Revenue officer may notify an employer that no wages are levy-exempt

Plain-English summary

An employer challenged an IRS letter stating that none of an employee's wages were exempt from levy because the letter was signed by a GS-12 revenue officer rather than a district director. Chief Counsel explained that IRS restructuring eliminated the district director position and transferred the relevant authority to area directors and their delegates. Delegation Order 5-3 authorized revenue officers at grade GS-09 and above to issue notices of levy. Although Letter 1697 was not separately listed, it was a central part of executing a wage levy when the taxpayer had another source of income sufficient to cover the statutory exemption. The GS-12 revenue officer therefore had authority to sign the letter, and it was not defective.

Ruling snapshot

• Question: May a GS-12 revenue officer sign Letter 1697 notifying an employer that no amount of a taxpayer's wages is exempt from levy?
• Outcome: Advice given, the revenue officer was authorized and the letter was valid.
• Key authorities: IRC §§ 6331 and 6334; Treas. Reg. §§ 301.6331-1, 301.6334-2, and 301.6334-3; Delegation Order 5-3

Full text (IRS public release)

       Office of Chief Counsel
       Internal Revenue Service
       memorandum
       Number: 201521001
       Release Date: 5/22/2015
       CC:GLS:EGG:JVFormagus
       CC:PA:04:ANSolodchikova
       GL-134889-14

UILC: 6334.00-00, 6331.00-00

date: October 23, 2014

 to:   Timothy B. Heavner
       Associate Area Counsel (Richmond)
       (Small Business/Self-Employed)

from: Kirsten N. Witter
Branch Chief
(General Legal Services)

       Susan T. Mosley
       Branch Chief
       (Procedure & Administration)

subject: Authority to Sign Letter 1697

                                                      ISSUE

       Whether a GS-12 Revenue Officer (RO), has the delegated authority to sign Letter
       1697.1

                                                  CONCLUSION

       Yes. The RO is authorized to sign Letter 1697 and the letter is not defective because it
       was not signed by a District Director.

                                                      FACTS

       The facts we were provided indicate that the Letter 1697, sent to the taxpayer’s
       employer, was signed by the GS-12 RO assigned to the case. The employer argues

       1
        Letter 1697 is sent to a taxpayer’s employer when the Service levies on the taxpayer’s take home pay
       and the taxpayer is not entitled to levy exemptions.

GL-134889-14 2

that the letter is defective because Treas. Reg. § 301.6334-2(c) states that “[i]n the case
of a taxpayer who has more than one source of wages, salary, or other income, the
district director may elect to levy on only one or more sources while leaving other
sources of income free from levy.” In such a case, “the district director must notify the
employer or other person upon whom the levy is served that no amount of the
taxpayer’s wages, salary, or other income is exempt from levy.” (Emphasis added).
Because the Letter 1697, which operates to notify an employer that no amount of the
taxpayer’s wages is exempt from levy, was not signed by a district director, the
employer argues it cannot rely on the RO’s instruction that the income stream is exempt
from levy. Accordingly, the employer contends that normal exemptions under section
6334 should apply to reduce the amounts turned over to the Service.

                                  DISCUSSION

Section 6331(a) authorizes the Commissioner to collect delinquent taxes by levy upon a
taxpayer’s property and rights to property. Treas. Reg. § 301.6331-1 states that the
“district director may levy upon any property, or rights to property, whether real or
personal, tangible or intangible, belonging to the taxpayer.” Section 301.6334-2(c)
provides, if the wages, salary or other income that is left free from levy equals or
exceeds the amount to which the taxpayer would be entitled as an exemption to levy
under section 6334(a)(9), then the district director may treat no amount of the wages or
salary on which the district director elects to levy as exempt. The regulations specify in
these circumstances that the district director must notify the employer or other person
upon whom the levy is served that no amount of the taxpayer’s wages, salary, or other
income is exempt from levy. Letter 1697 is used for this purpose. The employer may
then rely on the notification in paying over amounts pursuant to the levy. In the absence
of the notification, the employer is responsible for determining the exempt amount
pursuant to section 301.6334-3. Sections 301.6334-2 and 301.6334-3 were
promulgated in 1979 and amended in 1994 before the Restructuring and Reform Act of
1998 (RRA’98). RRA ’98 required the Service to modify its organizational structure to
feature operating units that would serve particular groups of taxpayers with similar
needs. The restructuring of the IRS resulted in the elimination of certain positions,
including the position of District Director.

