## Facts

- Roy Reeves and two codepositors, Ruby and Neva Reeves, held two joint bank accounts at National Bank of Commerce in Arkansas.
- Roy Reeves had unpaid federal income tax liabilities; the codepositors were not liable for Roy’s taxes.
- Under the account agreement and applicable state law, Roy could withdraw up to the full balances on his sole signature, and the bank was obligated to honor his demand.
- The IRS served the bank with a notice of levy under I.R.C. §§ 6331 and 6332, seeking Roy’s “property and rights to property” in the bank’s custody.
- The bank refused to surrender any funds, asserting it could not determine what portion of the joint-account balances belonged to Roy as opposed to the codepositors.
- The United States sued the bank to enforce the levy and recover the amount attributable to Roy’s tax debt.

## Issues

1. Whether the IRS may use the administrative levy procedure under I.R.C. §§ 6331 and 6332 to reach joint bank accounts when only one depositor is a delinquent taxpayer and ownership shares among codepositors are uncertain.
2. Whether a bank may refuse to honor such a levy based on uncertainty about competing interests of nonliable codepositors.

## Decision

- The Supreme Court reversed the Eighth Circuit and held the IRS could levy on the joint accounts.
- The Court held the bank had no valid statutory defense for refusing to comply with the levy.
- The Court concluded that Roy’s unilateral right to withdraw the full balances constituted “property” or “rights to property” reachable by levy.
- The Court held that potential third-party claims by codepositors do not bar levy; those claims are addressed through post-seizure remedies.

## Legal Principles

- I.R.C. § 6332(a) affords a person served with an IRS levy only two defenses: (1) the person is not in possession of, and not obligated with respect to, property or rights to property of the taxpayer; or (2) the property is subject to a prior judicial attachment or execution.
- State law determines the nature of the taxpayer’s legal interest in property, but federal law determines whether that interest constitutes “property” or “rights to property” subject to federal tax levy.
- A delinquent taxpayer’s unilateral contractual and legal power to withdraw the entire balance of a joint bank account is a “right to property” subject to levy under I.R.C. § 6331.
- The IRS is not required to adjudicate or allocate codepositors’ interests before levying; third parties may challenge a levy through a wrongful-levy action under I.R.C. § 7426.
- A bank that refuses to surrender property subject to levy, without a statutory defense, may be held liable under I.R.C. § 6332 for the value of the property not surrendered.

## Conclusion

The Court upheld the IRS’s authority to levy administratively on joint bank accounts based on a delinquent taxpayer’s unilateral withdrawal rights, limiting a bank’s defenses to those specified in § 6332 and directing competing third-party claims to the wrongful-levy remedy in § 7426.


United States v. Nat’l Bank of Com., 472 U.S. 713 (1985)