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distribution from a qualified plan is made as a result of a levy
action under section 6331. As we cannot point to authoritative
case law, we accordingly begin our analysis with the relevant
legislative history and intent behind the enactment of clause
(vii) of section 72(t)(2)(A).
Section 72(t)(2)(A)(vii) was enacted as an amendment to
section 72(t) as part of the IRS Restructuring and Reform Act of
1998, Pub. L. 105-206, 112 Stat. 685. As reasoning for the
addition of clause (vii), the Senate report states:
the imposition of the 10-percent early withdrawal tax on
amounts distributed from employer-sponsored retirement plans
or IRAs on account of an IRS levy may impose significant
hardships on taxpayers. Accordingly, the Committee believes
such distributions should be exempt from the 10-percent
early withdrawal tax. [S. Rept. 105-174, at 83 (1998),
1998-3 C.B. 537, 619.]
Notably, in further explanation of clause (vii), the Senate
report emphasizes that the exception provided in clause (vii)
shall only apply if “the plan or IRA is levied; it does not
apply, for example, if the taxpayer withdrawals funds to pay
taxes in the absence of a levy, [or] in order to release a levy
on other interests.” Id.
Therefore, the distinction that gives section
72(t)(2)(A)(vii) precedence over the recapture tax clause in
section 72(t)(4)(A) is the concept of voluntariness; namely, that
clause (vii) is intended to apply where the action that caused a
distribution to be made did not originate with the taxpayer
and/or did not occur at the discretion or direction of the
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