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Section 3813.

Where a fine is not paid in full upon imposition, subsection (a) requires the district court that imposes sentence to certify to the Attorney General specified information about the defendant and the fine, most of which is identification information, including the defendant's identifying number under the tax laws.2 The court is also required to certify any subsequent remission or modification of the fine, and to notify the Attorney General of any payments that the court receives with respect to previously certified fines.

This provision, placing responsibility in the clerk of the district court, should improve the notification process and thus better insure that all fine-debtors are brought to the attention of the enforcing authorities in the Department of Justice. At the present time, there is no standardized procedure for notification of the United States Attorney. Rather, he receives notification of fines and payment difficulties through a number of methods, which increases the chance of administrative error. By centralizing the responsibility for notification in the district court, section 3812 lessens this chance.

Subsection (b) places the responsibility for collecting and enforcing criminal fines with the Attorney General. Since this responsibility is currently centered in the Criminal Division of the Department of Justice and the United States Attorneys, this provision effects no change in existing law. Rather than shifting the burden of enforcement (e.g., to the Internal Revenue Service), the Committee has elected to expand the enforcement powers of the Justice Department in order to strengthen the government's collection effort. Subsection (b) also provides that fines collected by the Attorney General shall be forwarded to the newly created Criminal Victim Compensation Fund, and that their collection shall be reported to the Administrative Office of the United States Courts.

SECTION 3813. LIEN PROVISIONS FOR SATISFACTION OF AN UNPAID FINE 1. In General

Section 3813 establishes the procedure by which the Attorney General is to make collection of unpaid fines. This section significantly improves current practices by providing a Federal collection procedure independent of State laws and patterned on the collection procedures utilized so successfully over the years by the Internal Revenue Service.

2. Present Federal Law

The primary method of enforcement currently used by the Federal government is execution of the judgment, either against income (garnishment) or against real or personal property. Writs of execution are issued by the district court and endorsed by the United States marshal. In the case of income executions, the procedures are dictated by the law of the State in which the Federal court sits. Where execution is to be made against property, the procedure to be followed is that detailed in 28 U.S.C. 2001-2007; State law may also be used. In either case, however, State law prescribes how much income may be garnisheed and the classes of property (e.g., homestead) that are exempt from Federal execution.

2 See 26 U.S.C. 6109.

Criminal fine judgments may also be perfected as liens under State law, if the law of the State in which the district court sits provides for such perfection by filing or recording. Because of State exemption laws, other perfected liens, and unclear title to the property, enforcement of this lien (which under most State laws is confined to real estate) by foreclosure and sale is usually not a realistic possibility. The Committee regards the lien as a protective first step, since it does help insure the satisfaction of the debt should the defendant-debtor wish to transfer the property.

The laws of several States allow a judgment creditor (in the case of a criminal fine the United State government) to obtain an order compelling the judgment debtor (the defendant) to make specified installment payments where it is shown that he is receiving or will receive money from any source. This order is called an installment payment order, and results from a Federal district court hearing sought by the United States. Notice must be given to the judgment debtor so that he may appear and contest the motion.

Finally, Rule 69 (a) of the Federal Rules of Civil Procedure states in part that:

In aid of the judgment or execution, the judgment creditor... may obtain discovery from any person, including the judgment debtor, in the manner provided in these rules or in the manner provided by the practice of the state in which the district court is held.

The United States Attorney may use this rule to obtain financial information about the debtor-defendant by oral or written depositions, or by written interrogatories. In most cases, the assistance of the district court or a United States magistrate is necessary.

3. Provisions of S. 1, as Reported

Section 3813 (a) eliminates the clerical procedures necessary to create judgment liens, by providing that the fine:

is a lien in favor of the United States upon all property be-
longing to the person fined. The lien arises at the time of the
entry of the judgment and continues until the liability is satis-
fied, remitted, or set aside, or until it becomes unenforceable
by reason of subsection (b).

Under this subsection, a lien similar to a tax lien arises at the time of judgment, and, as subsection (c) provides, may be enforced like a tax lien through the use of the administrative levy procedures. Filing under subsection (d) is necessary only to perfect the lien as against innocent third parties.

