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REQUESTS FOR RELIEF FOR LOSSES INCURRED IN THE ROUTINE BUSINESS OPERATION OF THE TAX LIEN REVOLVING FUND OF THE INTERNAL REVENUE SERVICE (IRS) (THOSE WHERE THE COST OF REDEEMING PROPERTY FINANCED OUT OF THE FUND EXCEEDS THE RESALE PRICE RECEIVED FOR THE PROPERTY WHICH IS DEPOSITED TO THE FUND) ARE INAPPROPRIATE FOR CONSIDERATION UNDER 31 U.S.C. OR INCORRECT PAYMENTS ARE FOR CONSIDERATION UNDER 31 U.S.C. INTERNAL REVENUE SERVICE (IRS) OPERATING APPROPRIATIONS ARE NOT AVAILABLE FOR TRANSFER TO TAX LIEN REVOLVING FUND TO RESTORE FUND'S FUNDING LEVEL WHICH HAS BEEN REDUCED AS A RESULT OF THE AMOUNTS IRS PAYS FROM THE FUND IN ORDER TO REDEEM PROPERTY SUBJECT TO JUNIOR TAX LIENS IN FAVOR OF THE GOVERNMENT EXCEEDING THE AMOUNT RECEIVED BY THE IRS AND DEPOSITED TO THE FUND WHEN THE PROPERTY IS SOLD.

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B-219940, B-221040, B-221443, SEP 26, 1986, 65 COMP.GEN. 881

ACCOUNTABLE OFFICERS - PHYSICAL LOSSES, ETC. OF FUNDS VOUCHERS, ETC. - WHAT CONSTITUTES 1. REQUESTS FOR RELIEF FOR LOSSES INCURRED IN THE ROUTINE BUSINESS OPERATION OF THE TAX LIEN REVOLVING FUND OF THE INTERNAL REVENUE SERVICE (IRS) (THOSE WHERE THE COST OF REDEEMING PROPERTY FINANCED OUT OF THE FUND EXCEEDS THE RESALE PRICE RECEIVED FOR THE PROPERTY WHICH IS DEPOSITED TO THE FUND) ARE INAPPROPRIATE FOR CONSIDERATION UNDER 31 U.S.C. SEC. 3527(A) SINCE SUCH LOSSES DO NOT CONSTITUTE "PHYSICAL LOSSES OR DEFICIENCY" FOR THE PURPOSE OF THIS RELIEF STATUTE. REQUEST FOR RELIEF FOR ILLEGAL, ERRONEOUS, OR INCORRECT PAYMENTS ARE FOR CONSIDERATION UNDER 31 U.S.C. SEC. 3527(C) OR 3528. HOWEVER, MERE FACT THAT SUBSEQUENT SALE DOES NOT RECOVER THE AMOUNT SPENT BY IRS FOR REDEMPTION DOES NOT BY ITSELF SERVE TO MAKE THE REDEMPTION AN "ILLEGAL, IMPROPER, OR INCORRECT" PAYMENT. APPROPRIATIONS - AVAILABILITY - REVOLVING FUND REPLACEMENTS 2. INTERNAL REVENUE SERVICE (IRS) OPERATING APPROPRIATIONS ARE NOT AVAILABLE FOR TRANSFER TO TAX LIEN REVOLVING FUND TO RESTORE FUND'S FUNDING LEVEL WHICH HAS BEEN REDUCED AS A RESULT OF THE AMOUNTS IRS PAYS FROM THE FUND IN ORDER TO REDEEM PROPERTY SUBJECT TO JUNIOR TAX LIENS IN FAVOR OF THE GOVERNMENT EXCEEDING THE AMOUNT RECEIVED BY THE IRS AND DEPOSITED TO THE FUND WHEN THE PROPERTY IS SOLD. THE FUND IS THE APPROPRIATION SPECIFICALLY AVAILABLE TO IRS FOR REDEEMING PROPERTY SUBJECT TO JUNIOR TAX LIENS IN FAVOR OF GOVERNMENT. THEREFORE, MORE GENERAL APPROPRIATION AVAILABLE TO IRS FOR OPERATIONS MAY NOT BE USED TO FINANCE THIS ACTIVITY. THUS, ABSENT ANY STATUTORY AUTHORITY AUTHORIZING TRANSFER, THE ONLY WAY IRS COULD REPLENISH LOSSES TO THE FUND WOULD BE FOR IT TO SPECIFICALLY REQUEST APPROPRIATIONS FROM CONGRESS FOR THIS PURPOSE.

