If the Tax Department issues a tax levy against 'Mr. X individually and as an officer of ABC, Inc.' for the corporation's unpaid taxes, can the bank apply the levy against the corporation's own bank account, or only against Mr. X's personal account?

Plain-English summary

Marine Midland Bank, N.A. asked a practical collection question. ABC, Inc., a New York corporation, failed to pay sales taxes it collected and owed. Because of that failure, the Commissioner issued a tax warrant, and later a tax levy, naming the Commissioner as judgment creditor against "Mr. X individually and as an officer of ABC, Inc." (Mr. X being an officer of ABC). The levy was served on Marine Midland, which held two separate accounts -- one in Mr. X's name, one in ABC, Inc.'s name. The bank asked whether it must apply the levy to Mr. X's account only, to ABC's account only, or to both.

The answer: only Mr. X's individual account. The Department reasoned by analogy to Reid v. Stegman, 99 NY 646, where the Court of Appeals held that when a corporation is authorized to be sued in its own name and a judgment is docketed against named individuals as constituting the corporation, an execution against those individuals personally is unauthorized and void -- the judgment reaches only the corporate entity, not the individuals' personal assets. Applying the same logic in reverse: a warrant or levy docketed against an individual officer of a corporation can be executed only against that individual, not against the corporation itself. So even though the levy recites Mr. X's role "as an officer of ABC, Inc.," it is legally a levy against Mr. X personally -- it must be applied against the account in Mr. X's name, and cannot be applied against the separate account in ABC, Inc.'s name, regardless of which account (or both) holds sufficient funds.

What this means for you

Banks served with a New York tax levy against "an individual as an officer of" a corporation

Apply the levy only to the account held in the named individual's personal name. Do not extend it to a separate account held in the corporation's name, even if the levy's language references the individual's corporate role and even if the corporation's account has ample funds to satisfy the debt.

Corporate officers facing a tax warrant tied to corporate tax debt

A warrant or levy that names you "individually and as an officer of" your corporation reaches your personal assets, not the corporation's -- the corporate reference in the levy language doesn't give the state a claim on corporate bank accounts under this warrant.

The Tax Department and collection practitioners

If the actual target is the corporation's own funds, a separate warrant/levy naming the corporation directly (not just its officer) would be needed -- this ruling confirms the individual-vs-entity distinction cuts both ways under New York collection procedure.

Common questions

Q: Does naming someone "as an officer of" a corporation in a tax levy let the state reach the corporation's bank account? A: No -- based on this ruling, the levy is treated as directed at the individual personally, and only the individual's own account may be applied.

Q: What if both the individual's and the corporation's accounts have enough money to pay the levy? A: It doesn't matter -- the levy may still only be applied against the individual's account, not the corporation's, regardless of available balances.

Q: Does this collection rule apply beyond sales tax warrants? A: The underlying warrant/levy/execution mechanics in Tax Law section 692(c)-(f) are similar across the several tax articles the Department administers, per the ruling's own note that "other articles of Tax Law involving other taxes... contain similar collection procedures."

Citations and references

Statutes and regulations:

• Tax Law section 692(c) (issuance of a warrant after notice and demand)
• Tax Law section 692(d) (warrant filed as a lien)
• Tax Law section 692(e) (warrant filing creates a judgment)
• Tax Law section 692(f) (execution on the warrant)

Case cited in the ruling:

• Reid v. Stegman, 99 NY 646

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1991.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/multitax/a91_49s_16c_8i_7r_1m.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-91 (49) S
Sales Tax
TSB-A-91 (16) C
Corporation Tax
TSB-A-91 (8) I
Income Tax
TSB-A-91 (7) R
Real Estate Gains Tax
TSB-A-91 (1) M
Miscellaneous Tax
July 30, 1991

