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U.S. DEPARTMENT OF LABOR
Employment and Training Administration
Washington, D. C. 20210

CLASSIFICATION

UI

CORRESPONDENCE SYMBOL

TEUL

ISSUE DATE

May 1, 1998

RESCISSIONS

None

EXPIRATION DATE

May 1, 1999

DIRECTIVE

:

UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 25-98

 

TO

:

ALL STATE EMPLOYMENT SECURITY AGENCIES

 

FROM

:

GRACE A. KILBANE
Director
Unemployment Insurance Service

 

SUBJECT

:

Internal Revenue Service (IRS) Levy Authority

 

  1. Purpose. To advise States of the position currently taken by the IRS with respect to the levy authority on unemployment compensation (UC) provided by the Taxpayers' Relief Act (TPRA) of 1997, and to provide interim instructions for States in handling levy notices.

  2. References. The TPRA of 1997, P.L. 105-34 and Unemployment Insurance Program Letter (UIPL) No. 44-97.

  3. Background. The TPRA, enacted on August 5, 1997, made several changes affecting the UC program, including giving the IRS the authority to impose a continuous levy on UC benefits. In response to the enactment of the TPRA, UIPL No. 44-97 was issued to advise the States of the pertinent amendments affecting UC and of necessary action required of the States.

    Federal UC law provides that payments of UC may not be subjected to levy. Although the TPRA did not amend these UC provisions, it authorized the IRS to impose a continuous levy on certain payments by adding new subsection (h) to Section 6331, Internal Revenue Code. Under this authority, the IRS may continuously levy up to 15 percent of "any specified payment", including UC. The amendment applies to levies issued after August 5, 1997, the date of the enactment of the TPRA, and applies to any payment under Federal or State UC law, including UC for Federal employees (UCFE), UC for ex-servicemembers (UCX), the Disaster Unemployment Assistance (DUA) program, as well as trade readjustment allowances (TRA) under the Trade Adjustment Assistance and NAFTA-Transitional Adjustment Assistance programs.

  4. Current IRS position. Although the IRS has the authority to issue levies on UC, it has chosen not to exercise this authority. Consequently, until further notice, there will be no effort on the part of the IRS to levy on UC, except in child support collection cases. IRS employees will be advised of the current IRS position on levies through a levy handbook slated for distribution in the near future.

  5. Action. States may occasionally receive levies issued by the IRS in error. Except for levies that clearly show that the levy is for the collection of child support, notices of levy issued by the IRS should be returned unpaid by the State, with an explanation that current IRS policy limits levy on UC to child support cases. States will be notified of any changes to IRS policy on this matter.

  6. Inquiries. Please direct inquiries to the appropriate Regional Office.

  7. Attachments.

    1. Letter from the IRS explaining the current position on levies.

    2. Pertinent pages from a draft of the new IRS levy handbook which is expected to soon be printed and distributed.