Under § 6331 of the Internal Revenue Code of 1954, a Director of
Internal Revenue issued notices of levy directed to a State and
served them on petitioner, the State Auditor, seizing the accrued
salaries of certain employees of the State against whom the
Commissioner of Internal Revenue had assessed income tax
deficiencies. Petitioner refused to honor the levies, and issued
and delivered to the taxpayers warrants for their accrued salaries.
The Federal Government then brought this suit against petitioner
under § 6332 to recover from him personally the sums he had so paid
to the taxpayers in disobedience of the Government's levies.
Held:
1. Sections 6331 and 6332 authorize a levy on the accrued
salaries of the employees of a State to collect federal income
taxes. Pp.
359 U. S.
110-113.
2. Petitioner, as State Auditor, was a person "obligated with
respect to" the accrued and seized salaries, within the meaning of
§ 6332, and therefore was personally liable for refusing to
surrender them to the Government. Pp.
359 U. S.
113-114.
252 F.2d 434 affirmed.
MR. JUSTICE WHITTAKER delivered the opinion of the Court.
The Commissioner of Internal Revenue assessed an income tax
deficiency against each of three residents of West Virginia and
forwarded the assessment lists to the
Page 359 U. S. 109
Director of Internal Revenue at Parkersburg for collection. The
deficiencies remaining unpaid for more than 10 days after demand
for payment, and, the taxpayers being then employed by the State of
West Virginia, the Director issued notices of levy directed to the
State of West Virginia and served them on petitioner, as the State
Auditor, seizing the accrued salaries of the taxpayers pursuant to
§ 6331 of the 1954 Internal Revenue Code, 26 U.S.C. (Supp. V) §
6331. [
Footnote 1] Petitioner
refused to honor the levies, and instead issued and delivered
payroll warrants to the taxpayers for their then accrued net
salaries aggregating $519.71. [
Footnote 2] Thereafter, the Government brought this suit
in the Federal District Court against petitioner under § 6332 of
the 1954 Internal Revenue Code, 26 U.S.C. (Supp. V) § 6332,
[
Footnote 3] to recover
from
Page 359 U. S. 110
him personally the $519.71 that he had so paid to the taxpayers
in disobedience to and defeat of the Government's levies. The
District Court rendered judgment for the Government, and the Court
of Appeals affirmed, 252 F.2d 434. Certiorari was sought on the
grounds that § 6331 does not authorize a levy on the accrued
salaries of employees of a State, and that, if it be held that it
does, petitioner was not a person "obligated with respect to" the
accrued and seized salaries, within the meaning of § 6332, and,
therefore, is not personally liable for refusing to surrender them
to the Government. We granted the writ to determine those
questions. 358 U.S. 809.
Nothing in the Constitution requires that the salaries of state
employees be treated any differently, for federal tax purposes,
than the salaries of others,
Helvering v. Gerhardt,
304 U. S. 405;
Graves v. New York ex rel. O'Keefe, 306 U.
S. 466, and it is quite clear, generally, that accrued
salaries are property and rights to property
Page 359 U. S. 111
subject to levy. [
Footnote
4] In plain terms, § 6331 provides for the collection of
assessed and unpaid taxes "by levy upon all property and rights to
property" belonging to a delinquent taxpayer. [
Footnote 5] Pursuant to that statute, a regulation
was promulgated expressly interpreting and declaring § 6331 to
authorize levy on the accrued salaries of employees of a State to
enforce collection of any federal tax. [
Footnote 6]
Although not disputing these principles, petitioner advances two
arguments in support of his claim that the statutes do not
authorize a levy on the accrued salaries of employees of a State.
First, he contends that a State is not a "person" within the
meaning of § 6332, and, second, he argues that Congress, by
specifically authorizing in § 6331 a levy "upon the accrued salary
or wages of any officer, employee, or elected official, of the
United States, the District of Columbia, or any agency or
instrumentality" thereof, but not similarly specifically
authorizing levy upon the accrued salaries or wages of
Page 359 U. S. 112
employees of a State, evinced its intention to exclude the
latter from such levies.
