Lead Opinion
delivered the opinion of the Court.
Section 6331(a) of the Internal Revenue Code of 1954, as amended, 26 U. S. C. § 6331(a), provides that the Government may collect taxes of a delinquent taxpayer “by levy
The controversy in this case concerns two joint accounts in a bank in Arkansas.
I
A
The relevant facts are stipulated. On December 10, 1979, the IRS assessed against Roy J. Reeves federal income taxes, penalties, and interest for the taxable year 1977 in
On June 13, 1980, there were on deposit with respondent National Bank of Commerce, at Pine Bluff, Ark., the sum of $321.66 in a checking account and the sum of $1,241.60 in a savings account, each in the names of “Roy Reeves or Ruby Reeves or Neva R. Reeves.” Id., at 11-12.
On the same date, that is, on June 13, 1980, a notice of levy was served on the respondent bank pursuant to § 6331(d) of the Code, 26 U. S. C. § 6331(d), demanding that the bank pay over to the United States all sums the bank owed to Roy J. Reeves up to a total of $1,302.56. Subsequently, there was a Partial Release of Levy for the amount in excess of $856.61. On October 10, a final demand for payment was served on the bank.
The bank, contending that it did not know how much of the money on deposit belonged to Roy as opposed to Ruby and Neva, refused to comply with the levy. Ibid. The United States thereupon instituted this action in the United States District Court for the Eastern District of Arkansas, pursuant to § 6332(c)(1) of the Code, 26 U. S. C. § 6332(e)(1), seeking judgment against the bank in the amount of $856.61.
B
The case was submitted to the District Court on cross-motions for summary judgment and on the respondent bank’s motion to dismiss the complaint. Id., at 18-24. The District Court granted the motion to dismiss, holding the case procedurally “premature.”
The United States Court of Appeals for the Eighth Circuit affirmed.
The Court of Appeals acknowledged that “Roy could have withdrawn any amount he wished from the account and used it to pay his debts, including federal income taxes. . . .” Id., at 1295. It rejected, however, the Government’s contention that it stood “in Roy’s shoes and could do anything Roy could do, subject to whatever duties Roy owes to Ruby or Neva,” id., at 1295-1296, for it observed that “at least as to ordinary creditors, [that] is not the law of Arkansas.” Id., at 1296. Under state garnishment law, the court noted, a creditor of a codepositor is not “subrogated to that co-owner’s power to withdraw the entire account.” Instead, a creditor must join both co-owners as defendants and permit them to “show by parol or otherwise the extent of his or her interest in the account.” Ibid.
The Court of Appeals then concluded that a similar precept should apply in administrative levy proceedings under the
Because the opinion of the Court of Appeals appeared to us to conflict, directly or in principle, with decisions of other Courts of Appeals,
II
A
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 (and, as well, in §§ 6331(a) and, essentially, in 6332(a), see nn. 1 and 2, supra), is broad
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). See generally United States v. Rodgers,
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, United States v. Eiland,
The administrative levy has been aptly described as a “provisional remedy.” 4 Bittker, ¶ 111.5.5, at 111-108. 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.” Phillips v. Commissioner,
The constitutionality of the levy procedure, of course, “has long been settled.” Phillips v. Commissioner,
B
It is well established that a bank account is a species of property “subject to levy,” within the meaning of §§ 6331_and 6332. A levy on a bank account has been permitted since the Revenue Act of 1924, § 1016, 43 Stat. 343, and the Treasury Regulations explicitly authorize such levies. Treas. Reg. §301.6331-1(a)(1), 26 CFR §301.6331-1(a)(1) (1984).
The courts uniformly have held that a bank served with an IRS notice of levy “has only two defenses for a failure to com
There is no suggestion here that the Reeves accounts were subject to a prior judicial attachment or execution. Nor is there any doubt that the bank was “obligated with respect to” the accounts because, as it concedes, “Roy Reeves did have a right under Arkansas law to make withdrawals from the bank accounts in question.” Brief for Respondent 2. The bank’s only defense, therefore, is that the joint accounts did not constitute “property or rights to property” of Roy J. Reeves. See § 6331(a).
