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Regarding The Levy Power Reflected At 26 USC 6331

 

"For a levy to be statutorily authorized in the circumstances here, two conditions must be fulfilled. First, a 10-day notice of intent to levy must have issued. See 26 U.S.C. § 6331(a). Second, the taxpayer must be liable for the tax. Id. Tax liability is a condition precedent to the demand. Merely demanding payment, even repeatedly, does not cause liability.

 

For the condition precedent of liability to be met, there must be a lawful assessment, either a voluntary one by the taxpayer or one procedurally proper by the IRS. Because this country's income tax system is based on voluntary self-assessment, rather than distraint, Flora v. United States, 362 U.S. 145, 176, 80 S.Ct. 630, 646-47, 4 L.Ed.2d 623 (1960), the Service may assess the tax only in certain circumstances and in conformity with proper procedures."

Bothke v. Terry, 713 F. 2d 1405, at 1414 (1983).

 

Much like its close cousin, the codified rendering of the summons/examination/audit authority (discussed here), the levy power codified at 26 USC 6331(a) deploys expansive-- indeed, seemingly all-encompassing-- language:

26 USC 6331

(a) Authority of Secretary

If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax (and such further sum as shall be sufficient to cover the expenses of the levy) by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person or on which there is a lien provided in this chapter for the payment of such tax. Levy may be made upon the accrued salary or wages of any officer, employee, or elected official, of the United States, the District of Columbia, or any agency or instrumentality of the United States or the District of Columbia, by serving a notice of levy on the employer (as defined in section 3401(d)) of such officer, employee, or elected official. If the Secretary makes a finding that the collection of such tax is in jeopardy, notice and demand for immediate payment of such tax may be made by the Secretary 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 this section.

Taken as presented, the general provisions of this "code" section would appear to apply, at least potentially, to "any person" at all.  That is, this language suggests that any (which is to say, every) person can be among those whose property is subject to unilateral seizure by levy, presuming a liability for any tax is asserted or established.  However, this is not the case.

 

The actual statutory language underlying 26 USC 6331 confines the application of its authority to a relatively narrow class of "taxpayer"-persons, distinguished by monthly (and other special return) filing requirements-- such as federal "employers", of course, as well as distillers, per section 3307 of the Revised Statutes (R. S.); brewers, per R. S. 3337 and 3338; and tobacco producers, per R. S. 3358 and 3390.  Annual filers are not encompassed by this authority (although nothing precludes an effort by a government to treat such a filer otherwise should he or she declare a taxable amount of "income" on a return or fail to answer an allegation to the same effect by someone else, resulting in a tax due, which then goes unpaid).  That language reads as follows:

R. S.  Sec. 3185.  All returns required to be made monthly by any person liable to tax shall be made on or before the tenth day of each month, and the tax assessed or due thereon shall be returned by the Commissioner of Internal Revenue to the collector on or before the last day of each month.  All returns for which no provision is otherwise made shall be made on or before the tenth day of the month succeeding the time when the tax is due and liable to be assessed, and the tax thereon shall be returned as herein provided for monthly returns, and shall be due and payable on or before the last day of the month in which the assessment is so made.  When the said tax is not paid on or before the last day of the month, as aforesaid, the collector shall add a penalty of five per centum, together with interest at the rate of one per centum per month, upon such tax from the time the same became due; but no interest for a fraction of a month shall be demanded: Provided, that notice of the time when such tax becomes due and payable is given in such manner as may be prescribed by the Commissioner of Internal Revenue.  It shall then be the duty of the collector, in case of the non-payment of said tax on or before the last day of the month, as aforesaid, to demand payment thereof, with five per centum added thereto, and interest at the rate of one per centum per month, as aforesaid, in the manner prescribed by law; and if said tax, penalty, and interest, are not paid within ten days after such demand, it shall be lawful for the collector or his deputy to make distraint therefor, as provided by law.  (The interest rate established in this statute was changed to 6% per annum by section 404 of the Revenue Act of 1935.)