This procedure significantly alters current practices. As stated previously, 28 U.S.C. 1962 provides that:

Every judgment rendered by a district court within a State shall be a lien on property located in such State in the same manner, to the same extent and under the same conditions as a judgment of a court of general jurisdiction in such State, and shall cease to be a lien in the same manner and time. Whenever the law of any State requires a judgment of a State court to be registered. recorded, docketed or indexed, or any

3 28 U.S.C. 1962.

other act to be done, in a particular manner, or in a certain
office or county or parish before such lien attaches, such re-
quirements shall apply only if the law of such State author-
izes the judgment of a court of the United States to be regis-
tered, recorded, docketed, indexed, or otherwise conformed to
rules and requirements relating to judgments of the courts
of the State.

These liens are usually only against real estate, and enforcement of the lien is often prevented by the State law restrictions noted above. Further, the life of the lien is prescribed by the law of the State in which the district court sits. State laws usually require an abstract of judgment to be filed in the office of the county clerk, county recorder, or other State or county office. A small recording fee is assessed. Most of these procedural limitations and requirements are eliminated by section 3813(a).

Subsection (b) changes current law by imposing a twenty-year statute of limitations on the collection of criminal fines, unless there is a levy made or a judicial proceeding for collection begun within that time. Under existing law, the government's right to seek execution of a criminal sentence, including a fine, is not subject to time limitations. Currently, such cases may be closed only through payment in full, death of the debtor, or Presidential pardon. The limitation period established by subsection (b) will permit the closing of files by United States Attorneys for cases which are so old that collection of fines is unlikely. With the new enforcement tools of section 3813, it seems reasonable to conlude that if a debtor is pursued unsuccessfully for the twenty-year period it is unlikely that additional enforcement efforts would prove fruitful. A number of unproductive clerical tasks will thus be eliminated by this provision.

The period for collection may be extended by a written agreement entered into by the defendant and the Attorney General prior to the expiration of the period. This allowance for an extension is similar to that existing in the tax area."

Subsection (b) also provides that the running of the twenty-year statute of limitations is to be suspended "during any interval for which the running of the period of limitations for collection of a tax would be suspended" pursuant to the following provisions of law:

(A) 26 U.S.C. 6503 (b), relating to cases where the assets of the taxpayer are in the control or custody of a court in a proceeding before any United States, District of Columbia, or State court; the suspension of the limitations period is also extended for six months after the court proceeding ends;

(B) 26 U.S.C. 6503 (c), relating to cases where the taxpayer is outside the United States if the absence is for a continuous period of at least six months:

(C) 26 U.S.C. 6503(g), relating to cases where the property of a third person has been wrongfully seized;

(D) 26 U.S.C. 7508 (a) (1) (Î), relating to cases where the person is serving in the armed forces of the United States, or in support of such forces, during time of war, or is in a hospital as a result of a combat injury, and for 180 days thereafter; and

4 Smith v. United States, 143 F.2d 228 (9th Cir.), cert. denied, 323 U.S. 729 (1944). 5 See 26 U.S.C. 6501 (c) (4).

(E) section 513 of the Act of October 17, 1940, 54 Stat. 1190, relating to cases where the person is serving in the military. Finally, subsection (b) provides that a lien becomes unenforceable and liability to pay a fine expires upon the death of the individual fined. This is in keeping with present law, and reflects one of the differences between a criminal fine and a tax liability, despite their generally similar treatment in this statute. The word "individual” is used instead of "person" to exclude organizations such as corporations from this provision, and to avoid the argument that a fine against a corporation is extinguished on the dissolution (and therefore "death") of the corporation. In such case, an existing fine will make the United States a creditor against the assets of the dissolved corporation with whatever preferences the provisions of this section grant. Subsection (c) provides that certain sections of the Internal Revenue Code of 1954, as amended, shall:

apply to a fine, and to the lien imposed by subsection (a) as
if the liability of the person fined were for an internal
revenue tax assessment, except to the extent that the applica-
tion of such statutes is modified by regulations issued by the
Attorney General to accord with differences in the nature of
the liabilities.

