5.10.2. Securing Approval for Seizure Actions and Post-Approval Actions

(1) Purpose: This section provides guidance for collection staff on securing managerial approval for seizures, including determining the appropriate approval level for seizures. It also provides guidance on some post-approval actions.

(2) Audience: This section is for Collection employees involved in the seizure of assets.

(3) Policy Owner: Director, Collection Policy.

(4) Program Owner: Small Business/Self Employed office of Headquarters Collection Policy.

(5) Primary Stakeholders: The primary stakeholders are revenue officers, advisors and Property Appraisal and Liquidation Specialists (PALS).

(6) Program Goals: Enforcement is a necessary component of a voluntary assessment system, and the IRS is responsible for taking all appropriate actions provided by law to compel non-compliant taxpayers to pay their taxes (P-5-1). The determination to seize a taxpayer’s interest in real or personal property is based on the individual case facts and circumstances. By following the procedures in this IRM, employees will have the information necessary to prepare the seizure file for the required level of managerial review and approval.

(1) If all of the IRM requirements have been met and seizure is the appropriate case action, the revenue officer should enter the appropriate asset information into the ICS seizure application and prepare

• Form 13719, Pre-Seizure Checklist and Approval Request. See ICS User Guide for instructions on preparation

• Form 668-B, Levy. See Exhibit 5.10.2-2, Form 668-B, Levy and Instructions, for instructions on preparation.

• Form 2433, Notice of Seizure. See IRM 5.10.3-1, Form 2433, Notice of Seizure, for instructions on preparation.

• Form 2434-B, Notice of Encumbrances Against or Interests in Property Offered for Sale. See IRM 5.10.1-1, Form 2434-B and Instructions, for instructions on preparation.

• Form 668-A, Notice of Levy, if the property is in the possession of a third party.

(2) The revenue officer should review the IRM procedures for conducting the seizure to determine whether any special circumstances should be addressed before the seizure is conducted. The revenue officer should also determine to whom and where the seizure documents must be delivered. See IRM 5.10.3.8, Seizing the Property (Form 668-B Delivery), and IRM 5.10.3.9, Notice of Seizure (Form 2433 - Delivery).

(3) Form 668-B should generally contain all outstanding tax periods. Some circumstances may lend themselves to exceptions to this rule. Examples include

• Tax periods arising after approval but prior to seizure

• Tax balances on multiple periods significantly in excess of the fair market value of the asset when there are no junior creditors

• Tax periods currently in Appeals or pending adjustment

(4) Calculate penalties and interest on Form 668-B as of thirty (30) days after the date of submission for approval.

(5) The determination to seize and authority to sign Form 668–B, Levy, may be delegated to revenue officers GS-09 and above. Delegation authority for approving Form 668–B is included in Delegation Order Number 1-23-2 [formerly SBSE DO 5.1 (Rev. 2)]. See IRM 1.2.65.3.1, Authority to Sign and Issue Levy and Related Documents.

(6) Consent may be requested and secured from the taxpayer or rightful occupant before submission of approval of the seizure. If consent is denied a writ may be requested concurrently with the seizure approval package. As a general rule, the seizure should be made not more than 30 working days from the date of consent. If the seizure must be made more than 30 days later, a new consent should be requested. See IRM 5.10.3.5, Conducting the Seizure --Securing Consent for additional guidance.

(7) The balance due case file and seizure approval package must contain the appropriate documentation to justify the seizure action. The approval package should include an adequate description of the property that is to be seized. Form 13719 should be used to document the following required information:

• Whether a consent or writ will be required (IRM 5.10.1.14, Consent or Writ Determination)

• Verification of the liability (IRM 5.10.1.5.1, Verifying the Liability)

• Risk analysis comparing seizure to alternative collection methods considered (IRM 5.10.1.5.2(3), Alternative Methods of Collection)

• Documentation of estimated minimum net sale proceeds (IRM 5.10.1.5.3, Equity Determination)

• Due process notification with appropriate forms and publications (IRM 5.10.1.6, Pre-Seizure Taxpayer Notifications)

• Attempts to personally notify the taxpayer of proposed seizure (IRM 5.10.1.6.1, Personal Contact to Advise the Taxpayer of Proposed Seizure Action)

• Economic hardship - has the taxpayer substantiated that a verifiable economic hardship condition currently exists (or would be created by the seizure) as described in IRM 5.11.2.3.1, Legal Basis for Releasing Levies.

