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Supreme Court of the United States

UNITED STATES, Petitioner

Lucille Mitzi Bosco RODGERS et al.

No. 81-1476.

Argued Dec. 6, 1982.

Decided May 31, 1983.^FN*

Justice BRENNAN delivered the opinion of the Court.

These consolidated cases involve the relationship between the imperatives of federal tax collection and rights accorded by state property laws. **2136Section 7403 of the Internal Revenue Code of 1954, 26 U.S.C. § 7403, authorizes the judicial sale of certain properties to satisfy the tax indebtedness of delinquent taxpayers. The issue in both cases is whether § 7403 empowers a federal district court to order the sale of a family home in which a delinquent taxpayer had an interest at the time he incurred his indebtedness, but in which the taxpayer's spouse, who does not owe any of that indebtedness, also has a separate “homestead” right as defined by Texas law. We hold that the statute does grant power to order the sale, but that its exercise is limited to some degree by equitable discretion. We also hold that, if the home is sold, the non-delinquent spouse is entitled, as part of the distribution of proceeds required under § 7403, to so much of the proceeds as represents complete compensation for the loss of the homestead estate.

Section 7403 provides in full as follows:

“(a) Filing.-In any case where there has been a refusal or neglect to pay any tax, or to discharge any liability in respect thereof, whether or not levy has been made, the Attorney General or his delegate, at the request of the Secretary [of the Treasury], may direct a civil action to be filed in a district court of the United States to enforce the lien of the United States under this title with respect to such tax or liability or to subject any *681 property, [of] whatever nature, of the delinquent, or in which he has any right, title, or interest, to the payment of such tax or liability. For purposes of the preceding sentence, any acceleration of payment under section 6166(g) or 6166A(h) shall be treated as a neglect to pay tax.

“(b) Parties.-All persons having liens upon or claiming any interest in the property involved in such action shall be made parties thereto.

“(c) Adjudication and decree.-The court shall, after the parties have been duly notified of the action, proceed to adjudicate all matters involved therein and finally determine the merits of all claims to and liens upon the property, and, in all cases where a claim or interest of the United States therein is established, may decree a sale of such property, by the proper officer of the court, and a distribution of the proceeds of such sale according to the findings of the court in respect to the interests of the parties and of the United States. If the property is sold to satisfy a first lien held by the United States, the United States may bid at the sale such sum, not exceeding the amount of such lien with expenses of sale, as the Secretary directs.

“(d) Receivership.-In any such proceeding, at the instance of the United States, the court may appoint a receiver to enforce the lien, or, upon certification by the Secretary during the pendency of such proceedings that it is in the public interest, may appoint a receiver with all the powers of a receiver in equity.”

As a general matter, the “lien of the United States” referred to in § 7403(a) is that created by 26 U.S.C. § 6321, which provides:

“If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any *682 interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.”

**2137 Section 7403, whose basic elements go back to revenue legislation passed in 1868 (§ 106 of the Act of July 20, 1868, ch. 186, 15 Stat. 125, 167) is one of a number of distinct enforcement tools available to the United States for the collection of delinquent taxes. The Government may, for example, simply sue for the unpaid amount, and, on getting a judgment, exercise the usual rights of a judgment creditor. See 26 U.S.C. § § 6502(a), 7401, 7402(a). Yet a third route is administrative levy under 26 U.S.C. § 6331, which provides:

“If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary or his delegate to collect such tax (and such further sum as shall be sufficient to cover the expenses of the levy) by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person or on which there is a lien provided in this chapter for the payment of such tax....”

Administrative levy, unlike an ordinary lawsuit, and unlike the procedure described in § 7403, does not require any judicial intervention, and it is up to the taxpayer, if he so *683 chooses, to go to court if he claims that the assessed amount was not legally owing. See generally Bull v. United States, 295 U.S. 247, 260, 55 S.Ct. 695, 699, 79 L.Ed. 1421 (1935).