"The terms 'includes' and 'including,' when used in a definition
contained in this title, shall not be deemed to exclude other
things otherwise within the meaning of the term defined."
26 U.S.C. (Supp. V) § 7701(b). Whether the term "person," when
used in a federal statute, includes a State cannot be abstractly
declared, but depends upon its legislative environment,
Ohio v.
Helvering, 292 U. S. 360,
292 U. S. 370;
Georgia v. Evans, 316 U. S. 159,
316 U. S. 161.
It is clear that § 6332 is stated in all-inclusive terms of general
application.
"In interpreting federal revenue measures expressed in terms of
general application, this Court has ordinarily found them operative
in the case of state activities even though States were not
expressly indicated as subjects of tax."
Wilmette Park Dist. v. Campbell, 338 U.
S. 411,
338 U. S. 416,
and cases cited. We think that the subject matter, the context, the
legislative history, and the executive interpretation,
i.e., the legislative environment, of § 6332 make it plain
that Congress intended to and did include States within the term
"person" as used in § 6332.
Nor is there merit in petitioner's contention that Congress, by
specifically providing in § 6331 for levy upon the accrued salaries
of federal employees, but not mentioning state employees, evinced
an intention to exclude the latter from levy. The explanation of
that action by Congress appears quite clearly to be that this Court
has held, in
Smith v. Jackson, 246 U.
S. 388, that a federal disbursing officer might not, in
the absence of express congressional authorization, set off an
indebtedness of a federal employee
Page 359 U. S. 113
to the Government against the employee's salary, and, pursuant
to that opinion, the Comptroller General ruled that an
"administrative official served with [notices of levy] would be
without authority to withhold any portion of the current salary of
such employee in satisfaction of the notices of levy and
distraint."
26 Comp.Gen. 907, 912 (1947). It is evident that § 6331 was
enacted to overcome that difficulty, and to subject the salaries of
federal employees to the same collection procedure as are available
against all other taxpayers, including employees of a State.
Accordingly, we hold that §§ 6331 and 6332 authorize levy upon
the accrued salaries of state employees for the collection of any
federal tax.
This brings us to petitioner's contention that, even if the
salaries of state employees are subject to levy, he is not
personally liable to the Government for refusing to honor its
levies, because, contrary to the holding of the courts below, he
was not a person "obligated with respect to" the salaries covered
thereby. Congress did not define the questioned phrase, nor do we
feel called upon here to delimit its scope, for we think it
includes at least a person who has the sole power to control
disposition of the fund, and we also think that, under the West
Virginia law, petitioner both had and exercised that power. By a
West Virginia statute, 1 W.Va.Code, 1955, § 1013(1), (12-3-13a) he
was empowered and obligated to deduct and withhold from the
salaries of state employees sums "to pay taxes as may be required
by an act or acts of the congress of the United States of America,"
and, similarly, another West Virginia statute, 2 W.Va.Code, 1955, §
3834(18), (38-5B-5), authorizes garnishments to be served upon him
to sequester the salaries of state employees. He alone has the
obligation and power to issue warrants for the payment of salaries,
and state employees entitled to payment for services may enforce
their rights by mandamus against him.
State
Page 359 U. S. 114
ex rel. Board of Governors of West Virginia University v.
Sims, 133 W.Va. 239, 55 S.E.2d 505;
State ex rel. Board of
Governors of West Virginia University v. Sims, 136 W.Va. 789,
68 S.E.2d
489;
State ex rel. Board of Governors of West Virginia
University v. Sims, 140 W.Va. 64,
82
S.E.2d 321. By and to the extent of these West Virginia laws,
petitioner was obligated and empowered in respect to the
sequestered salaries. These laws empowered him completely to
control the disposition of that fund. He exercised that power by
refusing to honor the Government's valid levies and to surrender
the fund to the Government. Instead, he surrendered the fund to the
taxpayers. That action by petitioner resulted in defeat of the
Government's valid levies.