TO THE HONORABLE LAWRENCE B. GIBBS, INTERNAL REVENUE SERVICE, SEPTEMBER 26, 1986:

THIS DECISION IS IN RESPONSE TO THREE SUBMISSIONS FROM JOHN WEDICK, JR., ASSISTANT COMMISSIONER (PLANNING, FINANCE AND RESEARCH), INTERNAL REVENUE SERVICE (IRS), CONCERNING A LOSS TO IRS' FEDERAL TAX LIEN REVOLVING FUND AS A RESULT OF ITS INABILITY TO RESELL CERTAIN PROPERTY FOR AT LEAST AS MUCH AS THE IRS EXPENDED TO REDEEM THE PROPERTY FROM A FORECLOSING LIEN HOLDER. TWO OF THE SUBMISSIONS SEEK RELIEF FROM A PHYSICAL LOSS TO THE FUND, UNDER 31 U.S.C. SEC. 3527(A), APPARENTLY ON BEHALF OF THE DISTRICT DIRECTORS OF THE ATLANTA AND LAS VEGAS DISTRICTS, WHILE THE THIRD SEEKS CLARIFICATION OF THE AUTHORITY OF IRS TO TRANSFER FUNDS APPROPRIATED FOR INTERNAL REVENUE COLLECTION TO THE TAX LIEN REVOLVING FUND TO OFFSET LOSSES INCURRED IN THE OPERATION OF THE FUND. FOR THE REASONS STATED BELOW, IT IS OUR OPINION THAT THE LOSSES INCURRED IN THE ROUTINE BUSINESS OPERATIONS OF THE REVOLVING FUND ARE INAPPROPRIATE FOR CONSIDERATION UNDER 31 U.S.C. SEC. 3527(A) AND WE ARE UNAWARE OF ANY AUTHORITY UNDER WHICH THE IRS MAY TRANSFER FUNDS FROM ANNUAL APPROPRIATIONS FOR INTERNAL REVENUE COLLECTION TO THE REVOLVING FUND TO OFFSET THESE LOSSES.

THE TAX LIEN REVOLVING FUND IS ESTABLISHED BY 26 U.S.C. SEC. 7810 TO FUND THE REDEMPTION (PURCHASE) OF PROPERTY BY THE UNITED STATES FROM THOSE WHO HAVE PURCHASED THE PROPERTY FROM A FORECLOSING LIENHOLDER WHOSE LIEN WAS SENIOR TO THE GOVERNMENT'S TAX LIEN. /1/ PROPERTY IS REDEEMED BY THE IRS IN ANTICIPATION THAT IT WILL BE RESOLD AT A PRICE IN EXCESS OF THE REDEMPTION PRICE. THE REVOLVING FUND IS REIMBURSED FROM THE PROCEEDS IN AN AMOUNT WHICH MAY NOT EXCEED THE AMOUNT THE UNITED STATES PAID AT REDEMPTION AND ANY EXCESS IS CREDITED TOWARDS THE TAXPAYER'S INDEBTEDNESS TO THE UNITED STATES. THUS, AS IS THE CASE GENERALLY WITH REGARD TO REVOLVING FUNDS, THE LAW AUTHORIZES BOTH EXPENDITURES FROM THE FUND AND DEPOSITS TO THE FUND. THERE ARE TWO SEPARATE AND DISTINCT TRANSACTIONS, THE PROPRIETY OF EITHER UNDER THE LAW BEING INDEPENDENT OF THE OTHER.

