A levy can reach current and future rent fixed by an existing lease

Plain-English summary

Chief Counsel addressed which levy form the IRS should use for rent payable under a contract and whether using the other form changes the levy’s reach. The email found no authority expressly requiring Form 668-A or Form 668-W for current and future rent. Form 668-A appeared acceptable because the wage and income exemptions that Form 668-W lets a taxpayer claim did not appear readily applicable to rental income, but Chief Counsel found no legal bar or material harm from using Form 668-W. When an existing lease makes the taxpayer’s right to future rent fixed and determinable, one levy reaches both rent currently due and later payments under that right. The levy reaches the taxpayer’s present contractual right to those payments, rather than operating as a new levy each time rent comes due.

Ruling snapshot

• Question: Which levy form applies to contractual rental income, and can one levy reach future rent payments?
• Outcome: Advice given (Form 668-A appears acceptable, Form 668-W is not legally precluded, and one levy reaches fixed and determinable future rent).
• Key authorities: IRC §§ 6331 and 6334(a); Treas. Reg. § 301.6331-1(a); Rev. Rul. 55-210.

Full text (IRS public release)

ID: CCA_2021051014044705
UILC: 6330.00-00; 6331.16-00

Number: 202137010
Release Date: 9/17/2021
From: --------------------------
Sent: Monday, May 10, 2021 2:04:48 PM
To: -------------------
Cc:
Bcc:
Subject: RE: Levy on Rental Income

-------- thank you for your inquiry. Concerning your general questions relating to the
proper levy procedures with respect to rental income, you asked (1) whether a Form
668-W can be used for rental income received pursuant to a rental contract, and (2) if
the wrong form was used, whether the results remain the same, meaning that a
continuous levy attaches to income proceeds of a rental contract. In your transmittal,
you also forwarded a copy of KMG Properties v. Internal Revenue Service, No. 08-
1544, 2009 WL 1885930, at *8 (W.D. Pa. June 30, 2009), that provides, in relevant part,

          Under these facts, the levy on Plaintiff's right to receive
          payment under the lease with Visionquest attached to
          Plaintiff's present right to receive future rental payments
          because the right to rental payments under the lease is
          fixed and determinable. See United States v. Halsey, Civ. A.
          No. 85–1266, 1986 U.S. Dist. LEXIS 24130 (C.D.Ill.1986)
          (upholding levy on taxpayer's receipt of future rental
          payments under lease); Weissman v. United States Postal
          Service, 19 F.Supp.2d 254, 261 (D.N.J.1998) (party obligated
          to pay under lease required to forward all subsequent rent
          payments pursuant to a levy as they came due). The fact
          that lease was a month-to-month lease does not affect the
          levy's attachment to future payments. The levy was effective
          to reach future payments not by reason of the fact that
          it continued to operate beyond the time at which it was
          made, which it does not, but rather because the levy reached
          Plaintiff's then existing right to the future payments under the
          lease, not the future payments themselves. This rationale is
          consistent with the Treasury Regulation governing same, 26
          C.F.R. 301.6331–1(a)(1), 17 and with the rule that this Court
          must strictly construe waivers of the United States' sovereign
          immunity. Lane, 518 U.S.at 192.

We have not located any guidance or authority expressly addressing whether a Form
668-A or a Form 668-W should be used in the context of levying current and future
2

rental payments. The IRM and the instructions to Form 668-W contemplate other
income, so it is not necessarily limited to wages. Historically, “[t]he purpose of using
Form 668-W instead of Form 668-A is to give the taxpayer an opportunity to claim
exemptions pursuant to I.R.C. § 6334(a).” Private Letter Ruling 199948004, 1999 WL
1100099 (Dec. 3, 1999). To the extent that we’re not readily seeing the application of
section 6334 exemptions to rental income, Form 668-A would appear
acceptable. However, there doesn’t appear to be any legal authority precluding use of a
Form 668-W here and we are not aware of any material harm in employing the Form
668-W in this situation.

Rental income is generally subject to a levy with continuous effect meaning that, to the
extent that future rental liabilities are fixed and determinable, meaning the terms are
provided for in a rental contract, the single levy reaches both current and future rental
payments. Treas. Reg. § 301.6331-1(a); KMG Properties v. Internal Revenue Service,
supra, at *8; Revenue Ruling 55-210 (Jan. 1, 1955) (“Where a taxpayer has an
unqualified fixed right, under a trust or a contract…to receive periodic payments or
distributions of property, a Federal lien for unpaid tax attaches to the taxpayer’s entire
right, and a notice of levy based on such lien is effective to reach, in addition to
payments or deductions then due, any subsequent payments or distributions that will
become due thereunder.”).

We hope that this answers your questions. Please note that we coordinated this advice
with our Procedure and Administration Counsel colleagues. Because this TAO review
included a request for Chief Counsel Advice (CCA), in accordance with CCA
procedures, please include a copy of the email and the attached letter with the TAS
response to the taxpayer – note, while the letter references privileged and/or taxpayer-
specific information, no such information was included in this email advice, so no
redactions are necessary. Please feel free to reach out with any additional questions.

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