This language is helpfully reformatted in the original codification of the statute in 1939 (of which the current section 6331 of 26 USC is merely a convenient, consolidated rendering, with no change in meaning):

Part II—Assessment, Collection, and Refund

SEC. 3310. RETURNS AND PAYMENT OF TAX.

(a) MONTHLY RETURNS.—All returns required to be made monthly by any person liable to tax shall be made on or before the 10th day of each month, and the tax assessed or due thereon shall be returned by the Commissioner to the collector on or before the last day of each month.

(b) OTHER RETURNS.—All returns for which no provision is otherwise made shall be made on or before the 10th day of the month succeeding the time when the tax is due and liable to be assessed, and the tax thereon shall be returned as herein provided for monthly returns, and shall be due and payable on or before the last day of the month in which the assessment is so made.

(c) ADDITION TO TAX IN CASE OF NONPAYMENT.—When the said tax is not paid on or before the last day of the month, as aforesaid, the collector shall add a penalty of 5 per centum, together with interest at the rate of 6 per centum per annum, upon such tax from the time the same became due; but no interest for a fraction of a month shall be demanded: Provided, That notice of the time when such tax becomes due and payable is given in such manner as may be prescribed by the Commissioner.

(d) DEMAND FOR TAX, PENALTY, AND INTEREST.—It shall then be the duty of the collector, in case of the nonpayment of said tax on or before the last day of the month, as aforesaid, to demand payment thereof, with 5 per centum added thereto, and interest at the rate of 6 per centum per annum, as aforesaid, in the manner prescribed by law; and

(e) DISTRAINT.—If said tax, penalty, and interest, are not paid within ten days after such demand, it shall be lawful for the collector or his deputy to make distraint therefor, as provided by law.

As previously noted, it will be observed that the distraint (levy) authority is provided only in connection with "monthly return" filers and those required to file "other returns for which no provision [as to filing time] is otherwise made...".  This excludes annual filers, for whom filing dates are specified by law, as reflected in the following language of the 1939 IRC:

CHAPTER 1- INCOME TAX

SUBCHAPTER B- GENERAL PROVISIONS

PART V- RETURNS AND PAYMENT OF TAX

SEC. 53. TIME AND PLACE FOR FILING RETURNS.

(a) TIME FOR FILING.—

(1) GENERAL RULE.—Returns made on the basis of the calendar year shall be made on or before the 15th day of March following the close of the calendar year. Returns made on the basis of a fiscal year shall be made on or before the 15th day of the third month following the close of the fiscal year.

(Although the derivation tables for section 6331(a) of the current code indicate that, in addition to section 3310 of the 1939 IRC, elements of sections 3660, 3690, 3692 and 3700 of that earlier code are also reflected in 6331(a)’s construction, none of these expand the scope of application of the levy power.  It is only in 3310 that the relevant notice and demand requirement, around which all the other sections revolve, is presented.  This accurately reflects the statutes underlying all the relevant derivative 1939 and current IRC sections-- which include R. S. 3187, 3188 and 3196, as well as sections 1016 of the Revenue Act of 1924, 1105 of the Revenue Act of 1932, 510 of the Revenue Act of 1934 and 404 of the Revenue Act of 1935.  Only R. S. 3185 imposes the relevant notice and demand protocol, and thus establishes the class to which the related provisions apply.  See your CtC Companion CD for the complete language of these code and statute sections.)

 

 

The actual statutory language of the "jeopardy" provision, also referenced in a vague and seemingly expansive manner in 26 USC §6331(a) (and presented here as accurately codified in 1939), underscores the limited lawful application of the authority reflected in that code section as a whole:

SEC. 3660. JEOPARDY ASSESSMENT.

