26 U.S.C. § 6342: Application of proceeds of…

Summary

When the government collects money by taking or selling someone's property to pay taxes — including sales after the United States redeemed property because it had a tax lien, and except in cases covered by a special surrender rule elsewhere in the law — the money must be used in a specific order. First, pay the costs of taking and selling the property. Next, pay any unpaid tax that applied to the seized item (and record that tax if it hasn't been recorded). Then use the rest to pay the tax debt that led to the seizure. Any leftover money will be returned to the person who proves they are legally entitled to it.

Title 26, §6342

Internal Revenue Code, Source: USLM XML via OLRC

(a)Collection of liability

Any money realized by proceedings under this subchapter (whether by seizure, by surrender under section 6332 (except pursuant to subsection (d)(2) thereof), or by sale of seized property) or by sale of property redeemed by the United States (if the interest of the United States in such property was a lien arising under the provisions of this title) shall be applied as follows:

(1)Expense of levy and sale

First, against the expenses of the proceedings;

(2)Specific tax liability on seized property

If the property seized and sold is subject to a tax imposed by any internal revenue law which has not been paid, the amount remaining after applying paragraph (1) shall then be applied against such tax liability (and, if such tax was not previously assessed, it shall then be assessed);

(3)Liability of delinquent taxpayer

The amount, if any, remaining after applying paragraphs (1) and (2) shall then be applied against the liability in respect of which the levy was made or the sale was conducted.

(b)Surplus proceeds

Any surplus proceeds remaining after the application of subsection (a) shall, upon application and satisfactory proof in support thereof, be credited or refunded by the Secretary to the person or persons legally entitled thereto.

Notes & Related Subsidiaries

Editorial Notes

Amendments

2018—Subsec. (a). Pub. L. 115–141 substituted “subsection (d)(2)” for “subsection (c)(2)” in introductory provisions. 1976—Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing. 1966—Subsec. (a). Pub. L. 89–719 inserted in introductory provisions, references to an exception in the case of surrender under section 6332(c)(2) and to sale of property redeemed by the United States if the interest of the United States in such property was a lien arising under the provisions of this title, struck out “under this subchapter” after “proceedings” in par. (1), and inserted “or the sale was conducted” after “levy was made” in par. (3).

Statutory Notes and Related Subsidiaries

Effective Date

of 1966 AmendmentAmendment by Pub. L. 89–719 applicable after Nov. 2, 1966, regardless of when title or lien of United States arose or when lien or interest of another person was acquired, with certain exceptions, see section 114(a)–(c) of Pub. L. 89–719, set out as a note under section 6323 of this title.

§6342 Application of Proceeds of Levy