MCINTYRE v USA, 9817192
U.S. 9th Circuit Court of Appeals
MCINTYRE v USA
9817192
In re JERRY W. MCINTYRE and
WALTROUT MCINTYRE,
Debtors.
No. 98-17192
WALTROUT MCINTYRE, D.C. No.
CV-98-01084-SI
Plaintiff-Appellant,
OPINION
v.
UNITED STATES OF AMERICA,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of California
Susan Illston, District Judge, Presiding
Submitted March 17, 2000*
San Francisco, California
Filed July 13, 2000
Before: Diarmuid F. O'Scannlain, Edward Leavy, and
Pamela Ann Rymer, Circuit Judges.
Opinion by Judge O'Scannlain
SUMMARY
The summary, which does not constitute a part of the opinion of the court,
is copyrighted C 2000 by West Group.
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Tax/Tax Liens
The court of appeals reversed a judgment of the district
court. The court held that the Internal Revenue Service may
levy ERISA-regulated pension benefits to satisfy a husband's
tax debt.
Waltrout McIntyre's husband and codebtor, Jerry McIntyre,
owed almost $300,000 in overdue federal income taxes. The
Internal Revenue Service (IRS) levied Jerry's pension plan,
the California Field Iron Worker Pension Trust Fund, which
was governed by the Employee Retirement Income Security
Act of 1974 (ERISA). The McIntyres filed a joint bankruptcy
petition under Chapter 13. Waltrout initiated within the bank-
ruptcy proceedings an adversary proceeding against the
United States, claiming the IRS's levy of Jerry's pension ben-
efits was wrongful under California community property law.
The bankruptcy court granted the IRS's motion for summary
judgment.
Waltrout appealed. She argued that the IRS lacked author-
ity to levy her community interest in the pension benefits. She
also argued that ERISA preempted California law to the
extent it gave her husband's creditors any recourse against her
share of his pension benefits, and that ERISA's anti-alienation
provision prevented the IRS from levying on the benefits
from any ERISA-governed pension plan.
[1] The IRS may levy on a delinquent taxpayer's property
for the enforcement of his or her federal tax obligations. State
law controls in determining the nature of the legal interest
which the taxpayer has in property.
[2] California community property law gives husband and
wife present, existing, and equal interests in community prop-
erty during the marriage relationship.
[3] California community property law refers to equal inter-
ests in the whole of the community property rather than in
terms of exclusive interests in only half of the community
property. Further, by statute in California, the community
estate is liable for a debt incurred by either spouse before or
during marriage, regardless of which spouse has the manage-
ment and control of the property and regardless of whether
one or both spouses are parties to the debt or to a judgment
for the debt. By granting creditors recourse against the whole
community estate on debts of only one spouse, California law
implicitly establishes that spouse's interest in the whole of the
community property, at least to a degree sufficient for the IRS
to impose tax liens under the Internal Revenue Code.
[4] ERISA's anti-alienation provision requires that benefits
provided under any ERISA-governed pension plan may not be
assigned or alienated. ERISA's anti-alienation provision does
not preempt the operation of California law insofar as it vests
in the husband a continuing property interest in his own pen-
sion benefits.
[5] The Internal Revenue Code expressly indicates that no
other federal law shall exempt property from the IRS's
authority to levy a delinquent taxpayer's property. Moreover,
ERISA itself has a savings clause, which prohibits construc-
tion of the anti-alienation provision to alter, amend, modify,
invalidate, impair, or supersede any law of the United States.
The IRS's authority to proceed against a delinquent taxpay-
er's interest in benefits from an ERISA-governed plan is not
constrained by ERISA's anti-alienation provision.
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COUNSEL
Waltrout McIntyre, Stockton, California, in pro se, for the
plaintiff-appellant.
Loretta C. Argrett, William S. Estabrook, and Janet A. Brad-
ley, United States Department of Justice, Washington, D.C.,
for the defendant-appellee.
