Third Party Levies: Bulten Stumbles (keyboard alert)

[Famspear]

In a thread entitled “USSC cites on liens/levy” over at losthorizons.com, I found the following post by John Bulten:

So Dr. C, given the brief above as well as Schulz II, it seems to me that when a private workplace gets a "notice of levy" on one of its workers, it is perfectly reasonable and lawful for it to reply simply: "Our policy is not to turn over workers' contractual earnings to alleged third-party creditors without court order."

Care to disabuse me?

Translation: So Dr. C, it seems to me that when a freight train is bearing down on me at 85 miles per hour, it is perfectly reasonable and lawful for me to jump right up onto the railroad track, place my left hand on my hip, hold up my hand up in front of me, and state simply: “Oh stop, thou horrid freight train, I forbid thee to proceed; it is my policy not to allow thee to pass.”

Uh, John, can you say “personal liability”?

[Famspear]

From 26 USC 6332:

(a) Requirement

Except as otherwise provided in this section, any person in possession of (or obligated with respect to) property or rights to property subject to levy upon which a levy has been made shall, upon demand of the Secretary, surrender such property or rights (or discharge such obligation) to the Secretary, except such part of the property or rights as is, at the time of such demand, subject to an attachment or execution under any judicial process.

[ . . . ]

(d) Enforcement of levy

(1) Extent of personal liability

Any person who fails or refuses to surrender any property or rights to property, subject to levy, upon demand by the Secretary, shall be liable in his own person and estate to the United States in a sum equal to the value of the property or rights not so surrendered, but not exceeding the amount of taxes for the collection of which such levy has been made, together with costs and interest on such sum at the underpayment rate established under section 6621 from the date of such levy (or, in the case of a levy described in section 6331 (d)(3), from the date such person would otherwise have been obligated to pay over such amounts to the taxpayer). Any amount (other than costs) recovered under this paragraph shall be credited against the tax liability for the collection of which such levy was made.

(2) Penalty for violation

In addition to the personal liability imposed by paragraph (1), if any person required to surrender property or rights to property fails or refuses to surrender such property or rights to property without reasonable cause, such person shall be liable for a penalty equal to 50 percent of the amount recoverable under paragraph (1). No part of such penalty shall be credited against the tax liability for the collection of which such levy was made.

(e) Effect of honoring levy

Any person in possession of (or obligated with respect to) property or rights to property subject to levy upon which a levy has been made who, upon demand by the Secretary, surrenders such property or rights to property (or discharges such obligation) to the Secretary (or who pays a liability under subsection (d)(1)) shall be discharged from any obligation or liability to the delinquent taxpayer and any other person with respect to such property or rights to property arising from such surrender or payment. [ . . . ]

[webhick]

Famspear, I think you're missing what these people believe is an important distinction. The employer receives a "notice of levy" not a levy. I believe the theory goes that it's not an actual levy so the laws of the levy don't apply. It's just a notice. The notice has no power. But then again, in regards to NFTLs...I've heard that the notice is the same as the lien....

Hard to tell what they're trying to say when they keep talking in circles.

[Famspear]

Yeah, but Bulten refers to the "Schulz II" case. I haven't checked, but Bulten might be referring to the Bob Schulz administrative summons case - the one where I think the court noted that a taxpayer could not be punished for failure to comply with an IRS administrative summons until a court order had been issued. But I've also read the levy/notice of levy arguments many times, so who knows.

[Famspear]

Before we get into case law on third party levies or personal liability of third parties for failure to honor, look at Brian v. Gugin. The following is adapted from something I wrote in another forum. The statute authorizing the Internal Revenue Service to seize assets without going to court is section 6331. In the case of Brian v. Gugin, a group of taxpayers (including a Mr. Ralph Brian) sued a group of IRS and other government employees, (including Ms. Phylis Gugin), for what the taxpayers claimed was a violation of their rights. I need to go back and check to see if the levies were directly on property held by the taxpayers or, alternatively, whether there were third party levies (such as, on bank accounts). At any rate, the following is an excerpt from the court’s decision in the case:

The plaintiffs' premise for their complaint is that the IRS agents were required to have a court order in order to be able to legally seize property for delinquent taxes. Unfortunately, this is a faulty premise. Title 26 U.S.C. §6331 authorizes the IRS to seize property of any person liable for any tax upon ten days notice. The plaintiffs are incorrect in stating that §§6331 and 6321 only apply to the Bureau of Alcohol, Tobacco and Firearms. The statute specifically states that any person may have their property levied upon. 26 U.S.C. §§6331(a) and 6321. The plaintiffs also cite 26 U.S.C. §7402 which grants jurisdiction to the district courts to issue orders, processes and judgments as well as enforce IRS summons. This section does not require a court order in order to levy on property under §6331.

