| Date: | 08/07/2017 |
|---|---|
| Organization: | Massachusetts Department of Revenue |
| Regulatory Authority: | Massachusetts General Laws |
| Official Version: | Published by the Massachusetts Register |
830 CMR: DEPARTMENT OF REVENUE
830 CMR 62C.00: STATE TAX ADMINISTRATION
830 CMR 62C.55A.1: LEVY FOR NON-PAYMENT OF TAXES
(a) Statement of Purpose . Pursuant to provisions of M.G.L. c. 62C, the Commissioner of Revenue has broad authority to institute collection procedures for all delinquent taxes, including the authority to levy upon a taxpayer’s property or rights to property. 830 CMR 62C.55A.1 explains the application of levy provisions in M.G.L. c. 62C, §§ 53, 54, 55A and 64, particularly the rules and procedures that apply to persons receiving a notice of levy from the Commissioner in connection with the Commissioner’s authority to collect taxes. It explains the continuous levy upon a taxpayer’s compensation for personal services performed and the 60-day levy upon a taxpayer’s property or rights to property, including in particular a taxpayer‘s accounts at financial institutions. 830 CMR 62C.55A.1 identifies the types of property commonly subject to or exempt from levy pursuant to the tax administration statutes and procedures. Finally, 830 CMR 62C.55A.1 sets forth the circumstances and procedures necessary for release of levy. The guidelines in 830 CMR 62C.55A.1 apply to all holders of property with respect to which the Commissioner serves a levy.
(b) Effective Date . 830 CMR 62C.55A.1 is effective upon promulgation.
(c) Outline of Topics . 830 CMR 62C.55A.1 is organized as follows:
(1) Statement of Purpose; Effective Date; Outline of Topics
(2) Definitions
(3) Levy Rules
(4) Exemptions from Tax Levy
(5) Surrender of Property or Discharge of Obligation; Exceptions; Personal Liability; Penalty
(6) Claiming Wrongful Levy
(7) Release of Levy
For purposes of 830 CMR 62C.55A.1, the following words have the following meanings, unless the context otherwise requires:
Commissioner, the Commissioner of Revenue or the Commissioner's duly authorized representative.
Financial Institution, the term financial institution includes commercial banks, savings banks, trust companies, savings and loan associations, building and loan associations, cooperative banks, homestead associations, credit unions, brokers, brokerage firms mutual fund managers, investment companies, unit investment trust, and similar entities doing business in Massachusetts.
Levy, the term levy includes the power of distraint and seizure by any means.
Payor , the employer or other person obligated to pay the taxpayer compensation for personal services and upon whom the Commissioner's levy is served with respect to such compensation.
Tax or Taxes, any tax, excise, interest, penalty, or addition to tax imposed by chapter 60A; by chapters 62 through 65C, inclusive; by chapter 121A, § 10; by chapter 138, § 21; or by any act in addition thereto or amendment thereof.
Taxpayer, any individual or entity with an outstanding tax liability who or which has neglected or refused to pay after demand by the Commissioner.
Compensation for Personal Services, any amount payable to or received by an individual as compensation for personal services performed, including, but not limited to, wages, salaries, fees, bonuses, commissions, pensions, retirement pay, but excluding any amounts listed as being exempt from levy under M.G.L. c. 62C, § 55A(a)(9) and (d) and 830 CMR 62C.55A.1(4)(a).
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(a) General. If any person liable to pay any tax neglects or refuses to pay the tax within ten days after demand, the Commissioner may collect such tax, and such further sum as shall be sufficient to cover the expenses of the levy, by levy upon all property and rights to property belonging to such person or on which there is a lien provided in M.G.L. chs. 62C, 65 or 65C for payment of such tax. If the Commissioner makes a finding that the collection of such tax is in jeopardy, notice and demand for immediate payment of such tax may be made by the Commissioner and, upon failure or refusal to pay such tax, collection thereof by levy shall be lawful without regard to the ten-day period.