THE ACTIONS TAKEN WHICH PROMPTED THE REQUESTS FOR RELIEF, WHILE FACTUALLY COMPLEX, MAY, FOR PURPOSES OF OUR DISCUSSION BE SUMMARIZED AS FOLLOWS.

IN THE ATLANTA CASE, PROPERTY WAS REDEEMED AT THE COST OF $14,923.43 AND IT COULD BE RESOLD FOR ONLY $9,000. AS A RESULT, THE REVOLVING FUND HAS BEEN REDUCED BY THE AMOUNT OF $5,923.43.

IN THE LAS VEGAS CASE, PROPERTY WAS REDEEMED AT THE COST OF $143,941.87 AND IT COULD BE RESOLD FOR ONLY $91,000. AS A RESULT THE REVOLVING FUND HAS BEEN REDUCED BY THE AMOUNT OF $52,941.87. ADDITIONALLY, IRS INDICATES THAT IT INCURRED ANOTHER $12,189.57 IN ADMINISTRATIVE EXPENSES WHICH APPARENTLY WERE PAID OUT OF ITS ANNUAL APPROPRIATIONS.

IN BOTH CASES, THE SUBMISSIONS SUGGEST THAT THERE MAY BE SOME QUESTION AS TO WHETHER THE OFFICIALS INVOLVED IN DECIDING TO REDEEM THE PROPERTY (NEITHER SUBMISSION CLEARLY IDENTIFIES THESE PERSONS) EXERCISED REASONABLE JUDGMENT. THE LAS VEGAS CASE RAISES THE QUESTION OF WHETHER INTERNAL PROCEDURES WHICH APPARENTLY REQUIRE THAT A PURCHASE BID BE IN HAND PRIOR TO REDEMPTION HAD BEEN PROPERLY WAIVED. THE ATLANTA CASE RAISES THE QUESTION OF THE PROPRIETY OF PERMITTING A BID TO EXPIRE BEFORE THE PROPERTY WAS OFFERED FOR RESALE.

THE IMPORTANT POINT FOR PURPOSES OF THIS RESPONSE IS THAT 31 U.S.C.SEC. 3527(A), THE STATUTE UNDER WHICH RELIEF WAS REQUESTED IN BOTH CASES, IS INAPPLICABLE. UNDER 31 U.S.C SEC. 3527(A), THE COMPTROLLER GENERAL MAY RELIEVE A PRESENT OR FORMER ACCOUNTABLE OFFICER OR AGENT FROM LIABILITY FOR THE PHYSICAL LOSS OR DEFICIENCY OF PUBLIC MONEY UPON CONCURRENCE WITH DETERMINATIONS BY THE HEAD OF THE AGENCY THAT THE OFFICER WAS CARRYING OUT OFFICIAL DUTIES WHEN THE LOSS OR DEFICIENCY OCCURRED, THAT THE LOSS WAS NOT ATTRIBUTABLE TO FAULT OR NEGLIGENCE ON THE PART OF THE OFFICER, AND THAT THE LOSS OR DEFICIENCY WAS NOT THE RESULT OF AN ILLEGAL OR INCORRECT PAYMENT. AS TO WHETHER A PARTICULAR TRANSACTION CONSTITUTES A "PHYSICAL LOSS OR DEFICIENCY," WE HAVE STATED:

