IRS proposes to change rules for sales of seized property

The Internal Revenue Service is proposing to update the regulations governing the sale of a taxpayer’s property that the IRS has seized during a levy.

The IRS posted proposed amendments last week aimed at modernizing the rules pertaining to the sale of property seized by levy. The proposed amendments would enable the IRS to maximize the sale proceeds for the benefit of the taxpayer whose property the IRS has seized as well as the public. The proposed regulations would affect all sales of property seized by levy by the IRS.

Among the changes proposed are to allow the sale of the seized property to be advertised on the internet, as opposed to only local newspapers. Section 301.6335-1(c)(1) of the Tax Code currently requires that the place of sale be within the county in which the seizure took place unless “substantially higher bids” can be obtained by holding the sale elsewhere, in which case the district director may order that the sale be held in that other place, the IRS noted, but doesn’t expressly include online sales. 

“But online sales can attract a wider range of potential purchasers, and thus potentially higher bids, while conserving IRS resources,” said the document. “Given that section 6342(a) of the Code provides that money realized by the sale of seized property is applied against the expenses of the levy and sale before any remaining amount is made available to satisfy the liability of the taxpayer, taxpayers whose seized property is being sold benefit both when the IRS realizes more money from a sale and when the IRS incurs less expense in conducting the sale.”

This would also allow the sale to be available to potential buyers outside the local county where the property was seized. Under the IRS’s current practice for online sales (which uses a special-order process), bids are solicited from in-county bidders, there is in-county advertising, the property is stored in the county, inspection of the property (when permitted) occurs in the county, and the winning bidder must retrieve the property from within the county. Under the proposed regulations, the place of sale for the online sales would be considered to be within the county in which the property was seized, and no special order would be needed. However, in the unusual situation in which an online sale deviates from current practice, for example, if the seized property is moved outside the county for storage and stays outside the county during any allowable period for pre-sale inspection or if the internet is not generally available within the county, then the proposed amendment would require the sale to be done on the internet only by special order when doing so would be more efficient or is likely to result in more competitive bids.

Other proposed amendments would enable the IRS to choose the method of grouping property (or selling items separately) that would be likely to produce the highest overall sale amount and be the most feasible. The proposed rules would make the terms of payment more flexible, removing the existing $200 or 20% requirements, and say that the public notice of sale, or the instructions referenced in the notice, would specify the amount of the initial payment that must be made when full payment is not required upon acceptance of the bid.