22 Hoosier Banker December 2014 COMPLIANCE CONNECTION Question: Please describe the process that our bank should follow when it receives a Notice of Levy relating to one of its depositors. Answer: Levies are a statutory process used by the Indiana Department of Revenue (IDOR) to collect delinquent taxes by taking property of the taxpayer (e.g. bank accounts) in payment of the taxes owed.1 Pursuant to statutory authority, IDOR has contracted with Premiere Credit of North America LLC (“Premier”) to serve as its collection agent.2 In this capacity, Premier may apply levies and other collection mechanisms on behalf of IDOR. Upon receipt of a Notice of Levy, the bank should complete a diligent search of its customer files as soon as possible to determine if the bank has a deposit account in the name of the taxpayer. Similar to the process that the bank undertakes when it received a garnishment, the bank should attempt to match as much of the information provided in the Notice of Levy as possible. At a minimum, the bank should match the name and Social Security number of its depositor to the information contained in the Notice of Levy.3 If an account is identified, and if there are sufficient funds in the account to satisfy the amount indicated in the Notice of Levy, the funds should immediately be transferred to IDOR, according to the instructions in the Notice of Levy. If the balance in the account is less than the amount indicated in the Notice of Levy, the bank should restrict the withdrawal of funds from the account for 60 days (up to the amount indicated in the levy) to attempt to capture and restrict any additional deposits. At the end of the 60-day period, the bank should forward the funds in the account, not to exceed the amount indicated in the Notice of Levy, as instructed in the Notice of Levy.4 The Indiana Code provides protection from liability to the bank for disclosing certain information to IDOR, for blocking an account and for surrendering assets in response to a levy, as well as for any other action taken in good faith to comply with the requirements of a levy.5 Levies are also used by the Internal Revenue Service as one of several means to collect past due taxes of all types (e.g. income, employment, excise, etc.) and are authorized by Chapter 64 of the Internal Revenue Code. Similar to the state tax levy procedure, upon receipt of an IRS Notice of Levy, the bank should complete a search of its customer files as soon as possible to determine if the bank has a deposit account in the name of the taxpayer. If the bank has a deposit account in the name of the taxpayer, a 21-day hold should be placed on the balance in the account to the extent of the amount indicated in the IRS Notice of Levy.6 After the 21 days have elapsed, the bank should send the amount held, plus any interest earned on that amount, to the IRS as indicated in the IRS Notice of Levy. Failure to properly surrender property subject to a levy to the IRS may result in personal liability for an amount equal to the value of the property not surrendered, plus interest and penalties.7 Although there are detailed statutory guidelines that can be followed in regard to state and federal levies, these situations can be confusing and can create liability for the bank if handled improperly. Therefore, if you are unsure of the validity of any documents received or the process that should be followed in a specific situation while processing a levy, contact your bank counsel for guidance. t aBout compliance connection In order to address compliance inquiries from members, IBA provides Compliance Connection, an assistance program offering advice on Indiana-specific compliance questions. If the matter requires legal advice, IBA Compliance Connection will refer the bank to a law firm. The material in this issue was prepared by Larry C. Tomlin, partner with Krieg DeVault LLP, Indianapolis, and IBA compliance consultant. Submit Compliance Connection questions to IBA’s Amber R. Van Til at avantil@ indianabankers.org. 1 A description of the IDOR’s collection process is provided at ind. Code § 6-8.1-8-1 et seq. 2 ind. Code § 6-8.1-8-4. 3 ind. Code § 6-8.1-8-8.7(c)(1). 4 ind. Code § 6-8.1-8-8(1). 5 ind. Code § 6-8.1-8-8.7(i). 6 26 U.S.C. § 6332(c). 7 26 U.S.C. 6332(d)(1) and (2). This information is provided for general education purposes and is not intended to be legal advice. Please consult legal counsel for specific guidance as to how this information applies to your institution’s circumstances or situation. Two member banks of the Indiana Bankers Association were honored in American Banker magazine’s second annual ranking of the Best Banks to Work For. The rankings were based on employee surveys and employer reports on benefits and policies: Centier Bank, Northern Indiana First Internet Bank, Indianapolis Leslie Carter-Prall, executive vice president, Regions Bank, Indianapolis, has been honored by the Indianapolis Business Journal as a 2014 Women of Influence. She also serves the bank as area president, overseeing commercial banking offices from Chicago to Cincinnati, and serves on the boards for the Indiana Chamber of Commerce and Little Red Door Cancer Agency. Carter-Prall is a past president of the Indiana University Kelley School of Business Alumni Association. t HonoraBle mentions
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