Unlawful levy - SEC. 7426. CIVIL ACTIONS BY PERSONS OTHER THAN TAXPAYERS.
7426(a) ACTIONS PERMITTED. --
7426(a)(1) WRONGFUL LEVY. --If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States. Such action may be brought without regard to whether such property has been surrendered to or sold by the Secretary.

7426(a)(2) SURPLUS PROCEEDS. --If property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property junior to that of the United States and to be legally entitled to the surplus proceeds of such sale may bring a civil action against the United States in a district court of the United States.

7426(a)(3) SUBSTITUTED SALE PROCEEDS. --If property has been sold pursuant to an agreement described in section 6325(b)(3) (relating to substitution of proceeds of sale), any person who claims to be legally entitled to all or any part of the amount held as a fund pursuant to such agreement may bring a civil action against the United States in a district court of the United States.

7426(a)(4) SUBSTITUTION OF VALUE. --If a certificate of discharge is issued to any person under section 6325(b)(4) with respect to any property, such person may, within 120 days after the day on which such certificate is issued, bring a civil action against the United States in a district court of the United States for a determination of whether the value of the interest of the United States (if any) in such property is less than the value determined by the Secretary. No other action may be brought by such person for such a determination.

7426(b) ADJUDICATION. --The district court shall have jurisdiction to grant only such of the following forms of relief as may be appropriate in the circumstances:

7426(b)(1) INJUNCTION. --If a levy or sale would irreparably injure rights in property which the court determines to be superior to rights of the United States in such property, the court may grant an injunction to prohibit the enforcement of such levy or to prohibit such sale.

7426(b)(2) RECOVERY OF PROPERTY. --If the court determines that such property has been wrongfully levied upon, the court may --

7426(b)(2)(A) order the return of specific property if the United States is in possession of such property;

7426(b)(2)(B) grant a judgment for the amount of money levied upon; or

7426(b)(2)(C) if such property was sold, grant a judgment for an amount not exceeding the greater of --

7426(b)(2)(C)(i) the amount received by the United States from the sale of such property, or

7426(b)(2)(C)(ii) the fair market value of such property immediately before the levy.

For purposes of subparagraph (C), if the property was declared purchased by the United States at a sale pursuant to section 6335(e) (relating to manner and conditions of sale), the United States shall be treated as having received an amount equal to the minimum price determined pursuant to such section or (if larger) the amount received by the United States from the resale of such property.

7426(b)(3) SURPLUS PROCEEDS. --If the court determines that the interest or lien of any party to an action under this section was transferred to the proceeds of a sale of such property, the court may grant a judgment in an amount equal to all or any part of the amount of the surplus proceeds of such sale.

7426(b)(4) SUBSTITUTED SALE PROCEEDS. --If the court determines that a party has an interest in or lien on the amount held as a fund pursuant to an agreement described in section 6325(b)(3) (relating to substitution of proceeds of sale), the court may grant a judgment in an amount equal to all or any part of the amount of such fund.

7426(b)(5) SUBSTITUTION OF VALUE. --If the court determines that the Secretary's determination of the value of the interest of the United States in the property for purposes of section 6325(b)(4) exceeds the actual value of such interest, the court shall grant a judgment ordering a refund of the amount deposited, and a release of the bond, to the extent that the aggregate of the amounts thereof exceeds such value determined by the court.

7426(c) VALIDITY OF ASSESSMENT. --For purposes of an adjudication under this section, the assessment of tax upon which the interest or lien of the United States is based shall be conclusively presumed to be valid.

7426(d) LIMITATION ON RIGHTS OF ACTION. --No action may be maintained against any officer or employee of the United States (or former officer or employee) or his personal representative with respect to any acts for which an action could be maintained under this section.

7426(e) SUBSTITUTION OF UNITED STATES AS PARTY. --If an action, which could be brought against the United States under this section, is improperly brought against any officer or employee of the United States (or former officer or employee) or his personal representative, the court shall order, upon such terms as are just, that the pleadings be amended to substitute the United States as a party for such officer or employee as of the time such action was commenced upon proper service of process on the United States.

7426(f) PROVISION INAPPLICABLE. --The provisions of section 7422(a) (relating to prohibition of suit prior to filing claim for refund) shall not apply to actions under this section.

7426(g) INTEREST. --Interest shall be allowed at the overpayment rate established under section 6621 --

7426(g)(1) in the case of a judgment pursuant to subsection (b)(2)(B), from the date the Secretary receives the money wrongfully levied upon to the date of payment of such judgment;

7426(g)(2) in the case of a judgment pursuant to subsection (b)(2)(C), from the date of the sale of the property wrongfully levied upon to the date of payment of such judgment; and

7426(g)(3) in the case of a judgment pursuant to subsection (b)(5) which orders a refund of any amount, from the date the Secretary received such amount to the date of payment of such judgment.

7426(h) RECOVERY OF DAMAGES PERMITTED IN CERTAIN CASES. --

7426(h)(1) IN GENERAL. --Notwithstanding subsection (b), if, in any action brought under this section, there is a finding that any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence, disregarded any provision of this title the defendant shall be liable to the plaintiff in an amount equal to the lesser of $1,000,000 ($100,000 in the case of negligence) or the sum of --

7426(h)(1)(A) actual, direct economic damages sustained by the plaintiff as a proximate result of the reckless or intentional or negligent disregard of any provision of this title by the officer or employee (reduced by any amount of such damages awarded under subsection (b)); and

7426(h)(1)(B) the costs of the action.

7426(h)(2) REQUIREMENT THAT ADMINISTRATIVE REMEDIES BE EXHAUSTED; MITIGATION; PERIOD. --The rules of section 7433(d) shall apply for purposes of this subsection.

7426(h)(3) PAYMENT AUTHORITY. --Claims pursuant to this section shall be payable out of funds appropriated under section 1304 of title 31, United States Code.

7426(i) CROSS REFERENCE. --

For period of limitation, see section 6532(c).
SEC. 6532. PERIODS OF LIMITATION ON SUITS.
6532(a) SUITS BY TAXPAYERS FOR REFUND. --

6532(a)(1) GENERAL RULE. --No suit or proceeding under section 7422(a) for the recovery of any internal revenue tax, penalty, or other sum, shall be begun before the expiration of 6 months from the date of filing the claim required under such section unless the Secretary renders a decision thereon within that time, nor after the expiration of 2 years from the date of mailing by certified mail or registered mail by the Secretary to the taxpayer of a notice of the disallowance of the part of the claim to which the suit or proceeding relates.

6532(a)(2) EXTENSION OF TIME. --The 2-year period prescribed in paragraph (1) shall be extended for such period as may be agreed upon in writing between the taxpayer and the Secretary.

6532(a)(3) WAIVER OF NOTICE OF DISALLOWANCE. --If any person files a written waiver of the requirement that he be mailed a notice of disallowance, the 2-year period prescribed in paragraph (1) shall begin on the date such waiver is filed.

6532(a)(4) RECONSIDERATION AFTER MAILING OF NOTICE. --Any consideration, reconsideration, or action by the Secretary with respect to such claim following the mailing of a notice by certified mail or registered mail of disallowance shall not operate to extend the period within which suit may be begun.

6532(a)(5) CROSS REFERENCE. --

For substitution of 120-day period for the 6-month period contained in paragraph (1) in a title 11 case, see section 505(a)(2) of title 11 of the United States Code.

6532(b) SUITS BY UNITED STATES FOR RECOVERY OF ERRONEOUS REFUNDS. --Recovery of an erroneous refund by suit under section 7405 shall be allowed only if such suit is begun within 2 years after the making of such refund, except that such suit may be brought at any time within 5 years from the making of the refund if it appears that any part of the refund was induced by fraud or misrepresentation of a material fact.

6532(c) SUITS BY PERSONS OTHER THAN TAXPAYERS. --

6532(c)(1) GENERAL RULE. --Except as provided by paragraph (2), no suit or proceeding under section 7426 shall be begun after the expiration of 9 months from the date of the levy or agreement giving rise to such action.

6532(c)(2) PERIOD WHEN CLAIM IS FILED. --If a request is made for the return of property described in section 6343(b), the 9-month period prescribed in paragraph (1) shall be extended for a period of 12 months from the date of filing of such request or for a period of 6 months from the date of mailing by registered or certified mail by the Secretary to the person making such request of a notice of disallowance of the part of the request to which the action relates, whichever is shorter.




Next Generation Wireless, Ltd., Plaintiff v. United States of America, Defendant.

U.S. District Court, So. Dist. Ohio, East. Div.; 06-CV-838, August 28, 2008.



[ Code Secs. 6532 and 7426]

Suits by nontaxpayers: Wrongful levy: Nine-month limitations period: Written request to IRS: Procedural requirements. --

A federal district court lacked subject matter jurisdiction over a corporation's wrongful levy suit that was not filed within the nine-month limitations period. The Form 911, Application for Assistance Order, that the corporation sent to the IRS's Taxpayer Advocate Service did not constitute a proper written request to the IRS for return of the levied funds and did not extend the limitations period from nine months to 12 months under Code Sec. 6532 (c)(2). Furthermore, even assuming that the Form 911 was a proper written request, it did not comply with the procedural requirements of Reg. §301.6343-2(c) because the corporation did not address its request to the district director for the IRS district in which the levy was made.



OPINION AND ORDER



I. INTRODUCTION


MARBLEY, United States District Court Judge: Plaintiff Next Generation Wireless, Ltd. ("Next Generation") claims that the Internal Revenue Service ("IRS") improperly levied $15,736.68 from its bank accounts as payment for the tax liability of other business entities. Next Generation brought suit under the wrongful-levy statute, 26 U.S.C. § 7246(a)(1), for recovery of the levied funds. Defendant United States has moved for summary judgment on the grounds that this Court lacks subject matter jurisdiction over Next Generation's case because Next Generation failed to file suit within the nine-month limitations period governing wrongful-levy claims. For the reasons described below, the Court GRANTS the Government's motion.


II. BACKGROUND


On April 27, 2005, the IRS notified Next Generation that it was imposing a lien in the amount of $627,795.72 on Next Generation's property for the unpaid tax liability of Next Generation Wireless, Inc. ("NG II") and Allied Communications, Inc. ("Allied"). The IRS claimed that Next Generation was the transferee, alter ego, and/or nominee of NG II and Allied. Because the imposition of a federal tax lien is not sufficient for the Government to collect an unpaid tax liability, on December 15, 2005, the IRS served Key Bank and Next Generation with a notice of levy upon Next Generation's bank accounts. See EC Term of Years Trust v. United States, __U.S. __; 127 S. Ct. 1763, 1765 (2007) (stating that "[a] federal tax lien ... is not selfexecuting, and the IRS must take affirmative action to enforce collection of the unpaid taxes") (internal quotation marks and citation omitted). On January 6, 2006, the contents of Next Generation's Key Bank accounts, totaling $15,736.68, were transferred to the IRS pursuant to the notice of levy.

On January 12, 2006, Next Generation sent a Form 911, entitled "Application for Taxpayer Assistance Order" ("Form 911"), to the Taxpayer Advocate Service, a division within the IRS. The Form 911 explained that Next Generation was in danger of going out of business if the levied funds were not restored to its bank accounts. The Form was faxed to the attention of Trish Dinser. At her deposition, Dinser testified that she forwarded the Form to John Rice, an IRS revenue officer, who investigated the circumstances giving rise to the levy. In his report back to Dinser, Rice concluded that there was no basis for releasing the levy "because the taxpayer continues to deny responsibility for the liability and has made no effort to negotiate a settlement, despite having several opportunities to do so prior to the issuance of the levies." Rice confirmed that he had consulted with his superiors and that they agreed with this conclusion. As a result, the Taxpayer Advocate Service sent Next Generation a rejection letter on January 18, 2006, stating that the levy was valid and the funds would not be returned.

On October 4, 2006, nine months and twenty-one days after the IRS served the notice of levy, Next Generation filed this action, seeking to recover the levied funds under the wrongfullevy statute, 26 U.S.C. § 7246(a)(1). The United States moved to dismiss the complaint on November 30, 2006, for lack of subject matter jurisdiction on the grounds that Next Generation had failed to file suit within the applicable nine-month limitations period. On December 1, 2006, Next Generation filed an amended complaint alleging that because it had made a written request of the IRS to return the levied funds, the nine-month limitations period had been extended pursuant to 26 U.S.C. § 6532(c)(2). On June 14, 2007, this Court denied the United States' motion to dismiss, finding that because Next Generation's written request to the IRS was not attached to its complaint, the Court had no way of ascertaining whether the request contained all the information necessary to extend the limitations period. See Next Gen. Wireless, Ltd. v. United States, No. 06-CV-838, 2007 WL 1731212 (S.D. Ohio June 14, 2007). The United States now moves for summary judgment.


III. STANDARD OF REVIEW


Summary judgment is appropriate where the record shows that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The movant has the burden of proving the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). In determining whether the movant has carried its burden, the Court views the evidence in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The central inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).


IV. ANALYSIS


The United States Government cannot be sued unless Congress waives its sovereign immunity. Block v. North Dakota, 461 U.S. 273, 287 (1983). "A necessary corollary of this rule is that when Congress attaches conditions to legislation waiving the sovereign immunity of the United States, those conditions must be strictly observed, and exceptions thereto are not to be lightly implied." Id. A statute-of-limitations provision is one such condition that must be strictly applied. Id.; see also United States v. Ranger Elec. Communs., 210 F.3d 627, 631 (6th Cir. 2000) ("Courts have consistently held that a statutory time limit is an integral condition of the sovereign's consent."). Therefore, if a plaintiff exceeds the statute of limitations, a court is deprived of subject matter jurisdiction to entertain the matter. Ranger, 210 F.3d at 631.

Congress has provided for a waiver of sovereign immunity in cases where a third party asserts that the Government has wrongfully levied his/her property in order to satisfy someone else's tax liability. See 26 U.S.C. § 7426(a)(1) (stating that "[i]f a levy has been made on property ... any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in ... such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court"). The Government's waiver of sovereign immunity is conditioned upon a nine-month statute of limitations, measured from the date the notice of levy was served. See 26 U.S.C. § 6532(c)(1); see also State Bank of Fraser v. United States, 861 F.2d 954, 967 (6th Cir. 1988). Because compliance with the statute of limitations is a term of the Government's consent to be sued, noncompliance with the nine-month limitations period deprives a district court of subject matter jurisdiction over the claim. See, e.g., Amwest Surety Ins. Co. v. United States, 28 F.3d 690, 694 (7th Cir. 1994). However, if the claimant submits a request for the return of the levied property, the limitations period will be extended by twelve months from the date of filing such request, or six months from the date of the Government's response denying the request, whichever is shorter. See 26 U.S.C. § 6532(c)(2).

To qualify for the statute-of-limitations extension, the claimant must satisfy the requirements for a "request," as set forth in 26 C.F.R. § 301.6343-2. First, the request must be in writing and "must 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 was made." 1 Id. at § 301.6343-2(b). Second, the request must contain the following specific information: (1) the name and address of the person submitting the request; (2) a detailed description of the levied property; (3) a description of the claimant's interest in the levied property; and (4) the name and address of the taxpayer, the originating Internal Revenue district, and the date of the levy. Id.

A written request for the return of wrongfully levied property that does not contain all the foregoing information will not be deemed adequate. See 26 C.F.R. § 301.6343-2(c). A deficient request will be treated as adequate, however, if the Government fails to inform the claimant of the inadequacies within thirty days of receiving the request. Id.

There is no dispute that Next Generation did not file its complaint within nine months of service of the notice of levy (the record suggests that the statute expired twenty-one days before Next Generation filed suit). The question is whether Next Generation's submission of its Form 911 constituted a written request for the return of its levied funds sufficient to extend the limitations period as authorized by § 6532(c)(2). The Government argues that a Form 911 can never constitute a proper written request under § 6532(c)(2) for the return of wrongfully levied property. A Form 911, reasons the Government, is a mechanism for providing relief to persons at risk of suffering "significant hardship as a result of the manner in which the internal revenue laws are being administered," 26 U.S.C. § 7811(a)(1)(A), whereas the wrongful-levy statute sets up an administrative mechanism for reviewing the merits of the challenged levy. Given these contrasting purposes, the Government contends that a wrongful-levy claimant cannot fulfill the procedural requirements of that statute by resorting to a Form 911. But putting aside this issue, and assuming that a Form 911 could serve as a proper "written request" for purposes of extending the statute of limitations, the real question is whether Next Generation complied with all the procedural requirements of 26 C.F.R. § 301.6343-2. As described below, it did not.

Next Generation concedes that it did not address its Form 911 to "the district director (marked for the attention of the Chief, Special Procedures Staff) for the Internal Revenue district in which the levy was made," as expressly required by the wrongful-levy regulations. 2 26 C.F.R. § 301.6343-2. Instead, Next Generation sent its "request," if it may be called that, to an altogether different division of the IRS, namely, the Taxpayer Advocate Service, and specifically, its Cincinnati, Ohio office. Next Generation argues that its request must be treated as adequate despite this "technical[] insufficien[cy]" because the district director never notified it of the deficiency, i.e., Next Generation's failure to address its request to the proper IRS recipient. Citing the wrongful-levy regulations, Next Generation points out that when the district director fails to notify the claimant within thirty days of any inadequacies plaguing a request, the request must be treated as adequate. 26 C.F.R. §301.6343-2(c).

There is an obvious logical flaw to Next Generation's argument: how could the district director inform Next Generation that its request was improperly addressed when the district director never received the request in the first place, precisely because it was improperly addressed? See, e.g., Amwest, 28 F.3d at 697 ("It only makes sense ... that before the district director can notify the claimant of any inadequacies, it is first necessary that the district director actually received the request."). Next Generation gets around this problem by charging the district director with knowledge of its request to have the levied funds restored to its bank accounts based on the fact that the Taxpayer Advocate Service and the revenue officer in charge of Next Generation's case knew about its request. In other words, because certain IRS officials knew that Next Generation was seeking the return of its levied funds, Next Generation claims that all other relevant IRS officials are presumed to have known as well.

There is certainly a fairness appeal to Next Generation's argument. It ought not be asking too much for the left hand to know what the right hand is doing, especially when otherwise the burden is placed on the public to independently open multiple channels of identical communication with the same federal agency. But things are not so straightforward here because courts have strictly observed, to say the least, the requirements of the wrongful-levy regulations, including the requirement that the written request seeking the return of 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 was made." 26 C.F.R. § 301.6343-2(b).

In Amwest, for example, the wrongful-levy claimant mailed its request to the IRS revenue officer in charge of its case, rather than the district director. 28 F.3d at 692. While acknowledging that this "seemed the most logical thing to do," id., given that the notice of levy advised the claimant to contact the revenue officer with any questions, the Seventh Circuit nonetheless held that wrongful-levy claimants must comply with the requirements of 26 C.F.R. § 301.6343-2(b) to the letter, that Amwest's improperly addressed request did not meet this standard, and that therefore the statute of limitations had not been extended and the claim had to be dismissed as time barred. Id. at 696.

