A legal action used by the Minnesota Department of Revenue to confiscate a debtor’s stocks, bonds, and other non-exempt publicly-traded securities
to pay owed taxes. A Third Party Levy on Securities letter is sent to the investment company and the debtor named on the levy.
Results of Levy on Securities
The investment company is required to freeze the accounts of the debtor on the day the levy notice is received. After 10 days, the investment company must liquidate enough of the debtor’s investments to pay the owed taxes. If the value of the investments exceed the amount owed, the debtor may, within seven days, instruct the investment company which to liquidate to satisfy the debt.
If the securities do not equal the amount owed, the investment company must liquidate all of them. All liquidated proceeds minus normal commissions and fees must be sent to the department.
There are some exemptions
from third party levies. For example, retirement accounts may be exempt. There is no formal exemption claim process. The investment company must verify what accounts are exempt. For details on exemptions, view the statute (Minnesota Statutes, section 550.37
If the investment company does not respond or cooperate with the levy, the investment company can be held liable for the levied amount plus a 25 percent penalty for failure to honor the levy.
A Reduction of Levy Notice is used to notify the investment company if the amount of the levy is reduced. It is used primarily for two reasons:
- A payment is received from another investment levy, bank levy, or revenue recapture that reduces the amount due.
- An adjustment is done to reduce the debt amount.
If multiple levies exist and a payment from one will create an overpayment, a levy reduction or release may occur.
A levy on securities will be released if the debtor proves the funds are exempt or if bankruptcy is filed.