Taxpayer Services Division
Technical Services Bureau

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. Z910304C

On March 4, 1991 a Petition for Advisory Opinion was received from Marine Midland Bank, N.A., One Marine Midland Center, 27th Floor, Buffalo, New York 14203-2827. The issue raised by Petitioner, Marine Midland Bank, N.A., is whether a bank must apply a New York State Tax Levy, which is against "Mr. X individually and as an officer of ABC, Inc." against: a) only an account in the name or Mr. X; or b) only an account in the name or ABC, Inc.; or c) both the accounts of Mr. X and ABC, Inc. ABC, Inc. is a New York State corporation engaged in retail sales which require the collection of sales taxes. Mr. X is an officer of ABC, Inc. At some point, ABC, Inc. fails to pay the sales taxes which it owes. Because of the failure, the Commissioner of Taxation and Finance issues a tax warrant against "Mr. X individually and as an officer of ABC, Inc." Subsequently, the Commissioner issues a Tax Levy which names the Commissioner as judgment creditor and "Mr. X individually and as officer of ABC, Inc." The Tax Levy is served upon the bank. At the time it receives the Tax Levy the bank holds two accounts. One account is in the name of Mr. X. The other account is in the name of ABC, Inc. Neither account, jointly or severally, holds a sufficient balance to pay the Tax Levy. In the alternative, both of the accounts each hold sufficient balances to pay the Tax Levy. Sections 692(c), (d), (e) and (f) of the Tax Law provide that: (c) Issuance of warrant after notice and demand.--If any person liable under this article for the payment of any tax, addition to tax, penalty or interest neglects or refuses to pay the same within ten days after notice and demand therefor is given to such person under subsection (b), the tax commission may within six years after the date of such assessment issue a warrant under its official seal directed to the sheriff of any county of the state, or to any officer or employee of the department of taxation TP-9 (9/88)

-2­

TSB-A-91 (49) S
Sales Tax
TSB-A-91 (16) C
Corporation Tax
TSB-A-91 (8) I
Income Tax
TSB-A-91 (7) R
Real Estate Gains Tax
TSB-A-91 (1) M
Miscellaneous Tax
July 30, 1991

and finance, commanding him to levy upon and sell such person's real and personal property for the payment of the amount assessed, with the cost of executing the warrant, and to return such warrant to the tax commission and pay to it the money collected by virtue thereof within sixty days after the receipt of the warrant. If the tax commission finds that the collection of the tax or other amount is in jeopardy, notice and demand for immediate payment of such tax may be made by the tax commission and upon failure or refusal to pay such tax or other amount the tax commission may issue a warrant without regard to the ten-day period provided in this subsection. (d) Copy of warrant to be filed and lien to be created.--Any sheriff or officer or employee who receives a warrant under subsection (c) shall within five days thereafter file a copy with the clerk of the appropriate county. The clerk shall thereupon enter in the judgment docket, in the column for judgment debtors, the name of the taxpayer mentioned in the warrant, and in appropriate columns the tax or other amounts for which the warrant is issued and the date when such copy is filed; and such amount shall thereupon be a lien upon the title to and interest in real, personal and other property of the taxpayer. Such lien shall not apply to personal property unless such warrant is filed in the department of state. (e) Judgment.--When a warrant has been filed with the county clerk the tax commission shall, in the right of the people of the state of New York, be deemed to have obtained judgment against the taxpayer for the tax or other amounts. (f) Execution.--The sheriff or officer or employee shall thereupon proceed upon the warrant in all respects, with like effect, and in the same manner prescribed by law in respect to executions issued against property upon judgments of a court of record, and a sheriff shall be entitled to the same fees for his services in executing the warrant, to be collected in the same manner. An officer or employee of the department of taxation and finance may proceed in any county or counties of this state and shall have all the powers of execution conferred by law upon sheriffs, but shall be entitled to no fee or compensation in excess of actual expenses paid in connection with the execution of the warrant. Other articles of Tax Law involving other taxes collected by the Department of Taxation and Finance contain similar collection procedures. The Court of Appeals held in Reid v. Stegman, 99 NY 646 that where a corporation is authorized to be sued in its own name and a judgment is entered and docketed against named individuals as constituting the corporation, an execution against such persons individually is unauthorized and void.

-3­

TSB-A-91 (49) S
Sales Tax
TSB-A-91 (16) C
Corporation Tax
TSB-A-91 (8) I
Income Tax
TSB-A-91 (7) R
Real Estate Gains Tax
TSB-A-91 (1) M
Miscellaneous Tax
July 30, 1991

It therefore follows that in the reverse situation an execution docketed against the individual officers of a corporation may only be applied against the individual officers and not against the corporation. Thus in the instant case a tax levy or warrant against "Mr. X individually and as an officer of ABC, Inc." is to be applied only against an account in the name of Mr. X and may not be applied against an account in the name of "ABC, Inc." even though the same bank may hold separate accounts for the individual and the corporation.

DATED: July 30, 1991

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions are limited to the facts set forth therein.