In LaBonte v. United States, 233 F.3d 1049 (7th Cir. 2000), the Seventh Circuit again dismissed a wrongful-levy claim for failure strictly to observe the procedural requirements for making a written request. The claimant there did virtually everything right: he addressed his request to the correct IRS division (the Special Procedures Staff), sent it to the same address and fax number as the district director, and specifically requested in the body of the letter that the "district director" release the levy on his property. Id. at 1052-53. All the claimant neglected to do was specifically address his letter to "the district director, marked to the attention of the Chief of the Special Procedures Staff." Id. at 1053. The Seventh Circuit concluded that this omission alone was enough to require dismissal of his claim. Similarly, in BSC Term of Years Trust v. United States, No. 00-CA-270, 2000 U.S. Dist. LEXIS 20058, *10 (W.D. Tex. Dec. 28, 2000), the court dismissed a claim where the request for the return of the levied property was properly addressed to the district director, but was mailed to the wrong address in Austin, Texas. See also Peoples Banking Co. v. United States, No. C2-93-785, 1994 U.S. Dist. LEXIS 7151, *13 (S.D. Ohio May 18, 1994) (holding that the filing of a cross-claim against the United States in an underlying state-court action did not constitute a written request for the return of levied property under 26 C.F.R. § 301.6343-1(b) and therefore the limitations period had not been extended).

The foregoing precedent, although not binding on this Court, plainly support dismissing Next Generation's claim as untimely. Next Generation has not pointed to any authorities holding to the contrary. Moreover, this Court recognizes the good reasons supporting the requirement that a request for the return of levied property be addressed to the proper recipient. As the Amwest Court noted, it is the district director who is vested with administrative authority to resolve wrongful-levy claims and so directing requests to any other IRS official is pointless. See Amwest, 28 F.3d at 696. And, "given the size of the IRS, it is possible that a request mailed to someone besides the district director will languish on some subordinate's desk ... and never find its way to the district director." Id.

The Court is persuaded by the reasoning in Amwest, LaBonte, and the other cases cited above. But, like those other courts, this Court is not indifferent to the apparent "harshness" of the result. Amwest, 28 F.3d at 697; LaBonte, 233 F.3d at 1053. The Seventh Circuit has twice expressed concern that the IRS' communications with wrongful-levy claimants were not all they could, and perhaps should, have been. See Amwest, 28 F.3d at 697; LaBonte, 233 F.3d at 1053. In both Amwest and LaBonte, the Seventh Circuit's criticism stemmed mainly from the fact that IRS officials conducted settlement negotiations with the claimants for extended periods of time without ever mentioning that the claimants' written requests were deficient. There is no evidence showing that the IRS engaged in similarly confusing (if not misleading) behavior here.

Nonetheless, the general concern articulated in Amwest and LaBonte about the adequacy of the IRS' "procedures" in dealing with wrongful-levy claimants is still very much at play. Amwest, 28 F.3d at 698. The IRS knew, even if the precise district director did not, that Next Generation was seeking relief from the levy imposed on its bank accounts. There is no evidence, though, suggesting that the IRS did anything to educate Next Generation about its rights and responsibilities under the wrongful-levy statute, nor did the IRS forward Next Generation's dispute to the district director. 3 Of course, there does not appear to be anything that compelled the IRS to take these steps, and therefore the Court's opinion should not be read as rebuking the agency for failing to live up to its established duties.

The Court's purpose, rather, is to make plain that where the IRS has crafted specific regulations governing wrongful-levy claims, where the IRS has taken the position that courts must strictly enforce those regulations, and where the law of sovereign immunity demands that courts do so, the wisdom of the IRS' judgment --its minimalist approach of declining to provide claimants with any meaningful information about preserving their claims --is open to considerable debate. The inevitable consequence of what might be regarded as the IRS' lack of initiative is that wrongful-levy claimants are forced to independently "navigate their way through a 'regulatory maze.'" BSC, 2000 U.S. Dist. LEXIS 20058 at *12. Penalizing claimants when they go astray in a way that the IRS easily could have prevented is indeed a "disappointment," in the words of the BSC court. Id.; see also LaBonte, 233 F.3d at 1053 (commenting that "we are especially hard-pressed to explain the IRS' behavior in light of its recent efforts to improve its image in the eyes of a skeptical public"). The burden imposed on wrongful-levy claimants is especially ironic here because Next Generation sought help from, of all places, the IRS' Taxpayer Advocate Service. The mission of the Taxpayer Advocate Service is, among other things, to "assist taxpayers in resolving problems with the Internal Revenue Service." 26 U.S.C. § 7803(c)(2)(A). One may well wonder about the usefulness of a Taxpayer Advocate Service if it does not at least help taxpayers acquire the information necessary to preserve their claims.

It is not for this Court to tell the IRS how to do its job, but this case reinforces Judge Cudahy's belief, articulated in his Amwest concurrence, that "the Internal Revenue Service ought to be able to do a great deal better than its performance here indicates." Id. at 698.


V. CONCLUSION


For the foregoing reasons, the United States' motion for summary judgment is GRANTED and this case is dismissed.

IT IS SO ORDERED.
s/Algenon L. Marbley

ALGENON L. MARBLEY

United States District Court Judge

1 The wrongful-levy regulations were amended in 2007. Rather than requiring a claimant's written request to be addressed to "the district director (marked for the attention of the Chief, Special Procedures Staff)," the amended regulation, § 301.6343-2T, now provides that the written request "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)' ... ." 26 C.F.R. § 301.6343-2T(b). The amended regulation goes on to state that "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." Id. Because the amended regulation was not promulgated until after the events giving rise to this suit occurred, the Court will continue to apply the prior version, which required the claimant to address the request to the district director.

2 Next Generation does not argue that the IRS' regulations are not part of the conditions Congress attached to its waiver of sovereign immunity. The Amwest Court considered the issue and concluded that "the requirement that requests for the return of property be mailed specifically to the district director [is binding on the courts], and therefore constitutes an additional condition to the government's consent to be sued under § 7426(a)(1)." 28 F.3d at 696.

3 The Government does not defend, nor could it, by arguing that Next Generation's submission of its Form 911 was insufficient to apprise the IRS that Next Generation was challenging the imposition of the levy. The Form 911 specifically sought return of the levied funds and stated that "[t]his levy is for taxes owed by Allied Communications."

Next Generation Wireless, Ltd., Plaintiff v. The United States of America, Defendant.

U.S. District Court, So. Dist. Ohio, East. Div.; 06-CV-838, June 14, 2007.

[ Code Secs. 6532 and 7426]

Limitations period: Suits by nontaxpayers: Wrongful levy: Request to IRS: Tolling. --
A federal district court denied the government's motion to dismiss as untimely a corporation's wrongful levy complaint. Although the complaint was filed after the Code Sec. 6532 limitations period had expired, the complaint alleged that the claimant made a proper written request to the IRS for return of the levied funds. While the government conceded that under Code Sec. 6532(c)(2) the limitations period is extended from nine months to 12 months if a proper written request for return of the funds is made by a claimant, it contended that the company failed to prove that its request was proper and, therefore, the extended period did not apply. Despite the government's contention, the claimant was not required to prove the truth of its allegation that it had made a proper written request for return of the levied funds because all allegations in a complaint are taken as true for purposes of deciding a motion to dismiss.




OPINION AND ORDER



I. INTRODUCTION


MARBLEY, District Judge: This matter comes before the Court on Defendant United States of America's ("Defendant") Motion to Dismiss for want of jurisdiction pursuant to FED. R. CIV. P. 12. Specifically, Defendant avers that Plaintiff, Next Generation Wireless, Ltd. ("Plaintiff") failed to file this action within the applicable statute of limitations. For the reasons stated herein, Defendant's Motion to Dismiss is DENIED.


II. BACKGROUND


From February 2000 until November 2003, the Internal Revenue Service ("IRS") made assessments against Allied Communications, Inc. ("Allied") and Next Generation Wireless, Inc. ("NG II") for unpaid federal unemployment and employment taxes. Based on the alleged "alter ego" relationship between Allied, NGII, and Plaintiff, the IRS filed notices of federal tax liens in the amount of $639,496,67 against Plaintiff. On or about February 14, 2006, pursuant to a levy, Key Bank transferred a payment in the amount of $15,760.86 from Plaintiff's account to the IRS.

On October 4, 2006, Plaintiff filed this action, seeking to recover the $15,760.86 transferred from Key Bank to the IRS pursuant to the wrongful levy statute, 26 U.S.C. 7426(a)(1). 1 On November 30, 2006, Defendant moved to dismiss the complaint for lack of jurisdiction. On December 1, 2006, Plaintiff amended its complaint to include the allegation that it made a written request to the IRS on or about January 13, 2006 to return the levied funds. On the same day, Plaintiff filed its opposition to Defendant's Motion to Dismiss. Plaintiff replied and the Motion is now ripe for adjudication.


III. STANDARD OF REVIEW


Defendants contend that dismissal is warranted under FED. R. CIV. P. 12(b)(1), which enables a defendant to raise by motion the defense of "lack of jurisdiction over the subject matter." When a defendant argues that the plaintiff has not alleged sufficient facts in the complaint to establish subject matter jurisdiction, the court takes the allegations in the complaint as true. Nichols v. Muskingum College, 318 F.3d 674, 677 (6th Cir. 2003). The plaintiff bears the burden of proving jurisdiction. Rogers v. Stratton Indus., 798 F.2d 913, 915 (6th Cir. 1986). In considering such a motion, however, the court has wide discretion to consider evidence outside the pleadings to resolve disputed jurisdictional facts. Nichols, 318 F.3d at 677.


IV. LAW and ANALYSIS


Defendant contends that this Court lacks jurisdiction over Plaintiff's complaint because Plaintiff filed it after the expiration of the nine month statute of limitations. The United States government may be sued only where Congress has waived its sovereign immunity. United States v. Mitchell, 463 U.S. 206 (1983). The government may attach conditions to its waiver such as a statute of limitations; when they do so, the limitations provision constitutes a condition on the waiver of sovereign immunity. Block v. North Dakota, 461 U.S. 273, (1983). When such conditions are attached, they must be strictly construed. See, Whittle v. United States, 7 F.3d 1259, 1261 (6th Cir. 1993).

Congress has provided for a waiver of sovereign immunity in cases where a claimant seeks the return of property seized to satisfy the tax liability of another. 26 U.S.C. §7426(a)(1). In order for the Government to waive its sovereign immunity under Section 7426, a non-taxpayer plaintiff bringing a wrongful levy action under must commence the action within nine months of the levy. 26 U.S.C. §6532(c)(1) 2 . The statute of limitations begins to run on the date on which the notice of levy is served. State Bank of Fraser v. United States [ 88-2 USTC ¶9592], 861 F.2d 954, 966-67 (6 th Cir. 1988).

Defendant issued a notice of levy to Key Bank on December 15, 2005. Plaintiff commenced this action on October 4, 2006, outside the nine month statute of limitations.

Plaintiff retorts that the statute of limitations was tolled when it filed a request with the IRS for return of the levied funds on or about January 13, 2006. Section 6532(c)(2) extends the statute of limitations to twelve months from the filing of a request with the IRS or six months from the IRS's response, whichever is shorter. 3

In its reply, Defendant concedes that a properly filed request to the IRS tolls the statute of limitations and grants the Court jurisdiction in this case. Defendant, however, states that Plaintiff did not "prove the facts necessary to establish that the provisions of Section 6532(c) were strictly complied with." In its amended complaint, Plaintiff did not plead that the request: (1) was directed to the district director of the IRS; or (2) included Plaintiff's name and address; as required by the applicable Treasury Regulations. 4 Defendant claims that the burden of proof regarding whether the request was procedurally proper lies with Plaintiff. In doing so, Defendant relies on Labonte vs. United States [ 2001-1 USTC ¶50,104], 233 F.3d 1049, 1052 (7th Cir. 2000), in which the Seventh Circuit refused to toll the statute of limitations in a wrongful levy action pursuant to 26 U.S.C. §6532(c)(2) because the plaintiff's request was not sent to the district director of the IRS.

In this case, however, because Plaintiff did not attach the request to the IRS to the complaint, the Court cannot ascertain whether the request met the requirements of 26 C.F.R. §301.6343-2. Defendant asks this Court to dismiss the action because, without proof that Plaintiff's requests met the requirements of the IRS regulations, the statute of limitations is not tolled, the action was filed late, the Government has not waived sovereign immunity, and thus, the Court does not have subject matter jurisdiction. While the burden of proving subject matter jurisdiction lies with the Plaintiff, there is no precedent which indicates that the burden is on Plainitiff to establish the validity of its request at this stage in the proceeding. The Court must take the allegations in the complaint as true. Nichols v. Muskingum College, 318 F.3d 674, 677 (6th Cir. 2003). Plaintiff specifically pled that its request was in "conformity with 26 U.S.C. Section 6532(c)(2)." The Court can extrapolate from this assertion, that Plaintiff also contends that its request met the standards proscribed in 26 C.F.R. §301.6343-2. Defendant's theory that Plaintiff failed to proffer evidence sufficient to show that the request met the IRS regulations is best saved for summary judgment. Therefore, Defendant's Motion to Dismiss is DENIED .


V. CONCLUSION


For the reasons stated herein, Defendant's Motion to Dismiss is DENIED.

IT IS SO ORDERED.

1 26 U.S.C. §7426. Civil actions by persons other than taxpayers:

(a) Actions permitted: (1) Wrongful levy. --If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States. Such action may be brought without regard to whether such property has been surrendered to or sold by the Secretary.

2 26 U.S.C. §6532(c)(1) states:

Suits by persons other than taxpayers. --

(1) General rule. --Except as provided by paragraph (2), no suit or proceeding under section 7426 shall be begun after the expiration of 9 months from the date of the levy or agreement giving rise to such action.

3 26 U.S.C. §6532(c)(2) states:

Period when claim is filed. --

If a request is made for the return of property described in section 6343(b), the 9-month period prescribed in paragraph (1) shall be extended for a period of 12 months from the date of filing of such request or for a period of 6 months from the date of mailing by registered or certified mail by the Secretary to the person making such request of a notice of disallowance of the part of the request to which the action relates, whichever is shorter.

4 In order to qualify for the exception under Section 6532(c)(2), the claimant must satisfy the specific requirements for a proper written request as set forth by 26 C.F.R. §301.6343-2. The request must 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 was made." 26 C.F.R. §301.6343-2(b). The request must also contain certain specific information, including (1) the name and address of the person submitting the request; (2) a detailed description of the property levied upon; (3) a description of the claimant's basis for claiming an interest in the property levied upon; (4) the name and address of the taxpayer, the originating Internal Revenue district and the date of the levy. See 26 C.F.R. §301.6343-2(b)(1)-(4). If the written request does not contain the proper information, it will still be considered an adequate written request "unless a notification is mailed by the director to the claimant within 30 days of receipt of the request to inform the claimant of the inadequacies...." 26 C.F.R. §301.6343-2(c).

Labonte vs. United States [ 2001-1 USTC ¶50,104], 233 F.3d 1049, 1052 (7th Cir. 2000).

[88-2 USTC ¶9592] The State Bank of Fraser, Plaintiff-Appellee, Cross-Appellant v. United States of America, Defendant-Appellant, Cross-Appellee
(CA-6), U.S. Court of Appeals, 6th Circuit, 87-1666, 87-1789, 11/18/88, 861 F2d 954, Affirming and reversing an unreported District Court decision

[Code Secs. 6323 , 6332 , 6532 , and 7426 --Results unchanged by the Tax Reform Act of 1986 ]