The common purpose of this formidable arsenal of collection tools is to ensure the prompt and certain enforcement of the tax laws in a system relying primarily on self-reporting. See G.M. Leasing Corp. v. United States, 429 U.S. 338, 350, 97 S.Ct. 619, 627, 50 L.Ed.2d 530 (1977); United States v. Security Trust & Savings Bank, 340 U.S. 47, 51, 71 S.Ct. 111, 113, 95 L.Ed. 53 (1950); Bull v. United States, supra, 295 U.S., at 259-260, 55 S.Ct., at 699. Moreover, it has long been an axiom of our tax collection scheme that, although the definition of underlying property interests is left to state law, the consequences that attach to those interests is a matter left to federal law. See United States v. Mitchell, 403 U.S. 190, 205, 91 S.Ct. 1763, 1771, 29 L.Ed.2d 406 (1971) (state law determines income attributable to wife as community property, but state law allowing wife to renounce community rights and obligations not effective as to liability for federal tax); United States v. Union Central Life Insurance Co., 368 U.S. 291, 293-295, 82 S.Ct. 349, 351-352, 7 L.Ed.2d 294 (1961) (federal tax lien not subject, even as against good faith purchaser, to state filing requirements); Aquilino v. United States, 363 U.S. 509, 513-515, 80 S.Ct. 1277, 1280-1281, 4 L.Ed.2d 1365 (1960), and cases cited (attachment of federal lien depends on whether “property” or “rights to property” exist under state law; priority of federal lien depends on federal law); United States v. Bess, 357 U.S. 51, 56-57, 78 S.Ct. 1054, 1057-1058, 2 L.Ed.2d 1135 (1958) (once it has been determined that state law has created property interests sufficient for federal tax lien to attach, state law “is inoperative to prevent the attachment” of such liens); Springer v. United States, 102 U.S. 586, 594, 26 L.Ed. 253 (1881) (federal tax sale not subject to state requirement that independent lots be sold separately).

*684 B

The substance of Texas law related to the homestead right may usefully be divided into two categories. Cf. **2138Woods v. Alvarado State Bank, 118 Tex. 586, 590, 19 S.W.2d 35, 35 (1929). First, in common with a large number of States, Texas establishes the family home or place of business as an enclave exempted from the reach of most creditors. Thus, under Tex. Const., Art. 16, § 50,

“The homestead of a family, or of a single adult person, shall be, and is hereby protected from forced sale, for the payment of all debts except for [certain exceptions not relevant here].... No mortgage, trust deed, or other lien on the homestead shall ever be valid, except for [certain exceptions not relevant here]....”

Second, in common with a somewhat smaller number of states, Texas gives members of the family unit additional rights in the homestead property itself. Thus, in a clause not included in the above quotation, Tex. Const., Art. 16, § 50, also provides that “the owner or claimant of the property*685 claimed as a homestead [may not], if married, sell or abandon the homestead without the consent of the other spouse, given in such manner as may be prescribed by law.” Equally important, Art. 16, § 52, provides that:

“On the death of the husband or wife, or both, the homestead shall descend and vest in like manner as other real property of the deceased, and shall be governed by the same laws of descent and distribution, but it shall not be partitioned among the heirs of the deceased during the lifetime of the surviving husband or wife, or so long as the survivor may elect to use or occupy the same as a homestead, or so long as the guardian of the minor children of the deceased may be permitted, under the order of the proper court having the jurisdiction to use and occupy the same.”

The effect of these provisions in the Texas Constitution is to give each spouse in a marriage a separate and undivided possessory interest in the homestead, which is only lost by death or abandonment, and which may not be compromised either by the other spouse or by his or her heirs. It bears emphasis that the rights accorded by the homestead laws vest independently in each spouse regardless of whether one spouse, or both, actually owns the fee interest in the homestead. Thus, although analogy is somewhat hazardous in *686 this area, it may be said that the homestead laws have the effect of reducing the underlying ownership rights in a homestead property to something akin to remainder interests and vesting in each spouse an interest akin to an undivided life estate in the property. See **2139Williams v. Williams, 569 S.W.2d 867, 869 (Tex.1978), and cases cited; Paddock v. Siemoneit, 147 Tex. 571, 585, 218 S.W.2d 428, 436 (1949), and cases cited; Hill v. Hill, 623 S.W.2d 779, 780 (Tex.Civ.App.1981), and cases cited. This analogy, although it does some injustice to the nuances present in the Texas homestead statute, also serves to bring to the fore something that has been repeatedly emphasized by the Texas courts, and which was reaffirmed by the Court of Appeals in these cases: that the Texas homestead right is not a mere statutory entitlement, but a vested property right. As the Supreme Court of Texas has put it, a spouse “has a vested estate in the land of which she cannot be divested during her life except by abandonment or a voluntary conveyance in the manner prescribed by law.” Paddock v. Siemoneit, supra, 147 Tex., at 585, 218 S.W.2d, at 436; see United States v. Rogers, 649 F.2d 1117, 1127 (CA5 1981), and cases cited.