"IN SUM, 'PHYSICAL LOSS OR DEFICIENCY' INCLUDES SUCH THINGS AS LOSS BY THEFT OR BURGLARY, LOSS IN SHIPMENT, AND LOSS OR DESTRUCTION BY FIRE, ACCIDENT, OR NATURAL DISASTER. IT ALSO INCLUDES THE TOTALLY UNEXPLAINED LOSS, THAT IS, A SHORTAGE OR DEFICIENCY WITH ABSOLUTELY NO EVIDENCE TO EXPLAIN THE DISAPPEARANCE. E.G., 48 COMP.GEN. 566 (1969). FINALLY, *** LOSSES RESULTING FROM FRAUD OR EMBEZZLEMENT BY SUBORDINATE FINANCE PERSONNEL MAY CONTINUE TO BE TREATED AS PHYSICAL LOSSES. WITH THIS EXCEPTION, HOWEVER, THE DISBURSEMENT OF PUBLIC FUNDS BY A DISBURSING OFFICER OR HIS SUBORDINATE IS A PAYMENT, AND IF IT IS ILLEGAL OR ERRONEOUS, THE PROPER RELIEF STATUTE IS 31 U.S.C. SEC. 3527(C)." B-202074, JULY 21, 1983.

IT IS CLEAR THAT A LOSS TO THE REVOLVING FUND SUCH AS THOSE INVOLVED IN THE ATLANTA AND LAS VEGAS CASES, CANNOT BE CONSIDERED FOR RELIEF AS A PHYSICAL LOSS OR DEFICIENCY UNDER 31 U.S.C. SEC. 3527(A). GENERALLY, QUESTIONS CONCERNING RESPONSIBILITY FOR LOSSES RESULTING FROM ILLEGAL OR ERRONEOUS PAYMENTS FROM APPROPRIATION ACCOUNTS (AND THE REVOLVING FUND IS AN APPROPRIATION ACCOUNT) ARE DETERMINED UNDER 31 U.S.C. SECS. 3527 (C) OR 3528, WHICH APPLY TO FINANCE PERSONNEL (SPECIFICALLY, DISBURSING OFFICERS AND CERTIFYING OFFICERS). IT DOES NOT APPEAR THAT THE AGENTS CHARGED WITH DECIDING WHETHER TO REDEEM THE PROPERTY FIT INTO EITHER OF THESE CATEGORIES. NON-ACCOUNTABLE OFFICERS ARE NOT FISCALLY RESPONSIBLE FOR ERRORS IN JUDGMENT.

IN ANY CASE, THE ERROR, IF ONE EXISTED, DID NOT AMOUNT TO A VIOLATION OF A STATUTORY REQUIREMENT. 26 U.S.C. SEC. 7810(B) PROVIDES:

"THE FUND SHALL BE REIMBURSED FROM THE PROCEEDS OF A SUBSEQUENT SALE OF REAL PROPERTY REDEEMED BY THE UNITED STATES IN AN AMOUNT EQUAL TO THE AMOUNT EXPENDED OUT OF SUCH FUND FOR SUCH REDEMPTION."

IT IS CLEAR THAT THIS LANGUAGE IS INTENDED TO BE MERELY A LIMITATION ON THE AMOUNT THAT MAY BE DEPOSITED TO THE FUND FROM THE PROCEEDS OF THE SALE, AND NOT AN UNALTERABLE LEGISLATIVE REQUIREMENT BELOW WHICH DEPOSITS MAY NOT BE MADE. FOR EXAMPLE, THE COMMITTEE ON WAYS AND MEANS, IN ITS REPORT ON THE FEDERAL TAX LIEN ACT OF 1966 WHICH ENACTED THIS PROVISION INTO LAW, COMMENTED ON THIS PROVISION AS FOLLOWS:

"*** IT IS ANTICIPATED THAT THE PROCEEDS ON THE RESALE OF REDEEMED PROPERTY WILL REPLENISH THE REVOLVING FUND SO THAT ADDITIONAL APPROPRIATIONS WILL NOT BE NECESSARY." H.R. REP. NO. 1884, 89TH CONG., 2D SESS. 30 (1966). SEE ALSO S. REP. NO. 1708, 89TH CONG., 2D SESS. 32 (1966).