Levy: Liens: Suits by nontaxpayer: Statute of limitations.--A bank whose security interest gave it a right to apply a depositor's checking account proceeds against a debt owed to it by the depositor could not apply the proceeds after it was served with a notice of levy by the IRS to enforce a federal tax lien. The IRS's lien took priority. Given the strength of the law forbidding the bank's setoff of the proceeds, the setoff was unreasonable, warranting a penalty (half of the size of the proceeds) against the bank for failure to turn over the proceeds to the IRS. In addition, the bank's security interest in the depositor's contract rights amounted to an interest in the accounts receivable that arose under the contracts. Since an exception under the rules on tax liens permitted the security interest to take precedence over the federal tax lien against the accounts receivables, the bank could recover sums claimed by the IRS in a levy against the individuals or entities that owed the receivables to the depositor. The bank was time-barred from pressing a wrongful levy action to recover other sums levied by the IRS. Service of notice of levy started the running of the statute of limitations. BACK REFERENCES: 88FED ¶5362.0196, 88FED ¶5362.0199, 88FED ¶5371.13, 88FED ¶5498.25 and 88FED ¶5784K.195
G. Timothy Moore, Blomberg, Anderson & Moore, P.C., Seven N. Gratiot, Mount Clemens, Mich. 48043, for plaintiff-appellee, cross-appellant. William S. Rose, Jr., Assistant Attorney General, William S. Estabrook III, Gary R. Allen, Douglas Coulter, Department of Justice, Washington, D.C. 20530, for defendant-appellant, cross-appellee.
Before MARTIN and NELSON, Circuit Judges, and CONTIE, Senior Circuit Judge.
CONTIE, Senior Circuit Judge:
The United States (the Government) appeals and The State Bank of Fraser (the Bank) cross appeals from the judgment of the district court in this wrongful levy action brought under 26 U.S.C. §7426 1 in which the Government counterclaimed for the purpose of enforcing a levy pursuant to 26 U.S.C. §6332(c) . 2 For the following reasons, we affirm in part and reverse in part the judgment of the district court.
I.
On March 11, 1982, Cannon Electric Company 3 entered into a written security agreement with the Bank. Under the terms of the agreement, the Bank received a security interest in all of Cannon's existing and after acquired assets, including accounts and contract rights. 4 This agreement secured a promissory note executed by Cannon in favor of the Bank. At all relevant times, Cannon owed the Bank the principal sum of not less than $162,541.40.
On November 29, 1982, a delegate of the Secretary of the Treasury made an assessment against Cannon for social security and withheld income taxes due for the third quarter of 1982. Similar assessments were made for the fourth quarter of 1982 and the first two quarters of 1983. Despite notice and demand for payment, Cannon failed or refused to pay the assessed tax liabilities, which amounted to $150,853.11 exclusive of accrued interest and penalties.
On September 26, 1983, the Secretary filed a Notice of Federal Tax Lien with the Michigan Secretary of State with respect to the tax liabilities for the third and fourth quarter of 1982 and the first quarter of 1983. On November 1, 1983, a notice was filed with respect to the liabilities for the second quarter of 1983.
Commencing on September 12, 1983, the Secretary began serving notices of levy on various accounts receivable debtors of Cannon. Pursuant to these notices of levy, the Government received $88,447.24, which it applied to Cannon's outstanding assessments. The only documents served on the accounts receivable debtors were the notices of levy.
On November 4, 1983, the IRS delivered a notice of levy to the Bank on account of the outstanding tax liabilities of Cannon. At that time, Cannon maintained a checking account with the Bank which contained a balance of $21,225.14 and was in default on its loan with the Bank. After receiving the notice of levy, the Bank debited Cannon's account in the amount of $21,225 and offset the amount against the delinquent loan balance owed to the Bank. The Bank did not make any payment with respect to the November 4th notice of levy.
On October 2, 1984, the Bank made a formal written claim to the IRS for return of funds received by the IRS from Cannon's accounts receivable debtors. On October 23, 1984, the IRS denied the Bank's claim.
On April 19, 1985, the Bank filed a complaint seeking return of funds received by the Government pursuant to the notice of levy served on Cannon's accounts receivable debtors. The basis of its complaint was that its security interest in the accounts receivable took priority over the tax lien. On July 10, 1985, the Government answered and pled as one of its defenses that as to certain of the levies the statute of limitations had run. The Government also filed a counterclaim for enforcement of the November 4, 1983 levy. It sought $21,225.14, the amount in Cannon's checking account, and a fifty percent penalty for failure to honor the levy.
The Bank filed a motion for summary judgment and the Government filed a motion for partial summary judgment. A hearing was held, after which the district court made the following orders:
--The Bank was awarded a judgment of $22,957.22 plus interest. This amount represented the funds received by the Government pursuant to notices of levy served on or after January 2, 1984.
--The Government was awarded a judgment of $21,225.14 on its counterclaim for enforcement of the November 4, 1983 levy.
--The Government's claim for the fifty percent penalty was dismissed for the reason that the court found that the Bank had reasonable cause for failing to honor the levy.
--The Bank's claim for return of $34,370.49 which represented the funds received by the Government pursuant to notices of levy served prior to January 2, 1984 was dismissed.
--A trial was ordered to determine when three additional notices of levy were served, since there was a factual dispute over whether they were served prior to January 2, 1984.
The matter was tried on March 5, 1987, after which the court found that the three notices of levy in question were served prior to January 2, 1984 and, therefore, the Bank's action to recover funds received pursuant to these notices was time barred. Judgment for the Government was entered on May 12, 1987.
On July 9, 1987, the Government filed a notice of appeal. It appeals from the judgment for the Bank for return of the funds received by the Government pursuant to notices of levy served after January 2, 1984 and from the dismissal of the claim for the fifty percent penalty. On July 24, 1987, the Bank cross-appealed from the judgment in favor of the Government on its action to enforce the November 4, 1983 levy and from the dismissal of its claim to funds received by the Government pursuant to notices of levy served prior to January 2, 1984.
This case presents five issues. Three issues arise from the Government's action to enforce the November 4, 1983 levy. The Bank argues that since it exercised its right to setoff on Cannon's account after receiving the notice of levy it did not hold property or rights to property belonging to Cannon. The Bank also argues that the Government should have been estopped from asserting its counterclaim for enforcement of the levy. The Government argues that the Bank did not have reasonable cause for failing to honor the levy and, therefore, it should have been assessed the fifty percent penalty. The last two issues arise from the Bank's wrongful levy action. The Government argues that the Bank did not have a priority interest in Cannon's after-acquired accounts receivables. Finally, the Bank argues that its wrongful levy action was not time barred.
II.
In United States v. National Bank of Commerce [85-2 USTC ¶9482 ], 472 U.S. 713 (1985), the Supreme Court summarized the statutory scheme whereby the Government collects taxes from recalcitrant taxpayers.
Section 6321 of the Code, 26 U.S.C. §6321 , provides: "if any person liable to pay any tax neglects or refuses to pay the same after demand, the amount . . . shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person." Under the succeeding §6322 , the lien generally arises when an assessment is made, and it continues until the taxpayer's liability "is satisfied or becomes unenforceable by reason of lapse of time."
The statutory language "all property and rights to property," appearing in §6321 . . ., is broad and reveals on its face that Congress meant to reach every interest in property that a taxpayer might have. 'Stronger language could hardly have been selected to reveal a purpose to assure the collection of taxes.'
A federal tax lien, however, is not self-executing. Affirmative action by the IRS is required to enforce collection of the unpaid taxes. The Internal Revenue Code provides two principal tools for that purpose. The first is the lien-foreclosure suit. Section 7403(a) authorizes the institution of a civil action in federal district court to enforce a lien 'to subject any property, of whatever nature, of the delinquent, or in which he has any right, title, or interest, to the payment of such tax.' Section 7403(b) provides: 'All persons having liens upon or claiming any interest in the property involved in such action shall be made parties thereto.' The suit is a plenary action in which the court 'shall . . . adjudicate all matters involved therein and finally determine the merits of all claims to and liens upon the property.' §7403(c) . The second tool is the collection of the unpaid tax by administrative levy. The levy is a provisional remedy and typically 'does not require any judicial intervention.' The governing statute is §6331(a) . It authorizes collection of the tax by levy which, by §6331(b) , 'includes the power of distraint and seizure by any means.'
In the situation where a taxpayer's property is held by another, a notice of levy upon the custodian is customarily served pursuant to §6332(a) . This notice gives the IRS the right to all property levied upon, and creates a custodial relationship between the person holding the property and the IRS so that the property comes into the constructive possession of the Government. If the custodian honors the levy, he is 'discharged from any obligation or liability to the delinquent taxpayer with respect to such property or rights to property arising from such surrender or payment.' §6332(d) . If, on the other hand, the custodian refuses to honor a levy, he incurs liability to the Government for his refusal. §6332(c)(1) .
The administrative levy has been aptly described as a 'provisional remedy.' In contrast to the lien-foreclosure suit, the levy does not determine whether the Government's rights to the seized property are superior to those of other claimants; it, however, does protect the Government against diversion or loss while such claims are being resolved. 'The underlying principle' justifying the administrative levy is 'the need of the government promptly to secure its revenues.' 'Indeed, one may readily acknowledge that the existence of the levy power is an essential part of our self-assessment tax system,' for it 'enhances voluntary compliance in the collection of taxes.' 'Among the advantages of administrative levy is that it is quick and relatively inexpensive.'
Id. at 719-20 (citations omitted).
The first three issues arise from the Bank's failure to honor the November 4, 1983 notice of levy.
A.
The extent of personal liability for failing to honor a levy is the value of the property or rights to property not surrendered. 26 U.S.C. §6332(c)(1) . "The courts uniformly have held that a bank served with an IRS notice of levy 'has only two defenses for a failure to comply with the demand.' One defense is that the bank, in the words of §6332(a) , is neither in 'possession of' nor 'obligated with respect to' property or rights to property belonging to the delinquent taxpayer. The other defense . . . is that the taxpayer's property is 'subject to a prior judicial attachment or execution.' " National Bank of Commerce, 472 U.S. at 722-23 (citations omitted). The Bank argues that the levy was unenforceable against it because it was not in possession of or obligated with respect to property or rights to property belonging to Cannon.
Factually, there was no dispute on this issue. The parties stipulated that on November 4, 1983 Cannon had a checking account with the Bank which had $21,225.14 in it. Cannon had the right to withdraw funds from that account. There is also no dispute that under its security agreement the Bank had the contractual right to set off these funds against Cannon's delinquent loan with the Bank. Finally, it is also undisputed that the Bank chose to set off against these funds after it was served with the notice of levy. 5
" '[I]n the application of a federal revenue act, state law controls in determining the nature of the legal interest which the taxpayer has in the property. . . .' " Aquilino v. United States [60-2 USTC ¶9538 ], 363 U.S. 509, 513 (1960) (quoting Morgan v. Commissioner [40-1 USTC ¶9210 ], 309 U.S. 78, 82 (1940)). The Bank correctly asserts that under Michigan law, funds on general deposit in a bank are the property of the bank. See Guilds v. Monroe County Bank, 41 Mich. App. 616, 619 (1972) (adopting rule stated in 10 Am. Jur. 2d, Banks §666 pp. 636-37). It argues that the Government can only acquire the rights that Cannon had at the time of the levy and that since Cannon's rights to the funds in the account were "severely restricted" by the security agreement entered into between the Bank and Cannon, the Government's rights were likewise restricted. In support of its argument, it relies on United States v. Intermountain Region Concrete Co. [86-1 USTC ¶9304 ], 636 F. Supp. 280 (D. Utah 1986), appeal filed sub nom. United States v. Cache Valley Bank, No. 86-2432 (10th Cir. Oct. 1, 1986), and Trust Company v. United States [84-2 USTC ¶9614 ], 735 F.2d 447 (11th Cir. 1984).
In Intermountain, a lien foreclosure action, the district court summarized the relevant facts as follows:
At or about 9:20 a.m. on July 27, 1981, the bank received notice of an IRS levy purporting to attach all property of Intermountain then in the bank's possession. The bank's vice president, Michael Gomm, examined Intermountain's accounts and determined that its funds were negligible. Accordingly, Mr. Gomm returned the notice of levy to the IRS with the notation, '7/27/81, 9:30 a.m.; MG, NO FUNDS AVAILABLE.' Later that same day, deposits totalling $28,416.06 were made to Intermountain's checking account. Those deposits included a check for $27,000 from Interwest Construction Company in payment for services rendered by Intermountain. Understandably alarmed by the notice of levy, the bank on July 28, 1981, offset the entire amount in Intermountain's checking account--$29,614.41--against loans 269 U and 270 U. The IRS now seeks to recover that amount from the bank.
636 F. Supp. at 282 (footnotes omitted). The court in granting summary judgment for the bank, looked to Utah law to determine whether the bank would have had to honor a demand by the taxpayer for the funds in its account when the account holder was indebted to the bank. The court found that the depositor in that circumstance does not have an unrestricted right to withdraw the funds and the depositor's right to withdraw was subject to the bank's right of offset. Citing to the rule that the government " 'stands in the taxpayer's shoes' when it seeks to enforce a tax assessment against a third party allegedly holding a taxpayer's 'property' ", the court held that the government could not enforce its foreclosure lien. Id. at 285 (quoting United States v. Rodgers [83-1 USTC ¶9374 ], 461 U.S. 677, 691 (1983)).
The applicability of the court's holding in Intermountain to this case is severely limited by the fact that it was a lien foreclosure and not a levy enforcement action and the fact that the setoff did not occur after the notice of levy was served. If this case had been a levy enforcement case, and if the bank had attempted to setoff against the accounts of the taxpayer after the notice of levy was served, the court indicated that it would have reached a different result and enforced the levy. See Intermountain, 636 F. Supp. at 282. ("The government concedes that a levy is effective only against 'amounts in the taxpayer's account which have not previously been removed by actual exercise of the bank's right to setoff.' ")
Trust Company [84-2 USTC ¶9614 ], 735 F.2d 447, the other case relied on by the Bank, is equally unavailing since it also was not a levy enforcement action, but rather involved a wrongful levy action brought by the bank after it complied with a notice of levy served by the Government.
Therefore, the Bank's cases do not provide much guidance in resolving the issue of whether a bank which has a right to offset against a depositor's account can exercise that right against the Government after it has been served with a notice of levy.
The Government argues that since Cannon had the right to withdraw funds at the time of the levy, the Bank held property or rights to property of the taxpayer which the Government could levy upon. It asserts that the Bank cannot defeat the levy by a post-levy exercising of its right to setoff. Decisions from several other jurisdictions support the Government's position. See United States v. Central Bank, [88-1 USTC ¶9256 ], 843 F.2d 1300, 1309-10 (10th Cir. 1988); J.A. Wynne Co. v. R.D. Phillips Construction Co. [81-1 USTC ¶9305 ], 641 F.2d 205, 209 (5th Cir. 1981) (per curiam); United States v. Citizens and Southern Nat'l Bank [76-2 USTC ¶9665 ], 538 F.2d 1101, 1107 (5th Cir. 1976), cert. denied, 430 U.S. 945 (1977); United States v. Sterling Nat'l Bank & Trust Co. [74-1 USTC ¶9336 ], 494 F.2d 919, 922-23 (2d Cir. 1974); Bank of America Nat'l Trust and Savings Assoc. v. United States [65-1 USTC ¶9429 ], 345 F.2d 624, 625 (9th Cir.) (per curiam), cert. denied, 382 U.S. 927 (1965); Bank of Nevada v. United States [58-1 USTC ¶9228 ], 251 F.2d 820, 826-27 (9th Cir.), cert. denied, 356 U.S. 938 (1958); United States v. Bell Credit Union [86-1 USTC ¶9337 ], 635 F.Supp 501, 503 (D. Kansas 1986).
The Bank tries to distinguish these cases by arguing that they are inapplicable because they do not deal with Michigan law. It relies on the Aquilino principle that courts look to state law to determine the existence of property or rights of property. This argument is unpersuasive, however, since the key factor relied upon by the cases cited by the Government was the fact that the right of setoff in those cases was not automatic and that it had to be exercised by the bank. See e.g., Citizens and Southern, 538 F.2d at 1107 ("Georgia cases involving the right of banks to set off debts against depositor's accounts uniformly indicate the requirement of some positive act.") It is also true under Michigan law that the right of setoff is not automatic, but must be exercised. See Monroe County Bank, 41 Mich. App. at 620 ("until the bank elects to exercise its right of setoff anyone in favor of whom checks are drawn and paid takes the funds free of any claim by the bank.")
This position is also supported by section 4 -303 of the Uniform Commercial Code which Michigan adopted in section 440.4303 of the Michigan Compiled Laws. Section 4303 deals inter alia with the effectiveness of setoffs exercised by the payor bank. The official comments to section 4 -303 state that the effective time for determining whether a stop-order is too late is when a setoff is actually made. See U.C.C. §4 -303 (Official Comments ¶5). See also Baker v. Euclid City Bank, 511 F.2d 1016, 1018 (6th Cir. 1975). Thus, it is clear that a right to setoff has to be exercised or actually made to be effective.
We are persuaded by the Government's position and the cases upon which it relies. The Bank has cited to no case which has allowed a bank to use a setoff to avoid the enforcement of a levy. In this case, it is stipulated that Cannon was permitted to draw checks and otherwise withdraw funds from its account when the Bank received the notice of levy. Michigan law, while it does hold that funds on general deposit are the property of the bank, also holds that the bank's right of setoff is not automatic but must be exercised by the bank. It is further stipulated that the bank did not exercise its right of setoff until after it was served with the notice of levy. Since a depositor's access to funds in its account is not restricted until the bank exercises its right of setoff and since the Bank in this case did not exercise its right of setoff until after the levy was served, we conclude that at the time of the levy, the Bank held property or rights to property of Cannon which were subject to the levy. Therefore, since the priority of the Bank's lien or its right of setoff is not a proper defense to a levy enforcement action, we affirm the district court's ruling on this issue.
B.
The Bank argues that the Government is estopped from asserting its enforcement of levy counterclaim because it did not move to enforce the levy when it was notified by the Bank that it was going to setoff the funds levied upon, and that the Bank acted to its detriment by setting off those funds and crediting them to Cannon's loan account. 6 The basis of its detrimental reliance argument seems to be that because the Government did not seek prompt enforcement of the levy the Bank was forced to defend the counterclaim and that it would lose the funds it credited to the Cannon loan account even though it had a priority interest in them. 7
"Ordinarily the United States is not estopped by acts of individual officers and agents. At the very minimum some affirmative misconduct by a government agent is required as a basis of estoppel." United States v. River Coal Co., 748 F.2d 1103, 1108 (6th Cir. 1984) (citations omitted).
The Bank argues that because a local Internal Revenue Service collection policy was contrary to controlling law, it represented affirmative misconduct. The policy that the Bank refers to is an unwritten policy carried out by some revenue agents who when informed that the Bank was exercising a setoff based on a claimed priority interest would satisfy themselves that the priority was genuine and proceed no further. We are not persuaded by the Bank's argument. The fact that in certain circumstances the IRS may not have pursued levies when a bank notified it of a prior lien and setoff, does not establish affirmative misconduct in this case. The allegation that the Government committed an affirmative act is tenuous, since although the Government may have had this local policy there is no evidence that it followed the policy in this case. This is demonstrated by the fact that the Government decided to enforce the levy.
We also believe that the Bank's reliance was unreasonable. The law concerning levy enforcement actions is settled, notwithstanding the unofficial local IRS policy. The effect of serving the notice of levy was to convert Cannon's bank account to the Government. There is no time limit on the Government's right to enforce the levy and the claim of a priority interest is not a proper defense to a levy enforcement action. Rather, such a defense should be raised in a wrongful levy action. Given the foregoing, we believe the Bank when served with the notice of levy should have filed a wrongful levy action to protect its interests rather than rely on a local unwritten policy.
C.
The final issue involving the levy enforcement action concerns the district court's decision not to impose the fifty percent penalty on the Bank.
Section 6332(c) provides for a fifty percent penalty if a person required to surrender property or rights to property fails or refuses to do so without reasonable cause. In this case, although the district court found that the Bank was liable for the funds levied upon, it did not impose the penalty since it found that the Bank had reasonable cause for failing to honor the levy.
The Government argues that the Bank's position concerning this levy, i.e., that because it had the right of setoff it did not possess property of the taxpayer, would have been shown to be wrong by a "reasonable investigation" into the controlling law. The Government asserts that there was no "bona fide dispute" 8 as to the levied funds and therefore the penalty should have been applied.
The Bank argues that the district court correctly decided that it had reasonable cause for failing to honor the levy. It relies in part 9 on United States v. Citizens and Southern National Bank [76-2 USTC ¶9665 ], 538 F.2d 1101 (5th Cir. 1976) and United States v. Sterling National Bank & Trust Co. [74-1 USTC ¶9336 ], 494 F.2d 923 (2d Cir. 1974), where courts confronted with a similar issue chose not to impose the fifty percent penalty. In Sterling National Bank, the court in refusing to impose the fifty percent penalty, raised the following question: "The question here is whether we should penalize the Sterling Bank for forcing the government to litigate an unsettled question of law." Sterling National Bank, 494 F.2d at 919. The Bank asserts that in this case the effect of the setoff right on the question of whether the Bank held property which could be levied upon was an unsettled question of Michigan law.