C
“ ‘[I]n the. application of a federal revenue act, state law controls in determining the nature of the legal interest which the taxpayer had in the property.’” Aquilino v. United States,
In the Bess case, the Court held that a delinquent taxpayer, who had purchased life insurance policies, did not have “property or rights to property” in the death proceeds of the policies, but that he did have such rights in their cash surrender value.
As noted above, it is stipulated that Roy J. Reeves had the unqualified right to withdraw the full amounts on deposit in the joint accounts without notice to his codepositors. In any event, wholly apart from the stipulation, Roy’s right of withdrawal is secured by his contract with the bank, as well as by the relevant Arkansas statutory provisions. See Ark. Stat. Ann. §§ 67-521 and 67-552 (1980).
Roy, then, had the absolute right under state law and under his contract with the bank to compel the payment of the outstanding balances in the two accounts. This, it seems to us, should have been an end to the case, for we agree with the Government that such a state-law right constituted “property [or] rights to property . . . belonging to” Roy, within the meaning of § 6331(a). The bank, in its turn, was “obligated with respect to” Roy’s right to that property, § 6332(a), since state law required it to honor any withdrawal request he might make. The bank had no basis for refusing to honor the levy.
The overwhelming majority of courts that have considered the issue have held that a delinquent taxpayer’s unrestricted right to withdraw constitutes “property” or “rights to property” subject to provisional IRS levy, regardless of the facts
Common sense dictates that a right to withdraw qualifies as a right to property for purposes of §§ 6331 and 6332. In a levy proceeding, the IRS “‘steps into the taxpayer’s shoes,”’ United States v. Rodgers,
Ill
The Court of Appeals, however, applied state law beyond the point of that law’s specification of the nature of the property right, and bound the IRS to certain consequences of state property law. Because under Arkansas garnishment law, a creditor of a depositor is not subrogated to the depositor’s power to withdraw the account, the court reasoned that the IRS, too, could not stand in the depositor’s shoes. This gloss, it seems to us, is contrary to the analysis and holding in United States v. Bess,
We are not persuaded by any of these asserted justifications.
The Court of Appeals’ conclusion that Roy did not possess “property [or] rights to property” on which the IRS could levy rested heavily on its understanding of the Arkansas law of creditors’ rights, particularly those in garnishment. Id., at 1295-1296. See Hayden v. Gardner,
The Court of Appeals also was concerned that Ruby and Neva might have rights that are affected if the levy were honored.
Congress thus balanced the interest of the Government in the speedy collection of taxes against the interests of any claimants to the property, and reconciled those interests by permitting the IRS to levy on the assets at once, leaving ownership disputes to be resolved in a postseizure administrative or judicial proceeding. See United Sand & Gravel Contractors, Inc. v. United States,
The Court of Appeals’ final justification for its holding was its belief that an IRS levy “is not normally intended for use as
We disagree. The IRS’s understanding of the terms of the Code is entitled to considerable deference. Here, moreover, collection provisions plainly contemplate that a taxpayer’s interest in property may be less than full ownership. The tax lien attaches not only to “property” but also to “rights to property.” See S. Rep. No. 1708, at 29. Further, we see nothing in the language of §7426 that distinguishes among various species of third-party claimants. The language of the statute encompasses advertent seizures as well as inadvertent ones.
Rodgers held that § 7403 empowers a district court to order the sale of a family house in which a delinquent taxpayer has an interest, even though a nondelinquent spouse also has a homestead interest in the house under state law.
The judgment of the Court of Appeals is reversed.
It is so ordered.
Notes
Section 6331(a) reads in pertinent part:
“If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax ... by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person. . . .”