The two cases before us were consolidated for oral argument before the United States Court of Appeals for the Fifth Circuit, and resulted in opinions issued on the same day. United States v. Rogers, supra; *687Ingram v. Dallas Department of Housing & Urban Rehabilitation, 649 F.2d 1128 (1981). They arise out of legally comparable, but quite distinct, sets of facts.

Lucille Mitzi Bosco Rodgers is the widow of Philip S. Bosco, whom she married in 1937. She and Mr. Bosco acquired, as community property, a residence in Dallas, Texas, and occupied it as their homestead. Subsequently, in 1971 and 1972, the Internal Revenue Service issued assessments totalling more than $900,000.00 for federal wagering taxes, penalties, and interest, against Philip for the taxable years 1966 through 1971. These taxes remained unpaid at the time of Philip's death in 1974. Since Philip's death, Lucille has continued to occupy the property as her homestead, and now lives there with her present husband.

On September 23, 1977, the Government filed suit under 26 U.S.C. § § 7402 and 7403 in the United States District Court for the Northern District of Texas against Mrs. Rodgers and Philip's son, daughter, and executor. The suit sought to reduce to judgment the assessments against Philip, to enforce the Government's tax liens, including the one that had attached to Philip's interest in the residence, and to obtain a deficiency judgment in the amount of any unsatisfied part of the liability. On cross-motions for summary judgment, the District Court granted partial summary judgment on, among other things, the defendants' claim that the federal tax liens could not defeat Mrs. Rodgers's state-created right not to have her homestead subjected to a forced sale. Fed.Rule Civ.Proc. 54(b).

The Court of Appeals affirmed on the homestead issue, holding that if “a homestead interest is, under state law, a property right, possessed by the nontaxpayer spouse at the time the lien attaches to the taxpayer spouse's interest, then the federal tax lien may not be foreclosed against the homestead*688 property for as long as the nontaxpayer spouse maintains his or her homestead interest under state law.” 649 F.2d, at 1125 (footnotes omitted). The court implied that the Government had the choice of either waiting until Mrs. Rodgers's homestead**2140 interest lapsed, or satisfying itself with a forced sale of only Philip Bosco's interest in the property.

Joerene Ingram is the divorced wife of Donald Ingram. During their marriage, Joerene and Donald acquired, as community property, a residence in Dallas, Texas, and occupied it as their homestead. Subsequently, in 1972 and 1973, the Internal Revenue Service issued assessments against Donald Ingram relating to unpaid taxes withheld from wages of employees of a company of which he was president. Deducting payments made on account of these liabilities, there remains unpaid approximately $9,000, plus interest. In addition, in 1973, the Service made an assessment against both Donald and Joerene in the amount of $283.33 plus interest, relating to their joint income tax liability for 1971. These amounts also remain unpaid.

In March 1975, at about the time the Ingrams were seeking a divorce, their residence was destroyed by fire. In September 1975, the Ingrams obtained a divorce. In connection with the divorce, they entered into a property settlement agreement, one provision of which was that Donald would convey to Joerene his interest in the real property involved in this case in exchange for $1,500, to be paid from the proceeds of the sale of the property. Joerene tried to sell the property, through a trustee, but was unsuccessful in those efforts, apparently because of the federal tax liens encumbering the property. To make matters worse, she then received notice from the City of Dallas Department of Housing and Urban Rehabilitation (Department) that unless she complied with local ordinances, the remains of the fire-*689 damaged residence would be demolished. Following a hearing, the Department issued a final notice and a work order to demolish. Joerene Ingram and the trustee then filed suit in Texas state court to quiet title to the property, to remove the federal tax liens, and to enjoin demolition. The defendants were the United States, the Department, and several creditors claiming an interest in the property.

