INDUSTRIAL INSURANCE - WORKMEN'S COMPENSATION ACT - LEGALITY OF LEVIES ON ACCIDENT FUND BY UNITED STATES FOR UNPAID FEDERAL INCOME TAXES

INDUSTRIAL INSURANCE - WORKMEN'S COMPENSATION ACT - LEGALITY OF LEVIES ON ACCIDENT FUND BY UNITED STATES FOR UNPAID FEDERAL INCOME TAXES.

RCW 51.32.040 providing that no money payable out of the workmen's compensation accident fund shall, before the issuance and delivery of the warrant therefor, be capable of being attached, does not prevent levies from being made on awards from the fund by the United States pursuant to 26 U.S.C.A. 6321 for unpaid federal income taxes.

                                                                  - - - - - - - - - - - - -

                                                                   June 28, 1960

Honorable Jerry Hagan
Director,Department of Labor and Industries
General Administration Building
Olympia, Washington                                                                                              Cite as:  AGO 59-60 No. 128

Dear Sir:

            By letter previously acknowledged you requested an opinion of this office on a question which we paraphrase as follows:

            Does RCW 51.32.040, providing that no money payable out of the workmen's compensation accident fund shall, before the issuance and delivery of the warrant therefor, be capable of being attached, prevent levies being made on an award from this fund by the United States pursuant to 26 U.S.C.A. 6321 (1954 Code) for unpaid federal income taxes?

            We answer this question in the negative.

                                                                     ANALYSIS

            RCW 51.32.040 provides in part as follows:

            "No money paid or payable under this title out of the accident fund or out of the medical aid fund shall, prior to the issuance and delivery of the warrant  [[Orig. Op. Page 2]] therefor, be capable of being assigned, charged, or ever be taken in execution or attached or garnished, nor shall the same pass, or be paid, to any other person by operation of law, or by any form of voluntary assignment, or power of attorney.  Any such assignment or charge shall be void: . . ."

            This section also contains certain exceptions to the general provision quoted above but these exceptions are not relevant here.

            26 U.S.C.A. 6321 provides as follows:

            "If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.  Aug. 16, 1954, 9:45 a.m., E.D.T., c. 736, 68 A Stat. 779."

            Your question arises because of the conflict between these two provisions.

            In United States v. Snyder, 149 U.S. 210, 37 L.Ed. 705 (1893), in which it was held that a federal tax lien could be enforced even though the state recording law had not been complied with and the state statute of limitations on the enforcement of liens had run, the general rule was stated:

            ". . . the subject of Federal taxation, dealt with by Federal statutes, creating liens for taxes, and providing remedies for their collection, has always been conceded to be independent of the legislative action of the states."  (149 U.S. at 214)

            This general rule has been applied consistently in the area of state exemptions from liens; that is, the state exemptions have been held ineffective against the Federal government.  See United States v. Heffron et al, 158 F. (2d) 657 (1947), and cases therein cited.  No cases have been found dealing directly with a state exemption of a workmen's compensation award from attachment, but state exemptions have been held ineffective in the analogous areas of insurance proceeds, Knox v. Great West Life Assur. Co. et al, 212 F. (2d) 784 (1954), declaration of homestead, United States v. Heffron, supra, and spendthrift trusts, In re Rosenberg's Will, 269 N.Y. 247, 199 N.E. 206 (1935).

             [[Orig. Op. Page 3]]

            Accordingly, we conclude that federal law is paramount in this area, and that RCW 51.32.040 does not operate to prevent the attachment of a lien for federal income taxes.

            We trust the foregoing will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

TIMOTHY R. MALONE
Assistant Attorney General