26 U.S.C. § 7426 — Civil actions by persons other than taxpayers
submitted 60 years ago by Pub. L. 89-719 to r/title-26-INTERNAL-REVENUE-CODE · 1,238 words · no verdicts yet
People other than the taxpayer may sue the United States over wrongful tax levies, surplus proceeds, substituted proceeds, or an excessive lien-value determination. The section limits available relief, sets interest and damages rules, and treats the tax assessment as valid.
(a) Permitted actions. (1) Wrongful levy*. After a levy or levy sale, anyone other than the person assessed the tax may sue the United States in district court if the person claims an interest or lien and says the levy was wrongful. The suit may proceed whether or not the Secretary* has surrendered or sold the property. (2) Surplus. After a levy sale, a person other than the taxpayer* may sue if the person claims a junior interest or lien and legal entitlement to surplus proceeds. (3) Substituted proceeds. Anyone claiming legal entitlement to all or part of a fund* held under section 6325(b)(3) may sue. (4) Value substitution. A person receiving a section 6325(b)(4) discharge certificate may sue within 120 days to determine whether the United States’ interest is worth less than the Secretary determined; that person may bring no other action for that determination.
(b) Relief. The district court may grant only appropriate relief: (1) an injunction stopping a levy or sale if it would irreparably harm property rights the court finds superior to the United States’; (2) if the levy was wrongful, return specific property held by the United States, judgment for money levied, or, if sold, judgment no greater than the larger of the United States’ sale receipts or fair market value immediately before levy. If the United States was treated as the buyer under section 6335(e), receipts equal the statutory minimum price or, if larger, resale receipts. (3) If a party’s interest or lien transferred to sale proceeds, judgment for all or part of surplus proceeds. (4) If a party has an interest or lien in a section 6325(b)(3) fund, judgment for all or part of that fund. (5) If the Secretary overstated the United States’ interest value under section 6325(b)(4), refund the deposit and release the bond to the extent their total exceeds the court’s value.
(c) The tax assessment supporting the United States’ interest or lien is conclusively presumed valid.
(d) No action may be maintained against a current or former United States officer or employee*, or that person’s representative, for acts for which this section permits an action.
(e) If such an action is improperly filed against an officer or employee, the court must, on just terms and proper service, substitute the United States as defendant from the action’s start.
(f) Section 7422(a)’s rule requiring a refund claim before suit does not apply.
(g) Interest is allowed at the section 6621 overpayment rate: for a money judgment, from receipt of wrongfully levied money; for a sale judgment, from the sale date; and for a subsection (b)(5) refund, from receipt of the amount—each through payment of judgment.
(h)(1) If an IRS officer or employee recklessly, intentionally, or negligently disregarded this title, the defendant is liable for the lesser of $1,000,000, or $100,000 for negligence, and the sum of: (A) the plaintiff’s actual direct economic damages proximately caused by the disregard, reduced by subsection (b) damages; plus (B) action costs. (2) Section 7433(d)’s exhaustion, mitigation, and timing rules apply. (3) Claims are paid from section 1304 title 31 appropriations.
(i) For the limitation period, see section 6532(c).
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*.
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.
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.
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.
The district court shall have jurisdiction to grant only such of the following forms of relief as may be appropriate in the circumstances:
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.
If the court determines that such property has been wrongfully levied upon, the court may—
order the return of specific property if the United States is in possession of such property;
grant a judgment for the amount of money levied upon; or
if such property was sold, grant a judgment for an amount not exceeding the greater of—
the amount received by the United States from the sale of such property, or
the fair market value of such property immediately before the levy.
For the 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.
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.
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.
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.
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.
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.
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.
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.
Interest shall be allowed at the overpayment rate established under section 6621—
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;
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
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.
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—
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
the costs of the action.
The rules of section 7433(d) shall apply for purposes of this subsection.
Claims pursuant to this section shall be payable out of funds appropriated under section 1304 of title 31, United States Code.
Source credit: (Added Pub. L. 89–719, title I, § 110(a), Nov. 2, 1966, 80 Stat. 1142; amended Pub. L. 93–625, § 7(a)(2)(E), Jan. 3, 1975, 88 Stat. 2115; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 97–248, title III, § 350(a), Sept. 3, 1982, 96 Stat. 639; Pub. L. 99–514, title XV, § 1511(c)(16), Oct. 22, 1986, 100 Stat. 2745; Pub. L. 105–206, title III, §§ 3102(b), 3106(b)(1), (2), July 22, 1998, 112 Stat. 730, 733.)
- 1966Enacted · Pub. L. 89-719 · 80 Stat. 1142
- 1975Amended · Pub. L. 93-625 · 88 Stat. 2115
- 1976Amended · Pub. L. 94-455 · 90 Stat. 1834
- 1982Amended · Pub. L. 97-248 · 96 Stat. 639
- 1986Amended · Pub. L. 99-514 · 100 Stat. 2745
- 1998Amended · Pub. L. 105-206 · 112 Stat. 730, 733
A history note hasn’t been published yet. The record shows enactment by Pub. L. 89-719 on 1966-11-02.
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