Bank account superpriority turns on actual knowledge and factual tracing

Plain-English summary

Chief Counsel discussed the section 6323(b)(10) superpriority for certain deposit-secured loans. The advice states that the priority can defeat a filed federal tax lien when the statutory elements are met, including the lender's lack of actual knowledge and its qualification as a bank under section 581. It distinguished a customer's failure to honor an IRS levy from a taxpayer's later decision about how to use money received when no levy existed. Once funds reached the taxpayer, the federal tax lien attached even if the money came from an otherwise unencumbered source because it was after-acquired property. The particular cases still required factual development, including possible tracing of the deposited funds.

Ruling snapshot

• Question: How does section 6323(b)(10) apply when a taxpayer deposits proceeds into an account securing a bank loan?
• Outcome: Advice given, lack of actual knowledge is central, but the cases require further factual development.
• Key authorities: IRC §§ 581 and 6323(b)(10); United States v. McDermott

Full text (IRS public release)

ID: CCA_2015042709443757 [Third Party Communication:

UILC: 6323.00-00 Date of Communication: Month DD, YYYY]

Number: 201520012
Release Date: 5/15/2015
From:
Sent: Monday, April 27, 2015 9:44:37 AM
To:
Cc:
Bcc:
Subject: RE: -------------------------

All of these e-mails should include------------------------, who is ------------reviewer on the matter.

I would only add that the whole point of a subsection (b) superpriority is to cede FTL priority, even after
an NFTL is filed, to the various persons listed. The (b)(10) superpriority depends on nothing more than a
lack of actual knowledge (assuming the other elements are met, e.g., that the person is a bank for
purposes of section 581, that the account is secured under local law, that it is the correct type account,
etc.).

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What --------and - discussed is how these cases really need factual development. If the Service had
levied on the customer whose indebtedness was reflected by the account receivable, then the customer
would have personal liability (plus a potential 50% penalty) to the extent that it fails to honor the levy
and instead gives the money directly to the taxpayer. But, once the money was given to the taxpayer,
and in this case there was no levy, the taxpayer had no obligation to do anything with the money
(barring bankruptcy, or a receivership, etc.). Even if the government has an interest in property,
taxpayers have no obligation to pay one creditor ahead of another. Moreover, even if the money came
from a gift (i.e., a source that was unencumbered by the FTL), as opposed to the customer’s account
receivable (i.e., a source encumbered by the FTL), the FTL would still encumber such property (or rights
to property) in the hands of the taxpayer, because it would simply be after-acquired property under
McDermott (SP?). So the fact that the money came from the accounts receivable is, in some respects, a
red herring. The same “loss of government” priority happens anytime a taxpayer deposits money into a
(b)(10) secured account. So, --------was going to flesh out the facts a bit, I think to support some tracing
argument. I am happy to assist if/when we get something in writing.

Regards,

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