Title 26 — Internal Revenue Code
Chapter 76 — Judicial Proceedings
§ 7426. Civil actions by persons other than taxpayers
Statutory text
Actions permitted
Wrongful levy
If a levy has been made on property or 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 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.
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.
Substituted sale proceeds
If property has been sold pursuant to an agreement described in section 6325(b)(3) (relating 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 pursuant to such agreement may bring a civil action against the United States in a district court of the United States.
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 determined by the Secretary. No other action may be brought by such person for such a determination.
Adjudication
The district court shall have jurisdiction to grant only such of the following forms of relief as may be appropriate in the circumstances:
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 injunction to prohibit the enforcement of such levy or to prohibit such sale.
Recovery of property
If the court determines that such property has been wrongfully levied upon, the court may—
order the return of specific property if the United States is in possession of such property;
grant a judgment for the amount of money levied upon; or
if such property was sold, grant a judgment for an amount not exceeding the greater of—
the amount received by the United States from the sale of such property, or
the fair market value of such property 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) (relating to manner and conditions of sale), the United States shall be treated as having received 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.
Surplus proceeds
If the court determines that the interest or lien of any party to an action under this section was transferred to the proceeds of a sale of such property, the court may grant a judgment in an amount equal to all or any part of the amount of the surplus proceeds of such sale.
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 judgment in an amount equal to all or any part of the amount of such fund.
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 judgment ordering a refund of the amount deposited, and a release of the bond, to the extent that the aggregate of the amounts thereof exceeds such value determined by the court.
Validity of assessment
For purposes of an adjudication under this section, the assessment of tax upon which the interest or lien of the United States is based shall be conclusively presumed to be valid.
Limitation on rights of action
No action may be maintained against any officer or employee of the United States (or former officer or employee) or his personal representative with respect to any acts for which an action could be maintained under this section.
Substitution of United States as party
If an action, which could be brought against the United States under this section, is improperly brought against any officer or employee of the United States (or former officer or employee) or his personal representative, the court shall order, upon such terms as are just, that the pleadings be amended to substitute the United States as a party for such officer or employee as of the time such action was commenced upon proper service of process on the United States.
Provision inapplicable
The provisions of section 7422(a) (relating to prohibition of suit prior to filing claim for refund) shall not apply to actions under this section.
Interest
Interest shall be allowed at the overpayment rate established under section 6621—
in the case of a judgment pursuant to subsection (b)(2)(B), from the date the Secretary receives the money wrongfully levied upon to the date of payment of such judgment;
in the case of a judgment pursuant to subsection (b)(2)(C), from the date of the sale of the property wrongfully levied upon to the date of payment of such judgment; and
in the case of a judgment pursuant to subsection (b)(5) which orders a refund of any amount, from the date the Secretary received such amount to the date of payment of such judgment.
Recovery of damages permitted in certain cases
In general
Notwithstanding subsection (b), if, in any action brought under this section, there is a finding that any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence, disregarded any provision of this title the defendant shall be liable to the plaintiff in an amount equal to the lesser of $1,000,000 ($100,000 in the case of negligence) or the sum of—
actual, direct economic damages sustained by the plaintiff as a proximate result of the reckless or intentional or negligent disregard of any provision of this title by the officer or employee (reduced by any amount of such damages awarded under subsection (b)); and
the costs of the action.
Requirement that administrative remedies be exhausted; mitigation; period
The rules of section 7433(d) shall apply for purposes of this subsection.
Payment authority
Claims pursuant to this section shall be payable out of funds appropriated under section 1304 of title 31, United States Code.
Cross reference
For period of limitation, see section 6532(c).
Legislative history
Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.