1. In any case in which the Commissioner 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.
2. Whenever any property or right to property upon which levy has been made is not sufficient to satisfy the claim of the commonwealth for which levy is made, the Commissioner may, thereafter, and as often as may be necessary, proceed to levy in like manner upon any other property of the taxpayer, until the amount due from the taxpayer, together with all expenses, is paid in full.
(b) Property Subject to Levy. With exceptions enumerated in M.G.L. c. 62C, § 55A and 830 CMR 62C.55A.1(4) and subject to any applicable overriding federal law, all property or rights to property belonging to a taxpayer or on which there is a lien as provided in M.G.L. chs. 62C, 65, or 65C is subject to levy for payment of tax, including benefits not otherwise exempt, judgements, settlements and lottery winnings.
(c) Types of Tax Levies
1. Levy on Compensation for Personal Services . A levy on compensation for personal services payable to or received by a taxpayer allows the Commissioner to take a certain amount of a taxpayer’s compensation for personal services as payment of a tax liability. This type of levy remains in effect from the date such levy is first made until the levy is released for one of the reasons described in 830 CMR 62C.55A.1(7).
2. Levy on Other Property or Rights to Property. A levy on any other property or rights to property shall remain in effect for 60 days from the date such levy is first made until the levy is released for one of the reasons described in 830 CMR 62C.55A.1(7).
(a) Exempt Portions of Compensation for Personal Services . A portion of a taxpayer’s compensation for personal services is exempt from levy. The amount exempt is generally based on the pay period used and the number of dependents claimed by the taxpayer. Alternatively, the Commissioner may base the exempt amount on the taxpayer’s disposable income. The exempt amount calculated for the pay period is subtracted from the taxpayer’s net compensation for the period to determine the amount of non-exempt compensation required to be remitted to the Commissioner.
1. Exempt amount of compensation for personal services based on pay period and number of dependents .
a. Pay periods . For purposes of this section a pay period shall be as follows:
i. Amounts paid on a regular basis . In the case of compensation for personal services paid to a taxpayer with respect to an established period of time, regularly used by an employer, the pay period shall be such established period of time. Regularly used pay periods include, but are not limited to, pay periods which are daily, weekly, once every two weeks, twice in a calendar month, and monthly.
ii. Amounts paid on irregular but recurring basis . In the case of compensation for personal services paid to a taxpayer on an irregular but recurrent basis, the first day of the taxpayer's pay period is the day following the day upon which the compensation for personal services was last paid to the taxpayer. The last day of the pay period is the day upon which the current payment becomes payable to the taxpayer. However, where amounts are paid to the taxpayer on an irregular but recurrent basis and more than 60 days lapse between the current payment and the last payment, the current payment will be deemed a one-time payment as described in 830 CMR 62C.55A.1(4)(a)1.a.iii.
iii. One-time payment . If a taxpayer is paid compensation for personal services on a one-time basis, the taxpayer's pay period is deemed to be weekly, and the deemed one-week pay period ends on the day of payment.
b. Persons properly claimed as dependents . For purposes of M.G.L. c. 62C, § 55A(d)(1)(B) and 830 CMR 62C.55A.1(4)(a)1.c., a person is a dependent of the taxpayer for any pay period of the taxpayer if:
i. Over half of that person's support for the pay period was provided by the taxpayer, and
ii. The person either is the taxpayer's spouse or bears, on the last day of the pay period, a relationship to the taxpayer specified in Internal Revenue Code § 152 (relating to definition of dependent), as amended and in effect for the taxable year, and
iii. The person is not the taxpayer's minor child with respect to whom amounts are exempt from levy under M.G.L. c. 62C, § 55A(a)(8) (relating to exemption from levy for judgments for support of minor children) at any time during the pay period.