Upon these principles, four judges who are constantly required
to pass upon West Virginia laws have held that, under the law of
that State, petitioner is a person who was obligated with respect
to the salaries covered by the Government's levies. Their
conclusion appears to be founded on reason and authority, and,
under familiar principles, will be accepted here.
Propper v.
Clark, 337 U. S. 472,
337 U. S.
486-487. Being a person who, under the law of West
Virginia, was obligated with respect to the salaries covered by the
Government's levies, petitioner is, by § 6332(b), made personally
liable to the Government in a sum equal to the amount, not
exceeding the delinquent taxes, which he refused to surrender to
the Government, but surrendered instead to the taxpayers in defeat
of the Government's levies. The judgment of the Court of Appeals
was therefore correct, and must be
Affirmed.
[
Footnote 1]
26 U.S.C.(Supp. V) § 6331, in pertinent part, provides:
"(a) Authority of Secretary or delegate. -- If any person liable
to pay any tax neglects or refuses to pay the same within 10 days
after notice and demand, it shall be lawful for the Secretary or
his delegate to collect such tax . . . by levy upon all property
and rights to property (except such property as is exempt under
section 6334) belonging to such person or on which there is a lien
provided in this chapter for the payment of such tax. Levy may be
made upon the accrued salary or wages of any officer, employee, or
elected official, of the United States, the District of Columbia,
or any agency or instrumentality of the United States or the
District of Columbia, by serving a notice of levy on the employer.
. . ."
"(b) Seizure and sale of property. -- The term 'levy,' as used
in this title, includes the power of distraint and seizure by any
means. In any case in which the Secretary or his delegate may levy
upon property or rights to property, he may seize and sell such
property or rights to property (whether real or personal, tangible
or intangible)."
[
Footnote 2]
The assessment against each of the taxpayers substantially
exceeded in amount the accrued salary owing to each at the time of
the levies.
[
Footnote 3]
26 U.S.C.(Supp. V) § 6332 provides:
"(a) Requirement. -- 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 shall, upon demand of the Secretary
or his delegate, surrender such property or rights (or discharge
such obligation) to the Secretary or his delegate, except such part
of the property or rights as is at the time of such demand, subject
to an attachment or execution under any judicial process."
"(b) Penalty for violation. -- Any person who fails or refuses
to surrender as required by subsection (a) 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 the 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."
"(c) Person defined. -- The term 'person,' as used in subsection
(a), includes an officer or employee of a corporation or a member
or employee of a partnership, who as such officer, employee, or
member is under a duty to surrender the property or rights to
property, or to discharge the obligation."
[
Footnote 4]
Glass City Bank v. United States, 326 U.
S. 265,
326 U. S. 268;
United States v. Long Island Drug Co., 115 F.2d 983, 986
(C.A. 2d Cir.); 9 Mertens, Law of Federal Income Taxation (Rev.), §
49.205.
[
Footnote 5]
The only property exempt from levy is that listed in § 6334(a)
of the 1954 Internal Revenue Code, 26 U.S.C.(Supp. V) § 6334(a),
consisting of certain personal articles and provisions. It does not
exempt salaries or wages.
[
Footnote 6]
Section 301.6331-1(a)(4)(ii) of Treasury Regulations relating to
Seizure of Property for Collection of Taxes (1954), 26 CFR (Revised
as of Jan. 1, 1958) § 301.6331-1(a)(4)(ii), in pertinent part,
provides:
"
State and municipal employees. Accrued salaries,
wages, or other compensation of any officer, employee, or elected
or appointed official of a State or Territory, or of any agency,
instrumentality, or political subdivision thereof, are also subject
to levy to enforce collection of any Federal tax."
This Regulation became effective on January 1, 1955, 1955-1
Cum.Bull., p. 195, § 7851, and therefore prior to the service on
petitioner of the Government's notices of levy in October,
1955.