Question of the Week: IRS Levy of Term Certificates

Question: 

If the member has a term share certificate subject to the IRS levy, is the credit union required to redeem the account? If redeemed, is the credit union allowed to charge an early redemption penalty? 

Answer: 

Money on deposit in a bank represented by a nonnegotiable certificate of deposit in the hands of a delinquent taxpayer is subject to the levy. See IRM 5.17.3.5.3.2 (01-07-2011). A levy by the government on funds represented by a negotiable certificate of deposit must be made by presentation of the negotiable certificate and surrender of such certificate to the maker. The IRS may levy upon a property interest in a bank account regardless of the designation of a bank deposit if the taxpayer has property or rights to property as a depositor. See U.S. v. Natl. Bank of Com., 472 U.S. 713 (1985).