SEIZURE OF PROPERTY FOR COLLECTION OF TAXES.

SEC. 104. SEIZURE OF PROPERTY FOR COLLECTION OF TAXES. (a) Effect of Levy.—Section 6331(b) (relating to seizure and sale of property by levy and distraint) is amended by inserting after the first sentence the following new sentence: “A levy shall extend only to property possessed and obligations existing at the time thereof.” (b) Surrender of Property Subject to Levy.—Section 6332 relating to surrender of property subject to levy) is amended— (1) by striking out “Any person” in subsection (a) and inserting in lieu thereof “Except as otherwise provided in subsection (b), any person”; 80 Stat. 1136 (2) by amending subsection (b) to read as follows: “(b) Special Rule for Life Insurance and Endowment Contracts.— “(1) In general.—A levy on an organization with respect to a life insurance or endowment contract issued by such organization shall, without necessity for the surrender of the contract document, constitute a demand by the Secretary or his delegate for payment of the amount described in paragraph (2) and the exercise of the right of the person against whom the tax is assessed to the advance of such amount. Such organization shall pay over such amount 90 days after service of notice of levy. Such notice shall include a certification by the Secretary or his delegate that a copy of such notice has been mailed to the person against whom the tax is assessed at his last known address. “(2) Satisfaction of levy.—Such levy shall be deemed to be satisfied if such organization pays over to the Secretary or his delegate the amount which the person against whom the tax is assessed could have had advanced to him by such organization on the date prescribed in paragraph (1) for the satisfaction of such levy, increased by the amount of any advance (including contractual interest thereon) made to such person on or after the date such organization had actual notice or knowledge (within the meaning of section 6323(i) (1)) of the existence of the lien with respect to which such levy is made, other than an advance (including contractual interest thereon) made automatically to maintain such contract in force under an agreement entered into before such organization had such notice or knowledge. “(3) Enforcement proceedings.—The satisfaction of a levy under paragraph (2) shall be without prejudice to any civil action for the enforcement of any lien imposed by this title with respect to such contract.”; (3) by redesignating subsection (c) as subsection (e); and (4) by inserting after subsection (b) the following new subsections: “(c) Enforcement of Levy.— “(1) Extent of personal liability.—Any person who fails or refuses to surrender any property or rights to property, subject to levy, upon demand by the Secretary or his delegate, shall be liable in his own person and estate to the United States in a sum equal to the value of the property or rights not so surrendered, but not exceeding the amount of taxes for the collection of which such levy has been made, together with costs and interest on such sum at the rate of 6 percent per annum from the date of such levy. Any amount (other than costs) recovered under this paragraph shall be credited against the tax liability for the collection of which such levy was made. “(2) Penalty for violation.—In addition to the personal liability imposed by paragraph (1), if any person required to surrender property or rights to property fails or refuses to surrender such property or rights to property without reasonable cause, such person shall be liable for a penalty equal to 50 percent of the amount recoverable under paragraph (1). No part of such penalty shall be credited against the tax liability for the collection of which such levy was made. “(d) Effect of Honoring Levy.—Any person in possession of (or obligated with respect to) property or rights to property subject to levy upon which a levy has been made who, upon demand by the Secretary or his delegate, surrenders such property or rights to property (or discharges such obligation) to the Secretary or his delegate (or 80 Stat. 1137who pays a liability under subsection (c)(1)) shall be discharged from any obligation or liability to the delinquent taxpayer with respect to such property or rights to property arising from such surrender or payment. In the case of a levy which is satisfied pursuant to subsection (b), such organization shall also be discharged from any obligation or liability to any beneficiary arising from such surrender or payment.” (c) Property Exempt From Levy.—Section 6334(a) (relating to enumeration of property exempt from levy) is amended— (1) by striking out “or Territory” in paragraph (4); and (2) by adding at the end thereof the following new paragraphs: “(6) Certain annuity and pension payments.