Section 7701(a)(ll)(B) of the Code reads:
“The term ‘Secretary’ means the Secretary of the Treasury or his delegate.”
Section 6332(a) reads:
“Except as otherwise provided in subsection (b), any person in possession of (or obligated with respect to) property or rights to property subject to levy upon which a levy has been made shall, upon demand of the Secretary, surrender such property or rights (or discharge such obligation) to the Secretary, except such part of the property or rights as is, at the time of such demand, subject to an attachment or execution under any judicial process.”
“The basic legal conception of a ‘joint account’ means that it be in two or more names.” Harbour v. Harbour,
No point is made as to any distinction between the “Roy J. Reeves” against whom the assessment was made, and the “Roy Reeves” whose name was on the two accounts. We assume, accordingly, that Roy J. Reeves and Roy Reeves are one and the same person.
The record does not disclose any relationship that may exist among the three codepositors. The parties have indicated that Neva is Roy’s wife and that Ruby is his mother.
The complaint also asserted liability, under § 6332(c)(2), for a 50% penalty. See App. 7. The Government, however, subsequently waived the penalty claim, and the complaint was amended accordingly. Id., at 13-15.
See, e. g., United States v. Sterling National Bank & Trust Co. of New York,
Effective March 25, 1983, after the issuance of the notice of levy here, § 67-552 was amended and § 67-521 was repealed. 1983 Ark. Gen. Acts, No. 843, §§ 1 and 2. The result was recodification without substantial change.
The dissent misunderstands the import of United States v. Bess,
The dissent’s suggestion that these cases are “irrelevant,” see post, at 744, n. 9, stems from its erroneous assumption that state law dictates the extent of the Government’s power to levy. It does not, and these cases all stand for the proposition that a delinquent’s state-law right to withdraw funds from the joint bank account is a property interest sufficient for purposes of federal law for the Government to levy the account, notwithstanding the fact that questions as to the ultimate ownership of the funds may be unresolved.
We stress the narrow nature of our holding. By finding that the right to withdraw funds from a joint bank account is a right to property subject to administrative levy under § 6331, we express no opinion concerning the federal characterization of other kinds of state-law created forms of joint ownership. This case concerns the right to levy only upon joint bank accounts.
The dissent would find support in United States v. Stock Yards Bank of Louisville,
Raffaele v. Granger is even less on point. The decision there did not concern the propriety of a provisional remedy, but the final ownership of the property in question. The court held that under Pennsylvania law a husband and wife’s joint bank account was held by them together as tenants by the entirety, and that therefore the Government could not use the money in the account to satisfy the tax obligations of one spouse. The fact that either spouse could withdraw the property did not mean that it could be used to satisfy either spouse’s tax obligations.
We do not pass upon the constitutional questions that were addressed by the District Court, but not by the Court of Appeals, concerning the adequacy of the notice provided by § 6343(b) and § 7426 to persons with competing claims to the levied property. There is nothing in the sparse record in this case to indicate whether Ruby and Neva Reeves were on notice as to the levy, or as to what the Government’s practice is concerning the notification of codepositors in this context. As the parties are free to address this issue on remand, the dissent’s concerns on this score, see post, at 747-748, are decidedly premature.
As a result, it may well be that any attempt to recover against the bank under state law would be pre-empted. We need not resolve that question, however, for, under Arkansas law, the bank’s payment to one depositor was a complete defense against suit on a codepositor’s claim. Ark. Stat. Ann. §§ 67-521, 67-552 (h) (1980). Since the Government stood in Roy’s shoes when it levied upon the joint account, the bank’s payment to the IRS would likewise insulate the bank from actions by Roy’s codepositors.
