B-151687, AUG. 21, 1963, 43 COMP. GEN. 183

B-151687: Aug 21, 1963

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SET-OFF - AGRICULTURE PAYMENTS - TAX DEBTS - ASSIGNMENT EFFECT AN AGRICULTURE REGULATION WHICH IN EFFECT DENIES TAX LIENS PRIORITY BY PRECLUDING THE WITHHOLDING OF SOIL BANK PAYMENTS TO SATISFY DEBTS OF FARMER PARTICIPANTS TO OTHER GOVERNMENT AGENCIES WHERE THE FARMER HAS HAD A PRIOR ASSIGNMENT OF THE PAYMENTS RECORDED IS A PROPER REGULATION WITHIN THE BROAD POWERS AND DISCRETION VESTED IN THE SECRETARY OF AGRICULTURE UNDER THE SOIL BANK ACT. AN ASSIGNMENT OF A SOIL BANK PAYMENT WHICH HAS BEEN RECORDED PRIOR TO THE TIME THE COUNTY AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE RECEIVES NOTICE OF A FEDERAL TAX LEVY AGAINST THE FARMER PARTICIPANT IS UNDER THE REGULATIONS ISSUED BY THE SECRETARY OF AGRICULTURE A PROPER ASSIGNMENT HAVING PRIORITY OVER THE TAX DEBT IN VIEW OF THE BROAD AUTHORITY VESTED IN THE SECRETARY UNDER THE SOIL BANK ACT.

B-151687, AUG. 21, 1963, 43 COMP. GEN. 183

SET-OFF - AGRICULTURE PAYMENTS - TAX DEBTS - ASSIGNMENT EFFECT. SET-OFF - AGRICULTURE PAYMENTS - TAX DEBTS - ASSIGNMENT EFFECT AN AGRICULTURE REGULATION WHICH IN EFFECT DENIES TAX LIENS PRIORITY BY PRECLUDING THE WITHHOLDING OF SOIL BANK PAYMENTS TO SATISFY DEBTS OF FARMER PARTICIPANTS TO OTHER GOVERNMENT AGENCIES WHERE THE FARMER HAS HAD A PRIOR ASSIGNMENT OF THE PAYMENTS RECORDED IS A PROPER REGULATION WITHIN THE BROAD POWERS AND DISCRETION VESTED IN THE SECRETARY OF AGRICULTURE UNDER THE SOIL BANK ACT, 7 U.S.C. 1801, ET SEQ., TO DETERMINE THE AMOUNT AND CONDITIONS OF THE PAYMENTS TO CARRY OUT THE PURPOSES OF THE ACT. AN ASSIGNMENT OF A SOIL BANK PAYMENT WHICH HAS BEEN RECORDED PRIOR TO THE TIME THE COUNTY AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE RECEIVES NOTICE OF A FEDERAL TAX LEVY AGAINST THE FARMER PARTICIPANT IS UNDER THE REGULATIONS ISSUED BY THE SECRETARY OF AGRICULTURE A PROPER ASSIGNMENT HAVING PRIORITY OVER THE TAX DEBT IN VIEW OF THE BROAD AUTHORITY VESTED IN THE SECRETARY UNDER THE SOIL BANK ACT, 7 U.S.C. 1801, ET SEQ., TO DETERMINE THE AMOUNTS AND CONDITIONS OF THE PAYMENTS TO CARRY OUT THE PURPOSES OF THE ACT.

TO THE COMMISSIONER, INTERNAL REVENUE SERVICE, AUGUST 21, 1963:

REFERENCE IS MADE TO LETTERS OF APRIL 9 AND JULY 26, 1963 (CC:PHI:CL-648 MJR), FROM THE CHIEF COUNSEL, INTERNAL REVENUE SERVICE, CONCERNING MR. LYLE G. TARBOX, ULYSSES, PENNSYLVANIA, WHO IS INDEBTED TO THE UNITED STATES IN THE AMOUNT OF $1,340 FOR UNPAID TAXES. IT IS STATED THAT AT THE SAME TIME MR. TARBOX IS RECEIVING ANNUALLY $4,991.40 UNDER A CONSERVATION RESERVE CONTRACT FROM THE AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE OF THE DEPARTMENT OF AGRICULTURE.

