Opinion ID: 2400561
Heading Depth: 2
Heading Rank: 1

Heading: Federal Tax Levy

Text: [¶ 7] The Internal Revenue Code provides for the collection of unpaid taxes by administrative levy. 26 U.S.C.A. §§ 6331-6344 (1989 & Supp.2001). [2] This expeditious administrative levy process, Farr v. United States, 990 F.2d 451, 455 (9th Cir.1993), allows the IRS to collect delinquent taxes without judicial intervention, Kane v. Capital Guardian Trust Co., 145 F.3d 1218, 1221 (10th Cir.1998). See also United States v. Nat'l Bank of Commerce, 472 U.S. 713, 720, 105 S.Ct. 2919, 86 L.Ed.2d 565 (1985). Section 6332 requires any person in possession of property on which a levy has been made to surrender it upon demand to the IRS. 26 U.S.C.A. § 6332(a) (Supp.2001). Only two defenses are available for a party who fails to comply with a tax levy: (1) a claim that the property in possession is subject to judicial attachment or execution, or (2) a claim that the property in possession is not the taxpayer's property. Nat'l Bank of Commerce, 472 U.S. at 721-22, 105 S.Ct. 2919; 26 U.S.C.A. § 6332(a). [¶ 8] The Code provides incentives to comply with notices of levy. Any person who fails or refuses to surrender property subject to levy is liable to the IRS for the value of the property and an additional specified penalty if refusal is without reasonable cause. [3] Id. § 6332(d). On the other hand, a person who complies with a levy is discharged from any obligation or liability to the taxpayer and any other person with respect to the surrendered property. Id. § 6332(e). According to federal regulation, however, a person in possession of property who mistakenly surrenders property in which the taxpayer has no apparent interest is not immune from suit by a third person who has an interest in the property. 26 C.F.R. § 301.6332-1(c)(2)(2000). [4] [¶ 9] The appropriate remedy for one who believes a notice of levy to be wrongful is to surrender the property and bring an action against the federal government. State Bank of Fraser v. United States, 861 F.2d 954, 961 n. 6 (6th Cir.1988). [T]axpayers and third parties who have an interest in property surrendered in response to a levy may secure from the Internal Revenue Service the administrative relief provided for in section 6343(b) or may bring suit to recover the property under section 7426. [5] 26 C.F.R. § 301.6332-1(c)(3)(2000). [¶ 10] In compliance with section 6332, the Town surrendered money to the IRS on receipt of the notices of levy. AFAB argues that because there is a judgment in favor of A.F.A.B. Inc. d/b/a A.F.A.B. Construction, and the notices of levy name Timothy Swenson and Timothy Swenson AFAB Construction as the delinquent taxpayers, the Town did not possess property of the taxpayers and was not required to surrender the property. [6] Even assuming that the Town surrendered corporate property of A.F.A.B., Inc. for individual tax liabilities of Swenson, the appropriate remedy is administrative or legal relief against the IRS. Pursuant to section 6332, the Town was relieved of its obligation with respect to the surrendered money, and the court did not err in reducing the writ by the amount paid to the IRS.