The dissent’s central argument apes the decision of the Court of Appeals in suggesting that there is something in the language of § 6331 that, when compared to the language of § 7403, requires that it be read to apply only to the case where the Government has proof that the property levied upon “completely belong[s]” to the delinquent. See post, at 741 (emphasis added). The adverb, however, simply is not part of the statutory language. The dissent bases its reading on the contrast between the language in § 7403, “property ... in which [the delinquent] has any right, title, or interest,” with the language in § 6331, “property and rights to property . . . belonging to the delinquent.” See post, at 737-741. While the dissent’s reading of the statutes in contrast is plausible, so too is the Government’s, especially in light of the fact that § 6331 refers to “rights to property” as well as “property.” The legislative history also supports the agency’s understanding of the statutory language. Thus when Congress in § 7426 enacted a cause of action for one whose property was wrongfully levied, it explicitly recognized that it was protecting against the situation “where the Government levies on property which, in part at least, a third person considers to be his.” S. Rep. No. 1708, 89th Cong., 2d Sess., 29 (1966) (emphasis added). If Congress intended § 6331 to give the Government the power to levy only upon property it knows to be wholly owned by the delinquent, it never would have felt the need to enact § 7426. When the agency’s plausible interpretation of its statute is supported by the plain meaning of the statute, the statutory scheme as a whole, and the
The dissent also is incorrect when it implies that the Court gives the word “wrongful” a strained understanding in finding that a third party’s property could be “wrongful[ly]” levied even though the Government properly was following the procedures of § 6331. See post, at 746, n. 11. The legislative history makes clear that the word “wrongful” as it is used in § 7426(a) refers not to intentional wrongdoing on the Government’s part, but rather “refers to a proceeding against property which is not the taxpayer’s.” S. Rep. No. 1708, at 30.
The dissent’s misreading of Rodgers is of a piece with its misunderstanding of the Government’s use of § 6331 as a provisional remedy to seize property. See post, at 740-743, and n. 6. The reason that § 6331 is not itself “punctilious in protecting the vested rights of third parties caught in the Government’s collection effort,” Rodgers,
Nor is Mansfield v. Excelsior Refining Co.,
That holding is irrelevant to the present controversy. Insofar as the case stands for any general proposition at all concerning the Government’s power to levy, it is not that a levy cannot be used to freeze assets when the delinquent “had less than a complete interest” in the property levied, see post, at 738, but that the Government may not levy upon a leasehold interest and then turn around and sell a fee interest — an entirely different kind of interest. In Mansfield, the Court held that the delinquent held no interest in the fee that could be levied upon, and so that case has nothing to do with the question whether the Government can levy when the extent of the delinquent’s interest in the property is not finally determined. The part of the decision relied upon by the dissent has to do with the nature of the “waiver” as it affects the characterization of the interest held by the renter/distiller in the underlying fee. The phrase cited by the dissent in context stands for the proposition that the waiver did not give the delinquent a fee interest that the Government could levy upon, but rather gave the Government the right to foreclose on its lien through a suit in equity.
Dissenting Opinion
dissenting.
The issue presented is whether the Internal Revenue Service (IRS) may lawfully seize a joint bank account for payment of a single codepositor’s delinquent taxes when it does not know how much, if any, of the account belongs to the delinquent. As it seems to me that the Court today misreads the relevant statutory language, in effect overrules prior decisions of this Court, and substantially ignores the property rights of nondelinquent taxpayers, I dissent.
I — I
The parties have stipulated the following facts. On June 13, 1980, respondent bank held $321.66 in a checking account and $1,241.60 in a savings account, each in the names of “Roy Reeves or Ruby Reeves or Neva R. Reeves.” App. 11-12. Under state law and by contract with the bank, each of these individuals could withdraw any amount from either account. Also on June 13, the IRS served a notice of levy on the bank demanding that it pay over all sums owed to Roy J. Reeves
The District Court dismissed the complaint as “premature.”