Among the provisions of title 26 incorporated by reference into section 3813, the most significant, of course, is the administrative levy power referred to previously. The following is a summary of the provisions of the tax code cross-referenced into section 3813 and made applicable to the collection of a fine:

(i) 26 U.S.C. 6302, which provides that the Secretary of the Treasury (hereafter, Secretary) may issue regulations governing the mode or time of collection, and the use of government depositaries to receive payments;

(ii) 26 U.S.C. 6303 (a), which provides that notice of and demand for payment of a tax must be made within sixty days of the assessment:

(iii) 26 U.S.C. 6311, which authorizes payment of a tax by check or money order:

(iv) 26 U.S.C. 6312, which authorizes payment of a tax by United States notes and certificates of indebtedness:

(v) 26 U.S.C. 6314(a), which requires receipts, upon request, to be issued for all sums collected;

(vi) 26 U.S.C. 6316, which authorizes payment of a tax in foreign currency, in the discretion of the Secretary:

(vii) 26 U.S.C. 6323, which contains notice and filing provisions, compliance with which is necessary to insure the validity of a tax lien against certain third persons; priority rules are also set forth;

(viii) 26 U.S.C. 6325, which covers release of the lien, where the liability has been satisfied or found to be unenforceable; this section also provides for the discharge of property covered by the lien:

(ix) 26 U.S.C. 6331, which authorizes the Secretary to collect a tax by levy on the property of a delinquent taxpayer if the lien has not been satisfied; as has been stated, incorporating this power into the scheme for collection of fines is the most significant change wrought by section 3813; it should be noted that 26 U.S.C. 6502, which establishes

a six-year limitation period on the use of an administrative levy, has not been included in the section 3813 cross references from title 26; thus, the twenty-year period set forth in section 3813 (b) will also apply to the levy power in the area of criminal fine collection;

(x) 26 U.S.C. 6332, which requires surrender of property subject to levy, and also provides for enforcement of the levy by civil penalty; (xi) 26 U.S.C. 6333, which provides for demand by the Secretary of books and records relating to the property subject to levy;

(xii) 26 U.S.C. 6334, which provides that certain property (including various unemployment benefits, retirement benefits, workman's compensation, and tools of a trade up to a value of $250) is exempt. from levy; these exemptions are limited and standard; comparison should be made to the greater and more varied number of exceptions provided for in State laws to which the Federal government is now subject;

(xiii) 26 U.S.C. 6335, which sets forth the procedure to be used in the sale of property seized pursuant to levy;

(xiv) 26 U.S.C. 6336, which covers the sale of perishable goods; (xv) 26 U.S.C. 6337, which provides for redemption of property before sale, and, with respect to real property, redemption after sale: (xvi) 26 U.S.C. 6338, which provides that a certificate of sale is to be given to the purchaser of the property sold, and that a deed shall also be given where the property sold is real estate;

(xvii) 26 U.S.C. 6339, which provides that the certificate of sale and the deed are to have certain legal effects, including their use as conclusive evidence as to the regularity of the proceedings, the transfer of the right, title, and interest of the party delinquent, etc.;

(xviii) 26 U.S.C. 6340, which requires records to be kept of all sales; (xix) 26 U.S.C. 6341, which requires the Secretary to determine which expenses are to be allowed in all cases of levy and sale:

(xx) 26 U.S.C. 6342, which sets forth the order in which the proceeds of the levy and sale are to be applied to the taxpayer's liability; (xxi) 26 U.S.C. 6343, which authorizes the Secretary to release the levy and to return the property, or proceeds, where the property has been wrongfully levied;

(xxii) 26 U.S.C. 6401(a), which provides that "overpayment" includes payment of a tax assessed or collected after expiration of the period of limitations;

(xxiii) 26 U.S.C. 6402 (a), which allows the Secretary to credit the amount of overpayment against any liability in respect to a tax, and also provides for refunds;

(xxiv) 26 U.S.C. 6403, which provides that overpayment of an installment shall be credited against future installments, or refunded in a proper case;

(xxv) 26 Ú.S.C. 6873, which provides that any portion of a claim for taxes allowed in a bankruptcy proceeding or insolvency proceeding, which is unpaid, shall be paid by the taxpayer upon notice and demand by the Secretary after the termination of such proceeding;

(xxvi) 26 U.S.C. 7401, which provides that no civil action for collection shall be commenced unless sanctioned by the Secretary;

(xxvii) 26 U.S.C. 7402, which grants jurisdiction to the Federal courts in tax collection matters;

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