
Code (IRC) Section 6343(b),'' or its successor publication. The 
relevant IRS publications may be downloaded from the IRS Internet site 
at http://www.irs.gov. Under this section, a request for the return of 
property wrongfully levied upon is not effective if it is given to an 
office other than the office listed in the relevant publication. The 
written request must contain the following information--
    (b)(1) through (d)(2) [Reserved]. For further guidance see Sec.  
301.6343-2(b)(1) through (d)(2).
    (e) Effective/applicability date. This section applies to any 
request for return of wrongfully levied property that is filed after 
August 20, 2007.

0
Par. 4. Section 301.7425-3 is amended as follows:
0
1. Paragraphs (a)(1), (b)(1), (b)(2), (c)(1), (d)(2), (d)(3), and 
(d)(4) are revised.
0
2. Paragraphs (a)(2)(i), (a)(2)(ii)(C), and (a)(2)(iii) Examples 1, 2, 
and 3 are amended by removing the language ``district director'' and 
adding the language ``IRS'' in its place wherever it appears.
0
3. Paragraph (d)(1)(ii)(A) is amended by removing the language 
``internal revenue district'' and adding the language ``IRS office'' in 
its place.
0
4. Paragraph (e) is added.
    The revisions and addition read as follows:


Sec.  301.7425-3  Discharge of liens; special rules.

    (a) * * * (1) [Reserved]. For further guidance, See Sec.  301.7425-
3T(a)(1).
* * * * *
    (b) * * * (1) [Reserved]. For further guidance, See Sec.  301.7425-
3T(b)(1).
* * * * *
    (2) [Reserved]. For further guidance, See Sec.  301.7425-3T(b)(2).
    (c) * * * (1) [Reserved]. For further guidance, See Sec.  301.7425-
3T(c)(1).
* * * * *
    (d) * * * (2) [Reserved]. For further guidance, See Sec.  301.7425-
3T(d)(2).
    (3) [Reserved]. For further guidance, See Sec.  301.7425-3T(d)(3).
    (4) [Reserved]. For further guidance, See Sec.  301.7425-3T(d)(4).
    (e) [Reserved]. For further guidance, See Sec.  301.7425-3T(e).

0
Par. 5. Section 301.7425-3T is added to read as follows:


Sec.  301.7425-3T  Discharge of liens; special rules.

    (a) Notice of sale requirements--(1) In general. Except in the case 
of the sale of perishable goods described in paragraph (c) of this 
section, a notice (as described in paragraph (d) of this section) of a 
nonjudicial sale shall be given, in writing by registered or certified 
mail or by personal service, not less than 25 days prior to the date of 
sale (determined under the provisions of Sec.  301.7425-2(b)), to the 
Internal Revenue Service (IRS) official, office and address specified 
in IRS Publication 786, ``Instructions for Preparing a Notice of 
Nonjudicial Sale of Property and Application for Consent to Sale,'' or 
its successor publication. The relevant IRS publications may be 
downloaded from the IRS Internet site at http://www.irs.gov. Under this 
section, a notice of sale is not effective if it is given to an office 
other than the office listed in the relevant publication. The 
provisions of sections 7502 (relating to timely mailing treated as 
timely filing) and 7503 (relating to time for performance of acts where 
the last day falls on Saturday, Sunday, or a legal holiday) apply in 
the case of notices required to be made under this paragraph.
    (a)(2) [Reserved]. For further guidance, see Sec.  301.7425-
3(a)(2).
    (b) Consent to sale--(1) In general. Notwithstanding the notice of 
sale provisions of paragraph (a) of this section, a nonjudicial sale of 
property shall discharge or divest the property of the lien and title 
of the United States if the IRS consents to the sale of the property 
free of the lien or title. Pursuant to section 7425(c)(2), where 
adequate protection is afforded the lien or title of the United States, 
the IRS may, in its discretion, consent with respect to the sale of 
property in appropriate cases. Such consent shall be effective only if 
given in writing and shall be subject to such limitations and 
conditions as the IRS may require. However, the IRS may not consent to 
a sale of property under this section after the date of sale, as 
determined under Sec.  301.7425-2(b). For provisions relating to the 
authority of the IRS to release a lien or discharge property subject to 
a tax lien, see section 6325 and the section 6325 regulations.
    (2) Application for consent. Any person desiring the IRS's consent 
to sell property free of a tax lien or a title derived from the 
enforcement of a tax lien of the United States in the property shall 
submit to the IRS, at the office and address specified in the relevant 
IRS publications, a written application, in triplicate, declaring that 
it is made