II
Because “taxes are the life-blood of government, and their prompt and certain availability an imperious need,” Bull v. United States,
The Court today, however, ignores the property rights of nondelinquents. It holds that a delinquent’s right to compel payment from a bank of balances in a joint account entitles the Government to levy on all of those funds — even when it is stipulated, as in this case, that the Government does not know that any of the money in the account actually belongs to the delinquent. By so holding, the Court disregards both the plain language and structure of the statute, ignores this Court’s century-long interpretation of the Code (effectively overruling Mansfield v. Excelsior Refining Co.,
h — I HH
Administrative levy under .26 U. S. C. § 6331 is the more drastic of the Government’s two primary collection procedures.
Section 7403 provides a quite different method for collecting delinquent taxes.
The language of these two provisions reveals the central difference between them. -While § 6331 applies to “property and rights to property . . . belonging to [the delinquent],” § 6331(a), § 7403 applies to “property ... in which [the delinquent] has any right, title, or interest . . . ,” § 7403(a). In other words, § 6331 permits seizure and sale of property or property rights belonging to the delinquent, while § 7403 allows the Government to seize and sell any property right in which the delinquent has an interest — even a partial interest. In many cases, of course, this difference is unimportant. Both procedures, for example, apply to any property
Until today, this Court has followed this interpretation of the levy and foreclosure provisions for the past century. In Mansfield v. Excelsior Refining Co.,
“The government neglected to pursue the only mode by which the fee could be sold; namely, a suit in equity, in which all persons interested in the property could have been made parties. When the [delinquent] was in default in respect to taxes, it was for the proper officers of the government to elect whether they would seek satisfaction of its demands by means of a seizure and sale by the collector of the [delinquent’s] interest only, or by a suit to which all persons having claims upon the premises on which the government had a lien should be made parties. They chose to adopt the former method, under which only the interest of the delinquent . . . could be seized and sold.” Id., at 341.
In other words, the Government could have either levied administratively only on the leasehold or proceeded in equity (the forerunner of §7403) to condemn the entire freehold interest. Under the former approach, it could take only the interest that completely “belonged] to” the delinquent, while
In United States v. Rodgers,
“Under ... § 6331(a), the Government may sell for the collection of unpaid taxes all nonexempt ‘property and rights to property . . . belonging to [the delinquent taxpayer] . . . Section 6331, unlike §7403, does not require notice and hearing for third parties, because no rights of third parties are intended to be implicated by §6331. Indeed, third parties whose property or interests in property have been seized inadvertently are entitled to claim that the property has been ‘wrongfully levied upon,’ and may apply for its return either through administrative channels ... or through a civil action filed in a federal district court. ... In the absence of such ‘wrongful levy,’ the entire proceeds of a sale conducted pursuant to administrative levy may be applied, without any prior distribution of the sort required by§ 7403, to the expenses of the levy and sale, the specific tax liability on the seized property, and the general tax liability of the delinquent taxpayer.” Id., at 696 (first emphasis in original, second added).
The Court later described the various advantages of each method of tax collection as follows:
“Among the advantages of administrative levy is that it is quick and relatively inexpensive. Among the advantages of a § 7403 proceeding is that it gives the Federal Government the opportunity to seek the highest return possible on the forced sale of property interests liable for the payment of federal taxes. The provisions of § 7403 are broad and profound. Nevertheless, § 7J/.03 is punctilious in protecting the vested rights of third parties caught in the Government’s collection effort, and in ensuring that the Government not receive out of the proceeds of the sale any more than that to which it is properly entitled.” Id., at 699 (emphasis added).6
IV
The narrow question presented, then, is whether the Government levied upon property or rights to property belonging only to Roy Reeves. The Court holds that the Government did so because it levied on Roy Reeves’ right under state law to require the bank to pay over to him the outstanding balances in the accounts. This right unquestionably belonged tó Roy Reeves, as it did to each of the other codepositors. They all had the same right to withdraw. But the right to withdraw funds was no more than that. It was a right accorded parties to joint accounts as a matter of mutual convenience, and it was independent of any right to or in the property. It encompassed no right of possession, use, or ownership over the funds when withdrawn. See Black v. Black,
The Court nevertheless holds that the right to withdraw all of a joint account is determinative because “‘it is inconceiv
The Court also disregards the statutory language and its prior cases when it argues that the levy authorized by § 6331 is only a “provisional” remedy. Ante, at 715, 720, 726, and 728. Third parties who have their property taken may pursue — if they know about the taking — either administrative or judicial relief. But one would hardly characterize as “provisional” the Government’s taking of an innocent party’s property without notice, especially when, even if the taking is discovered, the burden is then on the innocent party to institute recovery proceedings.
