Seizures and Levies

 

 


Following is a reprint of the proposed regulations that pertain to the seizure and sale of taxpayer property.  While it is technical in nature, it should provide you with some answers to question you would have if your property is seized, or you have received notice that the IRS is planning to enforce collection by seizing your property.

The IRS typically resorts to seizure when their has been lack of taxpayer cooperation.  You will want to ensure that you have selected a representative with experience in dealing with Revenue Officers and other Collection Functions to protect your property from needless enforcement action by the IRS.

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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[GL-007-96]
RIN 1545-AU13
Sale of Seized Property
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains proposed regulations relating to the sale of seized property. The proposed regulations reflect changes concerning the setting of a minimum price for seized property by the Tax Reform Act of 1986. The proposed regulations affect all sales of seized property DATES: Written comments and requests for a public hearing must be received by September 11, 1996.


ADDRESSES: Send submissions to: CC:DOM:CORP:R (GL-007-96), room
5228, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. In the alternative, submissions may be
hand delivered to: CC:DOM:CORP:R (GL-007-96), room 5228,
Internal Revenue Service, 1111 Constitution Avenue NW.,
Washington, DC.


FOR FURTHER INFORMATION CONTACT: Concerning the regulations,
Kevin B. Connelly, (202) 622-3640 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background


This document contains proposed amendments to the Procedure and Administration Regulations (26 CFR part 301) relating to the sale of seized property under section 6335 of the Internal Revenue Code (Code). The Tax Reform Act of 1986 amended section
6335(e), relating to the manner and conditions of sale, to authorize the Secretary to determine whether it would be in the best interest of the United States to buy seized property at the
minimum price set by the Secretary. These proposed regulations reflect this change.
Explanation of provisions Section 1570 of the Tax Reform Act of 1986 amended section
6335(e) of the Code to require the Secretary to determine before the sale of seized property whether it would be in the best interest of the United States to purchase such property at the
minimum price set by the Secretary. The best interest determination is to be based on criteria prescribed by the Secretary.

If, at the sale, one or more persons offer at least the minimum price, the property shall be sold to the highest bidder. If no one offers at least the minimum price and the Secretary has determined that it would be in the best interest of the United States to purchase the property for the minimum price, the property will be declared sold to the United States for the minimum price. If no one offers the minimum price and the Secretary has not determined that it would be in the best interest of the United States to purchase the property for the minimum price, the property shall be released to the owner of the property and the expense of the levy and sale shall be added to the amount of tax for the collection of which the United States made the levy. Any property released shall remain subject to any lien imposed by subchapter C of chapter 64 of subtitle F of the Code.

The proposed regulations reflect the changes made by the Tax Reform Act of 1986. The regulations propose to authorize district directors to make the required determination whether it would be in the best interest of the United States to purchase seized property for the minimum price. In addition, the regulations propose to set forth factors the district director
may consider when determining the best interest of the United States. The district director may consider all relevant facts and circumstances including for example: (1) marketability of
the property; (2) cost of maintaining the property; (3) cost of repairing or restoring the property; (4) cost of transporting the property; (5) cost of safeguarding the property; (6) cost of potential toxic waste cleanup; and (7) other factors pertinent to the type of property.
Special Analyses It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in EO 12866. Therefore, a regulatory assessment is not required.

It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to
these regulations, and, therefore, a Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, this notice of proposed rulemaking will be
submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Comments and Requests for a Public Hearing

Before these proposed regulations are adopted as final regulations, consideration will be given to any written comments that are submitted timely (preferably a signed original and eight
(8) copies) to the IRS. All comments will be available for public inspection and copying. A public hearing may be scheduled if requested in writing by a person that timely submits written
comments. If a public hearing is scheduled, notice of the date, time, and place for the hearing will be published in the Federal Register.

Drafting Information
The principal author of these regulations is Kevin B. Connelly, Office of Assistant Chief Counsel (General Litigation) CC:EL:GL, IRS. However, other personnel from the IRS and
Treasury Department participated in their development.

List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes,
Income taxes, Penalties, Reporting and recordkeeping
requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 301 is proposed to be amended as
follows:
PART 301--PROCEDURE AND ADMINISTRATION
Paragraph 1. The authority citation for part 301 continues
to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.6335-1 is amended as follows:
1. Paragraph (c)(3) is revised.
2. Paragraphs (c)(4) through (c)(9) are redesignated as
paragraphs (c)(5) through (c)(10).
3. New paragraph (c)(4) is added.
The additions and revision read as follows:
301.6335-1 Sale of seized property.
* * * * *
(c) * * *
(3) Determinations relating to minimum price--(i) Minimum
price. Before the sale of property seized by levy, the district
director shall determine a minimum price, taking into account the
expenses of levy and sale, for which the property shall be sold.
The internal revenue officer conducting the sale may either
announce the minimum price before the sale begins, or defer
announcement of the minimum price until after the receipt of the
highest bid, in which case, if the highest bid is greater than
the minimum price, no announcement of the minimum price shall be
made.
(ii) Purchase by the United States. Before the sale of property seized by levy, the district director shall determine whether the purchase of property by the United States at the
minimum price would be in the best interest of the United States.