To properly claim a dependent for purposes of M.G.L. c. 62C, § 55A(d)(1)(B) and 830 CMR 62C.55A.1(4)(a)1.b., the taxpayer must submit to the payor either a completed DOR Statement of Exemption or a written statement signed under the penalties of perjury listing the name and relationship of each person that qualifies as a dependent pursuant to 830 CMR 62C.55A.1(4)(a)1.b. If the taxpayer fails to return a completed and signed Statement of Exemption, the exempt amount of compensation is calculated with no allowance for dependents.
c. Calculation of exempt amount . Out of amounts payable to a taxpayer as compensation for personal services for each pay period described in 830 CMR 62C.55A.1(4)(a)1.a, the following amounts are exempt from levy:
i. If the pay period is one week: $75 plus $25 for each person properly claimed as a dependent pursuant to 830 CMR 62C.55A.1(4)(a)1.b.
ii. If the pay period is two weeks: $150 plus $50 for each person properly claimed as a dependent pursuant to 830 CMR 62C.55A.1(4)(a)1.b.
iii. If there are two pay periods per calendar month: $162.50 plus $54.17 for each person properly claimed as a dependent pursuant to 830 CMR 62C.55A.1(4)(b)3.
iv. If the pay period is one month: $325 plus $108.33 for each person properly claimed as a dependent pursuant to 830 CMR 62C.55A.1(4)(a)1.b.
v. If the pay period is one day: $15 plus $5 for each person properly claimed as a dependent pursuant to 830 CMR 62C.55A.1(4)(a)1.b.
vi. If the pay period is not one of the pay periods described in 830 CMR 62C.55A.1(4)(a)1.a, a proportionate amount determined by multiplying the sum of $3,900 plus $1,300 for each person properly claimed as a dependent pursuant to 830 CMR 62C.55A.1(4)(a)1.b by a fraction, the numerator of which is the number of hours, days, weeks, or months, whichever is applicable, in the pay period, and the denominator of which is the corresponding number of hours, days, weeks, or months in a calendar year.
Example : Taxpayer A, an employee of the Y corporation, is paid wages of $600 every three weeks and has two dependent children. The amount of wages exempt from levy for taxpayer A for each three-week pay period is:
($3,900 + (2 x $1,300)) X (3/52) = $375.00
2. Exempt amount of compensation for personal services based on disposable income . As an alternative to determining the amount exempt from levy based on pay period and dependents, the payor of the compensation may be required by the Commissioner to determine the amount exempt from levy based on the taxpayer’s disposable income. In such a case, twenty-five percent of the taxpayer’s disposable income will be considered non-exempt compensation that must be remitted to the Commissioner. For purposes of this paragraph, the term “disposable income” means the amount of the taxpayer’s compensation for personal services per pay period remaining after subtracting federal and state income tax withholding; medicare tax, FICA or other statutorily required retirement contributions; amounts that an employer has been notified are subject to a court order for child support; and amounts required to be deducted for medical insurance coverage required by law.
Where the Commissioner has instructed the payor to remit twenty-five percent of the taxpayer’s disposable income, the taxpayer may request to have the exempt amount determined under 830 CMR 62C.55A.1(4)(a)1 by submitting a request to the Commissioner in writing. The request must include a Statement of Exemption or other documentation to substantiate the number of dependents. Upon satisfactory proof of the number of dependents claimed, the Commissioner will adjust the amount of the levy and will notify the payor of the amount to withhold each pay period while the levy remains in effect.
(b) Exempt Property . Under M.G.L. c. 62C, § 55A the following categories of property are exempt from levy for tax collection purposes:
1. Unemployment Compensation . Any amount payable to an individual with respect to the individual’s unemployment, including any portion thereof payable with respect to dependents, under an employment compensation law of the United States, or of any state. See M.G.L. c. 62C, § 55A(a)(4).
2. Certain federal pension or retirement benefits . Annuity or pension payments under the Railroad Retirement Act, benefits under the Railroad Unemployment Insurance Act, special pension payments received by a person whose name has been entered on the Army, Navy, Air Force and Coast Guard Medal of Honor Roll 38 U.S.C. § 562, and annuities based on retired or retainer pay under 10 U.S.C. chapter 73. See M.G.L. c. 62C, § 55A(a)(6).