(8) The approval package should then be submitted for approval through the appropriate levels of management. The approval package must contain the following information:

• Form 13719, Pre-Seizure Checklist and Approval Request, the checklist may reference the appropriate history entry where the required action can be verified; "N/A" may only be entered for "Individual Taxpayer — Exempt Assets Considered" and "Individual taxpayer — Business Assets/Other assets were Considered."

• Form 668–B (enter name of area director on Form 668-B, only if seizure requires director approval).

• NFTL Copies.

• Preliminary Form 2434–B (not applicable if only cash is to be seized).

• For real property seizures, include Form 2433 and deed(s).

Note: For real estate, the description should indicate whether the real estate is improved or unimproved. The approval package will address whether there are commercial or residential structures on the property, intended and actual use, whether or not any property is being used by any individual as a residence (specifically distinguishing between a principal residence and a personal residence; see IRM 5.10.2.3, 5.10.2.4, and Exhibit 5.10.2-1), and any other information that will allow the approving official to know exactly what type of property will be seized. This will help ensure the appropriate approval level is secured for the type of property being seized. Judicial approval applies to principal residences, not personal residences. See IRC 6334(e)(1).

• For personal property seizures, include Form 2433, with the property description blank or filled in if the assets are few and known, such as specific vehicles.

• Any other relevant items, such as title reports, appraisals, L-1058, L-3174, L-1040 / Form 12470, Form 668-A, information on to whom seizure documents must be delivered, etc.

(9) All approvals must be written and will be retained with the case file. (An electronic signature is acceptable evidence of approval for Form 668-B.) All Collection seizures will require a minimum approval level of the group manager. See Exhibit 5.10.2-1 for a chart containing asset types and approving official. The revenue officer group manager will review the case file for accuracy and approval of the seizure action and forward the approved file to Advisory. See Exhibit 1.4.50-2, Criteria for Review of Completed Work for group manager seizure review guide. The case file must be reviewed by Advisory for technical accuracy after group manager review. In cases when additional approvals are required, Advisory will forward the case file to the next level manager for seizure approval.

(10) Advisory will review all items on Form 13719, Pre-Seizure Checklist and Approval Request, for legal sufficiency. For real property seizures, Advisory will also review Form 2433, Notice of Seizure. The revenue officer should work with Advisory throughout the entire seizure process whenever there are questions regarding the appropriate technical procedures to follow on the case. If all items on Form 13719 have been sufficiently addressed and are procedurally accurate, the seizure file will be forwarded to the territory manager for approval, if required. If it is not required, the file should be returned to the originating group manager.

(11) The approving official(s) and the revenue officer should attempt to resolve any questions regarding the seizure as quickly as possible. Communications should be verbal, rather than written, whenever possible. Delays in the approval process should be avoided so that the seizure action is taken while it is appropriate and while the case information is still current. If the seizure is not approved, the reasons must be documented and retained as part of the case file.

(1) The IRS must secure judicial approval prior to seizing a principal residence (Internal Revenue Code (IRC) section 6334(e)(1)). Pursuant to Treas. Reg. 301.6334-1(d), this includes any real property used as a principal residence by any of the following individuals:

• Taxpayer

• Taxpayer's spouse or former spouse

• Taxpayer's minor children

(2) If there are issues related to ownership, nominee situations, collection statute concerns (CSED expires in one year or less), or other items, then a suit recommendation to foreclose the Federal Tax Lien and/or to reduce the tax claim to judgment may be the appropriate case action. Consult Advisory or Area Counsel for further guidance. Additional information on principal residence seizures is located in IRM 5.17.3.5.5, Seizure of a Residence/Principal Residence.

(3) If all of the IRM requirements have been met and it is determined that seizure is the appropriate case action, enter the asset information into the ICS seizure and sale application and begin preparing Form 4477-B, Civil Suit Narrative Report (see IRM 5.17.4.9, Proceeding to Seize a Principal Residence, and IRM 5.17.12, Investigations and Reports, for additional information). The use of Form 4477-D, Civil Suit Package, will allow for auto-population between the required suit forms.

(4) The format of Form 4477-B, Civil Suit Narrative Report for principal residence seizures is much the same as in other suit narrative reports. Form 4477-B details the results of the investigation and contains the recommendation to seize the principal residence. The narrative should be complete and concise and should contain only facts and not opinions. All supporting documents should be included as exhibits.