We do not agree with the Bank's position. Although there is no authority interpreting Michigan law on this issue, the Bank has not articulated any aspect of Michigan law which would distinguish this case from the great weight of authority from other jurisdictions. Also, the fact that the Bank has not cited to any case where a bank's unexecuted right of setoff was allowed to defeat a levy enforcement action provides further evidence that the Bank was not litigating an unsettled question of law. As Judge Friendly noted in dissent in Sterling National Bank, " 'reasonable cause' should not be read to include a clearly erroneous view of the law, stubbornly adhered to after investigation should have disclosed the error." Sterling National Bank, 494 F.2d at 924.
Accordingly, we hold that given the state of the law the Bank did not have reasonable cause for failing to honor the levy. Therefore, the district court erred in failing to impose the section 6332(c) penalty.
III.
The final two issues concern the Bank's wrongful levy action which was brought to recover funds collected by the Government pursuant to notices of levy served on Cannon's accounts receivable debtors.
A.
Under section 6321 of the Internal Revenue Code, the failure of a taxpayer to pay taxes after demand gives rise to a tax lien in favor of the Government which attaches to all property and rights to property, whether real or personal belonging to such a person. Pursuant to section 6322 , the tax lien arises automatically at the time of assessment, continues until the tax liability is satisfied or collection is barred by the statute of limitations, and attaches to after acquired property. Glass City Bank v. United States [45-2 USTC ¶9449 ], 326 U.S. 265, 267 (1945). The priority of federal liens vis-a-vis other liens is governed by the principles that first in time is first in right and that tax liens are superior to inchoate liens. United States v. City of New Britain [54-1 USTC ¶9191 ], 347 U.S. 81, 85-86 (1954). "The Federal Tax Lien Act of 1966, 80 Stat. 1125, as amended, 26 U.S.C. §6323 , . . . modified the Federal Government's preferred position under the choateness and first-in-time doctrines and recognized the priority of many state claims over federal tax liens." United States v. Kimbell Foods, Inc. 440 U.S. 715, 738 (1979) (footnote omitted).
This issue involves the provisions of section 6323(c) which reads in pertinent part as follows:
Protection for certain commercial transactions financing agreements, etc.
(1) In general.--To the extent provided in this subsection, even though notice of a lien imposed by section 6321 has been filed, such lien shall not be valid with respect to a security interest which came into existence after tax lien filing but which--
(A) is in qualified property covered by the terms of a written agreement entered into before tax lien filing and constituting--
(i) a commercial transactions financing agreement, and . . .
(B) is protected under local law against a judgment lien arising, as of the time of the tax lien filing, out of an unsecured obligation.
(2) Commercial transactions financing agreement--For purposes of this subsection--
(A) Definition.--the term "commercial transactions financing agreement" means an agreement (entered into by a person in the course of his trade or business)--
(i) to make loans to the taxpayer to be secured by commercial financing security acquired by the taxpayer in the ordinary course of his trade or business, or
(ii) to purchase commercial financing security (other than inventory) acquired by the taxpayer in the ordinary course of his trade or business;
but such an agreement shall be treated as coming within the term only to the extent that such loan or purchase is made before the 46th day after the date of tax lien filing or (if earlier) before the lender or purchaser had actual notice or knowledge of such tax lien filing.
(B) Limitation on qualified property.--The term "qualified property", when used with respect to a commercial transactions financing agreement, includes only commercial financing security acquired by the taxpayer before the 46th day after the date of tax lien filing.
(C) Commercial financing security defined.--The term "commercial financing security" means (i) paper of a kind ordinarily arising in commercial transactions, (ii) accounts receivable . . . .
The commercial security agreement entered into between the Bank and Cannon gave the Bank a security interest in all assets of Cannon, including accounts. The agreement defined accounts as follows: " 'Accounts' shall consist of accounts, documents, chattel paper, instruments, contract rights, general intangibles, and choses in action. . . ."
At issue on appeal are funds remitted to the Government which were earned after November 11, 1983 10 from contracts entered into before November 11, 1983.
The district court ruled that the Bank could recover from the Government certain funds which the Government had received from the accounts receivable debtors of Cannon:
As to priority, the Court notes that Regulation 6323(c)(1)(c)(2) distinguishes between a contract right and an account receivable, and the Court finds that the account receivable term is the point at which the bank has an entitlement to--well, first of all, the electric company had the entitlement to the funds which are here in issue. The accounts receivable are the right to payment for goods sold or for services rendered under the regulation. So once performance was rendered by Cannon for the contracts which it had, they became federally defined accounts receivable and constituted proceeds of the contract rights of Cannon Electric.
Cannon acquired rights to property or property in those contracts, then on or before 11-11-83, and the bank had priority over the United States, and to those entered after September 26th, '83, and on or before November 11th, '83.
Although these accounts receivables were earned after November 11, 1983, the contracts which gave rise to the accounts receivable were entered into before November 11, 1983. The Bank had a security interest in the proceeds of contract rights of Cannon. The Bank successfully relied on 26 C.F.R. §301.6323(c)-1(d) below to obtain the proceeds of the contracts received after November 11, 1983. 11
Section 301.6323(c)-1(d) provides that a tax lien is not valid with respect to a security interest which comes into existence after the tax lien filing, is in qualified property covered by the terms of a commercial transactions financing agreement entered into before the tax lien filing, and is protected under local law against a judgment arising, as of the time of the tax lien filing, out of an unsecured obligation. The section provides the following definitions of key terms:
Contract rights: any right to payment under a contract not yet earned by performance and not evidenced by an instrument or chattel paper.
Accounts receivable: any right to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper.
Qualified property consists solely of commercial financing security acquired by the taxpayer-debtor before the 46th day after the date of tax lien filing.
Section 6323(c) -1 provides that an account receivable is acquired by the taxpayer at the time, and to the extent, a right to payment is earned by performance. A contract right is acquired at the time the contract is made. Identifiable proceeds which arise from the collection or disposition of qualified property by the taxpayer are considered to be acquired at the time such qualified property is acquired. 26 C.F.R. §301.6323(c)-1(d) .
The Bank argued that although the contract rights turned into accounts receivable upon performance of the contract, the succeeding accounts receivable were proceeds of the contract rights and therefore were acquired before November 11, 1983.
The government argues that this ruling is contrary to the statute. It argues that accounts receivable are not acquired for the purposes of section 6323 until the services giving rise to them are performed. It contests the district court's holding that the funds received in this case were proceeds of contract rights and therefore acquired at the time the contract rights were acquired. It argues that since the accounts receivable in this case were not received until after the 45 day time period the Bank did not have a superior interest in them.
The resolution of this issue centers on a determination of whether the accounts receivables were identifiable proceeds of the contract rights in which the Bank had a protected interest.
One of the purposes of the Federal Tax Lien Act was to "conform the lien provisions of the internal revenue laws to the concepts developed in [the] Uniform Commercial Code." S. Rep. No. 1708, 89th Cong. 2d Sess. 1, reprinted in 1966 U.S. Code Cong. & Admin. News 3722. Many of the definitions set forth in section 6323 were taken from the provisions of Article 9 of the U.C.C. At the time of the Federal Tax Lien Acts enactment, the U.C.C. included the following in its definition of the term proceeds. "The term also includes the account arising when the right to payment is earned under a contract right." U.C.C. §9-306 (Text prior to 1972 amendment). 12
Section 301.6323(c)-1(d) states that "identifiable proceeds which arise from the collection or disposition of qualified property by the taxpayer, are considered to be acquired at the time such qualified property is acquired. . . ." To accept the Government's argument that the Bank had a priority interest in the contract right, but had no interest in the right when the contract was executed, would render the term collection in section 301.6323(c)-1(d) a nullity as far as contract rights were concerned since the secured creditor cannot collect on the contract rights until the contract is executed. Considering the language of section 301.6323(c)-1(d) and the language of the pre-1972 version of section 9-306 of the U.C.C., we believe the district court correctly determined that the accounts receivable were proceeds of contract rights in which the Bank had a protected security interest under section 6323 . 13
B.
The last issue which confronts us is whether the district court erred in ruling that the Bank's wrongful levy action to recover payments made to the IRS pursuant to notices of levy served on Cannon's accounts receivable debtors prior to January 2, 1984 was time barred.
The statute of limitations applicable to the Bank's section 7426 wrongful levy suit is found in 26 U.S.C. §6532(c) . See 26 U.S.C. §7426(h) .
(c) Suits by persons other than taxpayers.--
(1) General rule.--Except as provided by paragraph (2), no suit or proceeding under section 7426 shall be begun after the expiration of 9 months from the date of the levy or agreement giving rise to such action.
(2) Period when claim is filed.--If a request is made for the return of property described in section 6343(b) , the 9-month period prescribed in paragraph (1) shall be extended for a period of 12 months from the date of filing of such request or for a period of 6 months from the date of mailing by registered or certified mail by the Secretary or his delegate to the person making such request of a notice of disallowance of the part of the request to which the action relates, whichever, is shorter.
In this case, the Bank filed a formal written claim to the IRS for return of the funds collected from Cannon's accounts receivable debtors on October 2, 1984. The district court ruled that the Bank was foreclosed from recovering payments remitted to the IRS in response to notices of levy served prior to January 2, 1984. 14
The Bank correctly argues that the date that the statute of limitations begins to run is the date of levy. The term date of levy is not defined in section 6532 or any other part of the code. The Bank argues that "date of levy" is defined by section 6502(b) . Section 6502 reads in pertinent part as follows:
§6502 . Collection after assessment
(a) Length of period.--Where the assessment of any tax imposed by this title has been made within the period of limitation properly applicable thereto, such tax may be collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun--
(1) within 6 years after the assessment of the tax, . . . .
(b) Date when levy is considered made.--The date on which a levy on property or rights to property is made shall be the date on which the notice of seizure provided in section 6335(a) is given. 15
The only authority for the Bank's position is found in an example which follows Treasury Regulation 301.6532-3(c) . 16
Example (1). On June 1, 1970, a tax is assessed against A with respect to his delinquent tax liability. On July 19, 1970, a levy is wrongfully made upon certain tangible personal property of B's which is in A's possession at that time. On July 20, 1970, notice of seizure is given to A. Thus, under section 6502(b) , July 20, 1970, is the date on which the levy is considered to be made. Unless a request for the return of property is sooner made to extend the 9-month period, no suit or proceeding under section 7426 may be begun by B after April 20, 1971, which is 9 months from the date of levy.
26 C.F.R. §301.6532-3(c) (emphasis added).
While this example does reference section 6502(b) in relation to a proceeding under 7426, it provides limited support since the instant case does not involve a wrongful levy on tangible personal property.
The Government counters the Bank's argument by first noting that a levy upon intangible property which cannot be physically seized is effected by service of the appropriate forms upon the party holding the property. The Supreme Court reviewed this procedure in G.M. Leasing Corp. v. United States [77-1 USTC ¶9140 ], 429 U.S. 338, 350 (1977):
Both real estate and personal property, tangible and intangible, are subject to levy. Levy upon tangible property normally is effected by service of forms of levy or notice of levy and physical seizure of the property. Where that is not feasible the property is posted or tagged. Because intangible property is not susceptible of physical seizure, posting, or tagging, levy upon it is effected by serving the appropriate form upon the party holding the property or rights to property. See Treas. Reg. §301.6331-1(a)(1) , 26 CFR §301.6331-1(a)(1) (1976).
Section 301.6331-1(a)(1) differs from section 6502 in its answer to the question when is a levy made.
Levy may be made by serving a notice of levy on any person in possession of, or obligated with respect to, property or rights to property subject to levy, including receivables, bank accounts, evidences of debt, securities, and salaries, wages, commissions, or other compensation.
26 C.F.R. §301.6331-1(a)(1) (emphasis added).
The Government goes on to argue that the service of the notice of levy in this case was sufficient to begin the running of the statute of limitations.
We agree with the Government's position and hold that the service of the notices of levy on Cannon's accounts receivable debtors commenced the running of the statute of limitations set forth in section 6532(c) . We note that several courts have acknowledged this interpretation of the statute. See American Honda Motor Co. v. United States [73-2 USTC ¶9670 ], 363 F.Supp. 988, 993 (S.D. N.Y. 1973); DeGregory v. United States [75-1 USTC ¶9498 ], 395 F.Supp. 171, 173 (E.D. Mich. 1975); Newport Nat'l Bank v. United States [83-1 USTC ¶9191 ], 556 F.Supp. 94, 97 (D. R.I. 1983); Carlos v. New York State Dept. of Taxation [82-1 USTC ¶9142 ], 531 F.Supp. 359, 362 (N.D. N.Y. 1981); Universal Specialties Inc. v. United States [77-2 USTC ¶9621 ], 443 F.Supp. 87, 88 (D. D.C. 1977); Stuyvesant Ins. Co. v. Department of Treasury [75-1 USTC ¶9287 ], 378 F.Supp. 7, 10 (S.D. N.Y. 1974). See also Mertens, Law of Federal Taxation §54A. 72 (1987) ("The nine month period acts as a statute of limitations and commences on the date on which the notice of levy is served.").
Accordingly, we conclude that the district court correctly determined that the Bank's action to recover funds received by the Government from notices of levy served prior to January 2, 1984 were time barred.
IV.
For the foregoing reasons, the district court's judgment concerning the fifty percent penalty is REVERSED. All other aspects of the judgment are AFFIRMED and the case is REMANDED for imposition of the fifty percent penalty.
1 Section 7426 reads in pertinent part as follows:
Civil actions by persons other than taxpayers
(a) Actions permitted.--
(1) Wrongful levy.--If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States.
2 Section 6332(c) reads in pertinent part as follows:
Surrender of property subject to levy
(c) Enforcement of levy.--
(1) Extent of personal liability.--Any person who fails or refuses to surrender any property or rights to property, subject to levy, upon demand by the Secretary, shall be liable in his own person and estate to the United States in a sum equal to the value of the property or rights not so surrendered. . . .
(2) Penalty for violation.--In addition to the personal liability imposed by paragraph (1), if any person required to surrender property or rights to property fails or refuses to surrender such property or rights to property without reasonable cause, such person shall be liable for a penalty equal to 50 percent of the amount recoverable under paragraph (1). . . .
3 Cannon Electric Company is the taxpayer in this case. It was not a party below.
4 The Bank filed a financing statement with respect to this agreement with the Michigan Secretary of State on March 13, 1982.
5 Had the Bank set off against Cannon's account before being served with the levy, its position would have been much stronger. See e.g., Pittsburgh National Bank v. United States [81-2 USTC ¶9626 ], 657 F.2d 36 (3d Cir. 1981).
6 There is no time limit on the Government's right to pursue claims against those who fail to honor levies.
Since the notice of levy served on appellant reduced the debt owed to Andrews to the constructive possession of the United States, it would make no sense to impose a time limit upon bringing an action to enforce the notice of levy, which appellant wrongfully failed to honor, to reduce the property right to the actual possession of the United States.
The appropriate remedy for one in appellant's position, upon whom a notice of levy has been served which he believes to be wrongful, is to surrender the property and bring an action against the government pursuant to Internal Revenue Code §7426 .
United States v. Weintraub [80-1 USTC ¶9172 ], 613 F.2d 612, 621-22 (6th Cir. 1979), cert. denied, 447 U.S. 905 (1980) (footnote omitted).
7 The issue of whether the Bank actually had a priority interest in these funds was not developed by the parties.
8 A Senate Report accompanying the Tax Lien Act stated that "it is intended that a bona fide dispute over the amount owing to the taxpayer (by the property holder) or over the legal effectiveness of the levy itself is to constitute reasonable cause under [section 6332(c) ]." S. Rep. No. 1708, 89th Cong., 2d Sess., reprinted in 1966 U.S. Code Cong. & Admin. News 3722, 3740.
9 The Bank also argues that it had reasonable cause for failing to honor the levy due to the actions of the local IRS office. Since we have already concluded that the Bank's reliance on the unwritten local policy was not reasonable, we are not persuaded by this argument.
10 This date is the outside limit of the 45 day cutoff provided in section 6323 since the tax lien was filed on September 26, 1983.
11 The Bank relied on the following portion of section 301.6323(c)-1(d) which reads as follows:
Identifiable proceeds, which arise from the collection or disposition of qualified property by the taxpayer, are considered to be acquired at the time such qualified property is acquired if the secured party has a continuously perfected security interest in the proceeds under local law. The term "proceeds" includes whatever is received when collateral is sold, exchanged, or collected.
12 Although the U.C.C. was amended in 1972 to eliminate the separate terms accounts and contract rights and merge the two concepts into one under the term account, neither the Internal Revenue Code nor the Regulations were amended to incorporate the U.C.C. changes. One of the official reasons for the U.C.C. change was that the term contract rights had "been troublesome in creating a 'proceeds' problem where a contract right becomes an 'account' by performance . . .". U.C.C. §9-106 (Official Reasons for 1972 Change).
13 The Government's argument that this interpretation would make the accounts financing provisions of section 6323(c) irrelevant is not persuasive since not all contract rights are contained in a written document and not all accounts receivable are proceeds of a contract.
14 The district court arrived at this date by subtracting nine months from the date the Bank filed its claim with the Government.
15 Section 6335(a) reads as follows:
(a) Notice of seizure.--As soon as practicable after seizure of property, notice in writing shall be given by the Secretary to the owner of the property (or, in the case of personal property, the possessor thereof), or shall be left at his usual place of abode or business if he has such within the internal revenue district where the seizure is made. If the owner cannot be readily located, or has no dwelling or place of business within such district, the notice may be mailed to his last known address. Such notice shall specify the sum demanded and shall contain, in the case of personal property, an account of the property seized and, in the case of real property, a description with reasonable certainty of the property seized.
The Bank argues that the notices of levy served in this case do not comply with section 6335(a) since they were not given after service and they do not contain the mandatory accounting of property seized.
16 The Bank does not cite to any case nor did this court's research uncover any case which applies section 6502(b) 's definition of date when levy is made to an action governed by section 6532 .
Concurring and Dissenting Opinion
NELSON, Circuit Judge
I concur in the disposition of all but one of the issues raised on appeal. That one is the issue of whether it was error for the district court to refrain from imposing a 50% penalty on the Bank. I cannot say that the district court was wrong in concluding that the Bank had "reasonable cause" for acting as it did when served with the Government's demand for the proceeds of Cannon's bank account, and I would therefore affirm the judgment of the district court across the board.
Before the Government had any tax lien on Cannon's property, the Bank had a security interest in the property. It is undisputed that the Bank's security interest extended to Cannon's checking account, which had a balance of $21,225.14 when the notice of levy was served in November of 1983. The Bank believed--honestly, if erroneously--that if it were to pay the $21,225.14 over to the Government, as demanded in the notice of levy, it could get the money back through a wrongful levy action brought under 26 U.S.C. §7426 . Such an action would have to be brought within the nine month period prescribed by 26 U.S.C. §6532(c) ; the statute of limitations would run in August of 1984.
Doing exactly what it had always done in the past in such situations, the Bank paid the proceeds of the customer's account directly to itself and told the Government, in writing, what it had done. There was no dissembling, no misrepresentation, and no fraudulent concealment. The Government knew perfectly well that from the Bank's vantage point, the Bank had merely put itself in the position it would have been in had it incurred the trouble and expense of paying the money over to the Government and then recovering it back under §7426 . The Government had not objected to the Bank's use of the alternative "self-help" procedure in the past.
On November 17, 1983, the Government hand-delivered a "final demand" (IRS Form 680-C) to a "vault clerk" of the Bank. (What the vault clerk may have done with the final demand form is uncertain; the officers of the Bank apparently knew nothing about it until the filing of the Government's counterclaim in July of 1985.) The Form 680-C did not assert that the Government's tax lien was superior to the Bank's security interest, nor did it deny that the Bank would ultimately be able to recover the $21,225.14 in a wrongful levy action. In bold print, indeed, the form said "Please see the provisions of section 6332 of the Internal Revenue Code on the back of this form"--and the Supreme Court has made it clear that §6332 of the Internal Revenue Code gives the Government nothing more than a "provisional remedy" which "does not determine whether the Government's rights to the seized property are superior to those of other claimants. . . ." United States v. National Bank of Commerce [85-2 USTC ¶9482 ], 472 U.S. 713, 721 (1985).
Almost a year and a half went by without any further action on the Government's part. Only after the Bank had sued the Government in April of 1985 did the Government bestir itself to countersue for the disputed $21,225.14. By that time, of course, the Government could take comfort in the knowledge that a wrongful levy claim by the Bank with respect to the $21,225.14 would be barred by the statute of limitations. The fact that the Government ultimately prevailed on its counterclaim does not mean that the Bank had acted unreasonably. The district court was not persuaded that the Government had shown the Bank to have acted without reasonable cause, and I am not persuaded that the Government has shown the district court to have erred in this regard. Insofar as this court's judgment is to the contrary, I respectfully dissent.
of Limitation on Suits: Suits by Nontaxpayers: Levy