3. Workers' Compensation . Any amount payable to an individual as Workers' Compensation, including any portion payable with respect to dependents, under a workers' compensation law of the United States, or of any state. See M.G.L. c. 62C, § 55A(a)(7).
4. Amounts necessary to comply with pre existing child support orders . If the taxpayer is required by a judgment of a court of competent jurisdiction, entered prior to the date of levy, to contribute to the support of his minor children, so much of his salary, wages, or other income as is necessary to comply with such judgment. See M.G.L. c. 62C, § 55A(a)(8).
5. Supplemental Security Income (SSI) . Any amount payable to or received by an individual with respect to his or her eligibility for Supplemental Security Income, under the Social Security law of the United States. 42 U.S.C. §§ 407(a), 1383(d)(1),
6. Railroad Unemployment Insurance Benefits . Any amount payable to or received by an individual with respect to his or her eligibility for railroad unemployment benefits, under the Railroad Unemployment Insurance Act of the United States. 45 U.S.C. § 352(e).
(a) General. 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 Commissioner, surrender such property or rights, or discharge such obligation, to the Commissioner, 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.
(b) Specific Surrender Instructions for Particular Payors
1. Employers.
a. Exempt amount of compensation for personal services based on pay period and number of dependents. An employer receiving a notice of levy accompanied by DOR Statement of Exemption must promptly give the Statement of Exemption to the employee. To properly claim one or more dependents, the employee must return the completed and signed statement back to the employer within seven days of receiving it from the employer. Upon receiving the employee’s Statement of Exemption, the employer must calculate the amount of exempt wages for the pay period in which the notice of levy was received based on pay period and number of dependents in accordance with 830 CMR 62C.55.1(4)(a)1. If the employee fails to return a completed and signed Statement of Exemption, the amount of exempt wages is calculated with no allowance for dependents. The exempt wages for the pay period are subtracted from net pay for the period and the remaining amount of net pay is considered non-exempt wages and must be remitted to the Commissioner.
b. Exempt amount of compensation for personal services based on disposable income. An employer receiving a Notice of Levy from the Commissioner requesting twenty-five percent of the employee’s disposable income, as described in 830 CMR 62C.55.1(4)(a)2, must calculate such amount for the pay period in which the Notice of Levy was received. Twenty-five percent of disposable income is considered non-exempt wages and must be remitted to the Commissioner.
c. Time for employers to remit non-exempt wages. An employer receiving a Notice of Levy with respect to an employee must remit the employee’s non-exempt wages for the pay period in which the Notice of Levy was received to the Commissioner within 21 days of the date of the Notice of Levy, and continue to remit the employee’s non-exempt wages for each subsequent pay period on or before each pay date thereafter until the levy is satisfied or until the Commissioner notifies the employer that the levy has been released.
2. Financial Institutions .
a. General. When a financial institution receives a notice of levy from the Commissioner, such institution must match the information on the levy notice against each and every account on which the taxpayer’s name or taxpayer identification number appears, regardless of whether such information appears as the primary name or number on the account or as one or more secondary names or numbers on the account. After determining a match exists, either by name, social security number or other taxpayer identification number, the financial institution must surrender all property and rights to property described in the notice of levy, except property that is exempt or is, at the time of such demand, subject to an attachment or execution under any judicial process. The levy applies to both those funds or other property on deposit at the time the levy is received and to funds or other property held and received during the period for which the levy is effective.
b. 21-day holding period for levied accounts. Except as provided in 830 CMR 62C.55A.1(5)(b)2.d, financial institutions receiving a notice of levy on a depositor’s account or with respect to other property or rights to property must retain in the account an amount, up to the amount of the levy, for 21 days from the date of the levy.
i. During the 21-day holding period, taxpayers have an opportunity to notify the Commissioner of errors with respect to the levy.
ii. Taxpayers may waive the 21-day holding period by informing the financial institution.