 

(a) If the Commissioner believes that the collection of any tax (other than income tax, estate tax, and gift tax) under any provision of the internal-revenue laws will be jeopardized by delay, he shall, whether or not the time otherwise prescribed by law for making return and paying such tax has expired, immediately assess such tax (together with all interest and penalties the assessment of which is provided for by law). Such tax, penalties, and interest shall thereupon become immediately due and payable, and immediate notice and demand shall be made by the collector for the payment thereof. Upon failure or refusal to pay such tax, penalty, and interest, collection thereof by distraint shall be lawful without regard to the period prescribed in section 3690. (Emphasis added)

*****

 

Dealing with existing sworn allegations upon which underlying liabilities could be presumed, in the manner provided for by law (see 'Cracking the Code- The Fascinating Truth About Taxation In America'), is, of course, the proper means of precluding, or correcting, misapplication of the authority reflected at 6331(a).  (Ultimately, it is the ONLY effective means of doing so.)

 

Still, those who have foregone the timely taking of that "ounce of prevention", and are thus having to swallow a pound of cure-- that is, undoing the effects of having left erroneous evidence about one's earnings uncorrected, one of which is often an attempt to levy-- might be well-advised to review their status in light of the foregoing, and, if appropriate, consider constructively noticing anyone proposing to improperly levy, or proposing to cooperate with an improper levy.  Such a notice (transmission of which should absolutely be "comprehensively witnessed", as discussed on page 180 of CtC) might look something like this...

 

NOTE: The language in 6331(a) relating to levies of "wages" by means of a "Notice of Levy" is not a modification or expansion of the levy authority as such.  It is merely reflective of the fact that the particular property to which that language refers is already in the possession of the government.

 

This is so because that language refers exclusively to those paid by the federal government, or its agencies and instrumentalities.  Thus the "payor" who must respond to such a notice is a component of the federal government itself.  As a consequence of that fact, the only aspect of "levying" needing to be done in such cases is the administrative reassignment of the property from the status of "owed to the worker" to "seized (levied) by the Secretary".  The "Notice of Levy" is just what it says:  Notification that the property has been levied by this administrative mechanism.  Property not so situated can only be brought into the custody of the Secretary by means of an entirely different, much more circumscribed-- and properly adversarial-- process.

 

(Misunderstanding of the "Notice of Levy" provision is broadly exploited by the IRS.  See 'A Sorry But Instructive Little Subterfuge' for more on this subject.)

 

***

 

By the way, anyone on the receiving end of a dire-looking "notice" alleging that a tax (or "frivolous return" or other penalty assessable as a tax) is owing, and threatening levy, might want to keep the following (in which emphasis has been added where appropriate) in mind:

 26 USC §6203 Method of assessment

 

The assessment shall be made by recording the liability of the taxpayer in the office of the Secretary in accordance with rules or regulations prescribed by the Secretary. Upon request of the taxpayer, the Secretary shall furnish the taxpayer a copy of the record of the assessment;

...among the rules or regulations prescribed by the Secretary, per the directive reflected at 26 USC §6203, we find:

26 CFR §301.6203-1 Method of assessment 

 

The district director and the director of the regional service center shall appoint one or more assessment officers. The district director shall also appoint assessment officers in a Service Center servicing his district. The assessment shall be made by an assessment officer signing the summary record of assessment. The summary record, through supporting records, shall provide identification of the taxpayer, the character of the liability assessed, the taxable period, if applicable, and the amount of the assessment. The amount of the assessment shall, in the case of tax shown on a return by the taxpayer, be the amount so shown, and in all other cases the amount of the assessment shall be the amount shown on the supporting list or record. The date of the assessment is the date the summary record is signed by an assessment officer. If the taxpayer requests a copy of the record of assessment, he shall be furnished a copy of the pertinent parts of the assessment which set forth the name of the taxpayer, the date of assessment, the character of the liability assessed, the taxable period, if applicable, and the amounts assessed.

