26 U.S.C. § 7425 — Discharge of liens

Page 3881 TITLE 26—INTERNAL REVENUE CODE § 7425 section (a) [amending this section] shall apply to suits or proceedings which are instituted after January 30, 1967.’’ EFFECTIVE DATE OF 1969 AMENDMENT Amendment by Pub. L. 91–172 effective Jan. 1, 1970, see section 101(k)(1) of Pub. L. 91–172, set out as an Ef- fective Date note under section 4940 of this title. EFFECTIVE DATE OF 1966 AMENDMENT Pub. L. 89–713, § 3(d), Nov. 2, 1966, 80 Stat. 1109, pro- vided that: ‘‘The amendments made by subsections (a) and (b) [amending this section and section 2502 of Title 28, Judiciary and Judicial Procedure] shall apply to suits brought against officers, employees, or personal representatives referred to therein which are instituted 90 days or more after the date of the enactment of this Act [Nov. 2, 1966]. The amendment made by subsection (c) [amending section 7482 of this title] shall apply to all decisions of the Tax Court entered after the date of enactment of this Act.’’ EFFECTIVE DATE OF 1958 AMENDMENT Amendment by Pub. L. 85–866 as effective Aug. 17, 1954, see section 1(c)(2) of Pub. L. 85–866, set out as a note under section 165 of this title. PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989 For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title. § 7423. Repayments to officers or employees The Secretary, subject to regulations pre- scribed by the Secretary, is authorized to repay— (1) Collections recovered To any officer or employee of the United States the full amount of such sums of money as may be recovered against him in any court, for any internal revenue taxes collected by him, with the cost and expense of suit; also (2) Damages and costs All damages and costs recovered against any officer or employee of the United States in any suit brought against him by reason of anything done in the due performance of his official duty under this title. (Aug. 16, 1954, ch. 736, 68A Stat. 877; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.) Editorial Notes AMENDMENTS 1976—Pub. L. 94–455 struck out ‘‘or his delegate’’ after ‘‘Secretary’’ in provisions preceding par. (1). § 7424. Intervention If the United States is not a party to a civil action or suit, the United States may intervene in such action or suit to assert any lien arising under this title on the property which is the subject of such action or suit. The provisions of section 2410 of title 28 of the United States Code (except subsection (b)) and of section 1444 of title 28 of the United States Code shall apply in any case in which the United States intervenes as if the United States had originally been named a defendant in such action or suit. In any case in which the application of the United States to intervene is denied, the adjudication in such civil action or suit shall have no effect upon such lien. (Aug. 16, 1954, ch. 736, 68A Stat. 877; Pub. L. 89–719, title I, § 108, Nov. 2, 1966, 80 Stat. 1140.) Editorial Notes AMENDMENTS 1966—Pub. L. 89–719 substituted ‘‘Intervention’’ for ‘‘Civil action to clear title to property’’ in section catchline and substituted provisions, set out in a single paragraph, granting the government authority to inter- vene in a court proceeding to assert any lien arising under this title on property which is the subject of a civil action or suit to which the government is not a party with the same procedural rules to apply as where the government is initially joined properly as a party and with the proceedings to have no effect on the gov- ernment’s lien if the application to intervene is denied, for provisions, formerly set out in three subsections, setting out a procedure by which a person having a lien upon or interest in property referred to in section 7403 could file a civil action to clear title to the property and obtain an adjudication of the matter involved in the same manner as in the case of a civil action filed under section 7403. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1966 AMENDMENT Amendment by Pub. L. 89–719 applicable after Nov. 2, 1966, regardless of when the title or lien of the United States arose or when the lien or interest of another person was acquired, with certain exceptions, see sec- tion 114(a) to (c) of Pub. L. 89–719, set out as a note under section 6323 of this title. CIVIL ACTIONS TO CLEAR TITLE TO PROPERTY COMMENCED BEFORE NOV. 2, 1966 Pub. L. 89–719, title I, § 114(d), Nov. 2, 1966, 80 Stat. 1147, provided that civil actions commenced before Nov. 2, 1966, to clear title to property pursuant to this sec- tion as in effect before Nov. 2, 1966, were to be deter- mined in accord with this section as in effect before Nov. 2, 1966. § 7425. Discharge of liens (a) Judicial proceedings If the United States is not joined as a party, a judgment in any civil action or suit described in subsection (a) of section 2410 of title 28 of the United States Code, or a judicial sale pursuant to such a judgment, with respect to property on which the United States has or claims a lien under the provisions of this title— (1) shall be made subject to and without dis- turbing the lien of the United States, if notice of such lien has been filed in the place pro- vided by law for such filing at the time such action or suit is commenced, or (2) shall have the same effect with