c. Surrender after 21 days. Except as provided in 830 CMR 62C.55A.1(5)(b)2.d, on the first business day after the 21-day holding period, financial institutions must surrender levied property, including principal plus any interest earned before or during the 21-day holding period, up to the amount of the levy, unless the Commissioner releases the levy or requests any extension of the holding period. Surrendered interest is reported to the Commissioner as interest paid to the taxpayer.
d. Compliance with applicable federal rules for federal benefit payments. Financial institutions are required to comply with 31 CFR 212, in which the U.S. Treasury Department, along with several other federal agencies, adopted final rules governing procedures that financial institutions must follow when they receive a tax levy upon the account of a taxpayer whose account contains directly deposited exempt federal benefits payments.
3. Insurance companies .
a. A levy on an organization with respect to a life insurance or endowment contract issued by such organization shall, without necessity for the surrender of the contract document, constitute a demand by the Commissioner for payment of the amount described in 830 CMR 62C.55A.1(5)(b)3.b. and the exercise of the taxpayer's right to the advance of such amount. Such organization shall pay over such amount within ninety days after service of notice of levy. Such notice shall include a certification by the Commissioner that a copy of such notice has been mailed to the person against whom the tax is assessed at his last known address.
b. Such levy shall be deemed to be satisfied if such organization pays over to the Commissioner the amount which the person against whom the tax is assessed could have had advanced to him by such organization on the date prescribed for the satisfaction of such levy, increased by the amount of any advance, including contractual interest thereon, made to such person on or after the date such organization had actual notice or knowledge of the existence of the lien with respect to which such levy is made, other than an advance, including contractual interest thereon, made automatically to maintain such contract in force under an agreement entered into before such organization had such notice or knowledge.
4. Securities or mutual funds . With respect to a levy on securities or a levy on shares of a mutual fund other than a money market mutual fund, the person or entity in possession of such securities or shares may sell or repurchase such securities or shares, including at the direction of the taxpayer, in the ordinary and usual course of investing, but the taxpayer may not receive funds resulting from any such sale, for a time period of up to 45 days. If, during such time period, the Commissioner has not rescinded the levy, extended the time period or notified the person or entity in possession of such securities or shares to remit funds, at the end of such time period such person shall forthwith liquidate sufficient securities or shares to satisfy the full amount of the lien and remit the liquidated funds to the Commissioner.
(c) Compliance with Levy .
1. A party in possession of, or obligated with respect to, property or rights to property subject to levy that surrenders such property or rights to property to the Commissioner, or discharges such obligation, is discharged from any obligation or liability to the taxpayer with respect to such property or rights to property arising from such surrender or discharge.
2. In the case of a levy on an organization with respect to a life insurance or endowment contract, such organization is discharged from any obligation or liability to any beneficiary arising from such surrender or discharge.
3. The satisfaction of a levy shall be without prejudice to any civil action for the enforcement of any lien imposed by M.G.L. c. 62C, § 50 with respect to such life insurance or endowment contract.
(d) Failure or Refusal to Comply with Levy .
1. Pursuant to G.L. c. 62C, § 54(c)(1), any person who fails or refuses to surrender any property or rights to property subject to levy, upon demand by the Commissioner, shall be personally liable to the commonwealth in a sum equal to the value of the property or rights not so surrendered, but not exceeding the tax liability for which such levy has been made, together with costs and interest on such sum at the rate of eight per cent annually from the date of such levy. Any amount, other than costs, recovered under this paragraph shall be credited against the tax liability for the collection of which such levy was made.
2. In addition to the personal liability imposed by G.L. c. 62C, § 54(c)(1) and 830 CMR 62C.55A.1(5)(d)1, pursuant to G.L. c. 62C, § 54(c)(2) , 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 fifty per cent of the amount recoverable under 830 CMR 62C.55A.1(5)(d)1. No part of such penalty shall be credited against the tax liability for the collection of which such levy was made.
