Congress should rewrite IRC 6343(a) Release of Levy to read as follows:
It shall be required for the Secretary, under regulations prescribed
by the Secretary, to release the levy on all or part of the property
or rights to property levied on where the Secretary determines: that
such action will facilitate collection of the tax; or the taxpayer
makes satisfactory arrangements to pay the tax in installments over a
reasonable period of time; or the taxpayer can substantiate grounds for
financial hardship; or the taxpayer pays an amount determined by the
Secretary to be equal to the interest of the United States in the
seized property, or the part of the seized property to be released;
or where the value of the United States' interest is insufficient to
meet the expenses of seizure and sale.
Reasons for Change:
The regulations pursuant to IRC 6343 specify that the following conditions are
considered to facilitate the collection of the liability:
Regulations 301.6343-1. Authority to Release Levy and Return Property
(a) Release of levy-(1) Authority. The district director may release the levy upon
all or part of the property or rights to property levied upon as provided in subparagraphs
(2) and (3) of this paragraph. A levy may be released under subparagraph (2) of this
paragraph only if the delinquent taxpayer complies with such of the conditions thereunder
as the district director may require and if the district director determines that such
action will facilitate the collection of the liability. A release pursuant to the
subparagraph (3) of this paragraph is considered to facilitate the collection of the
liability. The release under this section shall not operate to prevent any subsequent
levy. (2) Conditions for Release. The district director may release the levy as authorized
under subparagraph (1) of this paragraph, if: (i) Escrow arrangement. The delinquent
taxpayer offers a satisfactory arrangement, which is accepted by the district director,
for placing property in escrow to secure the payment of the liability (including the
expenses of levy) which is the basis of the levy. (ii) Bond. The delinquent taxpayer
delivers an acceptable bond to the district director conditioned upon the payment of the
liability (including the expenses of levy) which is the basis of the levy. Such bond shall
be in the tom1 provided in section 7101 and 301.7101-1. (iii) Payment of amount of U.S.
interest in the property. There is paid to the district director an amount determined by
him to be equal to the interest to the United States in the seized property or the part of
the seized property to be released. (iv) Assignment of salaries and wages. The delinquent
taxpayer executes an agreement directing his employer to pay the district director amounts
deducted from the employee's wages on a regular, continuing, or periodic basis, in such
manner and in such amount as is agreed upon with the district director, until the full
amount of the liability is satisfied, and such agreement is accepted by the employer. (v)
Installment payment arrangement. The delinquent taxpayer makes satisfactory arrangements
with the district director to pay the amount of the liability in installments. (vi)
Extension of statute of limitations. The delinquent taxpayer executes an agreement to
extend the statute of limitations in accordance with section 6502(a)(2) and 301.6502-1.
(3) Release where value of interest of United States is insufficient to meet expenses of
sale. The district director may release the levy as authorized under subparagraph (1) of
this paragraph if he determines that the value of the interest of the United States in the
seized property, or in the part of the seized property to be released, is insufficient to
cover the expenses of the sale of such property.
There is additional criteria that the Collection Division has imposed on IRC Section
6343 that is not stated in the regulations. Internal Revenue Manual section 5346.1:(1)
reads:
"To facilitate collection of the liability, seized property may be released prior to
sale for less than immediate full payment. As a condition to such a release, subsequent
full payment must be provided for."
The imposition of the subsequent full payment rule makes sense if the taxpayer
offers an escrow agreement, delivers an acceptable bond, enters into an installment
arrangement, makes an assignment from his wages or salary, or agrees to extend the statute
of limitations. The subsequent full payment rule does not make sense where it is imposed
upon the release of a levy when the taxpayer pays the IRS the amount of U.S. interest in
the property, or where the value of the U. S. interest is insufficient to meet the
expenses of sale.
A taxpayer suffering the seizure of personal property should be able to have his
property released to him when he can pay the IRS the same minimum amount for which the IRS
would sell the property, or when the minimum amount for which the IRS would otherwise sell
the property is insufficient to meet the expenses of sale. These releases should be a
right of taxpayers even without the condition of subsequent full payment, or without
regard for whether the release facilitates collection of the liability. Otherwise it is an
abuse of taxpayers' property rights. The IRS should not be in the position of seizing and
selling a taxpayer's property or property rights to an anonymous third party for less
money than what it would cost the taxpayer to have his property returned to him.
This proposal would separate installment agreements, release where the value of U.S.
interest is insufficient to meet expenses of sale, and release where the amount of U.S.
interest in the property is paid to the IRS, from the pretext of "facilitating
collection of the tax," and from the requirement that subsequent full payment must be
provided for.
This proposal also codifies the main items listed in the regulations in order to
give taxpayers rights that may be enforced in the federal courts, and which would not
otherwise exist as regulations. As regulations, these conditions are not really
"rights" of release. Instead, they are nothing more than procedural guidelines
which, if not followed, cannot be enforced in court. In part, the conditions listed in
regulation 301.6343-1 for release of levy are not mandatory. The regulation states:
"The district director may release the levy..." It does not say the district
director will release the levy. (The implications of this are further discussed in
recommendation #4.) The IRS should be required to release levies in these situations.
The IRS would be required to establish regulations that would define a
"satisfactory arrangement" and what is a "reasonable period of time."
There are no regulations now existing on installment agreements. The only guidelines are
contained in the Internal Revenue Manual, which are general enough to allow local managers
to establish their own policies of implementation and their own interpretations of the
regulations.
Taxpayers who communicate with the IRS prior to levy, and who are able to present a
case of true financial hardship, are granted the privilege of not having to pay or being
forced to pay their tax liability in full. IRS procedures allow collection action on
hardship cases to be suspended until the taxpayer's ability to pay improves. Under the
present law and regulations, which do not address the hardship case, a taxpayer who
communicates with the IRS subsequent to a levy has no rights or benefits or privileges
which were available immediately prior to levy. Even though most collection employees are
compassionate enough to release a levy or Notice of Levy due to financial hardship. there
is no specific Tax Code provision, regulation, or Manual directive that would allow or
compel them to do so.
The fact is that a taxpayer experiencing a financial hardship cannot meet the
provisions of regulation 301.6343-I when combined with IRM 5346.1(1). It is therefore
possible for the IRS to legally seize and sell almost everything a destitute unemployed
taxpayer has (the exemptions from levy offer no protection either), simply because he may
not be able to pay the full amount owed (per IRC 6337(a)). or enter into an installment
agreement (by reason of his temporary unemployment) or even pay the IRS his forced sale
equity in the property (per regulation 301.6343-l(a)(2)(iii) and IRM 5346.1:(1)). A law
that provides no protection for these kinds of situations is a deliberate act of
injustice.