—Annuity or pension payments under the Railroad Retirement Act, benefits under the Railroad Unemployment Insurance Act, special pension payments received by a person whose name has been entered on the Army, Navy, Air Force, and Coast Guard Medal of Honor roll (38 U.S.C. 562), and annuities based on retired or retainer pay under chapter 73 of title 10 of the United States Code. “(7) Workmen’s compensation.—Any amount payable to an individual as workmen’s compensation (including any portion thereof payable with respect to dependents) under a workmen’s compensation law of the United States, any State, the District of Columbia, or the Commonwealth of Puerto Rico.” (d) Publication of Notice of Sale.—The first sentence of section 6335 (b) (relating to notice of sale of seized property) is amended to read as follows: “The Secretary or his delegate shall as soon as practicable after the seizure of the property give notice to the owner, in the manner prescribed in subsection (a), and shall cause a notification to be published in some newspaper published or generally circulated within the county wherein such seizure is made, or if there be no newspaper published or generally circulated in such county, shall post such notice at the post office nearest the place where the seizure is made, and in not less than two other public places.” (e) Redemption Period.—Paragraph (1) of section 6337(b) (relating to period of redemption of real estate after sale) is amended by striking out “1 year” and inserting in lieu thereof “120 days”. (f) Preparation of Deed.—Section 6338(c) (relating to real property purchased by United States) is amended to read as follows: “(c) Real Property Purchased by United States.—If real property is declared purchased by the United States at a sale pursuant to section 6335, the Secretary or his delegate shall at the proper time execute a deed therefor, and without delay cause such deed to be duly recorded in the proper registry of deeds.” (g) Discharge of Junior Encumbrances.—Section 6339 (relating to legal effect of certificate of sale of personal property and deed of real property) is amended by adding at the end thereof the following new subsections: “(c) Effect of Junior Encumbrances.—A certificate of sale of personal property given or a deed to real property executed pursuant to section 6338 shall discharge such property from all liens, encumbrances, and titles over which the lien of the United States with respect to which the levy was made had priority. “(d) Cross References.— “(1) For distribution of surplus proceeds, see section 6342(b). “(2) For judicial procedure with respect to surplus proceeds, see section 7426(a)(2).” (h) Application of Proceeds of Levy and Sale.—Subsection (a) of section 6342 (relating to collection of liability) is amended— 80 Stat. 1138 (1) by striking out so much thereof as precedes paragraph (1) and inserting in lieu thereof “(a) Collection of Liability.—Any money realized by proceedings under this subchapter (whether by seizure, by surrender under section 6332 (except pursuant to subsection (c) (2) thereof), or by sale of seized property) or by sale of property redeemed by the United States (if the interest of the United States in such property was a lien arising under the provisions of this title) shall be applied as follows:”; (2) by striking out “under this subchapter” in paragraph (1); and (3) by adding “or the sale was conducted” after “levy was made” in paragraph (3). (i) Return of Property.—Section 6343 (relating to authority to release levy) is amended— (1) by striking out the heading of such section and inserting in lieu thereof the following: “SEC. 6343. AUTHORITY TO RELEASE LEVY AND RETURN PROPERTY.”; (2) by striking out “It shall be” and inserting in lieu thereof “(a) Release of Levy.—It shall be”; and (3) by adding at the end thereof the following new subsection: “(b) Return of Property.—If the Secretary or his delegate determines that property has been wrongfully levied upon, it shall be lawful for the Secretary or his delegate to return— “(1) the specific property levied upon, “(2) an amount of money equal to the amount of money levied upon, or “(3) an amount of money equal to the amount of money received by the United States from a sale of such property. Property may be returned at any time. An amount equal to the amount of money levied upon or received from such sale may be returned at any time before the expiration of 9 months from the date of such levy. For purposes of paragraph (3), if property is 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 of money 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.” (j) Clerical Amendment.— The table of sections for subchapter D of chapter 64 is amended by striking out— “Sec. 6343. Authority to release levy.” and inserting in lieu thereof “Sec. 6343. Authority to release levy and return property.”