In proposed amendments to 26 CFR Part 301, it is explained that the title of District
Director was replaced with Area Director. See 68 FR 497929-01 (Aug. 19, 2003). The
elimination of the title District Director is also evidenced by the fact that in Delegation
Order 1-23, the Commissioner indicated that any authority previously delegated to
District Directors through the Treasury Regulations was now delegated to: Assistant
Deputy Commissioners; Division Commissioners; Chiefs; and certain Directors. IRM
1.2.40.21.

Based on the foregoing, it is apparent that the position of “District Director” no longer
exists and the position referred to in Treas. Reg. § 301.6334 is now Area Director. In
Delegation Order (D.O.) 5-3, the Commissioner re-delegated the authority to issue a
GL-134889-14 3

Notice of Levy from Area Directors to: GS-09 Insolvency employees; Technical Service
Advisors; GS-09 Revenue Officers; GS-09 Tax Resolution Representatives; GS-06 Tax
Examiners and Collection Representatives in SBSE and W&I responsible for collection
matters. See IRM 1.2.44.4. Since the lowest level to which the authority was delegated
is a GS-09 RO, a GS-12 RO would also be authorized to issue a Notice of Levy. See
IRM 1.11.4.4.1 (Every intervening line supervisory position up to and including the
Commissioner has the same authority.) While a Letter 1697 is not specifically
enumerated in D.O. 5-3, or any other delegation order, the purpose of the letter is to
effectuate a levy. Issuing the notification is a central component in the procedures to
levy on wages when the taxpayer has more than one source of income. Accordingly, it
follows that authority to issue a Letter 1697 is included in the authority to issue a Notice
of Levy as set forth in D.O. 5-3.

Aside from D.O. 5-3, several other sections of the IRM indicate that a RO is authorized
to issue a Notice of Levy. IRM 5.17.3.2 states that “Revenue Officers, while acting in
the course of their duties on behalf of the Area Director in levying upon property of the
taxpayer, are delegates of the Secretary of Treasury having power to levy.” Likewise,
IRM 5.11.1.1, Notice of Levy Overview, indicates that Chapter 5.11 of the IRM provides
ROs an overview of the levy process. Further, IRM 5.11.2.2.2, Preparing the Notice of
Levy, indicates that a RO is not required to physically sign a levy; rather, his stamped or
electronic signature will suffice. Finally, while IRM 5.11.5.4.4, which indicates that a
Letter 1697 should be used to inform an employer that no wages are exempt from levy,
does not specifically say that ROs may sign Letters 1697, it is located in Chapter 5.11,
which, as stated above, instructs ROs on levy procedures.

In addition to Delegation Orders and the IRM, the GS-12 RO’s position description also
makes clear that ROs may execute levies. The position description for a GS-12 RO
within SBSE states, numerous times, that the Officer will collect delinquent tax and take
enforced collection actions using collection tools such as levies. Further, under
Supervisory Controls, the position description states that the Officer will decide when to
take appropriate collection actions and will obtain managerial concurrence only when
necessary.

Based on the foregoing, it is our opinion that a GS-12 RO is authorized to sign a Letter
1697 issuing a Notice of Levy to an employer in cases in which no amount of the wages
is exempt from levy.
GL-134889-14 4

If you have any questions please contact Jennifer Formagus at (202) 317-5646 or Alina
Solodchikova at (202) 317-5209.

                             By: _____________________________
                                 Susan T. Mosley
                                 Branch Chief
                                 (Procedure & Administration)

cc: Deborah C. Stanley
Assistant Division Counsel General Litigation
(Small Business/Self-Employed)

Lisa P. Lafferty
General Attorney
(Small Business/Self-Employed)