In determining whether the purchase of property would be in the best interest of the United States, the district director may consider all relevant facts and circumstances including for
example--
(a) Marketability of the property;
(b) Cost of maintaining the property;
(c) Cost of repairing or restoring the property;
(d) Cost of transporting the property;
(e) Cost of safeguarding the property;
(f) Cost of potential toxic waste cleanup; and
(g) Other factors pertinent to the type of property.
(iii) Effective date. This paragraph (c)(3) applies to determinations relating to minimum price made on or after [date final regualtions are published in the Federal Register].
(4) Disposition of property at sale--(i) Sale to highest bidder at or above minimum price. If one or more persons offer to buy the property for at least the amount of the minimum price,
the property shall be sold to the highest bidder.
(ii) Property deemed sold to United States at minimum price.
If no one offers at least the amount of the minimum price for the property and the Secretary has determined that it would be in the best interest of the United States to purchase the property for the minimum price, the property shall be declared to be sold to
the United States for the minimum price.
(iii) Release to owner. If the property is not declared to be sold under paragraph (c)(4)(i) or (ii) of this section, the property shall be released to the owner of the property and the
expense of the levy and sale shall be added to the amount of tax for the collection of which the United States made the levy. Any property released under this paragraph (c)(4)(iii) shall remain subject to any lien imposed by subchapter C of chapter 64 of
subtitle F of the Internal Revenue Code.

(iv) Effective date. This paragraph (c)(4) applies to dispositions of property at sale made on or after [date final
regulations are published in the Federal Register].
* * * * *

Margaret Milner Richardson
Commissioner of Internal Revenue


Here is further discussion that provides additional guidance in this area:

IRS Restructuring and Reform Act of 1998

3441 - Prohibition of Sales of Seized Property at
Less Than Minimum Bid


Section 3441

A. Provision covered: RRA 3441 -- Prohibition of Sales of Seized Property at Less Than Minimum Bid -- I.R.C. 6335(e)(1) and (e)(4).

B. Background: I.R.C. 6335(e) requires that a minimum bid price be established for seized property offered for sale. To conserve the taxpayer's equity, the minimum bid price normally should be set at 80 percent or more of the forced sale value of the property less encumbrances having priority over the Federal tax lien. IRM 56(13)5.1:(1) provides that the minimum bid should normally be computed at 80 percent or more of the forced sale value. The manual provision goes on to provide that exceptions can be made to the 80 percent basis if, due to the situation, the revenue officer, with group manager concurrence, needs to compute the minimum bid at a lesser percentage. The taxpayer is to receive notice of the minimum bid price within 10 days of the sale. The taxpayer has the opportunity to challenge the minimum bid price. The minimum bid price cannot be more than the tax liability plus the expenses of sale. Accordingly, if the minimum bid price is set at the tax liability plus the expenses of sale, the taxpayer's concurrence is not required. IRM 56(13)5.1:(4). Section 6335 does not contemplate a sale of the seized property at less than the minimum bid price. If no one offers the minimum bid price and the Service has determined that the purchase of the property by the United States would be in the best interest of the United States, the Service must bid-in and buy the property at the minimum bid price. If no one offers the minimum bid price and the Service has determined that the purchase of the property by the United States would not be in the best interest of the United States, the Service must release the property back to the owner.

C. Change(s): RRA 3441 amends I.R.C. 6335(e)(1)(A)(i) to provide that the Service must determine a minimum bid price below which the seized property must not be sold. In addition, RRA 3441 adds a new I.R.C. 6335(e)(4) which makes a violation of I.R.C. 6335(e)(1)(A)(i) subject to the civil damages provided under I.R.C. 7433.

D. Impact: Applies to all sales after the date of enactment.

E. Necessary Actions

  1. Actions/Procedures: Requires changes in the procedures and instructions regarding sales of seized property and the establishment of the minimum bid price.
  2. Things we CAN'T do: Sell property for less than the minimum bid price or adjourn sales for the sole purpose of re-computing the minimum bid to facilitate the sale of the property.

F. Other Special Comments: Unresolved at the present is the question of whether the Service may adjourn a sale to re-compute the minimum bid where the taxpayer agrees, in writing, to the re-computed minimum bid.


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