CCA 1311026: CCA addresses a bank’s deposit-account superpriority claim

Plain-English summary

Chief Counsel advice considered a bank’s potential superpriority under IRC § 6323(b)(10) for loans secured by a deposit account. The advice stated that a bank may obtain and perfect a security interest in a business deposit account through control without filing a UCC financing statement. It also noted that a superpriority claim is not a defense to a levy and that the Service generally releases a levy after the bank establishes its superpriority interest.

Ruling snapshot

• Question: What did the IRS determine under the cited Code provisions?
• Outcome: advice.
• Key authorities: IRC § 6323

Full text (IRS public release)

ID: CCA_2012042613145247 Number: 201311026
Release Date: 3/15/2013
Office: ----------------
UILC: 6323.01-05

From:----------------------
Sent: Thursday, April 26, 2012 1:15:01 PM
To:---------------
Cc:--------------------------
Subject: FW: Lien Priority Question ------

Hi -----------
As noted below, under the facts provided it appears that the bank would have a
superpriority under section 6323(b)(10), for deposit-secured loans. There is not much
out there on 6323(b)(10) (a Lexis search pulled up only 3 cases), and I have not come
across anything specifically addressing UCC 9-312 in this context, but the below
excerpt from the GL training materials is useful:
Article 9 of the UCC allows a bank to obtain a security interest in a
deposit account. Specifically, section 9-109 of Article 9 allows a security
interest to be created in personal property. Section 9-109(d)(13), however,
excludes consumer loans from the scope of Article 9, so a security interest
may be created in only business loans. Section 9-314(a) provides that a
security interest in a deposit account may be perfected by control. Under
section 9-104(a)(1), a bank automatically has control when the bank
maintains the deposit account. Section 9-104(b) provides that the bank
still maintains control even if the depositor is allowed to withdraw funds
from the account. There is no requirement that the bank file a UCC
statement with the state. In effect, in most situations, the bank will
automatically and secretly have perfected a security interest in the
depositor's account. A bank’s claim to a section 6323(b)(10)
superpriority, however, is not a defense to a levy. Rev. Rul. 2006-42,
2006-2 C.B. 337.
The Rev Rul cited also provides that we will generally release a levy once a bank
establishes its superpriority interest. See also IRS CCA 200849001 (regarding
application of 6323(b)(10) to taxpayer checking accounts).
From the facts provided, I don't see an argument here that there are any grounds to
dispute the bank's superpriority claim unless the bank did not loan a "fixed and
determinable sum." I have never seen a case where we have disputed a bank's
security interest in a deposit account based upon lack of perfection by control.
Please let me know if I can be of further assistance.