The United States removed the suit to the District Court for the Northern District of Texas. It then filed a counterclaim against Joerene Ingram and Donald Ingram (who was added as a defendant on the counterclaim) for both the unpaid withholding taxes and the joint liability for unpaid income taxes. In its prayer for relief, the Government sought, among other things, judicial sale of the property under § 7403. Pursuant to a stipulation of the parties, the property was sold unencumbered and the proceeds (approximately $16,250) were deposited into the registry of the District Court pending the outcome of the suit. The parties agreed that their rights, claims, and priorities would be determined as if the sale had not taken place, and that the proceeds would be divided according to their respective interests. On cross-motions for summary judgment, the District Court granted summary judgment on the Government's counterclaims.

The Court of Appeals affirmed in part, and reversed and remanded in part. It agreed that the Government could foreclose its lien on the proceeds from the sale of the property to collect the $283.33, plus interest, for the unpaid income tax owed by Joerene and Donald Ingram jointly. Applying its decision in Rodgers, however, it also held that the Government could not reach the proceeds of the sale of the property to collect the individual liability of Donald Ingram, assuming Joerene Ingram had maintained her homestead interest in the property. The court remanded, however, for a factual determination of whether Joerene had “abandoned” the *690 homestead by dividing the insurance proceeds with Donald and by attempting-even before the stipulation entered into with the Government-to sell the property and divide the proceeds of that sale with Donald.

**2141 C

The Government filed a single petition for certiorari in both these cases. See this Court's Rule 19.4. We granted certiorari, 456 U.S. 904, 102 S.Ct. 1748, 72 L.Ed.2d 160 (1982), in order to resolve a conflict among the Courts of Appeals as to the proper interpretation of § 7403.

III

The basic holding underlying the Court of Appeals's view that the Government was not authorized to seek a sale of the homes in which respondents held a homestead interest is that “when a delinquent taxpayer shares his ownership interest in property jointly with other persons, rather than being the sole owner, his ‘property’ and ‘rights to property’ to which the federal tax lien attaches under 26 U.S.C. § 6321, and on which federal levy may be had under 26 U.S.C. § 7403(a), involve only his interest in the property, and not the entire property.” 649 F.2d, at 1125 (emphasis in original). According to the Court of Appeals, this principle applies, not only in the homestead context, but in any cotenancy in which unindebted third parties share an ownership interest with a delinquent taxpayer. See Folsom v. United States, 306 F.2d 361 (CA5 1962).

We agree with the Court of Appeals that the Government's lien under § 6321 cannot extend beyond the property interests*691 held by the delinquent taxpayer. We also agree that the Government may not ultimately collect, as satisfaction for the indebtedness owed to it, more than the value of the property interests that are actually liable for that debt. But, in this context at least, the right to collect and the right to seek a forced sale are two quite different things.

The Court of Appeals for the Fifth Circuit recognized that it was the only Court of Appeals that had adopted the view that the Government could seek the sale, under § 7403, of only the delinquent taxpayer's “interest in the property, and not the entire property.” 649 F.2d, at 1125, n. 12. We agree with the prevailing view that such a restrictive reading of § 7403 flies in the face of the plain meaning of the statute. See, e.g., United States v. Trilling, 328 F.2d 699, 702-703 (CA7 1964); Washington v. United States, 402 F.2d 3, 6-7 (CA4 1968); United States v. Overman, 424 F.2d 1142, 1146 (CA9 1970); United States v. Kocher, 468 F.2d 503, 506-507 (CA2 1972); see also Mansfield v. Excelsior Refining Co., 135 U.S. 326, 339-341, 10 S.Ct. 825, 830-831, 34 L.Ed. 162 (1890).

*692 **2142 Section 7403(a) provides, not only that the Government may “enforce [its] lien,” but also that it may seek to “subject any property, [of] whatever nature, of the delinquent, or in which he has any right, title, or interest, to the payment of such tax or liability” (emphasis added). This clause in and of itself defeats the reading proposed by the Court of Appeals. *693 Section 7403(b) then provides that “[a]ll persons having liens upon or claiming any interest in the property involved in such action shall be made parties thereto” (emphasis added). Obviously, no joinder of persons claiming independent interests in the property would be necessary if the Government were only authorized to seek the sale of the delinquent taxpayer's own interests. Finally, § 7403(c) provides that the district court should “determine the merits of all claims to and liens upon the property, and, in all cases where a claim or interest of the United States therein is established, may decree a sale of such property ... and a proper distribution of the proceeds of such sale according to the findings of the court in respect to the interests of the parties and of the United States ” (emphasis added). Again, we must read the statute *694 to contemplate, not merely the sale of the delinquent taxpayer's own interest, but the sale of the entire property (as long as the United States has any “claim or interest” in it), and the recognition of third-party interests through the mechanism of judicial valuation and distribution.