THIS LANGUAGE THUS APPEARS TO RECOGNIZE THAT THERE MAY BE SOME INSTANCES WHERE CIRCUMSTANCES MAY RESULT IN RESALES THAT DO NOT RECOVER THE AMOUNT EXPENDED FOR THE REDEMPTION (ALTHOUGH THESE SHOULD BE RARE).

SINCE THE REQUEST IS INAPPROPRIATE FOR CONSIDERATION UNDER ANY OF THE ACCOUNTABLE OFFICER RELIEF STATUTES, IRS MAY NOT AVAIL ITSELF OF THE AUTHORITY TO RESTORE LOSSES IN ACCOUNTS FROM CURRENT AGENCY APPROPRIATIONS IN 31 U.S.C. SEC. 3527 (D) (WHEN RELIEF IS GRANTED) OR 31 U.S.C. SEC. 3530 (WHEN RELIEF IS DENIED AND THE LOSS IS DETERMINED UNCOLLECTIBLE).

ONE OF THE LETTERS FROM ASSISTANT COMMISSIONER WEDICK SUGGESTS THAT IRS OPERATING APPROPRIATIONS MAY BE AVAILABLE TO REPLENISH THE REVOLVING FUND UNDER OUR DECISION A-42511, JUNE 1, 1932, WHICH HELD THAT OPERATING APPROPRIATIONS COULD BE USED TO FUND REDEMPTIONS. SEE ALSO A-42511, AUGUST 24, 1932. HOWEVER, THESE DECISIONS WERE RENDERED PRIOR TO THE REVOLVING FUND'S ESTABLISHMENT IN 1966.

AS A GENERAL RULE, AN APPROPRIATION FOR A SPECIFIC OBJECT IS AVAILABLE FOR THAT OBJECT TO THE EXCLUSION OF A MORE GENERAL APPROPRIATION WHICH MIGHT OTHERWISE BE CONSIDERED AVAILABLE FOR THE SAME OBJECT, AND THE EXHAUSTION OF THE SPECIFIC APPROPRIATION DOES NOT AUTHORIZE CHARGING ANY EXCESS PAYMENT TO A MORE GENERAL APPROPRIATION. /2/ THEREFORE, ESTABLISHMENT OF THE REVOLVING FUND PRECLUDED THE USE OF A MORE GENERAL APPROPRIATION WHICH OTHERWISE MIGHT HAVE BEEN AVAILABLE.

THE ONLY WAY IRS CAN REPLENISH LOSSES TO THE TAX LIEN REVOLVING FUND IS TO SPECIFICALLY REQUEST APPROPRIATIONS TO THE REVOLVING FUND IN THE AMOUNT IT DEEMS NECESSARY IN ORDER TO CARRY ON ITS AUTHORIZED ACTIVITY. SUCH APPROPRIATIONS ARE SPECIFICALLY AUTHORIZED BY 26 U.S.C. SEC. 7810(A), QUOTED IN FOOTNOTE 1, SUPRA.

/1/ 26 U.S.C. SEC. 7810(A) PROVIDES:

"THERE IS ESTABLISHED A REVOLVING FUND, UNDER THE CONTROL OF THE SECRETARY, WHICH SHALL BE AVAILABLE WITHOUT FISCAL YEAR LIMITATION FOR ALL EXPENSES NECESSARY FOR THE REDEMPTION (BY THE SECRETARY) OF REAL PROPERTY AS PROVIDED IN SECTION 7425(D) AND SECTION 2410 OF TITLE 28 OF THE UNITED STATES CODE. THERE ARE AUTHORIZED TO BE APPROPRIATED FROM TIME TO TIME SUCH SUMS (NOT TO EXCEED $1,000,000 IN THE AGGREGATE) AS MAY BE NECESSARY TO CARRY OUT THE PURPOSES OF THIS SECTION."

/2/ E.G., 38 COMP.GEN. 758, 767 (1950); 46 COMP.GEN. 198 (1966); B-70219, JANUARY 19, 1948; B-183922, AUGUST 5, 1975; B-202362, MARCH 24, 1981.

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