CCA 200928030: Montana law does not always require state debt offsets before a federal levy

Plain-English summary

Chief Counsel reviewed a Montana statute while considering priority language for a levy agreement. The statute directs the state to offset amounts owed to an agency “when appropriate,” rather than requiring an offset in every case. Counsel concluded that the law leaves room for another debt, such as a federal tax liability, to be paid before a debt to a state agency. The IRS and Montana could address when an offset is appropriate while negotiating their agreement, and those negotiations would affect any related agreement concerning federal refunds.

Ruling snapshot

• Question: Must Montana offset state-agency debts before honoring a federal levy under the proposed agreement?
• Outcome: Advice given that Montana law permits situations in which the federal tax debt is paid first
• Key authorities: IRC § 6331; Montana Code § 17-4-105(2)

Full text (IRS public release)

ID: CCA_2009052710334420 Number: 200928030

Release Date: 7/10/2009

Office: -------------

UILC: 6331.00-00

From: -------------------

Sent: Wednesday, May 27, 2009 10:33:45 AM

To: ----------------------

Cc: ------------------

Subject: RE: MT SITLP MOU Proposed Priority Language

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After reviewing the MT statutes, my reviewer and I found that the statute does not mandate the offset for certain types of debts before the SITLP levy. The language in 17-4-105(2) states that "[t]he department shall, when appropriate, offset any amount due an agency from a person or entity against any amount, including refunds of taxes, owing the person or entity by an agency" (emphasis added). Because the statute uses the language "shall, when appropriate" it follows that there are situations when it may not be appropriate to offset. The statute allows the possibility to have other debts, such as a federal tax liability, paid before a debt to a state agency. When it is appropriate or not will be part of the negotiations between the Service and Montana in entering into a SITLP agreement and those negotiations will impact any agreement the state would like to enter into with respect to federal refunds. --

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--------------------------- Please let me know if you have any questions or if you would like to discuss this further.

Thanks,

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