IRS may return levy proceeds after an installment agreement, but need not do so

Plain-English summary

Chief Counsel Advice addressed whether the IRS must return money obtained through a levy when the taxpayer later enters an installment agreement under IRC § 6159. The advice concluded that this is a return-of-property issue under IRC § 6343(d), not a wrongful-levy issue. If the installment agreement is silent, the Service may return the levy proceeds but is not required to do so. If the agreement specifically says that already-levied property will not be returned, the Commissioner may not grant the request under the cited regulation.

Ruling snapshot

• Question: Must the IRS return levy proceeds when a later installment agreement does not address their return?
• Outcome: Advice, return is discretionary unless the agreement bars it
• Key authorities: IRC §§ 6159 and 6343(d); Treas. Reg. § 301.6343-3(c)(2)

Full text (IRS public release)

ID:      CCA_2013111406444752
UILC:    6343.00-00

Number: 201350040
Release Date: 12/13/2013
From:
Sent: Thursday, November 14, 2013 6:44:48 AM
To:
Cc:
Bcc:
Subject: Section 6343 question


Good morning.

We are squared away on your section 6343 question. As we discussed, it is not a
wrongful levy situation. It is a return of property to the taxpayer issue under section
6343(d). Where the IA is silent, the Service may, but is not required, to return levy
proceeds.

Here is the condition relevant to your case under which the Service may return property
to the tp:

        Installment agreement. Subsequent to the levy, the taxpayer enters into an
        agreement under section 6159 to satisfy the liability for which the levy was made
        by means of installment payments. If, however, the agreement specifically
        provides that already levied upon property will not be returned under section
        6343(d), the Commissioner may not grant a request for return of property under
        this paragraph (c)(2).

Treas. Reg. 301.6343-3(c)(2)(emphasis added). So, language in an IA barring the
return of the money means the Service cannot grant a request for return of money. It in
no way follows that where the IA is silent that the Service has to give the money back—
it just means that the Service may give the money back (or not).

It was great talking to you. If you have additional questions or comments, just let me
know.