Under Code Sec. 6532(c)(1), an action for wrongful levy by a person other than the taxpayer must be commenced within nine months from the time the notice of levy is served, unless within that period the third-party claimant files with the IRS a request for return of the property seized. Such a request is an absolute prerequisite for the applicability of Code Sec. 6532(c)(2), which extends the period within which such an action may be commenced to twelve months from the filing of the request or six months from the disallowance of the request, whichever is shorter. Because the request was not timely filed in this case, the District Court lacked jurisdiction to hear the claim. The district director's erroneous advice of a right to sue did not estop the government from asserting the statute of limitations.

R. De Gregory, DC, 75-1 USTC ¶9498, 395 FSupp 171.

In an action for damages allegedly arising from the wrongful seizure of a nontaxpayer's property, his claims for lost rent and profit were dismissed. None of the possible forms of relief for wrongful levy permit recovery by the owner of lost rent or profits incurred during the period in which the government was wrongfully in possession. The court also noted that Code Sec. 6532 is a section setting forth the statute of limitations to be applied to nontaxpayer actions under Code Sec. 7426 and that this nontaxpayer's action was judicially time-barred insofar as claims under this Code section were asserted.

W.F. Young, DC, 75-2 USTC ¶9574.

Taxpayer's suit challenging a levy on his personal bank account for payment of taxes owed by his corporation was dismissed because he filed the refund suit more than nine months after receiving a notice disallowing his claim for refund. There is a nine-month statute of limitations on suits by a person other than the person against whom the tax out of which such levy arose is assessed.

J.S. Bascom, DC, 74-1 USTC ¶9218.

Similarly.

R.R. Dieckmann, CA-10, 77-1 USTC ¶9224, 550 F2d 622.

The taxpayer-pharmacy's suit, claiming that all or a major portion of approximately $103,000 seized in its former vice-president's home on February 28, 1970 actually belonged to the pharmacy, was dismissed on the IRS's motion for summary judgment. Such action was barred by the nine-month statute of limitations that began to run on March 16, 1970, the date of the levy. The taxpayer was also collaterally estopped from asserting that it was the true owner of the money by a previous decision.

Petworth Pharmacy, Inc., DC, 77-1 USTC ¶9150.

The government was awarded summary judgment in a suit brought by nontaxpayers requesting the return of property upon which they alleged the government had lawfully levied. The court concluded that the tax assessment was conclusively presumed. Further, the government had properly filed its notice of levy. Thus, since the suit was filed more than a year after the notice of levy was made, the suit was barred by the statute of limitations.

Stuyvesant Ins. Co., DC, 75-1 USTC ¶9287.

An action by the state of Vermont on a prior lien to recover from the United States the proceeds of a forced sale of chattels by the Internal Revenue Service was dismissed where the action was filed more than 12 months from the date of request for the return of the property. Since the expiration date was shorter in time than the six-month period from the denial letter, the earlier expiration date controlled. Consequently, the action was barred by the statute of limitations.

State of Vt., DC, 75-1 USTC ¶9175.

A complaint filed to obtain the release of funds levied on by the IRS was properly filed within the statutory period, since the filing of a request letter seeking IRS permission for the release of funds effectively extended such period.

W.J. Jones & Sons, Inc., DC, 74-2 USTC ¶9589.

Since the suit for wrongful levy here was commenced almost 34 months after the claim was filed, and two years after its rejection, it was barred by the applicable statute of limitations. The foreclosing company was not the nominee of the debtor against which the deficiency was originally assessed. Therefore, it could not be treated as a taxpayer, and the Court lacked jurisdiction for lack of timely filing.

Mill Factors Corp., DC, 75-1 USTC ¶9334, 391 FSupp 387.

A bank which held a perfected security interest in a portion of a bankrupt's accounts receivable and which filed a petition as an intervenor in a suit brought against the IRS by a trustee in bankruptcy to recover levies made by the IRS against the bankrupt's accounts receivable was barred from recovery by the statute of limitations since the suit was not begun within nine months of the levies.

J & H Electric Co., DC, 76-2 USTC ¶9640.

Taxpayer's disclaimer of his life interest in real property relieved him of any interest in that property that could be subject to a tax lien. Hence the remaindermen could enjoin the levy and sale of that property. The District Court had jurisdiction to hear the suit for wrongful levy, since the levy could irreparably injure plaintiffs' rights in the property. The suit here was not barred by the statute of limitations since it related back to a prior suit and preliminary injunction.

A.L. Stickell, Jr., DC, 78-1 USTC ¶9328.

A third party's motion to intervene in a levy action so as to assert a claim to $30,000 of the contents of a safe-deposit box was barred since her claim was not filed within nine months from the date of the levy. There was no tolling of the statute of limitations because of any lack of actual or constructive notice. Moreover, the intervenor's contention that the government's stipulation allowing intervention was a waiver of the statute was clearly invalid.

Bowery Saving Bank, DC, 76-2 USTC ¶9796.

An action by a third party claiming an interest in property under government levy was not barred by the statute of limitations. A written request from the third party had reached the IRS prior to the expiration of the nine-month period following the date of levy.

Dependable Insurance Co., DC, 78-2 USTC ¶9721. Aff'd, CA-4 (in an unpublished opinion 6/20/79).

An action for wrongful levy was barred by the statutory time limit. The fact that an IRS employee assured the party that he had more time to file did not prevent the IRS from raising the limitations issue.

R. Sanchez, DC, 79-1 USTC ¶9137.

An action for wrongful levy of property belonging to a nontaxpayer was barred by the statute of limitations even though the IRS failed to keep its promise to inform the nontaxpayer that it would receive notification prior to the sale of the property. The government was not estopped from raising the limitations issue because it had no duty to give notice of a levy or sale to a nontaxpayer.

Act Leasing Co., Inc., DC, 79-2 USTC ¶9558.

A suit by a subcontractor to recover funds of a general contractor that had been levied upon by the IRS to satisfy unpaid tax obligations was barred by the running of the statute of limitations because the suit was brought more than nine months after the subcontractor's request for payment had been denied by the IRS.

United Sand & Gravel Contractors, Inc., CA-5, 80-2 USTC ¶9626, 624 F2d 677.

An individual who sought to intervene in a suit to compel a bank to comply with a levy on the contents of his brother's safe deposit box was barred for lack of filing a timely motion. The motion alleging ownership of the funds in the box was filed past the expiration of the nine-month statute of limitations and the period was not extended by application of the taxpayer to extend the collection period or through lack of notice to the intervenor.

Atlantic Bank of America, DC, 80-1 USTC ¶9320.

The plaintiff's suit on an alleged security interest in accounts receivable levied on to satisfy a taxpayer's federal tax debts was barred because it was commenced 22 months after the alleged wrongful levy. Such a suit was required to be filed within 9 months of the levy, absent a 12-month extension triggered by a request that the property be returned by the Commissioner.

A.M. Cleveland, DC, 80-2 USTC ¶9523.

A counterclaim asserting an interest in cash, jewelry and furs on which the United States sought to reduce a lien to judgment was barred because it was not filed within nine months of the date the United States levied on the property.

R. Benveniste, DC, 81-1 USTC ¶9321.

A suit brought by a nontaxpayer-plaintiff, who was the spiritual leader of a church seeking recovery of an amount which he had deposited with a surety and which was subsequently levied on to collect a tax deficiency owed by the church was time-barred. Third-party levy contests are not governed by the 6-year statute of limitations under the Tucker Act. Legislative history of Code Sec. 6532(c) indicates that claims must be asserted within 9 months of levy.

K. Gordon, CtCls, 81-1 USTC ¶9409, 649 F2d 837.

An action by a nontaxpayer for the return of property was untimely because it had not been commenced within 12 months from the date of the plaintiff's formal request for the property's return.

R. Bustamante Carlos, DC, 82-1 USTC ¶9142, 531 FSupp 359.

The IRS's levy and seizure of funds in a wife's bank account to satisfy the employment tax liabilities of her former husband was wrongful and the IRS was ordered to refund the amounts seized. Although the ex-wife filed her action for return of the money more than one year after she had filed an administrative request for return of the seized funds, the IRS was estopped to raise the limitations period as a bar to her claim. The ex-wife had been lulled into inaction by an IRS agent's advice to file forms to recover the wrongfully seized funds and the agency's subsequent failure to act on the request.

B. Belton, DC, 82-2 USTC ¶9455.

The court denied the government's motion for reconsideration of the court's prior judgment in this case, above. The IRS was required to return to the taxpayer all funds wrongfully levied upon and seized without notice from her bank account, apparently to satisfy the tax owed by her ex-husband. The government's conduct estopped it from relying on the statute of limitations as a defense. The taxpayer had been lulled into inaction by an agent's advice and the subsequent inactivity of the agency. Also, the government was unable to locate the pertinent administrative records.

B. Belton, DC, 83-1 USTC ¶9181, 562 FSupp 30.

A corporation that paid a portion of another party's tax liability to prevent the IRS from levying on the business that they had purchased from that party was not a taxpayer within the meaning of Code Sec. 7422. Thus, its refund suit was barred by the six-month statute of limitations applicable to refund claims by nontaxpayers. Although the IRS expressly stated to the corporation that it had two years to file a civil refund action in the letter denying the refund claim, the government was not estopped from raising the six-month limitation period as a defense.

Spa World International, DC, 82-2 USTC ¶9632.

The plaintiffs were not entitled to recover monies allegedly wrongfully levied upon by the IRS to satisfy the tax liability of a third person because their action was not timely filed. The government was granted judgment on the pleadings where it was clear from the face of the complaint that the suit was not filed within the nine-month limitations period for filing such third-party actions. Furthermore, the complaint failed to allege facts sufficient to establish that the plaintiffs made a written request entitling them to an extension of the limitations period.

Maple Lane Farms, DC, 82-2 USTC ¶9661.

An action for wrongful levy brought by a nontaxpayer was dismissed because it was filed more than 21 months from the date of the levy on her savings account. The limitations period could not be waived on the ground that the nontaxpayer did not receive a notice of levy. It was sufficient that the savings and loan association received a notice of levy. The IRS is under no duty, constitutional or otherwise, to notify every person claiming an interest in property levied upon.

E. Douglas, DC, 83-1 USTC ¶9182, 562 FSupp 593.

The District Court granted the IRS's motion to dismiss a third-party bank's action to enjoin a levy by the IRS on a depositor-delinquent taxpayer's bank account where the bank's action was not instituted within the limitation period.

Newport National Bank, DC, 83-1 USTC ¶9191, 556 FSupp 94.

In an action for wrongful levy brought by secured creditors of a bankrupt taxpayer the government's motion for summary judgment was granted and the creditor's suit dismissed. The creditors did not file suit demanding return of the debtor-taxpayer's levied assets within the 9-month time limit. Although an involuntary petition in bankruptcy was filed against the taxpayer and an order granting such relief was issued, the automatic stay provisions of the Bankruptcy Act (which would have tolled the time limitation within which the creditors were required to file suit) did not apply. Because the assets were levied upon prior to the date on which the petition in bankruptcy was filed and the bankrupt-taxpayer had no legal or equitable interest in the assets after they were levied upon, the assets could not become part of the bankrupt's estate.

D.G. DiFlorio, DC, 83-2 USTC ¶9492, 30 BR 815.

The statute of limitations for wrongful levy barred an action by a Panamanian corporation that was seeking to recover funds initially seized from a bank account pursuant to a DEA seizure warrant and then levied upon by the IRS. The court held that it was unnecessary for the DEA to institute forfeiture proceedings prior to the disbursement of the funds because the IRS's levy reaches property in the hands of a government agency and, following the levy, the government's claim to the funds was based upon the levy and not the original seizure. Further, the court rejected the corporation's argument that its suit should not be barred because it did not have notice. There is no requirement that third parties be given notice of a levy and, in addition, the record in the instant case indicated that the corporation did have notice but failed to take the proper steps to preserve its rights.

Expoimpe, a Panamanian Corp., DC Fla., 85-1 USTC ¶9393, 609 FSupp 1098.

The district court held that a corporation's suit seeking enforcement of its order directing that assets which were being held in a court-ordered and court-supervised escrow account be transferred to the corporation was not barred by the statute of limitations. At the time the Notice of Levy was served on the escrowed assets, the assets were in the constructive custody of the district court, having already been placed in an escrow account under the jurisdiction of the court. Therefore, pursuant to Code Sec. 6332(a), because the escrowed assets were already in the constructive possession and actually under the jurisdiction of the court, such assets were immune from levy.

Securities and Exchange Commission, DC D.C., 85-2 USTC ¶9588.

An insurance company brought suit to recover retainage funds held by a corporation which were levied upon by the IRS. The insurance company, as surety, was required to complete a contract defaulted upon by the subcontractor and then claimed the retainage funds by right of subrogation. In the interim, the IRS levied upon and seized the funds to satisfy the delinquent taxes owed by the subcontractor. Although the insurance company had priority to the retainage funds held by the corporation by virtue of the surety agreement, it lost its right to such funds by failing to assert its claim within nine months of the levy placed on such funds by the IRS. Therefore, the IRS was entitled to judgment as a matter of law in that the insurance company's claim was barred by the statute of limitations.

American Fidelity Fire Insurance Co., DC Tenn., 85-2 USTC ¶9794, 623 FSupp 722.

A civil suit brought by a nontaxpayer challenging an IRS levy placed on the entity's bank account was dismissed by a district court due to lack of subject matter jurisdiction, since the nontaxpayer's petition was not filed within the 9-month statutory period for commencing such actions. Despite allegations by the nontaxpayer that the IRS had erroneously confused it with another business enterprise with a similar name, the court was not persuaded that the two businesses were not in fact related or that the government was given sufficient notice of a third-party interest in the levied property to warrant extension of the limitations period.

Barrett Treaty Limited, DC N.Y., 85-2 USTC ¶9801, 624 FSupp 166.

An action for wrongful levy brought against the IRS by an individual nontaxpayer to recover accounts receivable pledged to a bank as security was dismissed. The bank failed to file an action to recover the accounts within the statutory time period or to make a timely request for an extension to bring an action. Therefore, even assuming the individual stood in the bank's shoes, the action was barred by the statute of limitations. Further, there was no merit to the argument that the bank received erroneous information from the IRS regarding the time limits within which to file a suit. The action was barred prior to the time the information was received.

J. Strong, DC Tex., 85-2 USTC ¶9834.

Neither a statute-of-limitations defense nor a governmental-immunity defense operated to bar a creditor from obtaining a recovery from the United States after IRS officials lulled the creditor into inaction during the limitation period and then made a wrongful levy upon the assets of a taxpayer-creditor. Although it was argued that IRS officials did not have authority to enter into an agreement with the creditor before instituting the assessments, the statute of limitations was extended beyond the normal nine month period because the creditor reasonably relied upon their misrepresentations. Thereafter, the statute was extended further when the bank made a timely and adequate demand for compensation. R.R. Dieckmann (CA-10, 77-1 USTC ¶9224) did not require a different result because that case did not involve allegations of misrepresentations by the government.

Bank of Commerce and Trust Co. of Tulsa, DC Okla., 86-1 USTC ¶9111.

A civil action brought by a nontaxpayer challenging an IRS levy upon property owned by a third-party in which the nontaxpayer held a secured interest was summarily dismissed by a district court, since the nine-month statutory period for commencing such actions had expired.

The National Bank of Texas at Fort Worth, DC Tex., 86-1 USTC ¶9208.

An action for wrongful levy, brought by the owner of a paper and chemical company, was dismissed for lack of subject matter jurisdiction because the owner's complaint was not filed within the nine month time period prescribed in Code Sec. 6532(c)(1) or the extension period within Code Sec. 6532(c)(2). In a small claims proceeding, an IRS agent allegedly admitted that the owner's property was mistakenly levied; the agent stated that he would send forms to correct the mistake. The owner of the levied property never received the forms and he took no other action until he filed his claim 26 months after his property was levied. The owner's claim that the United States was estopped from raising the statute of limitations as an affirmative defense was rejected because the scope of the waiver of sovereign immunity was subject to the time limitations of Code Sec. 6532. The owner's untimely claim was outside the government's waiver of sovereign immunity and, therefore, the action was outside the court's subject matter jurisdiction.

E.J. O'Neal, DC N.C., 86-1 USTC ¶9264.

A nine-month statute of limitations barred a corporation from recovering amounts contained in a bank account that had been levied by the IRS; however, a larger portion of the corporation's claim was subject to a six-year statute of limitations under 28 U.S.C. 1491(a)(1). The six-year statute of limitations period was subject to a judicial exception for implied-in-fact contract levy contests set forth in Gordon, 81-1 USTC ¶9409, 227 CtCl 328, 649 F2d 837. Consequently, the nine-month time limit under Code Secs. 6532(c) and 7426(a)(1) partially prevailed over the six-year limitations period for the amount of money in the bank account that was actually levied. There was no overlapping between the remainder of the taxpayer's implied-in-fact contract remedy and the nontaxpayer remedy provided in Code Sec. 7426(a)(1). Permitting the suit under the six-year statute of limitations period was reasonable because it was unlikely that Congress intended that a victim of an allegedly improper and coercive agreement should take action the moment the agreement is made. The IRS motion to dismiss was granted only for the portion of the corporation's claim which was time barred by Code Sec. 7426(a)(1).