Federal Tax Lien Act of 1966
Pub. L. 89–719 title I § 110(a) · 80 Stat. 1125
Enacted · 26 U.S.C. § 7426
Added Pub. L. 89–719, title I, § 110(a), Nov. 2, 1966, 80 Stat. 1142
Source evidence
Code source credit
Added Pub. L. 89–719, title I, § 110(a), Nov. 2, 1966, 80 Stat. 1142Enacted provision · exact public law section
(a) Actions by Third Parties.— Subchapter B of chapter 76 (relating to proceedings by taxpayers) is amended by inserting after Post, p. 1148. 80 Stat.] section 7425 (as added by section 109 of this Act) the following new section: “SEC. 7426. CIVIL ACTIONS BY PERSONS OTHER THAN TAXPAYERS. “(a) Actions Permitted.— “(1) Wrongful levy.— If a levy has been made on property or 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 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 or his delegate. “(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) (relating Ante, p. 1133. 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 pursuant to such agreement may bring a civil action against the United States in a district court of the United States. “(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 injunction 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) grant a judgment for an amount not exceeding the amount received by the United States from the sale of such property. For the purposes of subparagraph (C), if the property was declared purchased by the United States at a sale pursuant to section 6335(e) (relating to manner and conditions of sale), the 68A Stat. 785. 26 USC 6335. United States shall be treated as having received 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 section was transferred to the proceeds of a sale of such property, the court may grant a judgment 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) (relat-ing to substitution of proceeds of sale), the court may grant a judgment in an amount equal to all or any part of the amount of such fund. “(c) Validity of Assessment.— For purposes of an adjudication under this section, the assessment of tax upon which the interest or lien of the United States is based shall be conclusively presumed to be valid. “(d) Limitation on Rights of Action.— No action may be maintained against any officer or employee of the United States (or former officer or employee) or his personal representative with respect to any acts for which an action could be maintained under this section. “(e) Substitution of United States as Party.— If an action, which could be brought against the United States under this section, is improperly brought against any officer or employee of the United States (or former officer or employee) or his personal representative, the court shall order, upon such terms as are just, that the pleadings be amended to substitute the United States as a party for such officer or employee as of the time such action was commenced upon proper service of process on the United States. “(f) Provision Inapplicable.— The provisions of section 7422(a) (relating to prohibition of suit prior to filing claim for refund) shall not apply to actions under this section. “(g) Interest.— Interest shall be allowed at the rate of 6 percent per annum— “(1) in the case of a judgment pursuant to subsection (b) (2) (B), from the date the Secretary or his delegate receives the money wrongfully levied upon to the date of payment of such judgment; and “(2) in the case of a judgment pursuant to subsection (b) (2) ((’), from the date of the sale of the property wrongfully levied upon to the date of payment of such judgment. “(h) Cross Reference.— “For period of limitation, see section 6532(c).”Pub. L. 93–625 § 7(a)(2)(E) · 88 Stat. 2108
Substituted · 26 U.S.C. § 7426(g)
Pub. L. 93–625 substituted “an annual rate established under section 6621” for “the rate of 6 percent per annum”
Source evidence
Code amendment note
Subsec. (g). Pub. L. 93–625 substituted “an annual rate established under section 6621” for “the rate of 6 percent per annum”.Enacted provision · exact public law section
(E) section 7426(g) (relating to interest on judgments 26 USC 6601. with respect to property wrongfully levied upon).Pub. L. 94–455 title XIX § 1906(b)(13)(A) · 90 Stat. 1520
Struck · 26 U.S.C. § 7426
Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing
Source evidence
Code amendment note
Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing.Enacted provision · exact public law section
(A) The Internal Revenue Code of 1954, as amended by this Act, is amended by striking out “Secretary or his delegate” each place it appears and inserting in lieu thereof “Secretary”.Pub. L. 97–248 title III § 350(a) · 96 Stat. 324
Inserted · 26 U.S.C. § 7426(b)(2)(C)
Pub. L. 97–248 inserted “if such property was sold,” before “grant a judgment” and “the greater of—” after “not exceeding”
Redesignated · 26 U.S.C. § 7426(b)(2)(C)
Pub. L. 97–248 redesignated remaining provisions as cl. (i)
Added · 26 U.S.C. § 7426(b)(2)(C)
Pub. L. 97–248 added cl. (ii)
Source evidence
Code amendment note
Subsec. (b)(2)(C). Pub. L. 97–248 inserted “if such property was sold,” before “grant a judgment” and “the greater of—” after “not exceeding”, redesignated remaining provisions as cl. (i), and added cl. (ii).Enacted provision · exact public law section
(a) General Rule.— Subparagraph (C) of section 7426(b)(2) (relating 26 USC 7426. to amount of damages) is amended to read as follows: “(C) if such property was sold, grant a judgment for an amount not exceeding the greater of— “(i) the amount received by the United States from the sale of such property, or “(ii) the fair market value of such property immediately before the levy.”Tax Reform Act of 1986
Pub. L. 99–514 title XV § 1511(c)(16) · 100 Stat. 2085
Substituted · 26 U.S.C. § 7426(g)
Pub. L. 99–514 substituted “the overpayment rate established under section 6621” for “an annual rate established under section 6621”
Source evidence
Code amendment note
Subsec. (g). Pub. L. 99–514 substituted “the overpayment rate established under section 6621” for “an annual rate established under section 6621”.Enacted provision · exact public law section