respect to the discharge or divestment of such lien of the United States as may be provided with respect to such matters by the local law of the place where such property is situated, if no notice of such lien has been filed in the place provided by law for such filing at the time such action Page 3882 TITLE 26—INTERNAL REVENUE CODE § 7425 or suit is commenced or if the law makes no provision for such filing. If a judicial sale of property pursuant to a judg- ment in any civil action or suit to which the United States is not a party discharges a lien of the United States arising under the provisions of this title, the United States may claim, with the same priority as its lien had against the prop- erty sold, the proceeds (exclusive of costs) of such sale at any time before the distribution of such proceeds is ordered. (b) Other sales Notwithstanding subsection (a) a sale of prop- erty on which the United States has or claims a lien, or a title derived from enforcement of a lien, under the provisions of this title, made pursuant to an instrument creating a lien on such property, pursuant to a confession of judg- ment on the obligation secured by such an in- strument, or pursuant to a nonjudicial sale under a statutory lien on such property— (1) shall, except as otherwise provided, be made subject to and without disturbing such lien or title, if notice of such lien was filed or such title recorded in the place provided by law for such filing or recording more than 30 days before such sale and the United States is not given notice of such sale in the manner prescribed in subsection (c)(1); or (2) shall have the same effect with respect to the discharge or divestment of such lien or such title of the United States, as may be pro- vided with respect to such matters by the local law of the place where such property is situated, if— (A) notice of such lien or such title was not filed or recorded in the place provided by law for such filing more than 30 days before such sale, (B) the law makes no provision for such filing, or (C) notice of such sale is given in the man- ner prescribed in subsection (c)(1). (c) Special rules (1) Notice of sale Notice of a sale to which subsection (b) ap- plies shall be given (in accordance with regula- tions prescribed by the Secretary) in writing, by registered or certified mail or by personal service, not less than 25 days prior to such sale, to the Secretary. (2) Consent to sale Notwithstanding the notice requirement of subsection (b)(2)(C), a sale described in sub- section (b) of property shall discharge or di- vest such property of the lien or title of the United States if the United States consents to the sale of such property free of such lien or title. (3) Sale of perishable goods Notwithstanding the notice requirement of subsection (b)(2)(C), a sale described in sub- section (b) of property liable to perish or be- come greatly reduced in price or value by keeping, or which cannot be kept without great expense, shall discharge or divest such property of the lien or title of the United States if notice of such sale is given (in ac- cordance with regulations prescribed by the Secretary) in writing, by registered or cer- tified mail or by personal service, to the Sec- retary before such sale. The proceeds (exclu- sive of costs) of such sale shall be held as a fund subject to the liens and claims of the United States, in the same manner and with the same priority as such liens and claims had with respect to the property sold, for not less than 30 days after the date of such sale. (4) Forfeitures of land sales contracts For purposes of subsection (b), a sale of property includes any forfeiture of a land sales contract. (d) Redemption by United States (1) Right to redeem In the case of a sale of real property to which subsection (b) applies to satisfy a lien prior to that of the United States, the Sec- retary may redeem such property within the period of 120 days from the date of such sale or the period allowable for redemption under local law, whichever is longer. (2) Amount to be paid In any case in which the United States re- deems real property pursuant to paragraph (1), the amount to be paid for such property shall be the amount prescribed by subsection (d) of section 2410 of title 28 of the United States Code. (3) Certificate of redemption (A) In general In any case in which real property is re- deemed by the United States pursuant to this subsection, the Secretary shall apply to the officer designated by local law, if any, for the documents necessary to evidence the fact of redemption and to record title to such property in the name of the United States. If no such officer is designated by local law or if such officer fails to issue such documents, the Secretary shall execute a certificate of redemption therefor. (B) Filing The Secretary shall, without delay, cause such documents or certificate to be duly re- corded in the proper registry of deeds. If the State in which the real property redeemed by the United States is situated has not by law designated an office in which such cer- tificate may be recorded, the Secretary shall file such certificate in the office of the clerk of the United States district court for the ju- dicial district in which such property is situ- ated. (C) Effect A certificate of redemption executed by the Secretary shall constitute prima facie evidence of the regularity of such redemp- tion and shall, when recorded, transfer to the United States all the rights, title, and interest in and to such property acquired by the person from whom the United States re- deems such property by virtue of the sale of such property. (Added Pub. L. 89–719, title I, § 109, Nov. 2, 1966, 80 Stat. 1141; amended Pub. L. 94–455, title XIX, Page 3883 TITLE 26—INTERNAL REVENUE CODE § 7426 § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 99–514, title XV, § 1572(a), Oct. 22, 1986, 100 Stat. 2765.) Editorial Notes PRIOR PROVISIONS A prior section 7425 was renumbered 7434 of this title. AMENDMENTS 1986—Subsec. (c)(4). Pub. L. 99–514 added par. (4). 