V
On the stipulated facts, the IRS did not know what portion, if any, of the joint accounts levied upon “belong[ed] to” Roy Reeves. It knew only that he had a right to withdraw that under state law encompassed no right to the possession, use, or ownership of the funds when withdrawn. In allowing the levy under these circumstances, the Court today not only decides this case contrary to all of the relevant decisions of the Courts of Appeals but also effectively overrules sub silentio its own prior decisions. Moreover, the Court relies on remedies that, because no notice is provided, may in many cases prove ineffective in protecting the rights of third parties.
I accordingly dissent, and would affirm the judgment of the Court of Appeals.
Section 6331 provides in pertinent part:
“(a) Authority of Secretary
“If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax ... by levy upon all property and rights to property. .. belonging to such person ....
“(b) Seizure and sale of property
“The term ‘levy’. . . includes the power of distraint and seizure by any means. ... In any case in which the Secretary may levy upon property or rights to property, he may seize and sell such property or rights to property (whether real or personal, tangible or intangible).”
Section 6343(b) states in pertinent part:
“If the Secretary determines that property has been wrongfully levied upon, it shall be lawful for the Secretary to return—
“(1) the specific property levied upon,
“(2) an amount of money equal to the amount of money levied upon, or
“(3) an amount of money equal to the amount of money received by the United States from a sale of such property.
“Property may be returned at any time. An amount equal to the amount of money levied upon or received from such sale may be returned at any time before the expiration of 9 months from the date of such levy.”
Section 7426(a)(1) provides as follows:
“If a levy has been made on property or property has been sold pursuant to a levy, and 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.”
Section 6532(c)(1) requires third parties who are not seeking administrative review to file suit within nine months of the levy.
Section 7403 provides in pertinent part as follows:
“(a) Filing
“In any case where there has been a refusal or neglect to pay any tax, or to discharge any liability in respect thereof, whether or not levy has been made, the Attorney General or his delegate, at the request of the Secretary, may direct a civil action to be filed in a district court of the United States to enforce the lien of the United States under this title with respectto such tax or liability or 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 or liability. . . .
“(b) Parties
“All persons having liens upon or claiming any interest in the property involved in such action shall be made parties thereto.
“(c) Adjudication and decree
“The court shall, after the parties have been duly notified of the action, proceed to adjudicate all matters involved therein and finally determine the merits of all claims to and liens upon the property, and, in all cases where a claim or interest of the United States therein is established, may decree a sale of such property . . . and a distribution of the proceeds of such sale according to the findings of the court in respect to the interests of the parties and of the United States. . . .” 26 U. S. C. § 7403.
The Court argues that Mansfield is irrelevant to today’s decision because it stands for the unremarkable proposition that “the Government may not levy upon a leasehold interest and then turn around and sell a fee interest — an entirely different kind of interest.” Ante, at 732, n. 15. It bases this reading of Mansfield on the presence of a waiver from the feeholder, which was in fact tangential to the Court’s holding in that case. The Court in Mansfield discussed the feeholder’s waiver only in order to determine whether it gave the Government an interest in the fee.