...and in regard to "frivolous return" or other penalties assessable as a tax:

26 USC §6671. Rules for application of assessable penalties

 

(a) Penalty assessed as tax

The penalties and liabilities provided by this subchapter [which includes section 6702 -PH] shall be paid upon notice and demand by the Secretary, and shall be assessed and collected in the same manner as taxes. Except as otherwise provided, any reference in this title to “tax” imposed by this title shall be deemed also to refer to the penalties and liabilities provided by this subchapter.

and

26 USC §6751. Procedural Requirements

(b) Approval of assessment

(1) In general
No penalty under this title shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate.

Thus we can see that in order for there to be legal force behind a "notice" demanding money for a tax liability or "frivolous return" or other penalty assessable as a tax and threatening levy, the "notice" must be (or there must have already been) a statutory "notice and demand"; it can only be issued after a record of assessment has been signed by an assessment officer (who therefore becomes legally responsible in a personal capacity for the legitimacy of the assessment); and provisions are in place obliging the Secretary to furnish a copy of that record of assessment to the person alleged to be liable.

 

Furthermore, an assessment, in turn, can only be made pursuant to a signed return:

26 USC §6201

 

(a) Authority of Secretary

The Secretary is authorized and required to make the inquiries, determinations, and assessments of all taxes (including interest, additional amounts, additions to the tax, and assessable penalties) imposed by this title, or accruing under any former internal revenue law, which have not been duly paid by stamp at the time and in the manner provided by law. Such authority shall extend to and include the following:

(1)   Taxes shown on return

The Secretary shall assess all taxes determined by the taxpayer or by the Secretary as to which returns or lists are made under this title.

Somebody's got to take responsibility for the creation of any enforceable debt.  If a filer hasn't created that debt by his or her own signature on an instrument declaring the obligation, then the alleged creditor would have to do so, as the very minimum necessary to support an allegation of the existence of an obligation.  Further, even that protocol only signifies in the case of a default by the supposed debtor.  When a filer has executed an appropriate instrument establishing that no such debt exists, that is the end of the matter.  As is specified in 26 CFR §301.6203-1 (quoted above):

"The amount of the assessment shall, in the case of tax shown on a return by the taxpayer, be the amount so shown,"

(Nonetheless, though, a certain level of sustained belatedness can possibly act as an effective exception.  For instance, a failure to file in the face of "information return" testimony, followed by a continuing failure to do so in response to correspondingly-proposed deficiencies (via a statutory "notice of deficiency", also known as a "90-day letter") and eventual collections activities could effectively amount to an assessment, and might ultimately be beyond effective remediation even by the eventual filing of a return.)

 

By the way, as is always the case, if a tax agency refuses to afford the benefit of a provision specified as for a "taxpayer" to anyone, this pretty clearly establishes that the agency does not have a good-faith belief that that person IS, in fact, a "taxpayer"...  In this particular case, the provision unambiguously links the right to demand a copy of the record of assessment to liability for the amount assessed.  Thus, agency refusal to furnish a copy of a "record of assessment" in connection with any "notice" purporting to demand a payment would constitute an unambiguous acknowledgement by the agency that the requester is not, in fact, actually liable for the amount "demanded".

 

Anyone making such a request might therefore want to consider including language explicitly declaring something to the effect of "...the making of the request is not to be considered or construed as an admission of "taxpayer" status or of liability for any tax or penalty, and that a refusal to cooperate with the request will be recognized as an acknowledgement that the requester is NOT, in fact, liable for the tax or penalty alleged to be due and owing or otherwise collectible in any manner on the document received, a copy of which is attached..."

 

Further, since certain IRS records of assessment are merely aggregate records-- batching many assessments together and only reporting aggregated totals-- a request made for the purpose of verifying or refuting personal liability might also benefit from language specifying that an aggregate record will not satisfy the request, and that adequate compliance with the request requires documentation sufficient to clearly establish the requester's personal liability.  Obviously, an "aggregate" assessment report neither satisfies the specifications of §6203 nor substantiates anything concerning the individual making the request.  (Nonetheless, several warriors being treated to "notices" alleging outstanding liabilities have received only such aggregate records in response to their §6203 requests, in what can only be taken to be comically transparent efforts to suggest that an assessment exists when none actually does.  Compare that "aggregate record" response to this example, while keeping in mind the specifications for § 6203 responses laid out in 26 CFR §301.6203-1.)