THE CHIEF COUNSEL SAYS THAT ON SEPTEMBER 25, 1962, A NOTICE OF LEVY WAS SERVED UPON THE POTTER COUNTY AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE BY THE DISTRICT DIRECTOR OF INTERNAL REVENUE OF THE DISTRICT OF SCRANTON, PENNSYLVANIA, PURSUANT TO THE REGULATIONS OF THE DEPARTMENT OF AGRICULTURE GOVERNING SET-OFFS, AND THAT ON OCTOBER 9, 1962, THE NOTICE OF LEVEY WAS RETURNED UNSIGNED ADVISING THAT AN ASSIGNMENT DATED SEPTEMBER 17, 1962, TO THE PRODUCTION CREDIT ASSOCIATION HELD PRECEDENCE OVER THE LEVY.

THE CHIEF COUNSEL FURTHER SAYS THAT IN SUBSEQUENT COMMUNICATION WITH THE DEPARTMENT OF AGRICULTURE, THEY ADVISED HIM THAT UNDER THEIR REGULATIONS GOVERNING THE CONSERVATION RESERVE PROGRAM, ONLY THOSE AMOUNTS WHICH WERE ENTERED ON THE DEBT RECORD OF THE AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE COUNTY OFFICE PRIOR TO THE DATE THE NOTICE OF ASSIGNMENT WAS RECEIVED ARE TO BE SET OFF AGAINST THE AMOUNT PAYABLE TO AN ASSIGNEE.

THE CHIEF COUNSEL STATES IT IS HIS UNDERSTANDING OF THE LAW THAT PRIOR TO PAYMENT AND ABSENT A DEFENSE CONTRACT CONTAINING A NO SET-OFF CLAUSE, THE GOVERNMENT'S RIGHT TO SET-OFF TAKES PRECEDENCE OVER THE ASSIGNMENT. STATES THAT IT APPEARS, THEREFORE, THAT THE DEPARTMENT OF AGRICULTURE REGULATIONS AS INTERPRETED BY THE DEPARTMENT IN THEIR APPLICATION TO THE INSTANT CASE ARE INCONSISTENT WITH THE LAW GOVERNING ASSIGNMENTS OF CLAIMS DUE FROM THE UNITED STATES AS WELL AS WITH THE LAWS GOVERNING THE FILING OF NOTICES OF FEDERAL TAX LIENS AND THAT THEY ARE ACCORDINGLY WITHOUT FORCE AND EFFECT IN THIS REGARD.

THE SOIL BANK ACT WHICH WAS ENACTED AS TITLE I OF THE AGRICULTURAL ACT OF 1956, 70 STAT. 188, 7 U.S.C. 1801 NOTE, IN ORDER "TO PROTECT AND INCREASE FARM INCOME" AND FOR OTHER REASONS, AUTHORIZES ASSISTANCE TO FARMERS TO DIVERT A PORTION OF THEIR CROPLAND FROM THE PRODUCTION OF EXCESSIVE SUPPLIES OF AGRICULTURAL COMMODITIES, AND TO CARRY OUT A PROGRAM OF SOIL, WATER, FOREST, AND WILDLIFE CONSERVATION.

SUBTITLE B THEREOF, 7 U.S.C. 1831, ET SEQ., ESTABLISHED THE CONSERVATION RESERVE PROGRAM UNDER WHICH FARMERS CONTRACTED TO SHIFT ALL OR PART OF THE CROPLAND ON THEIR FARMS TO LONGTIME SOIL, WATER, FORESTRY, OR WILDLIFE CONSERVATION USES. IN RETURN FOR SUCH AGREEMENT, THE SECRETARY OF AGRICULTURE AGREED TO MAKE AN ANNUAL PAYMENT TO THE FARMER. SECTION 107 (B) (2), 7 U.S.C. 1831 (B) (2), PROVIDES THAT THE RATE OR RATES OF SUCH ANNUAL PAYMENT SHALL BE ESTABLISHED ON SUCH BASIS AS THE SECRETARY DETERMINES WILL PROVIDE FARMERS WITH A FAIR AND REASONABLE ANNUAL RETURN ON THE LAND INVOLVED. SECTION 121, 7 U.S.C. 1809, CONTAINED IN SUBTITLE C --- GENERAL PROVISIONS, PROVIDES THAT THE FACTS CONSTITUTING THE BASIS FOR ANY PAYMENT OR COMPENSATION, OR THE AMOUNT THEREOF, AUTHORIZED TO BE MADE UNDER THIS TITLE, WHEN OFFICIALLY DETERMINED IN CONFORMITY WITH APPLICABLE REGULATIONS PRESCRIBED BY THE SECRETARY, SHALL BE FINAL AND CONCLUSIVE AND SHALL NOT BE REVIEWABLE BY ANY OTHER OFFICER OR AGENCY OF THE GOVERNMENT. SECTION 124, 7 U.S.C. 1812, PROVIDES THAT THE SECRETARY SHALL PRESCRIBE SUCH REGULATIONS AS HE DETERMINES NECESSARY TO CARRY OUT THE PROVISIONS OF THIS TITLE.

