Is the DOR entitled to seize our Security Deposits?

DATE: 08-02-10


Email from me : “Today I received a letter from my bank informing me that the MA Department of Revenue has put a levy and frozen in effect one of my tenant’s security deposit accounts held in escrow (to which the tenant never had any access anyway!) and the funds will be turned over to DOR within the next 3 weeks. I assume the tenant hasn’t paid his taxes or something.


How is it possible that we can be punished for the alleged wrongdoings of another person and our security deposits that are there for our security as landlords sucked away with such ease and with full disregard of the contracts we have with the tenant or the consequences to our business?”

Response from Department of Revenue on 08-10-10: “DOR Directive 97-2 (which can be found in the Legal Library on DOR’s website, describes the levy process.  DOR issues a levy against a bank, not a particular account.  If an account has the taxpayer’s name on it in any capacity, the bank will generally consider it to be subject to levy (based on the Directive referenced above) and will let DOR determine if that is not true.  If the parties involved don’t believe that the account should be subject to levy, they should submit a written request for review with all pertinent information.   Allowing time for people to dispute a levy is one reason why banks are required to hold the funds for 21 days rather than sending payment immediately.   Since I do not know if this particular situation involves a levy issued by a DOR collector or an automated levy, the written appeal may be submitted to my attention (see contact information below, fax or e-mail recommended) and I will see that it is reviewed by the appropriate person.

Dana Ackerman, Director
Problem Resolution Office
Massachusetts Department of Revenue
100 Cambridge Street
Boston, MA 02114

(617) 626-3827 phone

(617) 660-0723 fax ”

My response on 8-10-10: “I reviewed Dir 97-2 and it does not mention specifically Security Deposit Accounts as being subject to levy. The reason they should be excluded is because they are there for landlords’ convenience only. They are very special escrow accounts which do not mature while the levy is pending as long as the tenant remains in the building and to which the tenant does not have any access. If DOR can take our Security Deposit accounts that means that we cannot use that money for back rent or for repairs as counted for and so that affects directly the rights of all landlords in MA. It also means that if our security deposit money is gone we will most likely turn back to the tenant for new money to create a new security deposit so that our business is protected and many tenants will not be able to come up with the money which will result in people being thrown out in the street. I am sure that is not what the DOR intends to happen in this already difficult economy. Also the loss of the security deposit if the tenant leaves will come out of our pocket not the tenants’ as intended and will put a strain on our already very strained finances.

We have no objection to people paying for their child support or taxes promptly and if they don’t pay, we have no objection to their assets being seized with some exceptions (for example, it doesn’t make sense to take their assets to such an extent that they become homeless. No state can bear that cost).

Thank you for taking the time to evaluate this situation. We believe that Security Deposit Accounts should not be a part of a levy in this case and in general. We as landlords in MA are an innocent party to this transaction and our rights should be respected.”

CONCLUSION OF MY CASE: Email from me: “With the help of my Representative I appealed the levy put on the security deposit by the DOR and won. The levy was lifted last week which is basically an admission that it was a mistake.”

If the tenants leave without any back rent or damages then the DOR can take the Security Deposit at that point because the money belongs to the tenant but if the tenant leaves with back rent or damages the DOR cannot touch this escrow account because the money belongs to the landlord. Tell the DOR to stay away from our Security Deposits.

CALL TO ACTION: If I can do this on my own by writing one letter to my Representative and one letter to DOR, I can only imagine what we can accomplish as a group if we only stick together and found the group courage to write letters to express our positions as landlords in MA!








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