1976—Pub. L. 94–455 struck out ‘‘or his delegate’’ after ‘‘Secretary’’ wherever appearing. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1986 AMENDMENT Pub. L. 99–514, title XV, § 1572(b), Oct. 22, 1986, 100 Stat. 2765, provided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply to forfeitures after the 30th day after the date of the en- actment of this Act [Oct. 22, 1986].’’ EFFECTIVE DATE Section 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 an Effective Date of 1966 Amendment note under section 6323 of this title. § 7426. Civil actions by persons other than tax- payers (a) Actions permitted (1) Wrongful levy If a levy has been made on property or prop- erty has been sold pursuant to a levy, any per- son (other than the person against whom is as- sessed the tax out of which such levy arose) who claims an interest in or lien on such prop- erty and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States. Such action may be brought without regard to whether such property has been surrendered to or sold by the Secretary. (2) Surplus proceeds If property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property junior to that of the United States and to be legally entitled to the surplus proceeds of such sale may bring a civil action against the United States in a district court of the United States. (3) Substituted sale proceeds If property has been sold pursuant to an agreement described in section 6325(b)(3) (re- lating to substitution of proceeds of sale), any person who claims to be legally entitled to all or any part of the amount held as a fund pur- suant to such agreement may bring a civil ac- tion against the United States in a district court of the United States. (4) Substitution of value If a certificate of discharge is issued to any person under section 6325(b)(4) with respect to any property, such person may, within 120 days after the day on which such certificate is issued, bring a civil action against the United States in a district court of the United States for a determination of whether the value of the interest of the United States (if any) in such property is less than the value deter- mined by the Secretary. No other action may be brought by such person for such a deter- mination. (b) Adjudication The district court shall have jurisdiction to grant only such of the following forms of relief as may be appropriate in the circumstances: (1) Injunction If a levy or sale would irreparably injure rights in property which the court determines to be superior to rights of the United States in such property, the court may grant an injunc- tion to prohibit the enforcement of such levy or to prohibit such sale. (2) Recovery of property If the court determines that such property has been wrongfully levied upon, the court may— (A) order the return of specific property if the United States is in possession of such property; (B) grant a judgment for the amount of money levied upon; or (C) if such property was sold, grant a judg- ment for an amount not exceeding the great- er of— (i) the amount received by the United States from the sale of such property, or (ii) the fair market value of such prop- erty immediately before the levy. For the purposes of subparagraph (C), if the property was declared purchased by the United States at a sale pursuant to section 6335(e) (re- lating to manner and conditions of sale), the United States shall be treated as having re- ceived an amount equal to the minimum price determined pursuant to such section or (if larger) the amount received by the United States from the resale of such property. (3) Surplus proceeds If the court determines that the interest or lien of any party to an action under this sec- tion was transferred to the proceeds of a sale of such property, the court may grant a judg- ment in an amount equal to all or any part of the amount of the surplus proceeds of such sale. (4) Substituted sale proceeds If the court determines that a party has an interest in or lien on the amount held as a fund pursuant to an agreement described in section 6325(b)(3) (relating to substitution of proceeds of sale), the court may grant a judg- ment in an amount equal to all or any part of the amount of such fund. (5) Substitution of value If the court determines that the Secretary’s determination of the value of the interest of the United States in the property for purposes of section 6325(b)(4) exceeds the actual value of such interest, the court shall grant a judg- ment ordering a refund of the amount depos-