[Code of Federal Regulations]
[Title 26, Volume 18]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR301.6332-3]

[Page 290-292]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 301_PROCEDURE AND ADMINISTRATION--Table of Contents
 
               Seizure of Property for Collection of Taxes
 
Sec. 301.6332-3  The 21-day holding period applicable to property held 
by banks.

    (a) In general. This section provides special rules relating to the 
surrender, after 21 days, of deposits subject to levy which are held by 
banks. The provisions of Sec. 301.6332-1 which relate generally to the 
surrender of property subject to levy apply, to the extent not 
inconsistent with the special rules set forth in this section, to a levy 
on property held by banks.
    (b) Definition of bank. For purposes of this section, the term 
``bank'' means--
    (1) A bank or trust company or domestic building and loan 
association incorporated and doing business under the laws of the United 
States (including laws relating to the District of Columbia) or of any 
State, a substantial part of the business of which consists of receiving 
deposits and making loans and discounts, or of exercising fiduciary 
powers similar to those permitted to national banks under authority of 
the Comptroller of the Currency, and which is subject by law to 
supervision and examination by State or Federal authority having 
supervision over banking institutions;
    (2) Any credit union the member accounts of which are insured in 
accordance with the provisions of title II of the Federal Credit Union 
Act, 12 U.S.C. 1781 et seq.; and
    (3) A corporation which, under the laws of the State of its 
incorporation, is subject to supervision and examination by the 
Commissioner of Banking or other officer of such State in charge of the 
administration of the banking laws of such State.
    (c) 21-day holding period--(1) In general. When a levy is made on 
deposits held by a bank, the bank shall surrender such deposits (not 
otherwise subject to an attachment or execution under judicial process) 
only after 21 calendar days after the date the levy is made. The 
district director may request an extension of the 21-day holding period 
pursuant to paragraph (d)(2) of this section. During the prescribed 
holding period, or any extension thereof, the levy shall be released 
only upon notification to the bank by the district director of a 
decision by the Internal Revenue Service to release the levy. If the 
bank does not receive such notification from the district director 
within the prescribed holding period, or any extension thereof, the bank 
must surrender the deposits, including any interest thereon as 
determined in accordance with paragraph (c)(2) of this section (up to 
the amount of the levy), on the first business day after the holding 
period, or any extension thereof, expires. See Sec. 301.6331-1(c) to 
determine when a levy served by mail is made.
    (2) Payment of interest on deposits. When a bank surrenders levied 
deposits at the end of the 21-day holding period (or at the end of any 
longer period that has been requested by the district director), the 
bank must include any interest that has accrued on the deposits prior to 
and during the holding period, and any extension thereof, under the 
terms of the bank's agreement with its depositor, but the bank must not 
surrender an amount greater than the amount of the levy. If the deposits 
are held in a noninterest bearing account at the time the levy is made, 
the bank need not include any interest on the deposits at the end of the 
holding period, or any extension thereof, under this paragraph. Interest 
that accrues on deposits and is surrendered to the district director at 
the end of the holding period, or any extension thereof, is treated as a 
payment to the bank's customer.
    (3) Transactions affecting accounts. A levy on deposits held by a 
bank applies

[[Page 291]]

to those funds on deposit at the time the levy is made, up to the amount 
of the levy, and is effective as of the time the levy is made. No 
withdrawals may be made on levied upon deposits during the 21-day 
holding period, or any extension thereof.
    (4) Waiver of 21-day holding period. A depositor may waive the 21-
day holding period by notifying the bank of the depositor's intention to 
do so. Where more than one depositor is listed as the owner of a levied 
account, all depositors listed as owners of the account must agree to a 
waiver of the 21-day holding period. If the 21-day holding period is 
waived, the bank must include with the surrendered deposits a 
notification to the district director of the waiver.
    (5) Examples. The provisions of this paragraph (c) may be 
illustrated by the following examples:

    Example 1. On April 2, 1992, a notice of levy for an unpaid income 
tax assessment due from A in the amount of $10,000 is served on X Bank 
with respect to A's savings account. At the time the notice of levy is 
served, X Bank holds $5,000 in A's interest-bearing savings account. On 
April 24, 1992, (the first business day after the 21-day holding period) 
X Bank must surrender $5,000 plus any interest that accrued on the 
account under the terms of A's contract with X Bank up through April 23, 
1992, (the last day of the holding period).
    Example 2. The facts are the same as in Example 1 except that on 
April 3, 1992, A deposits an additional $5,000 into the account. On 
April 24, 1992, X Bank must still surrender only $5,000 plus the 
interest which accrued thereon until the end of the holding period, 
because the notice of levy served on April 2, 1992, attached only to 
those funds on deposit at the time the notice was served and not to any 
subsequent deposits.
    Example 3. The facts are the same as in Example 1 except that at the 
time the notice of levy is served on X Bank, A's savings account 
contains $50,000. On April 24, 1992, X Bank must surrender $10,000, 
which is the amount of the levy. The levy will not apply to any interest 
that accrues on the deposit during the 21-day holding period, because 
the entire amount of the levy is satisfied by the deposits existing at 
the time the levy is served.
    Example 4. The facts are the same as in Example 1 except that the 
amount of the levy is $5,002. Under the terms of A's contract with the 
bank, the account will earn more than $2 of interest during the 21-day 
holding period. On April 24, 1992, X Bank must surrender $5,002 to the 
district director. The remaining interest which accrued during the 21-
day holding period is not subject to the levy.
    Example 5. On September 3, 1992, A opens a $5,000 six-month 
certificate of deposit account with X Bank. Under the terms of the 
account, the depositor must forfeit up to 30 days of interest on the 
account in the event of early withdrawal. On January 4, 1993, a notice 
of levy for an unpaid income tax assessment due from A in the amount of 
$10,000 is served with respect to A's certificate of deposit account. On 
January 26, 1993, the bank must surrender $5,000 plus the interest which 
accrued on the account through January 25, 1993, minus the penalty of 30 
days of interest as provided in the deposit agreement.
    Example 6. Same facts as in Example 5 except that the notice of levy 
is served on X Bank on February 15, 1993. The certificate matures on 
March 2, 1993. On March 8, X Bank must surrender $5,000 plus the 
interest that accrued on the certificate without any reduction for 
penalties.

    (d) Notification to the district director of errors with respect to 
levied upon bank accounts--(1) In general. If a depositor believes that 
there is an error with respect to the levied upon account which the 
depositor wishes to have corrected, the depositor shall notify the 
district director to whom the assessment is charged by telephone to the 
telephone number listed on the face of the notice of levy in order to 
enable the district director to conduct an expeditious review of the 
alleged error. The district director may require any supporting 
documentation necessary to the review of the alleged error. The 
notification by telephone provided for in this section does not 
constitute or substitute for the filing by a third party of a written 
request under Sec. 301.6343-1(b)(2) for the return of property 
wrongfully levied upon.
    (2) Disputes regarding the merits of the underlying assessment. This 
section does not constitute an additional procedure for an appeal 
regarding the merits of an underlying assessment. However, if in the 
judgment of the district director a genuine dispute regarding the merits 
of an underlying assessment appears to exist, the district director may 
request an extension of the 21-day holding period.
    (3) Notification of errors from sources other than the depositor. 
The district director may take action to release the

[[Page 292]]

levy on the bank account based on information obtained from a source 
other than the depositor, including the bank in which the account is 
maintained.
    (e) Effective date. These provisions are effective with respect to 
levies issued on or after January 4, 1993.

[T. D. 8466, 58 FR 18, Jan. 4, 1993]