TAXATION ‑- FEDERAL TAX LIENS ON WAGES ‑- ENFORCEMENT

TAXATION ‑- FEDERAL TAX LIENS ON WAGES ‑- ENFORCEMENT

Debtor of delinquent federal taxpayer need not pay over to government funds owed to taxpayer until actual service of notice of levy.

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                                                                   March 5, 1957

Honorable Sid Buckley
Prosecuting Attorney
Stevens County
Colville, Washington                                                                                                                Cite as:  AGO 57-58 No. 27

Dear Sir:

            You have requested an opinion of this office in regard to the effect of a federal tax lien on wages.  We assume from the facts as they appear in your letter that notice of a federal tax lien was filed in the office of the county auditor against a school teacher for delinquent income taxes but that a tax levy was not served on the auditor.  You ask whether the county auditor should pay over to the government the salary due the school teacher in satisfaction of the lien as a result of the filing of the notice of the lien.

            We conclude that the auditor should not pay over the funds to the government unless he has been served with a notice of tax levy.

                                                                     ANALYSIS

            26 U.S.C.A. § 6321 provides that the United States shall have a lien upon all property and rights to property belonging to any person who neglects or refuses to pay any tax after demand.  26 U.S.C.A. § 6323 designates the office in which the lien must be filed to be valid against any mortgagee, pledgee, purchaser or judgment creditor, which in this  [[Orig. Op. Page 2]] state under RCW 60.68.010 is the office of the county auditor.  When the taxpayer neglects or refuses to pay the taxes within ten days after demand, assertion of this lien is authorized by 26 U.S.C.A. § 6331 by levy upon all property or rights to property of the taxpayer except such as is exempted by 26 U.S.C.A. § 6334, which has no application here.  Upon such levy it becomes the duty of the debtor of the taxpayer to surrender such property or rights to the government.  Any person failing to do so becomes personally liable in a sum equal to the value of the property, not exceeding the amount of the taxes.

            There can be no question but that the lien for taxes can be asserted against intangibles, such as a debt, and including wages due.  U. S. v. Liverpool and L. & G. Ins. Co., 348 U.S. 215, 75 S.Ct. 247, 99 L.Ed. 268;U. S. v. Eiland, 223 F. (2d) 118.

            Under the above federal statutes, when the government serves upon a debtor of the taxpayer a notice of levy, the debtor must pay over the funds he then holds, up to the amount of the tax.  No further proceedings are necessary.  In theEiland case, supra, the court said at page 121:

            "A creditor ordinarily perfects a lien upon a debt by attachment and garnishment with service of notice thereof upon the debtor.  * * * When this has been properly done, the effect thereof is to give to the attaching creditor a lien upon the indebtedness for the amount necessary to satisfy the judgment rendered in the proceedings in his favor.  The effect of the federal taxing statutes to which we have referred is to create a statutory attachment and garnishment in which the service of notice provided by statute takes the place of the court process in the ordinary garnishment proceeding.  There is no necessity for adjudicating the amount of the tax under the statutory proceeding, * * * and, consequently, the service of such notice results in what is virtually a transfer to the government of the indebtedness, or the amount thereof necessary to pay the tax, so that payment to the government pursuant to the levy and notice is a complete defense to the debtor against any action brought against him on account of the debt."

            In theEiland case the court states that it is not necessary for the taxpayer's debtor to search the records before paying his debt to the  [[Orig. Op. Page 3]] taxpayer prior to actual levy and notice.

            We hope the foregoing will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

HENRY W. WAGER
Assistant Attorney General