Any party claiming an interest in property upon which levy has been made and claiming that such property has been wrongfully levied may apply to the Commissioner for the return of any such amount.
(a) Written request . A written request for a review based upon a claim that the property levied upon was exempt or the taxpayer did not owe the amount stated in the levy notice must be submitted in the manner prescribed by the Commissioner.
(b) Determination by the Commissioner . If the Commissioner finds that the property or any portion of the property has been wrongfully levied upon, he may return i. money surrendered; ii. property surrendered and/or; iii. an amount of money received by the Commonwealth from the sale of the surrendered property.
(c) Discretionary Reimbursement of Fees . In addition the Commissioner may, in his discretion, reimburse a taxpayer for any fee or similar amount charged to the taxpayer by a bank or financial institution where such fee or charge proximately resulted from the Commissioner's improper or erroneous service of a notice of lien or levy on such bank or financial institution.
(a) Release when Liability is Satisfied or Becomes Unenforceable With respect to a levy described in 830 CMR 62C.55A.1, the Commissioner shall promptly release the levy when the liability out of which such levy arose is satisfied or becomes unenforceable by reason of lapse of time, and shall promptly notify the person upon whom such levy was made that such levy has been released.
(b) Release to Facilitate Collection of a Tax Liability The Commissioner may release a levy in certain other circumstances if the Commissioner determines that such action will facilitate the collection of the taxpayer's tax liability. For example, a levy on property may be released prior to the sale of such property to facilitate collection of a tax liability, even if the property is sold for less than the full amount of the liability. As a condition to such a release, the taxpayer must provide for full payment of the tax liability in a manner acceptable to the Commissioner, including, but not limited to, the following ways:
1. Escrow arrangement The taxpayer offers a satisfactory arrangement, acceptable to the Commissioner, for placing property in escrow to secure the payment of the liability (including the expenses incurred in levy on the property), which is the basis of the levy.
2. Bond The taxpayer delivers a bond, acceptable to the Commissioner, conditioned upon the payment of the liability (including the expenses incurred in levy on the property) which is the basis of the levy.
3. Payment of the amount of the Commonwealth's interest in the property The taxpayer pays to the Commissioner an amount determined by the Commissioner to be equal to the interest of the Commonwealth in the part of the seized property to be released. Such payment does not operate to release any tax lien which the Commonwealth may have on the property, which continues until the tax liability is satisfied, or the lien is specifically released, or until the expiration of the statutory period for which the lien remains in force.
4. Assignment of salaries and wages The taxpayer executes an agreement with the Commissioner directing the taxpayer’s employer to pay to the Commissioner amounts deducted from the taxpayer's wages or salary on a regular, continuing, or periodic basis, in such manner and in such amount as is agreed upon with the Commissioner, until the full amount of the liability is satisfied. The agreement must be accepted by the employer before the levy may be released.
5. Installment payment arrangement The taxpayer makes satisfactory arrangements with the Commissioner to pay the amount of the liability in installments.
6. Value insufficient to cover expenses If the Commissioner determines that the value of the interest of the Commonwealth in the property, or in the part of the property to be released from levy, is insufficient to cover the expenses of the sale of such property, the Commissioner may release the levy on such property. A release under 830 CMR 62C.55A.1(6)(c)6 will be considered to facilitate the collection of the delinquent taxpayer's tax liability.
(c) Release to Prevent Serious Hardship. A levy on property may be released prior to the sale of such property for less than the full amount of the liability if the taxpayer can demonstrate the levy has caused serious hardship. As a condition of release, the taxpayer must provide a written request for review and a statement detailing the hardship. If the Commissioner finds that the levy is causing the taxpayer serious hardship, the Commissioner may release the levy.
(d) Subsequent Levy A release of levy under M.G.L. c. 62C, § 64 shall not prevent any subsequent levy, even though the subsequent levy or levies are made on the same property or rights to property.
WORKING DRAFT FOR PRACTITIONER COMMENT - 8/7/17