_________________________________________________________________
OPINION
O'SCANNLAIN, Circuit Judge:
We must decide whether the Internal Revenue Service may
levy upon ERISA-regulated pension benefits to satisfy a hus-
band's tax debt against the claim that the wife has a vested
interest in half of those benefits under community property
laws.
I
Waltrout McIntyre's husband and co-debtor, Jerry McIn-
tyre, owed almost $300,000 in overdue federal income taxes
for the years 1983-1995. In 1996, the Internal Revenue Ser-
vice ("IRS") served a Notice of Federal Tax Levy upon
Jerry's pension plan, the California Field Iron Worker Pen-
sion Trust Fund, which is governed by the Employee Retire-
ment Income Security Act of 1974 ("ERISA"), 29 U.S.C.
SS 1001 et seq. Pursuant to the IRS levy, the pension plan
began paying Jerry's pension benefits directly to the IRS in
August 1996.
In May 1997, the McIntyres filed a joint bankruptcy peti-
tion under Chapter 13 of the Bankruptcy Code, 11 U.S.C.
S 1301 et seq. In June 1997, Mrs. McIntyre initiated within
the bankruptcy proceedings an adversary proceeding against
the United States under 26 U.S.C. S 7426, claiming that the
IRS's levy of Jerry's pension benefits was wrongful insofar as
it seized her one-half interest in those benefits (which she pur-
ported to hold under California's community property
regime).
The bankruptcy court granted the IRS's motion for sum-
mary judgment, rejecting her contentions both that the IRS
lacked authority to levy her interest in the pension benefits in
satisfaction of her husband's tax debt and that ERISA pre-
cluded the use of those benefits to discharge a federal tax lia-
bility.
II
"We review the bankruptcy court's . . . conclusions of law
de novo." Levin v. Maya Constr. (In re Maya Constr. Co.), 78
F.3d 1395, 1398 (9th Cir. 1996). On appeal from the district
court, "we independently review the bankruptcy court's deci-
sion and do not give deference to the district court's determi-
nations." Robertson v. Peters (In re Weisman), 5 F.3d 417,
419 (9th Cir. 1993).
A
[1] There is no dispute that the IRS may levy on a delin-
quent taxpayer's property for the enforcement of his federal
tax obligations. See, e.g., United States v. National Bank of
Commerce, 472 U.S. 713, 719 (1985). Broad authority to do
so is granted by statute:
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 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.
26 U.S.C. S 6331(a).1 Nonetheless, Mrs. McIntyre maintains
(and the United States does not contest) that this provision
authorizes the IRS to levy on property only insofar as the
interest of the delinquent taxpayer extends and no further. It
is well established that "state law controls in determining the
nature of the legal interest which the taxpayer ha[s] in proper-
ty." Morgan v. Commissioner, 308 U.S. 78, 82 (1940).
[2] Mrs. McIntyre objects to the IRS's levy of the whole of
her husband's pension benefits because, under California law,
the interest of her husband (the delinquent taxpayer) in those
benefits extends only to half of their face value. This is so, she
argues, because the pension benefits are subject to Califor-
nia's community property regime, which gives husband and
wife "present, existing, and equal interests" in community
property "during continuance of the marriage relation." Cal.
Fam. Code S 751 (West 2000).2 Mrs. McIntyre contends that,
under S 751, she has an "exclusive" half-interest in her hus-
band's pension benefits, that her husband's own interest in
those benefits thus extends only to half of their value, and that
the other half (her half) is therefore beyond the IRS's levy
power pursuant to 26 U.S.C. S 6331.