7 CFR 750.170 PROMULGATED BY THE SECRETARY OF AGRICULTURE STATES THAT ANY PRODUCER WHO MAY BE ENTITLED TO ANY PRACTICE PAYMENT OR ANNUAL PAYMENT UNDER THE CONSERVATION RESERVE PROGRAM MAY ASSIGN HIS RIGHT THERETO SUBJECT TO CERTAIN PRESCRIBED CONDITIONS AMONG WHICH IS 7 CFR 750.166 WHICH PROVIDES THAT SET-OFFS SHALL BE HANDLED IN ACCORDANCE WITH 7CFR PART 13. 7 CFR 13.7 READS IN PART, AS FOLLOWS:

NO AMOUNT PAYABLE TO A DEBTOR SHALL BE PAID TO HIS ASSIGNEE UNTIL THERE HAVE BEEN COLLECTED ANY AMOUNTS OWED BY THE DEBTOR TO AGENCIES OF THE UNITED STATES, WHICH WERE ENTERED ON THE DEBT RECORD OF THE AGRICULTURAL STABILIZATION AND CONSERVATION COUNTY OFFICE PRIOR TO THE DATE THE NOTICE OF ASSIGNMENT TO SUCH ASSIGNEE WAS ACCEPTED BY SUCH COUNTY OFFICE * * *.

UNDER 26 U.S.C. 6323, TO WHICH REFERENCE IS MADE, A FEDERAL TAX LIEN WHICH IS RECORDED PRIOR TO AN ASSIGNMENT IS SUPERIOR TO AN ASSIGNEE'S CLAIM. HOWEVER, THAT IS NOT THE SITUATION HERE, SINCE THE ASSIGNMENT IN QUESTION WAS IN FACT RECORDED PRIOR TO THE ATTEMPTED LEVY.

PAYMENTS MADE BY THE SECRETARY OF AGRICULTURE UNDER THE SOIL BANK ACT ARE NOT OBLIGATIONS OR DEBTS OF THE GOVERNMENT IN THE SENSE THAT CLAIMS THEREFORE COULD BE MAINTAINED BEFORE THE COURTS OR THIS OFFICE. ELLIOT V. UNITED STATES, 179 F.SUPP. 758 (D. NEB. 1959). FURTHER, NO PROVISION IS MADE THEREIN FOR WITHHOLDING AMOUNTS OTHERWISE PAYABLE THEREUNDER BECAUSE OF DEBTS DUE THE GOVERNMENT. CONSIDERING THE BASIS PURPOSES OF THE LEGISLATION TO PROTECT AND INCREASE FARM INCOME AND THE BROAD POWERS CONFERRED ON THE SECRETARY TO DETERMINE THE AMOUNTS, CONDITIONS, ETC., OF SUCH PAYMENTS TO EFFECTUATE THE PURPOSES THEREOF, IT IS OUR VIEW THAT THE APPLICATION OF SUCH PAYMENTS AGAINST THE INDEPENDENTLY ARISING DEBTS OF THE FARMERS IS A MATTER WITHIN THE DISCRETION OF THE SECRETARY. THUS, THE GENERAL ACCOUNTING OFFICE IS NOT REQUIRED TO QUESTION THE DETERMINATION OF THE SECRETARY AS TO THE EXTENT TO WHICH SUCH WITHHOLDING WOULD TEND TO EFFECTUATE OR DEFEAT THE PURPOSES OF THE LEGISLATION. ON SUCH BASIS, IT WOULD APPEAR THAT THE REGULATIONS IN QUESTION ARE VALID AND NOT INCONSISTENT WITH LAW.