A "levy" by definition is a summary non-judicial process which provides the IRS with prompt and convenient method for satisfying delinquent tax claims. [ . . . ] [T]he IRS has the option under §6502 to collect its assessment by ''either'' a levy or a court proceeding [ . . . . ]

Accordingly, the IRS agents were acting within the authority granted under §6331 and no court order was required for the attempted levy on Ralph Brian's property. Concerning the constitutional violations alleged by the plaintiffs, this court cannot find that any constitutional rights were allegedly violated if the attempted seizure was lawful under §6331.

It is important to note that the plaintiff Ralph Brian is not without a course of action under the Internal Revenue Code. If the delinquent taxes claimed are not delinquent, the taxpayer may bring an action with the IRS for a refund.

Brian v. Gugin, 853 F. Supp. 358, 94-1 U.S. Tax Cas. (CCH) paragr. 50,278 (D. Idaho 1994), aff’d, 95-1 U.S. Tax Cas. (CCH) paragr. 50,067 (9th Cir. 1995).

[Famspear]

After a quick review of Brian v. Gugin, it appears that the levies were directly on property at the taxpayers' residences.

[Famspear]

Here's an example where an employer was liable for failure to honor a third party levy: United States v. War Resister's League, 80-2 U.S. Tax Cas. (CCH) paragr. 9504 (S.D.N.Y. 1979). In this case, the employer (War Resistance League) was contending that it should not be held personally liable, based on constitutional grounds. The court rejected that argument.

I'm still looking to see if I can find a case where anyone had the temerity to try to argue that you need a court order before you can be held personally liable on a third party levy.

[Famspear]

Practicing law without a license? Good question, I haven't been thinking about that. He's not falsely holding himself out as a lawyer to obtain an economic benefit for himself (that would be separate offense in Texas, a felony). But, just practicing law without a license usually would be a misdemeanor in Texas unless you have a prior conviction. I'm not sure that John would be considered practicing law under the Texas definition.

Anyway, he's in Oklahoma, right? Maybe we'll check the Oklahoma law later.

[Famspear]

Internal Revenue Code sec. 6502 (excerpt):

Where the assessment of any tax imposed by this title has been made within the period of limitation properly applicable thereto, such tax may be collected by levy *OR* by a proceeding in court [ . . . ]

(emphasis on "OR" added). The "levy" referred to here is the administrative (i.e., non-judicial) levy.

There appears to be no distinction in any of these statutes between (A) levy against property in the taxpayer's physical possession and (B) third party levy against property owned by the taxpayer that happens to be in someone else's possession, such as an employer or a bank.

[jg]

Isn't John Bulten coming dangerously close to engaging in the practice of law without the appropriate licensing? And what of his advice? If someone relies on it to their detriment, can they then turn around and sue John Bulten?
Just curious......

Not sure about that.
Looks a lot more like attempts to interfere with administration of the Internal Revenue laws from my layman's view.

26 U.S.C. § 7212(a)"OMNIBUS CLAUSE"

§7212. Attempts to interfere with administration of the Internal Revenue Laws.

(a) Corrupt or forcible interference.
Whoever corruptly or by force or threats of force (including any threatening letter or communication) endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this title, or in any other way corruptly or by force or threat of force (including any threatening letter or communication) obstructs or impedes, or endeavors to obstruct or impede the due administration of this title, shall, upon conviction thereof, be fined* not more than $5,000 or imprisoned not more than three years or both.

For details see http://www.usdoj.gov/tax/readingroom/2001ctm/17ctax.htm

Mr. Bulten endeavors to impede the administration of the Internal Revenue laws; but is it "corruptly" in the legal sense or only in the common sense?

[Famspear]

Mr. Bulten endeavors to impede the administration of the Internal Revenue laws; but is it "corruptly" in the legal sense or only in the common sense?

Another good question. One case to look at is: United States v. Reeves, 752 F.2d 995, 85-1 U.S. Tax Cas. (CCH) paragr. 9190 (5th Cir. 1985). Gettin' too late, though. I'll have to read this case later.

'night all..

--Famspear

[wserra]

Looks a lot more like attempts to interfere with administration of the Internal Revenue laws from my layman's view.

I don't read Loser Heads. From what JJBlather has posted here, it looks a lot more like he is simply exercising his undoubted First Amendment right to be a pompous nitwit.

If, in fact, he practices what he preaches, of course it's tax evasion.