Document Management Group, Inc., ClsCt, 87-1 USTC ¶9125, 11 ClsCt 463.

Summary judgment was granted to the government because a petition filed by the plaintiffs for the return of a Mercedes Benz that was seized from their son because of his failure to pay taxes was untimely filed approximately thirteen months after the car was seized. According to the court, the parents, who contended that the car belonged to them and not to their son, failed to file their petition within the required nine-month filing period. Their presentation of a bill of sale to a revenue officer in --collection division of the IRS did not constitute a proper written request for an extension of the filing period and they failed to set forth specific facts showing why the filing period should be extended.

G.H. Edwards, Sr., DC Ill., 87-1 USTC ¶9281, 657 FSupp 36.

The taxpayer's suit to obtain a tax refund, which the IRS had applied to payment of the 100% penalty for his failure to pay over his corporation's withholding taxes, was dismissed for lack of subject matter jurisdiction because the nine-month limitation period for a wrongful levy suit had run. The IRS had received funds pursuant to a levy of a third party, and it applied the funds to payment of corporate tax liabilities other than the corporation's unpaid withholding taxes. The taxpayer asserted that the IRS had wrongfully levied funds that were owed to him personally rather than to his corporation. Thus, the action was characterized as one for wrongful levy rather than a refund suit, and the shorter limitation period applied. Also, because the suit essentially sought to force the IRS to reallocate the third-party payments, it was barred by the Anti-Injunction Act.

D.R. Ellis, DC-WD Wis., 87-2 USTC ¶9418.

A third-party complaint filed against the IRS, charging it with wrongful levy, was barred by the statute of limitations since the suit was filed more than five years after the levy was imposed. A timely suit would have been filed within 21 months after the levy.

Commonwealth of Kentucky, CA-6, 87-1 USTC ¶9119, 805 F2d 628.

A suit by a nontaxpayer and a taxpayer challenging an IRS levy against insurance proceeds received by the taxpayer and assigned to the nontaxpayer was dismissed. The nontaxpayer's claim was denied because more than nine months had elapsed after the service of the notice of levy and before the action was filed. The district court rejected the nontaxpayer's contention that the nine-month statute of limitations did not commence until the insurance company agreed to pay on the policies. The taxpayer's cause of action was dismissed because the statutory provision allowing challenges to wrongful levies expressly forbids suits by a taxpayer against whom the IRS has filed its original levy.

B. Glaze, DC Ind., 88-1 USTC ¶9384.

An individual occupying property that was the subject of a tax levy lacked standing to bring a wrongful levy action. Further, the trust to which the individual had allegedly transferred the property was barred by the statute of limitations from bringing an action for wrongful levy. The government met the requirements for an ejectment action by demonstrating that it held title to the property.

R.E. Spurgeon, DC Neb., 89-1 USTC ¶9345.

A construction company's surety could not sue a county that had paid the IRS funds due the company because the payment was made in response to a valid IRS tax levy. The evidence established the existence, service, and validity of the levy. Thus, the county was entitled to summary judgment, since the proper remedy was a suit for wrongful levy, rather than an action against the county, because custodians of property are held harmless in such circumstances.

Commonwealth of Kentucky, CA-6, 89-1 USTC ¶9295, 869 F2d 985.

Federal district court jurisdiction did not exist over a third-party action to recover amounts wrongfully levied by the IRS that was instituted more than nine months after the date of levy. Further, the third-party had no right to contribution from the government of the amount of its possible liability for funds owed to a corporation but paid to the IRS under the levy.

Creditbank, DC Fla., 89-1 USTC ¶9209, 707 FSupp 513.

A nontaxpayer bank's action for wrongful levy relating to amounts paid or owed by a corporation to the government was barred by the statute of limitations. The bank's request that the government return the subject property did not extend the nine-month period for filing the wrongful levy suit, since the request was made more than nine months after the notice of levy was served.

Southtrust Bank of Etowah County, DC Ala., 89-2 USTC ¶9603.

Notices of levy, served on a bank by the IRS, started the nine-month statute of limitations running. Over a year later, the plaintiff bank requested that the property seized by the IRS be returned. The court rejected the theory that the government's affirmative misconduct should delay the start of the running of the statute of limitations.

Royalton State Bank, DC Minn., 90-1 USTC ¶50,126, 725 FSupp 438.

The court lacked jurisdiction to entertain a wrongful levy claim because the request for return of the property was made after expiration of the statute of limitations. The claim that the government waived this defense by its failure to plead the defense affirmatively was not persuasive.

R. Pederson, DC Mont., 90-1 USTC ¶50,169.

A federal district court lacked jurisdiction over a suit filed seeking relief from an IRS levy on real property because both the owner of the property and the individual in possession of the property failed to timely file a wrongful levy action.

E. Winebrenner, CA-9, 91-1 USTC ¶50,057, 924 F2d 851.

A wrongful levy suit brought with respect to liens and levies placed on the taxpayers' property for failure to pay tax assessments was dismissed. Since the government has consented to suit only where a wrongful levy is alleged by third parties, the government did not waive sovereign immunity. Additionally, the court lacked jurisdiction over the suit because it was not brought within the nine-month period of limitations.

R.P. Detrick, DC Ore., 91-1 USTC ¶50,063.

A federal district court lacked jurisdiction over a suit filed by individuals seeking relief from an IRS levy on their real property because they failed to timely file a wrongful levy action. They had discovered the existence of a tax lien on the realty after purchasing it from a delinquent taxpayer.

R.R. Sheridan, DC Calif., 91-1 USTC ¶50,130.

An individual could not challenge a levy six years after its issuance since the applicable statute of limitations is nine months. The IRS levied upon an amount of money seized during an arrest. Six years later, one of the arrested men alleged that the money was his and did not belong to the person named in the levy. The argument that this claim was brought within two years of the IRS actually receiving the money, based on the two-year limitation period associated with refund denials, was disallowed.

B. Williams, CA-2, 91-2 USTC ¶50,529.

An investment company's wrongful levy action under Code Sec. 7426 was properly dismissed as untimely because it was brought more than nine months after the last levy was made. A letter issued for the purpose of dissuading the IRS from seizing the company's property did not change the status of the company's complaint because the complaint was not filed within 12 months of the date of the letter. A refund claim on Form 843 did not constitute a valid request for the release of the levy because it was mailed to an IRS office other than the office that imposed the levies. The company could not substitute substantial compliance for full compliance under the regulations because it did not comply with the terms under which the government consented to suit under Code Sec. 7426. However, in accordance with the ruling in Williams (SCt, 95-1 USTC ¶50,218), the company had standing to file suit for a refund under 28 U.S.C. §1346. The fact that a wrongful levy caused the company to pay the tax did not require, as its exclusive remedy, a suit under Code Sec. 7426.

WWSM Investors, CA-9, 95-2 USTC ¶50,454.

A secured creditor's claim against the IRS for wrongful levy was barred by the nine-month statute of limitations. The statute of limitations was not tolled because the creditor failed to establish that a payment of the excess proceeds of a tax sale by a state (Colorado) Department of Revenue to the IRS was actively concealed. Neither the IRS nor the state Department of Revenue had a duty to notify the creditor of the payment. Additionally, the secured creditor did not exercise reasonable diligence in attempting to determine whether the state Department of Revenue retained possession of the excess proceeds. Although the state Department of Revenue had filed an interpleader action within the nine-month statute of limitations to request that a court distribute the excess proceeds, the payment to the IRS was not disclosed until the state Department of Revenue filed an amended complaint after the statute of limitations had expired. However, the secured creditor had facts in its possession within three months of the notice of levy that would have allowed it to discover that the excess proceeds had been levied upon.

Mountain States Bank, DC Colo., 92-2 USTC ¶50,309.

Despite an individual's claim that the IRS wrongfully levied upon his bank account for the delinquent taxes owed by his son, his wrongful levy action, which was filed 16 months after the bank received notice of the IRS levy, was dismissed for failure to comply with the nine-month statute of limitations for wrongful levy actions. The individual did not demonstrate that the nine-month period should have been extended since he failed to file an administrative claim for return of the levied account.

D. Meminger, Sr., DC N.Y., 93-1 USTC ¶50,129.

A federal district court lacked jurisdiction over an insurance company's claim that the government wrongfully levied the company's property to satisfy an individual's tax liability. The company filed its complaint after the expiration of the statute of limitations under Code Sec. 6532(c). The company's request for a return of the levied property did not serve to extend the statute of limitations because the company mailed the request to a revenue agent rather than the district director, as required by the regulations that would allow the statute of limitations to be extended.

Amwest Surety Insurance Co., CA-7, 94-2 USTC ¶50,376.

A taxpayer's suit challenging a levy on his safe deposit box and bank account for payment of certain tax liabilities was dismissed because he filed a refund suit more than 12 months from the date of his request for return of the property. The taxpayer was allowed to extend the period for filing suit by 12 months from the date of the request for return of the property or six months from the date of disallowance, whichever was shorter. The IRS was not estopped from asserting its statute of limitations defense even though it did not inform the taxpayer of the disallowance until after the six-month limitations period had lapsed. The taxpayer did not demonstrate the required detrimental reliance on the government's conduct because he was statutorily required to preserve his rights within 12 months even if the IRS had not acted upon his claim.

K. Uddin, DC N.Y., 93-2 USTC ¶50,598.

An action for wrongful levy of property belonging to a nontaxpayer was barred by the statute of limitations because it was commenced 22 months after the date of the levy. The general nine-month period for bringing the suit was not extended because the claimant did not file the action within twelve months of making an administrative claim or within six months of the date when the administrative claim was denied.

R.M. Goossens, DC Calif., 94-1 USTC ¶50,116.

A wrongful levy action commenced by nontaxpayers was not barred by the statute of limitations because the limitations period had never commenced to run. The IRS's failure to give proper notice of the levy prevented the running of the limitations period.

D.S. Bonacci, DC Utah, 94-1 USTC ¶50,265.

An action of wrongful levy of funds belonging to a nontaxpayer bank was barred by the statute of limitations because the bank failed to file the action within the nine-month period after receiving notice of levy. Furthermore, the limitations period could not be extended because the bank failed to properly request a return of the property levied upon within the nine-month period. The bank's cross-claim filed in an interpleader action in state court was not equivalent to submitting a formal written request addressed to the District Director of the IRS.

Peoples Banking Company, DC Ohio, 94-1 USTC ¶50,271.

A corporation's lawsuit against the IRS for wrongfully levying on its customs duty refunds was improperly dismissed as untimely. The record established a likelihood that the corporation could prove that equitable tolling applied to extend the limitations period. In an attempt to collect a debt owed by the corporation's former attorneys, the IRS had levied upon the entity's customs duty refunds without providing notice to the corporation. Upon discovering the levy, the corporation promptly requested a return of the funds from the IRS office that imposed the levy, but was directed by the IRS to file its request with another office. The appellate court concluded that it was possible that facts could be proven that would toll the nine-month limitations period for filing refund requests until the date on which the corporation received actual notice of the levy. Alternatively, the corporation might be able to show that the 12-month period for filing a wrongful levy action was equitably tolled from the date when its initial refund request was filed until the date when it filed a second request with another IRS office.

Supermail Cargo, Inc., CA-9, 95-2 USTC ¶50,575.

A wrongful levy action instituted by the former spouse of a delinquent taxpayer with respect to amounts paid to the IRS was barred by the statute of limitations because the suit was filed more than nine months after the levy on the property. It was irrelevant that neither the government nor the insurance company that issued the annuity contract to which a federal tax lien had attached notified the former spouse, since neither party had a duty to notify potential third-party claimants. The lien attached to the annuity payments awarded to the spouse notwithstanding the fact that the property was in the divorce court's custody at the time of attachment, and the insurance company was obligated to surrender the property upon demand.

A. Mock, DC Pa., 94-2 USTC ¶50,360. Aff'd, CA-3 (unpublished opinion 10/18/94).

The wrongful levy action instituted by an attorney who sought to recover his legal fees and amounts owed to one of his clients out of an award made to a delinquent taxpayer and levied upon by the IRS was dismissed as untimely. The attorney's claims were filed with an IRS agent, not with the district director and not within nine months of the date of the IRS's levy. Upon receipt of the attorney's claim, the government was under no obligation to either act on the request or regard the claim as a request for an extension of the limitations period. Since an inadequate claim cannot extend the limitations period, the federal district court lacked jurisdiction over the matter.

J.L. Stevens, DC Mich., 94-2 USTC ¶50,367.

An individual's wrongful levy action contesting the seizure of his funds in satisfaction of his father's tax liabilities was dismissed due to his failure to file suit or to make a written request for the return of the property within nine months of the levy. The individual's verbal demand for the return of the property during the nine-month statutory period was an invalid claim and did not extend the statute of limitations.

J. Bannister, DC Tex., 94-2 USTC ¶50,403.

A title company's refund suit for recovery of levied property was improper. The proper action for recovery of property was a wrongful levy action. Because more than nine months had passed since the levy on the property, the statute of limitation had expired and the company's action was dismissed.

Industrial Valley Title Insurance Co., DC D.C., 94-2 USTC ¶50,436.

A refund suit brought by an individual, who claimed that taxes were erroneously collected from the sale of real property, was dismissed because she failed to file her claim within the nine-month statute of limitations. The property was levied upon and sold to satisfy the tax obligations of the individual's husband. The statute of limitations pursuant to this section expired nine months after the date of the levy. The refund claim was filed almost four years after the date of the levy. Therefore, the claim was barred by the statute of limitations.

J.B. Kopp, DC Calif., 94-2 USTC ¶50,517.

A corporation's action against the government to quiet title was barred by the statute of limitations because the corporation failed to file the claim of wrongful levy within one year of making a request for the return of levied property. The government levied on property of the corporation believing that the corporation was a nominee, transferee or agent of delinquent taxpayers. Because the corporation requested the return of the property within nine months of the levy, it had twelve months to file a wrongful levy action. However, the corporation filed its claim more than two years after making the request. Therefore, the wrongful levy claim was barred by the statute of limitations.

Towe Farms, Inc., DC Tex., 94-2 USTC ¶50,588.

An assignee corporation's wrongful levy suit was barred by the statute of limitations because the suit was filed more than nine months after the levies were filed. The corporation's assumption of the debtor's loans and succession to rights to the debtor's assets did not give the corporation greater rights to oppose the levy than those of a third party. Letters written by the corporation's attorney disputing the levy to an IRS representative were technically and procedurally insufficient to allow a 12-month tolling of the limitations period.

Edwards Machine Products, Co., DC Ga., 95-1 USTC ¶50,011.

A corporation that had bank funds wrongfully levied against by the IRS was not entitled to a return of its property because the extended statute of limitations had run. Even though the IRS admitted that the corporation was not the taxpayer who owed the money, the corporation did not file its suit to recover the property within six months from the date of the notice of disallowance of its request to return the property. The corporation's argument that the filing was within the statute of limitations because the last day for filing fell on a Sunday and was followed by a Monday holiday was rejected.

Equity Hernando Woods, Inc., DC Fla., 95-2 USTC ¶50,500.

A creditor who obtained a judgment against a fugitive evangelist's foundation did not file his wrongful levy complaint within the nine-month period following either the IRS's notice of seizure given to the foundation or the IRS's notice of levy on the warehouse where the assets were stored. The creditor was not entitled to the notice of seizure or notice of levy. A requirement that the IRS notify all creditors of a delinquent taxpayer would be burdensome. Finally, the limitations period was not equitably tolled when the IRS served notice on the warehouse, which held the taxpayer's assets as an agent of the IRS. The IRS's notice responsibility was to the party in possession.

R.A. Miller, DC Tenn., 95-2 USTC ¶50,606.

Two individuals were precluded from recovering property wrongfully levied by the IRS because they failed to properly request the return of the property or to file a wrongful levy suit before the statute of limitations had expired. Although the individuals took several steps to recover their property, they failed to file an action for the return of wrongfully levied property within nine months of the levy.

L.A. Fanning, DC Ga., 96-1 USTC ¶50,277.

A wrongful levy action brought by a law firm to clarify its rights with respect to funds it received as compensation for legal services as part of a settlement agreement between a client, upon whose proceeds from litigation the IRS had levied, and another party was time barred. The law firm failed to file its suit within the nine-month limitations period. The action could not be recharacterized as a quiet title action because a wrongful levy action was the exclusive remedy available to the law firm.

Tompkins & McMaster, CA-4 (unpublished opinion), 96-2 USTC ¶50,372.

A wrongful levy suit brought by an individual seeking compensation for property that was seized and sold by the IRS in satisfaction his parents' tax debts was dismissed as untimely because the lawsuit was not filed within the statutory nine-month limitations period. The son could not recover under Williams (SCt, 95-1 USTC ¶50,218) because he did not pay his parents' taxes in order to secure the immediate release of encumbered property. Williams does not change the principle that §7426 provides the exclusive remedy for a wrongful levy. In addition, agents of the IRS could not be sued in a Bivens action in light of the comprehensive administrative scheme in place to resolve tax-related disputes.

K. Dahn, CA-10, 97-2 USTC ¶50,847.

A wrongful levy suit brought by a divorced taxpayer in connection with her former husband's tax liabilities was properly dismissed as untimely. Because sovereign immunity barred subject matter jurisdiction over untimely claims against the U.S., the government's failure to raise the issue in its answer did not amount to a waiver. Accordingly, the issue was properly presented in a motion to dismiss. Also, the district court's dismissal of the complaint before the taxpayer presented her arguments regarding equitable tolling was not an abuse of discretion because the court fully discussed that issue when it rejected her post-trial motion for reconsideration. Finally, the court properly refused to allow her to amend her petition to include a refund claim under 28 U.S.C. §1346. Because she never filed an administrative refund claim, she did not exhaust her administrative remedies and, thus, could not maintain a refund claim.

J.M. Compagnoni, CA-11, 99-1 USTC ¶50,508.

A wrongful levy action brought by several individuals that challenged a foreign country's seizure and sale of property to satisfy their father's U.S. tax liability was time barred. The notice received by their father from the foreign country was sufficient to trigger the commencement of the limitations period. It was not necessary for the children as known putative owners to receive notice of the seizure because notice must be sent only to the possessor of personal property, not to potential third-party owners. As the named renter of the safe deposit box, the father was in possession of its contents and was the only one entitled to notice.

Q.A. Miller, DC Ohio, 96-2 USTC ¶50,660.

Individuals lacked standing to bring a wrongful levy action to recover funds obtained by the IRS from accounts belonging to their corporations or its alter-ego trust. The individuals failed to show they had an interest in the levied bank accounts. Also, the claims were barred by the expiration of the nine-month limitation period on wrongful levy actions, and an alternative statute of limitations did not apply.