(16) Subsection (g) of section 7426 is amended by striking out “an annual rate established under section 6621” and inserting in lieu thereof “the overpayment rate established under section 6621”.Taxpayer Bill of Rights 3
Pub. L. 105–206 § 3106(b)(1) · 112 Stat. 685
Added · 26 U.S.C. § 7426(a)(4)
Pub. L. 105–206, § 3106(b)(1), added par. (4)
Source evidence
Code amendment note
Subsec. (a)(4). Pub. L. 105–206, § 3106(b)(1), added par. (4).Enacted provision · exact public law section
(1) In general.— Subsection (a) of section 7426 (relating to civil actions by persons other than taxpayers) is amended by adding at the end the following new paragraph: “(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 determined by the Secretary. No other action may be brought by such person for such a determination.”.Effective date note
Pub. L. 105–206, title III, § 3102(d), July 22, 1998, 112 Stat. 731, provided that: “The amendments made by this section [amending this section and section 7433 of this title] shall apply to actions of officers or employees of the Internal Revenue Service after the date of the enactment of this Act [July 22, 1998].” Amendment by section 3106(b)(1), (2) of Pub. L. 105–206 effective July 22, 1998, see section 3106(c) of Pub. L. 105–206, set out as a note under section 6325 of this title.Taxpayer Bill of Rights 3
Pub. L. 105–206 § 3106(b)(2)(A) · 112 Stat. 685
Added · 26 U.S.C. § 7426(b)(5)
Pub. L. 105–206, § 3106(b)(2)(A), added par. (5)
Source evidence
Code amendment note
Subsec. (b)(5). Pub. L. 105–206, § 3106(b)(2)(A), added par. (5).Enacted provision · exact public law section
(A) In general.— Subsection (b) of section 7426 is amended by adding at the end the following new paragraph: “(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 judgment ordering a refund of the amount deposited, and a release of the bond, to the extent that the aggregate of the amounts thereof exceeds such value determined by the court.”.Effective date note
Pub. L. 105–206, title III, § 3102(d), July 22, 1998, 112 Stat. 731, provided that: “The amendments made by this section [amending this section and section 7433 of this title] shall apply to actions of officers or employees of the Internal Revenue Service after the date of the enactment of this Act [July 22, 1998].” Amendment by section 3106(b)(1), (2) of Pub. L. 105–206 effective July 22, 1998, see section 3106(c) of Pub. L. 105–206, set out as a note under section 6325 of this title.Taxpayer Bill of Rights 3
Pub. L. 105–206 § 3106(b)(2)(B) · 112 Stat. 685
Added · 26 U.S.C. § 7426(g)(3)
Pub. L. 105–206, § 3106(b)(2)(B), added par. (3)
Source evidence
Code amendment note
Subsec. (g)(3). Pub. L. 105–206, § 3106(b)(2)(B), added par. (3).Enacted provision · exact public law section
(B) Interest allowed on refund of deposit.— Subsection (g) of section 7426 is amended by striking “and” at the end of paragraph (1), by striking the period at the end of paragraph (2) and inserting “; and”, and by adding at the end the following new paragraph: “(3) in the case of a judgment pursuant to subsection (b)(5) which orders a refund of any amount, from the date the Secretary received such amount to the date of payment of such judgment.”.Effective date note
Pub. L. 105–206, title III, § 3102(d), July 22, 1998, 112 Stat. 731, provided that: “The amendments made by this section [amending this section and section 7433 of this title] shall apply to actions of officers or employees of the Internal Revenue Service after the date of the enactment of this Act [July 22, 1998].” Amendment by section 3106(b)(1), (2) of Pub. L. 105–206 effective July 22, 1998, see section 3106(c) of Pub. L. 105–206, set out as a note under section 6325 of this title.Taxpayer Bill of Rights 3
Pub. L. 105–206 § 3102(b) · 112 Stat. 685
Added · 26 U.S.C. § 7426(h); 26 U.S.C. § 7426(i)
Pub. L. 105–206, § 3102(b), added subsec. (h)
Redesignated · 26 U.S.C. § 7426(h); 26 U.S.C. § 7426(i)
Pub. L. 105–206, § 3102(b), redesignated former subsec. (h) as (i)
Source evidence
Code amendment note
Subsecs. (h), (i). Pub. L. 105–206, § 3102(b), added subsec. (h) and redesignated former subsec. (h) as (i).Enacted provision · exact public law section
(b) Damages Allowed in Civil Actions by Persons Other Than Taxpayers.— Section 7426 is amended by redesignating subsection (h) as subsection (i) and by adding after subsection (g) the following new subsection: “(h) Recovery of Damages Permitted in Certain Cases.— “(1) In general.— Notwithstanding subsection (b), if, in any action brought under this section, there is a finding that any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence, disregarded any provision of this title the defendant shall be liable to the plaintiff in an amount equal to the lesser of $1,000,000 ($100,000 in the case of negligence) or the sum of— “(A) actual, direct economic damages sustained by the plaintiff as a proximate result of the reckless or intentional or negligent disregard of any provision of this title by the officer or employee (reduced by any amount of such damages awarded under subsection (b)); and “(B) the costs of the action. “(2) Applicability. Requirement that administrative remedies be exhausted; mitigation; period.— The rules of section 7433(d) shall apply for purposes of this subsection. “(3) Payment authority.— Claims pursuant to this section shall be payable out of funds appropriated under section 1304 of title 31, United States Code.”.Effective date note
Pub. L. 105–206, title III, § 3102(d), July 22, 1998, 112 Stat. 731, provided that: “The amendments made by this section [amending this section and section 7433 of this title] shall apply to actions of officers or employees of the Internal Revenue Service after the date of the enactment of this Act [July 22, 1998].” Amendment by section 3106(b)(1), (2) of Pub. L. 105–206 effective July 22, 1998, see section 3106(c) of Pub. L. 105–206, set out as a note under section 6325 of this title.