B
[3] There is no authority for Mrs. McIntyre's characteriza-
tion of her property interest in her husband's pension benefits
as "exclusive" of any that he may retain. As an initial matter,
Family Code S 751 does not speak in terms of any "exclu-
sive" divisions of community property: That provision refers
to "equal interests" in the whole of the community property
rather than in terms of "exclusive" interests in only half of the
community property. Family Code S 910 further undermines
Mrs. McIntyre's characterization. That section establishes
that:
the community estate is liable for a debt incurred by
either spouse before or during marriage, regardless
of which spouse has the management and control of
the property and regardless of whether one or both
spouses are parties to the debt or to a judgment for
the debt.
Cal. Fam. Code S 910(a) (emphases added). We have held
before that, by granting creditors recourse against the whole
community estate on debts of only one spouse, California law
"implicitly" establishes that spouse's "interest" in the whole
of the community property, at least to a degree sufficient for
the IRS to impose tax liens under the Internal Revenue Code.
See Babb v. Schmidt, 496 F.2d 957, 960 (9th Cir. 1974).
As both the bankruptcy court and the district court indi-
cated, our decision in Babb must foreclose Mrs. McIntyre's
claim, at least to the extent that she bases it on California's
community property regime. Like her, the plaintiff in Babb
was a wife who brought suit for wrongful levy under 26
U.S.C. S 7426 because the IRS had sought recourse against
community property for satisfaction of tax debts owed by the
husband alone. See id. at 958. The wife argued that, because
California law gave her a vested interest in half of the moneys
in the couple's bank accounts, "her husband [could] not be
said to have `property or rights to property' " in that half, and
the IRS thus could not attach it. Id. We rejected the wife's
argument. We held that California law has "implicitly given
the husband rights in [the wife's share] sufficient to meet the
requirements" for tax liens against the property of delinquent
taxpayers. Id.
The plaintiff in Babb contended, just as Mrs. McIntyre does
here, that California's provision of recourse for one spouse's
creditors against the other spouse's share of the community
property is merely a rule regulating creditors' rights and does
not define the first spouse's "rights to property " for purposes
of federal tax law. See id. at 959. We dismissed this conten-
tion, however, and our reasoning plainly disposes of Mrs.
McIntyre's further argument that the scope of the federal
authority to attach a wife's property for the satisfaction of a
husband's tax debt should be uniform across states. See id. at
958-59 (distinguishing contrary holdings from cases in Wash-
ington and Arizona by noting that those states defined the
husband's property interests differently by "deny[ing] pre-
marital creditors of the husband access to the wife's share of
the community").
1
Mrs. McIntyre's efforts to distinguish Babb are unavailing.
She first asserts that Babb turned on the extent of a federal tax
lien against a wife's share under 26 U.S.C. S 6321 rather than
the IRS's authority to levy thereon pursuant to 26 U.S.C.
S 6331. This observation is irrelevant, for the provisions for
the federal tax lien and the IRS's levy power are both explic-
itly limited to "all property and rights to property . . . belong-
ing to" the delinquent taxpayer, 26 U.S.C. SS 6321, 6331. The
Supreme Court has thus acknowledged the similarity in the
scope of the provisions. See National Bank of Commerce, 472
U.S. at 719, 720 (1985) ("The statutory language`all property
and rights to property,' appearing in S 6321 (and, as well, in
S 6331(a) . . . ), is broad and reveals on its face that Congress
meant to reach every interest in property that a taxpayer might
have.").3
2
Mrs. McIntyre next argues that our holding in Babb is inap-
plicable because the property at issue in that case, a bank
account, was not regulated by ERISA whereas the pension
payments at issue in this case are. Her distinction of Babb
based on the role of ERISA in this case appears to rest on one
of two arguments; neither of them is valid.
The first argument is that ERISA effectively preempts Cal.
Fam. Code S 910 and thereby preempts California law to the
extent that it gives Mrs. McIntyre's husband any interest in
her share of his pension benefits (by giving to his creditors
recourse against her share). Because Mrs. McIntyre's husband
has no interest in her share under the remaining, non-
preempted provisions of California law, the argument goes,
the scope of the IRS's levy authority cannot extend to her
share.