**2143 Our reading of § 7403 is consistent with the policy inherent in the tax statutes in favor of the prompt and certain collection of delinquent taxes. See supra, at 2137. It requires no citation to point out that interests in property, when sold separately, may be worth either significantly more or significantly less than the sum of their parts. When the latter is the case, it makes considerable sense to allow the Government to seek the sale of the whole, and obtain its fair share of the proceeds, rather than satisfy itself with a mere sale of the part.

Our reading is also supported by an examination of the historical background against which the predecessor statute to § 7403 was enacted. In 1868, as today, state taxation consisted in large part of ad valorem taxation on real property. In enforcing such taxes against delinquent taxpayers, one usual remedy was a sale by the State of the assessed property. The prevailing-although admittedly not universal-view was that such sales were in rem proceedings, and that the title that was created in the sale extinguished not only the interests of the person liable to pay the tax, but also any other interests that had attached to the property, even if the owners of such interests could not otherwise be held liable for the tax. See generally H. Black, The Law of Tax Titles § § 231-236 (1888); W. Burroughs, Law of Taxation § 122 (1877). Where in rem proceedings were the rule, they were generally held to cut off as well dower or homestead rights possessed by the delinquent taxpayer's spouse. See Lucas v. Purdy, 142 Iowa 359, 120 N.W. 1063 (1910); Robbins v. Barron, 32 Mich. 36 (1875); Jones v. Devore, 8 Ohio St. 430 (1858); Black 299; Burroughs 348. But cf. R. Blackwell, Power to Sell Land for the Non-Payment of Taxes *550 (3d ed. 1869).

*695 One evident purpose of the federal judicial sale provision enacted in 1868 was to obtain for the federal tax collector some of the advantages that many States enjoyed through in rem tax enforcement. As one commentator has put it, echoing almost exactly the usual description of state in rem proceedings, the § 7403 proceeding

“from its very nature, is a proceeding in rem. The purchaser receives a complete new title and not just somebody's interest. The court finds the state of the title to the real estate in question, orders it sold if the United States has a lien on it, and divides the proceeds accordingly. All prior interests are cut off and the title starts over again in the new purchaser.” Rogge, The Tax Lien of the United States, 13 A.B.A.J. 576, 577 (1927).

See also G. Holmes, Federal Income Tax 546-547 (1920).

Even as it gave the Government the right to seek an undivided sale in an in rem proceeding, however, the predecessor to § 7403 departed quite sharply from the model provided by the States by guaranteeing that third parties with an interest in the property receive a share of the proceeds commensurate with the value of their interests. This apparently unique provision was prompted, we can assume, by the sense that, precisely because the federal taxes involved were not taxes on the real property being sold, simple justice required significantly greater solicitude for third parties than was generally available in state in rem proceedings.

Finally, our reading of the statute is significantly bolstered by a comparison with the statutory language setting out the administrative levy remedy also available to the Government.*696 Under **214426 U.S.C. § 6331, the Government may sell for the collection of unpaid taxes all non-exempt “property and rights to property ... belonging to such person [i.e., the delinquent taxpayer] or on which there is a lien provided in this chapter for the payment of such tax” (emphasis added). This language clearly embodies the limitation that the Court of Appeals thought was present in § 7403, and it has been so interpreted by the courts. Section 6331, unlike § 7403, does not require notice and hearing for third parties, because no rights of third parties are intended to be implicated by § 6331. Indeed, third parties whose property or interests in property have been seized inadvertently are entitled to claim that the property has been “wrongfully levied upon,” and may apply for its return either through administrative channels, 26 U.S.C. § 6343(b), or through a civil action filed in a federal district court, § 7426(a)(1); see § § 7426(b)(1), 7426(b)(2)(A). In the absence of such “wrongful levy,” the entire proceeds of a sale conducted pursuant to administrative levy may be applied, without any prior distribution of the sort required by § 7403, to the expenses of the levy and sale, the specific tax liability on the seized property, and the general tax liability of the delinquent taxpayer. 26 U.S.C. § 6342.