Mathis Implement Trust, DC S.D., 97-1 USTC ¶50,406. Aff'd, CA-8 (unpublished opinion), 98-1 USTC ¶50,167.

An ex-wife's action against the IRS for wrongful levy of money owed to her ex-husband, which she also sought to garnish for back support, was not dismissed as untimely as a matter of law because she had filed an administrative claim against the levied property within the nine-month period, in addition to numerous other contacts with the IRS concerning the levy. Her actions could have extended the limitations period under Code Sec. 6532(c)(2).

D.S. Evert, DC Mo., 97-2 USTC ¶50,985.

A wrongful levy suit instituted by a bank that claimed to hold a security interest in accounts receivables of a delinquent taxpayer was dismissed as untimely because it failed to file suit within one year of the date that it filed a written request for a refund of the seized monies.

South Louisiana Bank, DC La., 98-1 USTC ¶50,143.

An unincorporated business trust was entitled to bring a refund suit challenging the IRS's collection and retention of funds belonging to the trust in satisfaction of the delinquent tax liabilities of the trustee and his wife. The trial court erred in characterizing the trust's claim as an untimely wrongful levy action. The government subsequently conceded that the trust's claim was one for a refund; the trust could bring a refund suit based on its assertion that it was wrongfully compelled to pay the couple's taxes. As a refund suit, the trust's claim was timely filed pursuant to Code Sec. 6511.

G.P. Walker, CA-9 (unpublished opinion), 2000-1 USTC ¶50,191, rev'g and rem'g DC Ore., 97-2 USTC ¶50,663.

A suit by an attorney to recover funds from a marine services corporation that had been levied upon by the IRS to satisfy unpaid payroll taxes of the attorney's corporate client was barred because the petition was not filed within the nine-month statutory period for commencing a third-party civil suit. He also failed to file a direct request with the IRS for the return of the funds pursuant to Reg. §301.6343-1(c).

G.A. Miller, DC La., 98-2 USTC ¶50,753.

Jurisdiction was lacking over an employer's wrongful levy action seeking to recover the value of an employee's pension and retirement benefits that it had remitted to the IRS in response to tax levies against the employee. Even though the taxpayer failed to initiate suit within the statutory nine-month period under Code Sec. 6532(c), it claimed that it was entitled to the value of the seized assets as restitution for fraud perpetrated on it by the employee. The statute of limitations, however, is a jurisdictional bar. While Code Sec. 7426 provides a limited waiver of the government's immunity from suit, exceptions to the limitations period are strictly observed. There was no indication that an equitable tolling exception existed. M. Brockamp (SCt), 97-1 USTC ¶50,216, distinguished.

Becton Dickinson and Co., CA-3, 2000-2 USTC ¶50,542. Cert. denied, 1/8/2001.

The government's sovereign immunity barred a trust's wrongful levy suit that was filed more than nine months after trust assets were seized to satisfy an individual's tax liabilities. The limitation period for filing a wrongful levy suit had to be strictly construed as it was a condition of the government's waiver of sovereign immunity. The trust's arguments regarding related state court litigation were irrelevant, and the trust's claim that an assistant U.S. attorney verbally waived the statute of limitations and sovereign immunity was meritless because an assistant U.S. attorney lacked the authority to do so.

Four Gees Trust, DC La., 99-1 USTC ¶50,356. Aff'd, per curiam, CA-5 (unpublished opinion), 99-2 USTC ¶50,897.

A bank's wrongful levy suit was dismissed for lack of subject matter jurisdiction because it was filed more than nine months after the IRS levied upon a delinquent taxpayer's funds in which the bank had a security interest. Equitable tolling did not extend the limitations period for the bank's suit because there was no evidence that circumstances beyond the bank's control prevented it from filing a timely claim or that the IRS took affirmative measures to lull the bank into inaction or purposefully frustrated the bank's efforts to file a claim.

Gothenburg State Bank & Trust Co., DC Neb., 99-1 USTC ¶50,476.

The government's sovereign immunity barred jurisdiction over a corporation's suit to foreclose its lien on a delinquent taxpayer's personal property that was held in trust and to determine lien priority between itself as a judgment creditor and the government's tax lien. The corporation failed to exercise its exclusive remedy under federal law by bringing a wrongful levy suit within nine months of the date of the levy. Moreover, the IRS's failure to physically seize the property within nine months after the levy was issued did not allow the corporation to pursue a quiet-title action since physical seizure of the property was irrelevant to the corporation's ability to initiate a wrongful levy action.

Entenmann's, Inc., DC Neb., 99-2 USTC ¶50,639.

An individual's claim of wrongful levy on monies being held by a third party was dismissed for lack of subject matter jurisdiction because it was not timely filed. The period within which the individual was required to file the wrongful levy action was not extended since his request for return of the property did not qualify as a proper administrative request. The request was not addressed to the appropriate IRS district director.

J.N. LaBonte, CA-7, 2001-1 USTC ¶50,104.

A law firm that lacked standing to maintain a wrongful levy suit against the government because it had no interest in the subject real property was also barred by the nine-month statute of limitations that began running on the date of the levy. Moreover, since the firm never requested return of the levied property, the nine-month period was not extended to 12 months. The law firm cited no authority that would permit it to extend the limitations period based on the request of another party.

Lawyers Title Insurance Corp., DC Ga., 2000-1 USTC ¶50,407.

Jurisdiction was lacking over an untimely wrongful levy suit brought by several trusts because their written request for the return of the property, which would have extended the statute of limitations, was not received by the IRS. The trusts demanded the return of all property levied because the IRS assessed new deficiencies against the trusts' creators, even though the parties had previously entered into an agreement that the levied property would completely satisfy the creators' tax liability. However, their written request was improperly addressed and was, therefore, never received by the proper party in the IRS.

BSC Term of Years Tr., DC Tex., 2001-1 USTC ¶50,174. Aff'd, sub nom. EC Term of Years Trust, on another issue, CA-5, 2006-1 USTC ¶50,171. Aff'd on another issue, SCt, 2007-1 USTC ¶50,466.

A trust contended that a levy was improper because the seizure and sale of the property affected the ownership interests of persons who were not the taxpayer subject to the liens. However, because the claim was brought more than one year after the expiration of the limitations period for filing a wrongful levy action, it was not viable.

Audio Investments, CA-4 (unpublished opinion), 2003-1 USTC ¶50,531, aff'g, per curiam, DC S.C., 2002-2 USTC ¶50,757.

Code Sec. 7426 is the exclusive remedy for wrongful levy actions, and such suits must be filed within the statute of limitations provided by Code Sec. 6532(c). The conclusion was reached in determining whether a third party alleging that it was wrongfully levied upon could maintain a refund suit for levied pension plan distributions.

CCA Letter Ruling 200238043, August 14, 2002.

The statute of limitations applicable to the plaintiff's wrongful levy claim was not jurisdictional in nature and, therefore, the plaintiff's failure to commence the action within the statute of limitations did not deprive the court of subject matter jurisdiction.

Mallard Automotive Group, Ltd., DC Nev., 2005-1 USTC ¶50,113.

A property co-owner's claim for wrongful levy upon the property for taxes owed by another co-owner was barred by the nine-month statute of limitations.

R.W. Jarvi, DC Mich., 2005-1 USTC ¶50,185.

A third person's remedy with respect to a levy against his property to satisfy the tax debt of another under Code Sec. 7426(a) is subject to the nine-month time limit for filing imposed by Code Sec. 6532(c)(1).

Rev. Rul. 2005-49, 2005-2 CB 125.

An individual's wrongful levy action was time barred under Code Sec. 6532(c). The IRS had not waived the limitations defense by failing to assert it in its answer. Because the taxpayer bought suit under 28 USC section 1346(a)(1), which applies to tax refund suits, and not 28 USC section 1346(e), which applies to Code Sec. 7426 wrongful levy actions, the IRS was not required to raise the limitations defense as an affirmative answer.

S.D. Young, DC N.Y., 2005-2 USTC ¶50,608.

An intervener's claim of wrongful levy against the government was barred by the statute of limitations because her intervention came more than 10 years, instead of within the nine-month statutory period, from the date of the alleged wrongful levy against her husband.

D. Purk, DC Ohio, 2006-1 USTC ¶50,358.

A bank's petition seeking to recover funds levied by the government from a corporation's receivables over which the bank had perfected its security interest was not barred by the statute of limitations although it was filed more than nine months after the notice of levy was issued because the limitations period was equitably tolled. Equitable tolling was appropriate because the bank had no actual or constructive notice of the levy until after the statute of limitations had expired and had proceeded diligently to protect its rights once it learned of the levy.

Fifth Third Bank, DC Ohio, 2007-1 USTC ¶50,244.

The Court of Federal Claims lacked jurisdiction over a corporation's wrongful levy claims and its request for injunctive relief against IRS collection actions. The corporation's wrongful levy claim was untimely because it was not filed within nine months of the levy. Furthermore, congressional intent showed that equitable tolling should not extend the statutory limitations period. Moreover, even if it were available, the corporation was not entitled to equitable tolling to consider the contention that the IRS had violated the automatic stay provision of the bankruptcy code by not assessing the penalty until after the corporation had filed for bankruptcy. The bankruptcy code in effect at that time allowed the IRS to assess taxes after the bankruptcy filing.

Four Rivers Investments, Inc., FedCl, 2007-2 USTC ¶50,608.

A federal district court denied the government's motion to dismiss as untimely a corporation's wrongful levy complaint. The complaint was filed after the Code Sec. 6532 limitations period had expired but contained an allegation that the company had made a proper written request for return of the levied funds. While the government conceded that under Code Sec. 6532(c)(2) the limitations period is extended from nine months to 12 months if a proper written request for return of the levied funds is made, it contended that the company failed to prove that its request was proper and, therefore, the extended period did not apply. Despite the government's contention, the claimant was not required to prove the truth of its allegation that it made a proper written request for return of the levied funds at this stage of the proceedings.

Next Generation Wireless, Ltd., DC Ohio, 2007-2USTC ¶50,705.

A corporation's motion for reconsideration of the dismissal of its wrongful levy and injunctive relief claims for lack of jurisdiction was denied. The new evidence and new arguments presented by the corporation were previously available and the corporation had a prior opportunity to present them.

Four Rivers Investments, Inc., FedCl, 2007-2USTC ¶50,746.

Civil Actions by Nontaxpayers: Statute of limitations

A trust that missed the Code Sec. 7426(a)(1) deadline for challenging a levy could not bring a challenge as a tax refund claim under the general tax refund jurisdiction of 28 USC §1346(a)(1). Congress specifically tailored Code Sec. 7426(a)(1) to provide the exclusive remedy for third-party wrongful levy claims. The precisely drawn, detailed statute pre-empted more general remedies. If third parties could avail themselves of §1346(a)(1)'s general tax refund jurisdiction, they could evade Code Sec. 7426(a)(1)'s much shorter limitations period.

EC Term of Years Trust, SCt, 2007-1 USTC ¶50,466.

Nine-month statute of limitations provided by Code Sec. 7426 was not applicable in a suit brought by the plaintiff-purchase money security holder against the insurer where the latter brought the Government into the suit as a third-party defendant. Insurer, not the purchase money security holder, had sued the Government charging not wrongful levy, but improper endorsement of a draft which was properly drawn by the insurer as defendant and third party plaintiff. Further, since there was no claim against the Government by the purchase money security holder, and since the insurer as defendant/third party plaintiff could not assert the jurisdictional defense against the purchase money security holder's action for nonpayment, that defense was not available to the Government.

Chrysler Credit Corp., DC, 73-1 USTC ¶9263.

Because an action to recover amounts paid on account of the tax liability of another was not commenced within nine months after the levy on the subject property, it was dismissed for lack of jurisdiction.

D. DeJesus, DC, 74-2 USTC ¶9502.

The court ruled that a suit to enjoin a levy for nonpayment of FICA and withholding taxes owed by plaintiff's husband was barred by the nine-month statute of limitations provided for such suits.

E. McCreary, DC, 73-2 USTC ¶9741.

A counterclaim asserting an interest in cash, jewelry, and furs on which the United States sought to reduce a lien to judgment and the defendant's cross-claim against the police for wrongful seizure of the property under New York law were barred by the statute of limitations.

R. Benveniste, DC, 81-1 USTC ¶9321.

A complaint to obtain the release of funds levied on by the IRS was properly filed within the statutory time period because the filing of a request letter seeking IRS permission for the release of these funds effectively extended such period.

W.J. Jones, Inc., DC, 74-2 USTC ¶9589.

An action by the State of Vermont on a prior lien to recover the proceeds of a forced sale of chattels by the IRS was dismissed where the action was filed more than 12 months from the date of request for the return of the property.

State of Vt., DC, 75-1 USTC ¶9175.

A suit for wrongful levy for taxes brought against the Government by a person other than the taxpayer was barred by the statute of limitations.

Penetryn International, Inc., DC, 75-1 USTC ¶9361, 391 FSupp 729.

J.S. Bascom, DC, 74-1 USTC ¶9218.

W.C. Goodwin, III, DC, 77-1 USTC ¶9230.

Stuyvesant Ins. Co., DC, 75-1 USTC ¶9287.

Mill Factors Corp., DC, 75-1 USTC ¶9334, 391 FSupp 387.

United Sand and Gravel Contractors, Inc., DC, 79-1 USTC ¶9240.

M.P. Schroeder, DC Minn., 84-1 USTC ¶9430.

F. Liptak, DC Minn., 84-1 USTC ¶9243.

First National Bank and Trust Co., DC Pa, 85-2 USTC ¶9798.

J. Strong, DC Tex., 85-2 USTC ¶9834.

The National Bank of Texas at Fort Worth, DC Tex., 86-1 USTC ¶9208.

E.J. O'Neal, DC N.C., 86-1 USTC ¶9264.

E.R. Zimmerman, DC Va., 86-2 USTC ¶9834.

H. Williams, Jr., ClsCt, 86-2 USTC ¶9840, 11 ClsCt 189.

The Document Management Group, Inc., ClsCt, 87-1 USTC ¶9125, 11 ClsCt 463.

D.R. Ellis, DC Wis., 87-2 USTC ¶9418.

Creditbank, DC Fla., 89-1 USTC ¶9209, 707 FSupp 513.

R.E. Spurgeon, DC Neb., 89-1 USTC ¶9345.

Southtrust Bank of Etowah County, DC Ala., 89-2 USTC ¶9603.

E. Winebrenner, CA-9, 91-1 USTC ¶50,057, 924 F2d 851.

R. Pederson, DC Mont., 90-1 USTC ¶50,169.

R.P. Detrick, DC Ore., 91-1 USTC ¶50,063. Aff'd, CA-9 (unpublished opinion 5/8/92).

R.R. Sheridan, DC Calif., 91-1 USTC ¶50,130.

D. Meminger, Sr., DC N.Y., 93-1 USTC ¶50,129.

L. Evangelista, DC N.Y., 92-2 USTC ¶50,533.

K. Uddin, DC N.Y., 93-2 USTC ¶50,598.

F.C. Geissler, DC Ida., 94-1 USTC ¶50,060.

A. Mock, DC Pa., 94-2 USTC ¶50,360. Aff'd, CA-3 (unpublished opinion 10/18/94).

J.L. Stevens, DC Mich., 94-2 USTC ¶50,367.

J. Bannister, DC Tex., 94-2 USTC ¶50,403.

Industrial Valley Title Insurance Co., DC S.C., 94-2 USTC ¶50,436.

J.B. Kopp, DC Calif., 94-2 USTC ¶50,517.

Towe Farms, Inc., DC Tex., 94-2 USTC ¶50,588.

Hanna Coal Co., Inc., DC Va., 94-2 USTC ¶50,603. Vac'd, 11/18/94.

D. Clark, CA-9 (unpublished opinion), 95-2 USTC ¶50,358.

R.A. Miller, DC Tenn., 95-2 USTC ¶50,606.

Tompkins & McMaster, CA-4, (unpublished opinion), 96-2 USTC ¶50,372, aff'g, per curiam, an unreported District Court decision.

J.M. Compagnoni, CA-11, 99-1 USTC ¶50,508.

K. Dahn, CA-10, 97-2 USTC ¶50,847, 127 F3d 1249.

Mathis Implement Trust, DC S.D., 97-1 USTC ¶50,406. Aff'd sub nom. R. Mathis, CA-8 (unpublished opinion), 98-1 USTC ¶50,167.

G.A. Miller, DC La., 98-2 USTC ¶50,753.

J.W. Veith, Jr., DC Va., 99-1 USTC ¶50,138.

Four Gees Trust, DC La., 99-1 USTC ¶50,356. Aff'd, per curiam, CA-5 (unpublished opinion), 99-2 USTC ¶50,897.

Merisel of Americas, Inc., DC R.I., 2000-1 USTC ¶50,385.

R.W. Jarvi, DC Mich., 2005-1 USTC ¶50,185.

An unincorporated business trust was entitled to bring a refund suit challenging the IRS's collection and retention of funds belonging to the trust in satisfaction of the delinquent tax liabilities of the trustee and his wife. The trial court erred in characterizing the trust's claim as an untimely wrongful levy action. As a refund suit, the trust's claim was timely filed.

G.P. Walker, CA-9 (unpublished opinion), 2000-1 USTC ¶50,191, aff'g in part, rev'g in part and rem'g DC Ore., 97-2 USTC ¶50,663.

The statute of limitations was not tolled by any lack of actual or constructive notice of the levy. It did not matter that the government had not notified the intervenor of the levy, even though she claimed an interest in the proceeds levied upon. Nor was the statute of limitations waived by the government's stipulation allowing intervention.

Bowery Savings Bank, DC, 76-2 USTC ¶9796.

The government was not estopped from asserting the statute of limitations. The plaintiff did not show that the government actually knew that the seized money belonged to him; so there was no reason to abrogate the rule that the statute begins to run when notice of levy is served on the person in possession of the property, not when creditors receive notices.

J.R. McCoy, DC, 77-2 USTC ¶9556.

Notice of a lien against real property transferred to the plaintiff pursuant to a divorce decree was equivalent to a notice of levy, and it commenced the nine-month limitation period for a civil action against the United States for a levy wrongful as to a person other than the taxpayer.

E.M. Busse, DC, 75-2 USTC ¶9714.

An action to enjoin an attempt by the IRS to collect taxes can be brought only if a levy has been made. The court in this case was, therefore, without power to enjoin a merely threatened levy. Furthermore, the taxpayer's wife lacked standing to attack the constitutionality of the Louisiana community property statutory scheme because she did not have a direct economic interest adverse to the defendants sued nor did she demonstrate any injury in fact as a result of their actions.

Bullock, DC, 76-1 USTC ¶9173, 403 FSupp 913.

A bank which held a perfected security interest in a portion of a bankrupt's accounts receivable and which filed a petition as an intervenor in a suit brought against the IRS by a trustee in bankruptcy to recover levies made by the IRS against the bankrupt's accounts receivable was barred from recovery by the statute of limitations since the suit was not begun within nine months of the levies.