The Court attempts to minimize the conflict between its holding today and the holding in Rodgers by mischaracterizing that case. The Court states that “[t]he [Rodgers] Court noted that §6331, unlike §7403, does not ‘implicate the rights of third parties,’ because an administrative levy, unlike a judicial lien-foreclosure action, does not determine the ownership rights to the property.” Ante, at 731. Nothing in Rodgers, however, suggests that § 6331 is not intended to implicate third-party rights for this reason. As the first quotation from Rodgers in the text above clearly indicates, § 6331 is not meant to implicate such rights because its explicit language limits levies for “unpaid taxes [to] all nonexempt ‘property and rights to property . . . belonging to [the delinquent taxpayer] . . .’” (emphasis in Rodgers).
The Court also argues that comparing § 6331 and § 7403 is like comparing “apples and oranges.” Ante, at 732, n. 15. It suffices to say that this Court always has relied on comparison of these two provisions. See United States v. Rodgers,
The Arkansas Supreme Court has described the statute granting co-depositors the right to withdraw in the following terms:
“[The statute was] passed for the protection of the bank in which the deposit was made. It permits the bank to pay out the deposit . . . and protects the bank in doing so. . . . The statute[, however,] effects no investiture of title as between the depositors themselves, but only relieves the bank of the responsibility and duty of making inquiry as to the respective interests of the depositors in the deposit . . . .” Black v. Black, 199 Ark. 609 , 617,135 S. W. 2d 837 , 841 (1940).
The Court of Appeals accepted this characterization of Arkansas law and described the interrelationship between the right to withdraw and the underlying property rights as follows:
“Roy [Reeves] could have withdrawn any amount he wished from the account and used it to pay his debts, including federal income taxes, and his co-owners would have had no lawful complaint against the bank. But they might have had a claim against Roy for conversion. The rights of the co-owners inter sese are not determined by the . . . Arkansas statutes [granting a right of withdrawal]. Those rights depend on the intention of whoever deposited the money, or on whatever agreement, if any, might have been made among the co-owners, or on some other applicable rule of state law. If, for example, a spouse makes a deposit in a bank account that bears both spouses’ names, a tenancy by the entirety is created, defea-sible by either spouse at will simply by making a withdrawal. But here we do not know whether Roy is married to Ruby or Neva. In fact, both the government and the bank have studiously avoided finding out. ... In short, we know, or presume, that each co-owner could withdraw all of both accounts, but that is all we know.”726 F. 2d 1292 , 1295 (CA8 1984) (citation omitted) (emphasis added).
The Court accepts, as it must, the state court’s determination of Arkansas law. It simply holds that federal law overrides it, despite what this Court has held in Aquilino v. United States,
The Courts of Appeals that have considered whether the IRS can levy on jointly held property to pay a co-owner’s taxes have held that it cannot when it does not know how much of the property actually belongs to the delinquent. In United States v. Stock Yards Bank of Louisville,
Likewise, in Raffaele v. Granger,
The Court today states that “[t]he overwhelming majority of courts that have considered the issue have held that a delinquent taxpayer’s unrestricted right to withdraw constitutes ‘property’ or ‘rights to property’ subject to provisional IRS levy, regardless of the facts that other claims to the funds may exist and that the question of ultimate ownership may be unresolved at the time.” Ante, at 724-725. Insofar as the Court states that the IRS can levy on the right to withdraw, one can assume, without deciding, that it is correct, because the statement is irrelevant. In the present case, the IRS is not levying on the right to withdraw, but on the underlying right in the property, which may well belong to innocent third parties. See supra, at 741-743. On the other hand, insofar as the Court states that “these cases all stand for the proposition that a delinquent’s state-law right to withdraw funds from [a] joint bank account is a property interest sufficient for purposes of federal law for the Government to levy the account. . . ,” ante, at 725, n. 9, it is simply mistaken. Not one, let alone “all,” of these cases stand for this proposition. The cases the Court cites from the Courts of Appeals, the District Courts, and the Tax Court either decide a different question or actually support the position taken by the Third and Sixth Circuits, see n. 5, supra. Four of the Court of Appeals cases and one of the District Court cases concern the amount of “property” in an individual’s account when the bank has either an unexercised right of setoff or checks still to be drawn against the account at the time of the levy. Citizens & Peoples National Bank v. United States,
These cases should also dispel the Court’s fear that the IRS will be forced to “bring a lien-foreclosure suit each time it wishe[s] to execute a tax lien on funds in a joint bank account. . . .” Ante, at 733. Nothing in my opinion suggests that under existing federal law the IRS can never levy on a joint bank account. As the cited cases make clear, many, if not most, States give codepositors property rights in all the funds in a joint account. As long as state law grants such a right — which Arkansas law does not, see n. 7, supra—levy on all the funds to pay a single codepositor’s taxes is proper. It is only when state law does not grant such a right that the IRS should not be allowed to levy under § 6331 without first determining that the funds “belong to” the delinquent. The Court’s position, however, would permit levies even when the IRS knows that none of the fluids in the account belongs to the delinquent taxpayer.