 

NOTE: There is some case law taking the position that even when a record of assessment DOES exist, and IS furnished in response to a §6203 request, the Secretary can choose to provide only selective information off the record that suits his convenience, rather than an actual copy of the summary record of assessment.  Rulings to this effect appear to relate only to challenges to the existence of the record, not the legal sufficiency of the assessment.  If I were requesting a copy of a record of assessment, I would include an explicit demand for an actual photocopy, with the signature of the assessment officer included, and I would include an explicit statement that the reason for the request was both to establish the existence of the assessment, and to determine for myself the assessment's complete compliance with all related provisions of law.

 

NOTE II: Whether or not a request for evidence of a technically-sufficient assessment has been complied with is not, in and of  itself, a factor in the technical-sufficiency of the assessment.  That is, if a technically-sufficient assessment HAS been made, it is valid for collections purposes even if evidence of it has not been provided to the individual concerned.  Click here for more on this.

 

Regarding Liens

 

All of the above relating to assessments has application to "lien" proceedings as well, which are also predicated on the existence of a valid, perfected assessment.

 

Furthermore:

 

I received the following email from an Arizona warrior recently:

 

"Hey, Pete.  I called up the Pima County recorders office today to have the federal notice of tax liens removed because they were not certified by the officer who wanted them recorded.  This is what he said to me, "The Arizona constitution says that federal law is the supreme law of the land."  I corrected him by saying section 3 of the Arizona constitution says the constitution of the United States of America is the supreme law of the land.  Undeterred, he says ARS 33-1031 -1035 has no bearing because it is state law and not federal."

 

Taking no regard of the relevant meaning of "State" in the language below (which is subject to the general, code-wide definition, by the way, not the more explicit definition in chapter 21)-- both because it is irrelevant here, and even if it reflected a distinction which WAS relevant, those in the offices in which the liens are to be filed wouldn't recognize or acknowledge that distinction, I am prompted to make the following observations (all emphasis added):

AR33-1033. Execution of notices and certificates

Certification of notices of liens, certificates or other notices affecting federal liens by the secretary of the treasury of the United States or his delegate, or by any official or entity of the United States responsible for filing or certifying notice of any other lien, entitles them to be filed or recorded and no other attestation, certification or acknowledgement is necessary.

26 USC 6323

(a) Purchasers, holders of security interests, mechanic’s lienors, and judgment lien creditors

The lien imposed by section 6321 [lien for taxes- PH] shall not be valid as against any purchaser, holder of a security interest, mechanic’s lienor, or judgment lien creditor until notice thereof which meets the requirements of subsection (f) has been filed by the Secretary.

...

(f) Place for filing notice; form

(1) Place for filing

The notice referred to in subsection (a) shall be filed

(A) Under State laws

(i) Real property In the case of real property, in one office within the State (or the county, or other governmental subdivision), as designated by the laws of such State, in which the property subject to the lien is situated; and

(ii) Personal property In the case of personal property, whether tangible or intangible, in one office within the State (or the county, or other governmental subdivision), as designated by the laws of such State, in which the property subject to the lien is situated, except that State law merely conforming to or reenacting Federal law establishing a national filing system does not constitute a second office for filing as designated by the laws of such State; or

...

"Filing" doesn't simply mean mailing the "designated office" some "notice" in whatever format to which one takes a fancy.  It means presenting notice in a form consistent with the standards and specifications for such notices required by that designated office, just as is expressed in Arizona's AR33-1031 presented above, which says that unless certified, notices of lien are not entitled to be filed...