Yes, we believe that the last two months of federal benefit payments are protected from a state tax levy, provided that the payments were made by direct deposit and tagged as federal benefit payments. While these protections do not apply when responding to a levy issued by the IRS, they do apply to levies issued by a “state or state agency,” such as the Illinois Department of Revenue.

For resources related to our guidance, please see:

• 31 CFR 212.3 (“Garnishment order or order means a writ, order, notice, summons, judgment, levy or similar written instruction issued by a court, a State or State agency, a municipality or municipal corporation, or a State child support enforcement agency, including a lien arising by operation of law for overdue child support or an order to freeze the assets in an account, to effect a garnishment against a debtor.”)

• 31 CFR 212.9 (“(a) Inconsistent law preempted. Any State or local government law or regulation that is inconsistent with a provision of this part is preempted to the extent of the inconsistency. A State law or regulation is inconsistent with this part if it requires a financial institution to take actions or make disclosures that contradict or conflict with the requirements of this part or if a financial institution cannot comply with the State law or regulation without violating this part.”)

• Illinois Income Tax Act, 35 ILCS 5/1109 (“Any officer or employee of the Department designated in writing by the Director is authorized to serve process under this Section to levy upon accounts or other intangible assets of a taxpayer held by a financial organization . . . .”)

• U.S. Treasury Department, FAQs, Garnishment of Accounts Containing Federal Benefit Payments (“Are levies subject to the rule? The agencies have revised the definition of a garnishment order in the rulemaking to include levies and orders issued by a State or a State agency or municipality. Tax levies issued by the Internal Revenue Service are not subject to the Final Rule.”)