12 of 12 references resolved to an enrolled provision
Editorial Notes
Amendments1975–1998 · 5 rounds
1998
Subsec. (a)(4). Pub. L. 105–206, § 3106(b)(1), added par. (4).
Subsec. (b)(5). Pub. L. 105–206, § 3106(b)(2)(A), added par. (5).
Subsec. (g)(3). Pub. L. 105–206, § 3106(b)(2)(B), added par. (3).
Subsecs. (h), (i). Pub. L. 105–206, § 3102(b), added subsec. (h) and redesignated former subsec. (h) as (i).
1986
Subsec. (g). Pub. L. 99–514 substituted “the overpayment rate established under section 6621” for “an annual rate established under section 6621”.
1982
Subsec. (b)(2)(C). Pub. L. 97–248 inserted “if such property was sold,” before “grant a judgment” and “the greater of—” after “not exceeding”, redesignated remaining provisions as cl. (i), and added cl. (ii).
1976
Pub. L. 94–455 struck out “or his delegate” after “Secretary” wherever appearing.
1975
Subsec. (g). Pub. L. 93–625 substituted “an annual rate established under section 6621” for “the rate of 6 percent per annum”.
Statutory Notes and Related Subsidiaries
Effective Date of 1998 Amendment
Pub. L. 105–206, title III, § 3102(d), , 112 Stat. 731, provided that: “The amendments made by this section [amending this section and section 7433 of this title] shall apply to actions of officers or employees of the Internal Revenue Service after the date of the enactment of this Act [].”
Amendment by section 3106(b)(1), (2) of Pub. L. 105–206 effective , see section 3106(c) of Pub. L. 105–206, set out as a note under section 6325 of this title.
Effective Date of 1986 Amendment
Amendment by Pub. L. 99–514 applicable for purposes of determining interest for periods after , see section 1511(d) of Pub. L. 99–514, set out as a note under section 47 of this title.
Effective Date of 1982 Amendment
Pub. L. 97–248, title III, § 350(b), , 96 Stat. 639, provided that: “The amendment made by subsection (a) [amending this section] shall apply with respect to levies made after .”
Effective Date of 1975 Amendment
Amendment by Pub. L. 93–625 effective , and applicable to amounts outstanding on such date or arising thereafter, see section 7(e) of Pub. L. 93–625, set out as an Effective Date note under section 6621 of this title.
Effective Date
Section applicable after , regardless of when title or lien of United States arose or when lien or interest of another person was acquired, except in a case in which a lien or title derived from enforcement of a lien held by United States has been enforced by a civil action or suit which has become final by judgment, sale, or agreement before , or in a case in which section would impair a priority held by any person other than United States holding a lien or interest prior to , operate to increase liability of such person, or shorten time of bringing suit with respect to transactions occurring before , see section 114(a)–(c) of Pub. L. 89–719, set out as Effective Date of 1966 Amendments note under section 6323 of this title.
Credits
1966–1998 · 6 acts
- 1966Added Pub. L. 89–719, title I, § 110(a), , 80 Stat. 1142
- 1975amended Pub. L. 93–625, § 7(a)(2)(E), , 88 Stat. 2115
- 1976Pub. L. 94–455, title XIX, § 1906(b)(13)(A), , 90 Stat. 1834
- 1982Pub. L. 97–248, title III, § 350(a), , 96 Stat. 639
- 1986Pub. L. 99–514, title XV, § 1511(c)(16), , 100 Stat. 2745
- 1998Pub. L. 105–206, title III, §§ 3102(b), 3106(b)(1), (2), , 112 Stat. 730, 733.
Show as published
(Added Pub. L. 89–719, title I, § 110(a), , 80 Stat. 1142; amended Pub. L. 93–625, § 7(a)(2)(E), , 88 Stat. 2115; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), , 90 Stat. 1834; Pub. L. 97–248, title III, § 350(a), , 96 Stat. 639; Pub. L. 99–514, title XV, § 1511(c)(16), , 100 Stat. 2745; Pub. L. 105–206, title III, §§ 3102(b), 3106(b)(1), (2), , 112 Stat. 730, 733.)