Validity of Federal Tax Lien 

on Civil Service Retirement Refund

Under 5 U.S.C. § 8346(a), the Internal Revenue Service is barred from attaching the civil 

service retirement refund of a former federal employee in order to satisfy her husband’s 

tax liability, notwithstanding any interest the latter individual may have in the refund 

under Nevada’s community property law.

January 13, 1981

MEMORANDUM OPINION FOR TH E GENERAL COUNSEL, 

O FFIC E OF PERSONNEL M ANAGEM ENT

This responds to your request for an opinion on the validity of a levy 

of the Internal Revenue Service (IRS) directed to half the civil service 

retirement deductions due for refund to Mrs. D, a former federal 

employee. The levy was occasioned by the individual tax liability of 

Mrs. D ’s husband, with whom she resides in Nevada, a community 

property state.

The statute relating to civil service retirement benefits that is principally relevant here provides as follows:

The money mentioned by this subchapter [Subchapter 

III—Civil Service Retirement, consisting of 5 U.S.C.

§§ 8331-8348] is not assignable, either in law or equity, 

except under the provisions o f subsections (h) and (j) o f

section 8345 o f this title, or subject to execution, levy, 

attachment, garnishment, or other legal process, except as

otherwise may be provided by Federal laws.

5 U.S.C. § 8346(a) (emphasis added). Subsection (h) of § 8345 permits 

an individual entitled to an annuity to make allotments or assignments 

of amounts therefrom for such purposes as the Office of Personnel 

Management (OPM) considers appropriate. Subsection (j), among other 

things, requires that funds which are otherwise payable by OPM to an 

individual under the retirement laws shall be paid instead to another 

person if so provided in a “court decree of divorce, annulment, or legal 

separation, or the terms of any court order or court-approved property 

settlement agreement incident to” such a decree. Subsection (j) encom37
passes court-ordered divisions of assets under state community property 

laws.

The provision of the IRS Code that is principally relevant here is 26 

U.S.C. § 6331(a), which reads in pertinent part:

If any person liable to pay any tax neglects or refuses to 

pay the same . . . it shall be lawful for the Secretary [of 

the Treasury] to collect such tax . . . by levy upon all 

property and rights to property (except such property 

as is exempt under section 6334) belonging to such person ....

Section 6334 does not exempt any payments made under the civil 

service retirement laws.

The issue in dispute between OPM and IRS is whether the second 

“except” clause of 5 U.S.C. § 8346(a) has the effect of bringing Nevada’s community property law into play with regard to the retirement 

deductions accumulated by OPM for Mrs. D ’s account. If so, IRS may 

reach 50 percent of the funds in the account as Mr. D ’s “property [or] 

rights to property” under 26 U.S.C. § 6331(a).

Before dealing specifically with this issue, it will be helpful to trace 

the history of 5 U.S.C. § 8346(a) and other statutory provisions that 

may impinge on an individual’s civil service retirement benefits. The 

original progenitor of § 8346(a) was § 14 of the legislation enacted in 

1920 to create the retirement system, Pub. L. No. 66-215, 41 Stat. 614, 

620. Section 14 did not contain the italicized language of § 8346(a), 

supra, but read simply as follows:

That none of the moneys mentioned in this Act shall be 

assignable, either in law or equity, or subject to execution, 

levy, or attachment, garnishment, or other legal process.

This wording remained essentially unchanged until late 1975. However, before then Congress had provided in other statutes for the 

government’s deductions of health insurance premiums (5 U.S.C. 

§ 8906(c)), life insurance premiums (5 U.S.C. § 8714a(d)), and medicare 

premiums (42 U.S.C. § 1395s(d)) from an individual’s retirement annuity. In addition, Congress had enacted § 459 of the Social Security Act, 

42 U.S.C. § 659, effective January 1, 1975, which lifted the bar of 

§ 8346(a) and similar provisions in other federal benefit laws for the 

purpose of allowing garnishment of benefits to satisfy an obligation for 

child support or alimony.1

The first amendment to 5 U.S.C. § 8346(a) was made by Pub. L. No. 

94-166, 89 Stat. 1002 (1975). It added subsection (h) to § 8345 to permit 

allotments and assignments by annuitants and correspondingly amended

*Two years later Congress defined “alimony” so as not to include a payment in compliance with a 

community property settlement—that is, Congress specifically ruled out garnishments to enforce such 

settlements. 42 U.S.C. § 662(c) (Supp. I 1977).

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§ 8346(a) to introduce the first “except” clause, as it pertains to subsection (h).2 It also added the second “except” clause.

Finally, in 1978, Congress enacted 5 U.S.C. § 8345(j) to allow OPM 

to comply with a decree, order, or property settlement (including one 

based on a state’s community property law) that arose from a divorce, 

annulment, or legal separation.3 Pub. L. No. 95-366, 92 Stat. 600, 

§ l(a)(1978). Section 8346(a) was amended accordingly by the addition 

of the italicized reference to § 8345(j) in the first “except” clause of 

§ 8346(a). Id.. § 1(b).