We are not entirely unmoved by the force of the basic intuition underlying the Court of Appeals's view of § 7403-that the Government, though it has the “right to pursue the property*697 of the [delinquent] taxpayer with all the force and fury at its command,” should not have any right, superior to that of other creditors, to disturb the settled expectations of innocent third parties. Folsom v. United States, 306 F.2d, at 367-368. In fact, however, the Government's right to seek a forced sale of the entire property in which a delinquent taxpayer had an interest does not arise out of its privileges as an ordinary creditor, but out of the express terms of § 7403. Moreover, the use of the power granted by § 7403 is not the act of an ordinary creditor, but the exercise of a sovereign prerogative, incident to the power to enforce the obligations of the delinquent taxpayer himself, and ultimately grounded in the constitutional mandate to “lay and collect taxes.” Cf. Bull v. United States, 295 U.S., at 259-260, 55 S.Ct., at 699; Phillips v. Commissioner, 283 U.S. 589, 595-597, 51 S.Ct. 608, 611, 75 L.Ed. 1289 (1931); United States v. Snyder, 149 U.S. 210, 214-215, 13 S.Ct. 846, 847-848, 37 L.Ed. 705 (1893).

Admittedly, if § 7403 allowed for the gratuitous confiscation of one person's property interests in order to satisfy another person's tax indebtedness, such a provision might pose significant difficulties under the Due Process Clause of the Fifth Amendment. But, as we have already indicated, § 7403 makes no further use of third-party property interests than to facilitate the extraction of value from those concurrent property interests that are properly liable for the taxpayer's debt. To the extent that third-party property interests are “taken” in the process, § 7403 provides compensation for that “taking” by requiring that the court distribute the proceeds of the sale “according to the findings **2145 of the court in respect to the interests of the parties and of the United *698 States.” Cf. United States v. Overman, 424 F.2d, at 1146. Moreover, we hold, on the basis of what we are informed about the nature of the homestead estate in Texas, that it is the sort of property interest for whose loss an innocent third-party must be compensated under § 7403. Cf. United States v. General Motors Corp., 323 U.S. 373, 377-378, 65 S.Ct. 357, 359, 89 L.Ed. 311 (1945). We therefore see no contradiction, at least at the level of basic principle, between the enforcement powers granted to the Government under § 7403 and the recognition of vested property interests granted to innocent third parties under state law.

The exact method for the distribution required by § 7403 is not before us at this time. But we can get a rough idea of the practical consequences of the principles we have just set out. For example, if we assume, only for the sake of illustration, that a homestead estate is the exact economic equivalent of a life estate, and that the use of a standard statutory or commercial table and an 8% discount rate is appropriate in calculating the value of that estate, then three non-delinquent surviving or remaining spouses, aged 30, 50, and 70 years, each holding a homestead estate, would be entitled to approximately 97%, 89%, and 64%, respectively, of the proceeds of the sale of their homes as compensation for that *699 estate. In addition, if we assume that each of these hypothetical non-delinquent spouses also has a protected half-interest in the underlying ownership rights to the property being sold, then their total compensation would be approximately 99%, 95%, and 82%, respectively, of the proceeds from such sale.

In sum, the Internal Revenue Code, seen as a whole, contains a number of cumulative collection devices, each with its own advantages and disadvantages for the tax collector. Among the advantages of administrative levy is that it is quick and relatively inexpensive. Among the advantages of a § 7403 proceeding is that it gives the Federal Government the opportunity to seek the highest return possible on the forced sale of property interests liable for the payment of federal taxes. The provisions of § 7403 are broad and profound. Nevertheless, § 7403 is punctilious in protecting the vested rights of third parties caught in the Government's collection effort, and in ensuring that the Government not receive out of the proceeds of the sale any more than that to which it is properly entitled. Of course, the exercise in any particular case of the power granted under § 7403 to seek the forced sale of property interests other than those of the delinquent taxpayer is left in the first instance to the good sense and common**2146 decency of the collecting authorities. 26 U.S.C. § 7403(a). We also explore in Part IV of this opinion the nature*700 of the limited discretion left to the courts in proceedings brought under § 7403. But that the power exists, and that it is necessary to the prompt and certain enforcement of the tax laws, we have no doubt.