[4] This argument relies on an over-exuberant interpreta-
tion of ERISA's anti-alienation provision, which requires only
that any ERISA-governed pension plan "provide that benefits
provided under the plan may not be assigned or alienated." 29
U.S.C. S 1056(d)(1). The underlying premise is that, because
ERISA's anti-alienation provision would preclude the opera-
tion of S 910 to the extent that it would permit creditors to
proceed against the pension benefits at issue, cf. Guidry v.
Sheet Metal Workers Nat'l Pension Fund, 493 U.S. 365
(1990); Ablamis v. Roper, 937 F.2d 1450, 1458 (9th Cir.
1991), the same provision also must preclude the operation of
S 910 to the extent it "implicitly" grants an interest in the
same benefits to her husband. We reject this premise.
Although the creditors' recourse guaranteed by S 910 may be
ineffective against Mrs. McIntyre's share of her husband's
pension benefits, it does not follow that the husband's prop-
erty interest therein has been similarly vitiated. ERISA's anti-
alienation provision plainly does not preempt the operation of
California law insofar as it vests in the husband a continuing
property interest in his own pension benefits, for less is being
alienated from the plan beneficiary (the husband) in this cir-
cumstance than if his interest in those benefits were entirely
foreclosed. Mrs. McIntyre's argument based upon ERISA's
preemption of S 910 thus must fail.
[5] The bankruptcy and district courts interpreted Mrs.
McIntyre's argument to be simply that ERISA's anti-
alienation provision prevents the IRS from levying on the
benefits from any ERISA-governed pension plan. As an initial
matter, the Internal Revenue Code expressly indicates that no
other federal law shall exempt property from the IRS's
authority to levy a delinquent taxpayer's property under
S 6331. See 26 U.S.C. S 6334(c). Moreover, ERISA's anti-
alienation clause cannot prevent the IRS from undertaking
what would otherwise be a valid exercise of its levy authority
under 26 U.S.C. S 6331, because ERISA itself has a saving
clause that states: "Nothing in this subchapter[which includes
the anti-alienation provision] shall be construed to alter,
amend, modify, invalidate, impair, or supersede any law of
the United States." 29 U.S.C. S 1144(a). The only other cir-
cuit that has addressed this issue reached the same conclusion,
which authority we find persuasive. See Shanbaum v. United
States, 32 F.3d 180, 182-83 (5th Cir. 1994); cf. United States
v. Sawaf, 74 F.3d 119, 123-24 (6th Cir. 1996) (upholding the
treasury regulation that authorizes the IRS to levy on the ben-
efits of an ERISA-governed plan and applying that regulation
to uphold the IRS's collection against such benefits); Ander-
son v. United States, 149 B.R. 591, 595 (9th Cir. BAP 1992)
(upholding a tax lien against benefits from an ERISA-
governed plan).4 We think it is plain that the IRS's authority
to proceed against a delinquent taxpayer's interest in benefits
from an ERISA-governed plan is not constrained by ERISA's
anti-alienation provision.
AFFIRMED.
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FOOTNOTES
*The panel finds this case suitable for decision without oral argument.
Fed. R. App. P. 34(a)(2).
1 There is no claim that Jerry's pension benefits fall under an exemption
enumerated in 26 U.S.C. S 6334.
2 The government concedes that the pension benefits are community
property, and thus we shall not address that claim here.
3 It is true that the IRS's levy power is somewhat narrower in that it does
not extend to property exempted under S 6334, but those exemptions are
not relevant to Mrs. McIntyre's case.
4 Treasury regulations interpreting the same language used in ERISA's
anti-alienation provision also suggest that the IRS's levy authority is not
restricted thereby. See 26 C.F.R. S 1.401(a)-13(B)(2) ("A plan provision
satisfying the [anti-alienation] requirements . . . shall not preclude the fol-
lowing: (i) The enforcement of a Federal tax levy made pursuant to section
6331.").