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Amended Regulation Requires Financial Institutions to Aid the Department in Collecting Delinquent Taxes

12.30.2008

Kentucky Revised Statute (“KRS”) 131.672 requires that the Department of Revenue (“Department”) establish procedures to be followed by the Department and Kentucky financial institutions in implementing and operating a data match and levy system to collect delinquent taxes and debts owed to the Commonwealth. 103 KAR 1:150 (“Regulation”) establishes the electronic data match and levy procedures, and was amended on November 12, 2008.

The Regulation generally provides that the Department shall have access to identifying information from financial institutions for a delinquent taxpayer or debtor that the Department has identified to a financial institution through a data match. The exchange of information by financial institutions and the Department must take place by way of an automated data exchange system. If a financial data match occurs, a financial institution must hold, encumber or surrender an account to the Department upon Notice of a Levy.

The Regulation was amended to “require” rather than “authorize” the Department to establish procedures in implementing and operating a data match and levy system. The amendments removed a provision that required the Department to reimburse a financial institution for costs incurred up to $500 for the implementation of the data match program. Also removed was a provision that stated that financial institutions would not incur liability for disclosing a financial record to the Department for the enforcement of a delinquent tax liability or debt of the account holder or encumbering or surrendering an asset held by a financial institution in response to a Notice of Levy.

If you have questions about this topic or any other legal issue, please contact any member of the firm's State and Local Tax Team.

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