[[Page 39740]]

under penalties of perjury, and requesting that such consent be given. 
The application shall contain the information required in the case of a 
notice of sale, as set forth in paragraph (d)(1) of this section, and, 
in addition, shall contain a statement of the reasons why the consent 
is desired.
    (c) Sale of perishable goodS--(1) In general. A notice (as 
described in paragraph (d) of this section) of a nonjudicial sale of 
perishable goods (as defined in paragraph (c)(2) of this section) shall 
be given in writing, by registered or certified mail or delivered by 
personal service, at any time before the sale, to the IRS official and 
office specified in the relevant IRS publications, at the address 
specified in such publications. Under this section, a notice of sale is 
not effective if it is given to an office other than the office listed 
in the relevant publication. If a notice of a nonjudicial sale is 
timely given in the manner described in this paragraph, the nonjudicial 
sale shall discharge or divest the tax lien, or a title derived from 
the enforcement of a tax lien, of the United States in the property. 
The provisions of sections 7502 (relating to timely mailing treated as 
timely filing) and 7503 (relating to time for performance of acts where 
the last day falls on Saturday, Sunday, or a legal holiday) apply in 
the case of notices required to be made under this paragraph. The 
seller of the perishable goods shall hold the proceeds (exclusive of 
costs) of the sale as a fund, for not less than 30 days after the date 
of the sale, subject to the liens and claims of the United States, in 
the same manner and with the same priority as the liens and claims of 
the United States had with respect to the property sold. If the seller 
fails to hold the proceeds of the sale in accordance with the 
provisions of this paragraph and if the IRS asserts a claim to the 
proceeds within 30 days after the date of sale, the seller shall be 
personally liable to the United States for an amount equal to the value 
of the interest of the United States in the fund. However, even if the 
proceeds of the sale are not so held by the seller, but all the other 
provisions of this paragraph are satisfied, the buyer of the property 
at the sale takes the property free of the liens and claims of the 
United States. In the event of a postponement of the scheduled sale of 
perishable goods, the seller is not required to notify the IRS of the 
postponement. For provisions relating to the authority of the IRS to 
release a lien or discharge property subject to a tax lien, see section 
6325 and the regulations.
    (c)(2) through (d)(1) [Reserved]. For further guidance, see Sec.  
301.7425-3(c)(2) through (d)(1).
    (d)(2) Inadequate notice. Except as otherwise provided in this 
paragraph, a notice of sale described in paragraph (a) of this section 
which does not contain the information described in paragraph (d)(1) of 
this section shall be considered inadequate by the IRS. If the IRS 
determines that the notice is inadequate, the IRS will give written 
notification of the items of information which are inadequate to the 
person who submitted the notice. A notice of sale which does not 
contain the name and address of the person submitting such notice shall 
be considered to be inadequate for all purposes without notification of 
any specific inadequacy. In any case where a notice of sale does not 
contain the information required under paragraph (d)(1)(ii) of this 
section with respect to a Notice of Federal Tax Lien, the IRS may give 
written notification of such omission without specification of any 
other inadequacy and such notice of sale shall be considered inadequate 
for all purposes. In the event the IRS gives notification that the 
notice of sale is inadequate, a notice complying with the provisions of 
this section (including the requirement that the notice be given not 
less than 25 days prior to the sale in the case of a notice described 
in paragraph (a) of this section) must be given. However, in accordance 
with the provisions of paragraph (b)(1) of this section, in such a case 
the IRS may, in its discretion, consent to the sale of the property 
free of the lien or title of the United States even though notice of 
the sale is given less than 25 days prior to the sale. In any case 
where the person who submitted a timely notice which indicates his name 
and address does not receive, more than 5 days prior to the date of 
sale, written notification from the IRS that the notice is inadequate, 
the notice shall be considered adequate for purposes of this section.
    (3) Acknowledgment of notice. If a notice of sale described in 
paragraph (a) or (c) of this section is submitted in duplicate to the 
IRS with a written request that receipt of the notice be acknowledged 
and returned to the person giving the notice, this request will be 
honored by the IRS. The acknowledgment by the IRS will indicate the 
date and time of the receipt of the notice.
    (4) Disclosure of adequacy of notice. The IRS is authorized to 
disclose, to any person who has a proper interest, whether an adequate 
notice of sale was given under paragraph (d)(1) of this section. Any 
person desiring this information should submit to the IRS a written 
request which clearly describes the property sold or to be sold, 
identifies the applicable notice of lien, gives the reasons for 
requesting the information, and states the name and address of the 
person making the request. The request should be submitted to the IRS 
official, office and address specified in IRS Publication 4235, 
``Technical Services (Advisory) Group Addresses,'' or its successor 
publication. The relevant IRS publications may be downloaded from the 
IRS internet site at http://www.irs.gov.
    (e) Effective/applicability date. This section applies to any 
notice of sale that is filed after August 20, 2007.

Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
    Approved: July 11, 2007.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
 [FR Doc. E7-14053 Filed 7-19-07; 8:45 am]
BILLING CODE 4830-01-P