At several points, the Court mischaracterizes my reliance on state law. I do not suggest that because state law “puts certain limits on the rights of creditors, and attaches certain consequences to [the right to withdraw] as regards the delinquent himself. . . the Government is limited by these same state-law constraints.” Ante, at 724, n. 8. Nor do I suggest that “state law dictates the extent of the Government’s power to levy.” Ante, at 725, n. 9. These are strawmen that the Court long ago rejected. United States v. Bess,
Moreover, if taken seriously, the Court’s reasoning would make any action for wrongful levy fruitless. If the mere right to withdraw payment is indeed the determinative interest, then a levy on a joint account for payment of a codepositor’s taxes can never be wrongful. It will always be true that a right to withdraw belonged to the delinquent codepositor. The Court, of course, does not actually take this extreme position. It would apparently allow a third party subsequently to contest a levy on the ground that “the money in fact belongs to him or her.” Ante, at 726 (emphasis added). This, however, amounts to recognition that it is the right of ownership, rather than the right to withdraw, that controls. To avoid taking a transparently unreasonable position, the Court switches the basis of its analysis. The relevant property interest, it appears, depends upon whether the Government is trying to seize property or a third party is trying to recoup it. The Court offers no reason for applying this double standard, and the statute itself yields none.
The Court also argues that a levy on third-party property may be justified because “[the levy] merely protects the Government’s interests so that rights to the property may be determined in a postseizure proceeding.” Ante, at 731, n. 15. This statement incorrectly states the law. Under the levy statute, the IRS has the power not only to seize but also to sell property. 26 U. S. C. § 6331(b). A co-owner of a house seized and sold to pay a delinquent’s taxes would indeed be surprised to discover that the IRS’s levy “merely protects the Government’s interests . . . .” Assuming that the co-owner discovered within nine months that the IRS had levied on the property (for no notice to him is required), he could recover in a wrongful-levy action at most some of the proceeds from the sale. This “remedy” hardly “punctiliously protects]” the rights of third parties, as the Court claims. Ante, at 731-732, n. 15.
The Court also emphasizes that administrative levy is justified because, like the delinquent’s right to withdraw, it is “subject to a later claim by a codepositor that the money in fact belongs to him or her.” Ante, at 726. This statement proves too much. Under the Court’s reasoning, the IRS could levy on anyone’s property to pay anyone else’s taxes because such wrongful seizures are nearly always “subject to a later claim by [the owner] that the [property] in fact belongs to him or her.” The fact that every wrongful taking is subject to a subsequent claim for conversion does not justify the taking.
The IRS may reach funds like these by following the procedure prescribed by § 7403. And, of course, Congress, if it wishes, may authorize collection of funds under a levy-type procedure, provided it observes constitutional requirements, particularly that of notice. As I would find the statutory language dispositive (as did the Court of Appeals), I do not address the due process claim relied on by the District Court.