The states are broke and running historically unprecedented budget deficits. They are looking under every rock to collect. There is no one they care less about harming than someone who has vacated their state.
Under the Uniform Enforcement of Foreign Judgments Act, a state tax agency cannot collect by lien nor levy in an another state without a court judgment in it’s own state.
How they collect when they do not have a judgment is through unsettled jurisdiction issue. If a taxpayer has a local and not a national nor international financial institution or employer who is levied, the state cannot levy without a court judgment in another state.
The question is how we stop the unlawful levy. If it is a California bank levy, the levy is payable in ten and not 21 days like the IRS. The state does not care that the levy is unlawful.
The pressure has to be put on the third party. If it is a financial institution, submit a written demand certified mail, not to pay the unlawful levy and complain all the way up to the top of the chain of command. My position is if the bank pays the money over, they are liable for the money.
If the levy is on a local employer, a taxpayer has a problem. The legal claim would be just as strong against the employer as against the financial institution. However, if the taxpayer asserts his or her rights. there may be job security problems in a poor job market.
You will likely see these desperate states turn their accounts over for collection to law firms. The law firm will get a judgment in the home state and then pursue collection in the taxpayer’s new state of residency.
Dana M. Ronald
Tax Crisis Institute
February 19,2011