[LPC]

I'm still looking to see if I can find a case where anyone had the temerity to try to argue that you need a court order before you can be held personally liable on a third party levy.

(Ahem.)

I assume you've looked at the cases collected at:

http://evans-legal.com/dan/tpfaq.html#levy
http://evans-legal.com/dan/tpfaq.html#c ... dueprocess
http://evans-legal.com/dan/tpfaq.html#notices
http://evans-legal.com/dan/tpfaq.html#bivens
http://evans-legal.com/dan/tpfaq.html#banklevies

All of them deal with different kinds of arguments against the validity of levies.

However, I'm not sure if any of the cases deal with a third party contesting the validity of the levy. I think that banks, employers, and others responsible enough to be in possession of someone else's property are also responsible enough not to make frivolous arguments.

However, there are cases against Quaker organizations that have refused to honor levies on religious grounds. See, for example, United States v. Philadelphia Yearly Meeting of the Religious Society of Friends, 2004 TNT 132-9, No. 03-4254 (E.D. Pa. 6/21/2004), which held the levy on the wages of an employee of PYM who was a Quaker and a war tax resister did not violate the Religious Freedom Restoration Act ("RFRA"), 42 U.S.C. § 2000bb-1 et seq., that PYM was liable for the amount subject to levy, but that PYM was not liable for the 50% penalty because the RFRA argument was an issue of first impression and so PYM had "reasonable cause" not to withhold.

See also, Adams v. C.I.R., 170 F.3d 173, 1999 U.S. App. LEXIS 3379, 99-1 U.S. Tax Cas. (CCH) P50,307, 83 A.F.T.R.2d (RIA) 1001, No. 98-7200 (3d Cir. 1999), cert. den. No. 99-798 (2000).

[webhick]

Anyway, he's in Oklahoma, right? Maybe we'll check the Oklahoma law later.

Actually, I don't think he's in Oklahoma anymore:

John's Profile on a Ron Paul website

[buck09]

Anyway, he's in Oklahoma, right? Maybe we'll check the Oklahoma law later.

Actually, I don't think he's in Oklahoma anymore:

John's Profile on a Ron Paul website

He moved to Floriduh. I had a post on that last week - looked it all up when I found out he was in the same denomination as I am. I challenged him to have his pastor read his posts here and on LH, but oddly enough, he didn't respond... It's as if he doesn't want to be held accountable in the real world... Sad thing is, if his pastor could hold him accountable, it will be a whole lot less painful than when Uncle Sam comes a-knocking.

[webhick]

Anyway, he's in Oklahoma, right? Maybe we'll check the Oklahoma law later.

Actually, I don't think he's in Oklahoma anymore:

John's Profile on a Ron Paul website

He moved to Floriduh. I had a post on that last week - looked it all up when I found out he was in the same denomination as I am. I challenged him to have his pastor read his posts here and on LH, but oddly enough, he didn't respond... It's as if he doesn't want to be held accountable in the real world... Sad thing is, if his pastor could hold him accountable, it will be a whole lot less painful than when Uncle Sam comes a-knocking.

Oops, sorry. I remember the pastor part and took great pleasure in your sticking it to him from the religion angle.

[grammarian44]

If the question is whether Bulten could be guilty of the practice of law without a license, then he may regret moving to Florida.

Because of the general desire of the Florida bar to prevent retired attorneys from other states from practicing in Florida after retirement, it can be very easy to be guilty of the unauthorized practice of law in Florida. And it is always a felony.

It is generally understood that the performance of services in representing another before the courts is the practice of law. But the practice of law also includes the giving of legal advice and counsel to others as to their rights and obligations under the law and the preparation of legal instruments, including contracts, by which legal rights are either obtained, secured or given away, although such matters may not then or ever be the subject of proceedings in a court.

[webhick]

If the question is whether Bulten could be guilty of the practice of law without a license, then he may regret moving to Florida.

Because of the general desire of the Florida bar to prevent retired attorneys from other states from practicing in Florida after retirement, it can be very easy to be guilty of the unauthorized practice of law in Florida. And it is always a felony.

It is generally understood that the performance of services in representing another before the courts is the practice of law. But the practice of law also includes the giving of legal advice and counsel to others as to their rights and obligations under the law and the preparation of legal instruments, including contracts, by which legal rights are either obtained, secured or given away, although such matters may not then or ever be the subject of proceedings in a court.

So, out of curiosity, when I told my grandfather that running that stop sign was illegal...I committed a felony. Sweet.

[webhick]

Sorry to harsh your mellow Webhick, but to answer your question - probably not.

Always got to rain on the parade, doncha?