Turning to the issue before us, we note first that there is nothing in 

the legislative history of the amendment of § 8346(a) in 1975 to indicate 

the reason for adding the words, “except as otherwise may be provided 

by Federal laws,” at its end. In fact, this language was not necessary to 

achieve the avowed purpose of the 1975 Act—that is, the authorization 

of allotments and assignments by annuitants.4 That purpose was realized 

by the enactment of § 8345(g) and the first “except” clause. Moreover, 

the second “except” clause was not necessary for the effectiveness of 

any of the earlier laws listed above because each was self-contained, 

and it was not necessary to enable IRS to reach funds payable under 

the retirement law to employees or former employees delinquent in the 

payment of their taxes.5 The most that can be said about the provision 

is that it was probably included pro forma.

Passing the question of purpose for the moment, we find that there 

was also silence in Congress concerning the meaning of the term 

“Federal laws” in the second “except” clause. We are faced in this 

context with a significant lack of assistance because we must determine 

whether the term covers 26 U.S.C. § 6331(a) as read together with the 

community property law of a state. If not, IRS cannot take half of Mrs. 

D ’s retirement deductions to reduce her husband’s indebtedness to the 

government.

We are of the opinion on this point that in the absence of congressional guidance regarding either the purpose of the second “except” 

clause or, more importantly, the scope of the term “Federal laws,” the 

term must be read in its natural sense of embracing only federal statutory laws.6 More particularly, we are unable to find either a precedent

‘ Public Law No. 94-166 mistakenly designated the new subsection in § 8345 as “(g)’’ and made the

same mistake in § 8346(a). The errors were corrected by Pub. L. No. 95-366, 92 Stat. 600 (1978).

5 Section 8345(j) in effect negated, as it applied to OPM, the provision in the definition of 

“alimony” in 42 U.S.C. § 662(c) that excluded payments based on community property laws. See note 

1, supra.

4See H R. Rep. No. 446, 94th Cong., 1st Sess. 1-2 (1975).

*39 Comp. Gen. 203 (1959); 27 Comp. Gen. 703 (1948); 21 Comp. Gen. 1000 (1942). These 

opinions, insofar as relevant here, were grounded on general principles of setoff.

8Cf. H.R. Rep. No. 713, 95th Cong., 1st Sess. 2 (1977), accompanying the bill that enacted 

§ 8345(j). At p. 2 the Committee paraphrased the second “except” clause o f § 8346(a) as follows: 

“except as may be expressly provided by Federal laws” (emphasis added). S. Rep. No. 1084, 95th 

Cong., 2d Sess. 2 (1978), contains the same paraphrase.

39
or a basis for construing the term to encompass a state’s community 

property law by transmutation through the medium of 26 U.S.C. 

6331(a). In short, we conclude that Nevada’s community property law, 

in the absence of explicit legislation by Congress, has not created for 

Mr. D “property [or] rights to property” in his wife’s retirement deductions that are assailable by IRS.

We are not inattentive to the judicial doctrine that state law generally governs the determination whether a federal taxpayer has an ownership interest in property sufficient for an IRS levy to grasp for taxes 

due from him. Aquilino v. United States, 363 U.S. 509 (1960). That rule, 

of course, is subject to the strictures of the Supremacy Clause of the 

Constitution. See Hisquierdo v. Hisquierdo, 439 U.S. 572, 581 (1979); 

United States v. Yazell, 382 U.S. 341, 352 (1966). However, we do not 

view the gloss put on § 6331(a) by Aquilino and similar cases as being 

pertinent here. It is one thing to hold that, paramount federal interests 

aside, the government should abide by state laws “in the field of family 

and family-property arrangements.” United States v. Yazell, 382 U.S. at 

352. It is another to conclude that the United States is bound by state 

law in its own administration of the Civil Service Retirement System.

There is no clash between federal and state interests here that requires scrutiny in the light of the Supremacy Clause. What is involved 

in reality is a clash between two federal policies, one calling for the 

expeditious collection o f taxes and the other for the protection of 

retirement deductions and benefits so that they will be paid to the 

persons who earned them. Since, in the instant matter, the barrier of 5 

U.S.C. § 8346(a) remains in place to block the thrust of the power 

granted IRS by 26 U.S.C. § 6331(a), there can be no question that the 

latter policy prevails.

We are mindful of the consideration that legislation in 

aid of collection o f Government revenues should be liberally construed and applied. There is obviously an imperative public interest in favor of the prompt collection of 

delinquencies. But manifestly it cannot be validly considered an overriding policy in any particular situation unless 

Congress has so demonstrated its intention.

United States v. Sullivan, 333 F. 2d 100, 119 (3d Cir., 1964).

In summary, IRS is not entitled to obtain any of Mrs. D ’s funds from 

OPM for application against her husband’s tax liability.

L e o n U l m a n

Deputy Assistant Attorney General

Office o f Legal Counsel

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