(5) Form 4477-B begins with the taxpayer’s name, address, and taxpayer identification number, followed by three sections:

• Introduction

• Body

• Conclusion and Recommendation

(6) The "Introduction" includes the following information:

• A request for institution of civil action for judicial approval of a principal residence seizure

• The amount of money expected as the net sale proceeds

• The type(s) of tax and current outstanding balance(s), including accruals, through a current date; this information should be the same as the account information included on Form 4477, Civil Suit Recommendation

• The earliest collection statute expiration date (CSED)

• A summary of administrative actions taken or the reason why specific administrative actions were not taken

• The need for urgent action if required

(7) The "Body" should contain a chronological presentation of the facts supported by exhibits. The following table describes the information and exhibits that should be included. Additional exhibits may be used as necessary.

(8) The "Conclusion and Recommendation" is the closing for the report. Include the following information in this section:

• A brief summary of the recommendation for a principal residence seizure

• A restatement of the request for institution of civil action

(9) The suit package should contain:

• Form 4477-C, Table of Contents and Contact List

• Form 4477, Civil Suit Recommendation

• Form 4477-B, Civil Suit Narrative Report

• Form 4480, Civil Suit Service of Legal Papers

• Form 13719, Pre-Seizure Checklist and Approval Request (the checklist should reference the appropriate paragraph from the suit narrative where the action is addressed)

• Form 2434–B, Notice of Encumbrances Against or Interests in Property Offered for Sale

• Form 2433, Notice of Seizure, with the current accurate legal description (and current derivation clause, if required)

• Copies of Notices of Federal Tax Lien

• Copy of Deed to Property

• Commercial title report, if secured, with explanation of title search results

• Any other relevant documents, such as appraisals, L–1058, L–3174, L-1040 / Form 12470, Form 668-A, etc.

(10) The completed suit package should be forwarded from the group manager, through Advisory, and then through the appropriate levels of management, including the area director. Advisory will complete the pre-seizure review as part of the suit review and approval process.

(11) After approval of the suit recommendation, Advisory will submit the case to Area Counsel for referral to the Department of Justice (DOJ). The DOJ will file a petition with the court and will make an initial showing that:

• The liability is due

• The government has complied with all legal/administrative requirements

• There are no collection alternatives to the principal residence seizure

(12) The taxpayer will be served with an order to show cause (Exhibit 5.10.2-3) why the residence should not be seized. In most cases, the revenue officer will be asked to serve the show cause order. Generally, the show cause order requires personal service or it may be left at the defendant's usual place of abode with someone of suitable age and discretion. Contact Advisory or counsel if there are any questions on the procedures for delivery of these documents. If the taxpayer files a response to the show cause order, a hearing will be held. The taxpayer cannot dispute the tax liability during this hearing.

(13) Where the property to be seized is also the principal residence of the taxpayer’s spouse, former spouse, or minor child, DOJ will send a "notice letter" to those parties informing them of the petition filed with the court and giving the number/address of the Clerk of the Court, if they wish to learn the date and location of the hearing.

(14) This notice letter also instructs the addressee to contact the revenue officer assigned the case to provide any other relevant information the IRS should consider before seizure. The revenue officer should forward any information received to the DOJ trial attorney through Advisory.

(15) After the court order is received, the revenue officer should prepare Form 668-B, Levy, and secure the appropriate approvals, based on local guidelines. Form 668-B includes only the periods for which the court order was approved.

(16) Rule 62 of the Federal Rules of Civil Procedure generally places a 30-day stay on execution of judgments. This delay is intended to provide time for the taxpayer to post a bond or file a motion to stay the action. If it is necessary to seize the property earlier than 14 days after the date the order is signed, consult Counsel through Advisory.

(17) If judicial approval is denied, consult with Advisory, and, if appropriate, Area Counsel, to determine further case action.

(1) The following seizures require approval by the area director (either Field Area or Advisory) or SCI Director (Insolvency) unless collection of the tax is in jeopardy:

• Principal residences of the taxpayer, taxpayer’s spouse or former spouse, or taxpayer’s minor children.

  Note: See IRM 5.10.2.3, Judicial Approval for Principal Residence Seizures, when preparing to seize real property used as a principal residence by the taxpayer, taxpayer’s spouse or former spouse, or taxpayer’s minor children.

  Note: There is no jeopardy exception to the judicial approval requirements.

• All tangible personal property or real property used in the trade or business of an individual taxpayer, including state commercial fishing or wildlife licenses

Exception: Seizures of rented real property only require group manager approval.

• Perishable goods determination/Perishable goods seizure under IRC 6336

Note: The Director of Field Collection has the final approval authority for perishable seizures.