J & H Electric Co., DC, 76-2 USTC ¶9640.

There can be no equitable extension of the statute of limitations in a suit brought by a nontaxpayer since waivers of sovereign immunity must be strictly construed. Nor was the limitations period extended by the government's failure to give notice of the seizure of property, as the government was under no duty to do so.

R.R. Dieckmann, CA-10, 77-1 USTC ¶9224, 550 F2d 622.

A corporation's wrongful levy action in which it challenged the IRS's levy on a bond that the corporation posted for an individual was not time barred even though it was filed after the limitations period had expired. The limitations period was equitably tolled until a related case was decided which held that federal district courts have jurisdiction to determine the rightful owner of bail funds. Since the law in the area was unsettled, the corporation's failure to know that it could only reclaim its bond by a wrongful levy action was not due to a lack of diligence.

Capital Tracing, Inc., CA-9, 95-2 USTC ¶50,473.

A corporation's suit against the IRS for wrongfully levying on its customs duty refunds to satisfy the tax liability of its legal counsel was improperly dismissed as untimely. Since the IRS did not provide notice of the levy, the company might have been able to show that the limitations period was equitably tolled until it discovered the levy. In addition, since the corporation requested a return of the funds from the IRS office that imposed the levy but was instructed to file the request with another office, it might have been able to show that the period for filing suit was equitably tolled from the date of its first request until the date that its second request was filed with the other IRS office.

Supermail Cargo, Inc., CA-9, 95-2 USTC ¶50,575, 68 F3d 1204.

Neither a statute-of-limitations defense nor a governmental-immunity defense operated to bar a creditor from obtaining a recovery from the United States after IRS officials lulled the creditor into inaction during the limitation period and then made a wrongful levy upon the assets of a taxpayer-creditor. Although it was argued that the IRS officials did not have authority to enter into an agreement with the creditor before instituting the assessments, the statute of limitations was extended beyond the normal nine-month period because the creditor reasonably relied upon their misrepresentations. Thereafter, the statute was extended further when the bank made a timely and adequate demand for compensation. R.R. Dieckmann (CA-10, 77-1 USTC ¶9224) did not require a different result because that case did not involve allegations of misrepresentations by the government.

Bank of Commerce and Trust Co. of Tulsa, DC Okla., 86-1 USTC ¶9111.

The statute of limitations began to run when notice of levy was served on the debtor even though a court case was pending at that time involving the amount he owed another party under a personal service contract. The amount of his obligation was contractually fixed at the time of levy despite the pendency of the litigation.

R.C. Reiling, Jr., DC, 77-1 USTC ¶9269.

The nine-month limitations period begins running whether or not the plaintiff has received notice of the seizure.

Universal Specialties, Inc., DC, 77-2 USTC ¶9621, 443 FSupp 87.

Similarly.

Expoimpe, a Panamanian Corp., DC Fla., 85-1 USTC ¶9393, 609 FSupp 1098.

A nontaxpayer action that sought to enjoin government conduct that had previously been enjoined related back to the original, timely suit in which the injunction was issued and was itself timely.

A.L. Stickell, Jr., DC, 78-1 USTC ¶9328.

A plaintiff cannot evade the bar of the statute of limitations by bringing suit against "unknown Internal Revenue Service agents".

Act Leasing Co., Inc., DC, 79-2 USTC ¶9558.

The dismissal by the bankruptcy court of an action to establish a prior right to funds collected pursuant to an IRS levy did not toll the statute of limitations for purposes of determining the timeliness of a subsequent filing of an identical action in the district court. The action was not officially transferred from the bankruptcy court to the district court, nor was a notice of appeal from the judgment of the bankruptcy court ever filed.

R. Smith, DC, 81-1 USTC ¶9139.

The Internal Revenue Service's levy and seizure of funds in a wife's bank account to satisfy the employment tax liabilities of her former husband was wrongful and the IRS was ordered to refund the amounts seized. Although the ex-wife filed her action for return of the money more than one year after she had filed an administrative request for return of the seized funds, the IRS was estopped to raise the limitations period as a bar to her claim. The ex-wife had been lulled into inaction by an IRS agent's advice to file forms to recover the wrongfully seized funds and the agency's subsequent failure to act on the request. Moreover, the IRS had seized the funds without notice and was unable to locate the records in the case and the initial seizure should not have occurred in the first place.

B. Belton, DC, 82-2 USTC ¶9455.

The court denied the government's motion for reconsideration of the court's prior judgment in this case, 82-2 USTC ¶9455. The IRS was required to return to the taxpayer all funds wrongfully levied upon and seized without notice from her bank account, apparently to satisfy the tax owed by her ex-husband. The government's conduct estopped it from relying on the statute of limitations as a defense. The taxpayer had been lulled into inaction by an agent's advice an the subsequent inactivity of the agency. Also, the government was unable to locate the pertinent administrative records.

B. Belton, DC, 83-1 USTC ¶9181, 562 FSupp 30.

An action for wrongful levy brought by a nontaxpayer was dismissed because it was filed more than 21 months from the date of the levy on her savings account. The limitations period could not be waived on the ground that the nontaxpayer did not receive a notice of levy. It was sufficient that the savings and loan association received a notice of levy. The IRS is under no duty, constitutional or otherwise, to notify every person claiming an interest in property levied upon.

E. Douglas, DC, 83-1 USTC ¶9182, 562 FSupp 593.

In an action for wrongful levy brought by secured creditors of a bankrupt taxpayer, the government's motion for summary judgment was granted and the creditors' suit dismissed. The creditors did not file suit demanding return of the debtor-taxpayer's levied assets within the time limits required under Code Sec. 6532(c). Although an involuntary petition in bankruptcy was filed against the taxpayer and an order granting such relief was issued, the automatic stay provisions of the Bankruptcy Act (which would have tolled the time limitation within which the creditors were required to file suit) did not apply. Because the assets were levied upon prior to the date on which the petition in bankruptcy was filed and the bankrupt-taxpayer had no legal or equitable interest in the assets after they were levied upon, the assets could not become part of the bankrupt's estate.

D.G. DiFlorio, DC, 83-2 USTC ¶9492, 30 BR 815.

A civil suit brought by a nontaxpayer challenging an IRS levy placed on the entity's bank account was dismissed by a district court due to lack of subject matter jurisdiction, since the nontaxpayer's petition was not filed within the nine-month statutory period for commencing such actions. Despite allegations by the nontaxpayer that the IRS had erroneously confused it with another business enterprise with a similar name, the court was not persuaded that the two businesses were not in fact related or that the government was given sufficient notice of a third-party interest in the levied property to warrant extension of the limitations period.

Barrett Treaty Limited, DC N.Y., 85-2 USTC ¶9801, 624 FSupp 166.

The government was granted summary judgment in a wrongful levy suit brought by two individuals who alleged that the government improperly seized property stored in a safety deposit box in the Netherlands in order to satisfy their father's tax debt (see Q.A. Miller, 96-1 USTC ¶50,164). Although the issue should have been contested in the Dutch judicial system, even under U.S. law, the suit was time barred. The father received sufficient notice of the seizure and sale from the Dutch government to trigger the statute of limitations period, and the period expired before the suit was filed.

Q.A. Miller, DC Ohio, 96-2 USTC ¶50,660.

A partner's action to recover monies collected nearly three years earlier by an IRS levy on his bank account was dismissed as untimely. Because the accounts had been levied upon to collect penalties assessed for the delinquent filing of partnership information returns, the court ruled that the partnership, and not the partner, was considered to be the taxpayer against whom the penalties had been assessed. Thus, the partner's suit was barred by the nine-month limitation period applicable to actions for wrongful levy brought by nontaxpayers.

F.E. Bader, ClsCt, 86-1 USTC ¶9432, 10 ClsCt 78.

An insurance company failed to assert a cause of action over which a federal district court could exercise jurisdiction when it sought reimbursement from a construction company and the IRS. The cause failed as a claim for wrongful levy. The nine-month period for filing such an action had expired before the suit was filed.

American States Ins. Co., DC W.Va., 87-2 USTC ¶9640. Aff'd, CA-4 (unpublished opinion, 7/20/89).

A suit by a nontaxpayer and a taxpayer challenging an IRS levy against insurance proceeds received by the taxpayer and assigned to the nontaxpayer was dismissed. The nontaxpayer's claim was denied because more than nine months had elapsed after the service of the notice of levy and before the action was filed. The district court rejected the nontaxpayer's contention that the nine-month statute of limitations did not commence until the insurance company agreed to pay on the policies.

B. Glaze, DC Ind., 88-1 USTC ¶9384.

The statute of limitations barred an untimely wrongful levy claim by a bank that held a perfected security interest in property seized and sold by the State (Colorado) Department of Revenue to satisfy tax liens. The bank unsuccessfully argued that, because the DOR failed to state that it paid the funds to the IRS until it filed the amended complaint in an interpleader suit to distribute the excess sale proceeds, equity required that the limitations period begin on the date the amended complaint was filed. The court disagreed since payment by the DOR on demand of the IRS levy released the state from liability with respect to the funds. Moreover, the IRS had no duty to give the bank notice of the payment it received from the DOR. Thus, the bank failed to show concealment of the claim by the DOR or the IRS. Moreover, the bank failed to exercise due diligence since it had facts less than 3 months after the original notice of levy that would have enabled it to discover that its secured property had been levied upon.

Mountain States Bank, DC Colo., 92-1 USTC ¶50,309.

An individual could not challenge a levy six years after its issuance since the nine-month statute of limitations period had run and the district court lacked jurisdiction. Further, the two-year limitation period associated with refund denials could not be applied, since the IRS did not levy upon the seized money to satisfy any tax debts of the individual.

B. Williams, CA-2, 91-2 USTC ¶50,529, 947 F2d 37. Cert. denied, 5/26/92.

A wrongful levy action that was brought more than nine months after the last levy was made was dismissed as untimely. Furthermore, a letter meant to dissuade the IRS from seizing the property and a refund claim on Form 843 that were sent to the IRS failed to constitute adequate requests for the return of property and did not extend the nine-month limitations period for wrongful levy actions. However, in accordance with the ruling in L.R. Williams (SCt, 95-1 USTC ¶50,218), the company had standing to file a suit for a refund under 28 U.S.C. §1346. The fact that a wrongful levy caused the company to pay the tax did not limit its exclusive remedy to a suit under Code Sec. 7426. E. Winebrenner (CA-9, 91-1 USTC ¶50,057) was overruled to the extent that it conflicts with the holding in the instant case.

WWSM Investors, CA-9, 95-2 USTC ¶50,454, 64 F3d 456.

A wrongful levy action was the exclusive remedy available to a surety who sought reimbursement for amounts paid upon a contractor's default from funds that were due to the contractor from a city construction project but that had been levied upon by the IRS for the contractor's unpaid employment taxes. The surety could not turn to a quiet title action under 28 U.S.C. §2410(a)(1) because the wrongful levy suit was foreclosed due to expiration of the limitations period. The surety's case was not distinguishable from E. Winebrenner (CA-9, 91-1 USTC ¶50,057, ¶41,713.10), which held that Code Sec. 7426 was the exclusive remedy for a wrongful levy. E. Winebrenner remained good law following the decisions in L.R. Williams (SCt, 95-1 USTC ¶50,218, ¶41,713.42) and WWSM Investors (CA-9, 95-2 USTC ¶50,454, above), which involved refund suits under 28 U.S.C. §1346(a)(1) and not quiet title actions.

Fidelity and Deposit Co. of Maryland, CA-9, 96-2 USTC ¶50,332.

A wrongful levy suit instituted by a bank that claimed to hold a security interest in a delinquent taxpayer's accounts receivables that were seized by the IRS was dismissed as untimely. Even if the bank made a proper written request for the seized monies within the statutory nine-month period, it failed to bring its wrongful levy suit within one year of the date of that request. The bank also could not bring a refund action under 28 U.S.C. §1346 because it did not have possession of the accounts that were levied upon and it did not actually pay the delinquent taxpayer's liabilities to the IRS.

South Louisiana Bank, DC La., 98-1 USTC ¶50,143.

The IRS's motion to dismiss was granted where a individual did not have standing to assert a claim for a refund of funds he alleged were wrongfully seized by the IRS. The individual's proper cause of action would have been under Code Sec. 7426, which allows an action by persons other than taxpayers for wrongful levy on property. However, the individual was time-barred from bringing such a claim because the nine-month statute of limitations for a wrongful levy claim had expired.

J. Swiriduk, DC Mass., 92-1 USTC ¶50,057.

Creditors with a prior lien on a debtor's property could not maintain a garnishment action against the IRS, which had levied on and sold the same property to satisfy an unpaid tax assessment. The IRS was immune from suit in the garnishment action and had not waived its immunity by intervening in another action brought by the creditors against different property of the debtor. The creditors' sole recourse against the government lay in a wrongful levy suit which was time-barred.

R.A. Miller, CA-8, 98-1 USTC ¶50,153, 134 F3d 910.

An issue of fact existed regarding the validity of the service of levy and the notice of seizure, which prevented the court from making a determination on the IRS summary judgment motion. The validity of the levy and of the notice of seizure affected the statute of limitations issue of whether the plaintiff's suit for wrongful levy was timely. The parties were given leave to file supplemental briefs concerning the validity of such service and notice.

C. Berlanga, DC Mich., 92-2 USTC ¶50,544.

A federal district court lacked jurisdiction over an insurance company's claim that the government wrongfully levied the company's property to satisfy an individual's tax liability. The company filed its complaint after the expiration of the statute of limitations under Code Sec. 6532(c). The company's request for a return of the levied property did not serve to extend the statute of limitations because the company mailed the request to a revenue agent rather than to the district director, as required by the applicable regulations.

Amwest Surety Insurance Co., CA-7, 94-2 USTC ¶50,376, 28 F3d 690.

The IRS's motion to dismiss an individual's wrongful levy action on the ground that it was not brought within the nine-month limitations period was denied. It was factually uncertain whether the individual had filed a written request for the release of the levy that would have extended the period for filing suit. Moreover, the individual did not possess the levied upon funds when the notices of levy were issued. Finally, the company of the individual's ex-husband that owed the taxes at issue and had surrendered the funds to the IRS was not a proper defendant and was dismissed from the case.

D.S. Evert, DC Mo., 97-2 USTC ¶50,985.

A delinquent taxpayer's relatives were entitled to the return of their jewelry that the IRS had levied upon to satisfy the taxpayer's tax liability and that it had seized from a safety deposit box. The levy was wrongful, and the nine-month limitations period had not run at the time the action was filed.

D.S. Bonacci, DC Utah, 94-1 USTC ¶50,265.

Two individuals were precluded from recovering personal property levied upon by the IRS to satisfy the unpaid tax liability of the mother of one of the individuals. Although the individuals spoke to an IRS agent and took several steps to recover their property, they failed to follow the strict procedures set forth in Code Sec. 7426, which required them to request return of the property or to file a wrongful levy suit before the statute of limitations had expired.

L.A. Fanning, DC Ga., 96-1 USTC ¶50,277.

A district court's improper dismissal of a company's suit for wrongful levy on the ground that it was untimely was vacated. Although the company did not send the required written request for return of the property to the IRS district director, the court should have considered the possibility that the IRS had adequate notice through a letter sent to an IRS attorney and a conversation between the company's legal counsel and the IRS district counsel about the letter. Thus, the company was given leave to amend its complaint to add these allegations.

Small and Small, P.A., DC Fla., 96-1 USTC ¶50,030, vac'g, DC Fla., 95-2 USTC ¶50,583

A bank's wrongful levy suit was dismissed for lack of subject matter jurisdiction because it was filed more than nine months after the IRS levied upon a delinquent taxpayer's funds in which the bank had a security interest. Equitable tolling did not extend the limitations period for the bank's suit because there was no evidence that circumstances beyond the bank's control prevented it from filing a timely claim or that the IRS took affirmative measures to lull the bank into inaction or purposefully frustrated its efforts to file a claim.

Gothenburg State Bank & Tr. Co., DC Neb., 99-1 USTC ¶50,476.

Similarly.

Entenmann's, Inc., DC Neb., 99-2 USTC ¶50,639.

Corporate taxpayers filed a timely wrongful levy claim seeking recovery of their portion of a joint award that had been seized by the government. The monies had been awarded in a case in which a levy had also been imposed. Because the taxpayers did not challenge the government's levy, which was imposed more than three years earlier, but sued based on the seizure, their claim fell within the nine-month limitation period. Consequently, the court had jurisdiction over the claim.

New Fairview, Inc., DC Mass., 2001-2 USTC ¶50,756.

Chief Counsel concluded in a CCA that Code Sec. 7426 is the exclusive remedy for wrongful levy actions, and that such suits must be filed within the statute of limitations provided by Code Sec. 6532(c).

CCA 200238043, August 14, 2002.

A daughter's claim challenging IRS allocations of sale proceeds of prunes acquired by levy to satisfy the tax liabilities of a corporation solely owned by her father was barred as untimely. Her attempt to recharacterize the claim by asserting that she was not seeking to recover the funds did not change the fact that she was seeking a determination that the proceeds were wrongly applied to one taxpayer and should have been applied to another taxpayer.

Cal Fruit International, Inc., DC Calif., 2006-2 USTC ¶50,600.

A federal district court denied the government's motion to dismiss as untimely a corporation's wrongful levy complaint. The complaint was filed after the Code Sec. 6532 limitations period had expired but contained an allegation that the company had made a proper written request for return of the levied funds. While the government conceded that under Code Sec. 6532(c)(2) the limitations period is extended from nine months to 12 months if a proper written request for return of the levied funds is made, it contended that the company failed to prove that its request was proper and, therefore, the extended period did not apply. Despite the government's contention, the claimant was not required to prove the truth of its allegation that it made a proper written request for return of the levied funds at this stage of the proceedings.

Next Generation Wireless, Ltd., DC Ohio, 2007-2USTC ¶50,705.

An individual and her attorney could not bring a wrongful levy claim because the IRS established the validity of its tax lien, which it could enforce independent from the levy. Furthermore, even if the IRS did not have a valid tax lien, the individuals did not file a wrongful levy suit under Code Sec. 7426 within the nine-month statute of limitations.

M.A. Norem v. G.A. Norem, DC Texas, 2008-1 USTC ¶50,368.

An individual's action challenging an IRS levy on her joint bank account that was filed 26 months after the levy on the account and 14 months after she became aware of the levy was not filed within the nine-month statutory period required for commencing a wrongful levy suit. Further, under controlling precedent in the circuit (Becton Dickinson and Co., CA-3, 2000-2 USTC ¶50,542) the statute of limitations could not be equitably tolled.

J R. Scheafnocker,, DC Pa., 2008-1 USTC ¶50,372.