• Contents of the principal residence of the taxpayer, taxpayer’s spouse, former spouse or taxpayer’s minor children , including items located in garages and other structures on the land on which the residence is located

• Stock in a retirement plan, including an IRA

(2) In addition to area director concurrence, judicial approval is required for certain principal residence seizures. (See IRM 5.10.2.3, Judicial Approval for Principal Residence Seizures. This includes any real property used as a principal residence by any of the following individuals:

• Taxpayer

• Taxpayer's spouse or former spouse

• Taxpayer's minor children

(1) The prior written approval of the area director must be secured for seizure of these types of assets unless collection of the tax is in jeopardy. The revenue officer must document in the history that the taxpayer's other assets subject to collection are insufficient to satisfy the liability and expenses of the proceeding (see IRM 5.17.3.5.6, Seizure of Business Assets).

(2) If the asset to be seized is a state commercial fish or wildlife license, the revenue officer must consider the value of any future income that could be derived from the commercial sale of fish or wildlife harvested under the license.

(3) This approval level is based on the use of the asset, not the type of liability for which the seizure is being conducted.

(4) For the purpose of determining seizure approval authority, a liquor license is considered a tangible asset. Area director approval is required to seize a liquor license from a sole proprietorship.

(5) Following are examples that meet the definition of tangible personal or real property used in the trade or business of an individual taxpayer:

Example: The taxpayer owns a restaurant as a sole proprietor. The revenue officer determines the next appropriate action is to seize the contents of the restaurant including the tables, chairs, kitchen equipment, and liquor license. The required approval level for this seizure is the area director.

Example: The taxpayer owns real property with waterfront access to a river which includes a boat dock. He operates guided duck hunting and fishing trips as a sole proprietorship on this property and sells temporary permits allowing unguided access onto both the real property and the dock. A determination is made that sufficient equity exists in the real property and seizure is the next appropriate action. The required approval level for this seizure is the area director.

Example: A self-employed real estate agent uses a vehicle as transportation for business. The taxpayer owes Form 1040, U.S. Individual Income taxes and the revenue officer determines seizure of the vehicle is the next appropriate action. The required approval level for this seizure is the area director.

(1) See IRM 5.10.1.7 and IRM 5.10.1.8 for criteria and pre-seizure development procedures for perishable goods.

(2) To secure approval for a seizure and expedited sale of property under IRC 6336, the revenue officer must prepare Form 13719, Pre-Seizure Checklist and Approval Request, Form 668-B, Levy and the Perishable Goods Criteria and Sale Plan memorandum for approval by the Director of Field Collection. In addition to the information required for all seizures outlined in IRM 5.10.2.2, Securing Managerial Approval of Seizure Actions, include the following on Form 13719:

• Proposed date of seizure

• The perishable goods criterion selected per IRM 5.10.1.7

• The appraised value of the property

• The expected net sale proceeds under IRC 6335andIRC 6336

(3) The Director of Field Collection will determine whether the property seized is of a type to which an expedited sale under IRC 6336 is applicable. If he or she determines the property is not perishable within the meaning of IRC 6336, he or she will inform the revenue officer and normal seizure and sale procedures will be followed. If the Director of Field Collection agrees that the property is perishable, he or she will approve Form 668–B, Form 13719 and the Perishable Goods Criteria and Sale Plan memorandum and advise the revenue officer to proceed. If the seizure and sale is approved as a normal IRC 6335 sale, the revenue officer and PALS will discuss and develop an appropriate seizure and sale case strategy given the changes to the initial plan.

(4) IRM 5.10.4.18, Pre-Sale Procedures for Perishable Goods, contains procedures for the sale of perishable goods. The PALS function will have responsibility for all perishable goods sales with assistance from the revenue officers.

(1) Estimated seizure and sale related expenses should have been determined in consultation with the PALS prior to submitting the case for approval, see IRM 5.10.1.5.3.4, Equity Determination - Expenses of Seizure and Sale, and IRM 5.10.4.3, Establishment of the Minimum Bid. For example, the revenue officer should have determined in the pre-approval stage whether the property will have to be removed from its location and stored at another facility. After the seizure has been approved, the revenue officer may begin contracting for seizure related expenses.

(2) For a single vendor service less than $2500, see IRM 5.10.2.7.1, Contracting for Services $2500 and Under

(3) For a single vendor service more than $2500 see IRM 5.10.2.7.2, Contracting for Services over $2500

(4) Revenue officers and PALS can contract for seizure services where the total of the single service expenses exceeds $2,500 as long as the cost of a single service does not exceed that figure. For example, separate government purchase card purchases can be used to contract for a $500 locksmith service, $2,000 storage, and a $200 towing charge, as long as all services are billed separately.