There is another, intermeshed but analytically distinguishable, ground advanced by the Court of Appeals and the respondents-and reiterated by the dissent-for denying the Government the right to seek the forced sale of property held as a homestead by a non-delinquent third party. Taken in itself, this view would hold that, even if § 7403 normally allows for the forced sale of property interests other than those directly liable for the indebtedness of the delinquent taxpayer, the special protections accorded by the exemption aspect of Texas homestead law, see supra, at 2138-2139, should immunize it from the reach of § 7403.

The Court of Appeals conceded that “the homestead interest of a taxpayer spouse, i.e., that of one who himself has tax liability, clearly cannot by itself defeat [the enforcement under § 7403 of] a federal tax lien.” 649 F.2d, at 1121 (emphasis in original); see also 649 F.2d, at 1132 (authorizing levy on proceeds in Ingram case to the extent of the $283.33 liability jointly owed by Mr. and Mrs. Ingram). This proposition, although not explicit in the Code, is clearly implicit in 26 U.S.C. § 6334(c) (relating to exemptions from levy), and in our decisions in United States v. Mitchell, 403 U.S., at 204-205, 91 S.Ct., at 1771; Aquilino v. United States, 363 U.S., at 513-514, 80 S.Ct., at 1280; and United States v. Bess, 357 U.S., at 56-57, 78 S.Ct., at 1057-1058, discussed supra, at 2137. The Court of Appeals also held that, if the homestead interest under Texas law were “merely an exemption” without accompanying vested property rights, it would not be effective against the Federal Government in a § 7403 *701 proceeding, even in the case of a non-delinquent spouse. 649 F.2d, at 1125. Nevertheless, the court concluded that, if the homestead estate both was claimed by a non-delinquent spouse and constituted a property right under state law, then it would bar the federal Government from pursuing a forced sale of the entire property.

We disagree. If § 7403 is intended, as we believe it is, to reach the entire property in which a delinquent taxpayer has or had any “right, title, or interest,” then state-created exemptions against forced sale should be no more effective with regard to the entire property than with regard to the “right, title, or interest” itself. Accord, United States v. Overman, 424 F.2d, at 1145-1147; Herndon v. United States, 501 F.2d 1219, 1223-1224 (CA8 1974) (Ross, J., concurring). No exception of the sort carved out by the Court of Appeals appears on the face of the statute, and we decline to frustrate the policy of the statute by reading such an exception into it. Cf. Hisquierdo v. Hisquierdo, 439 U.S. 572, 586-587, 99 S.Ct. 802, 810-811, 59 L.Ed.2d 1 (1979); United States v. Mitchell, 403 U.S., at 205-206, 91 S.Ct., at 1771-1772. Moreover, the Supremacy Clause which provides the underpinning for the Federal Government's right to sweep aside state-created exemptions in the first place-is as potent in its application to innocent bystanders**2147 as in its application to delinquent debtors. See United States v. Union Central Life Insurance Co., 368 U.S., at 293-295, 82 S.Ct., at 351-352 (federal tax lien good against bona fide purchaser, even though lien not filed in accordance with provisions of state law); cf. Hisquierdo v. Hisquierdo, supra, at 585-586, 99 S.Ct., at 810; *702United States v. Carmack, 329 U.S. 230, 236- 240, 67 S.Ct. 252, 254-256, 91 L.Ed. 209 (1946). Whatever property rights attach to a homestead under Texas law are adequately discharged by the payment of compensation, and no further deference to state law is required, either by § 7403 or by the Constitution.

The dissent urges us to carve out an exception from the plain language of § 7403 in that “small number of joint-ownership situations ... [in which] the delinquent taxpayer has no right to force partition or otherwise to alienate the entire property without the consent of the co-owner.” Post, at 2153. Its primary argument in favor of such an exception is that it would be consistent with traditional limitations on the rights of a lienholder. Post, at 2152-2153, 2158-2159. If § 7403 truly embodied traditional limitations on the rights of lienholders, however, then we would have to conclude that Folsom v. United States, 306 F.2d 361 (CA5 1962), discussed supra, at 2141, 18, was correctly decided, a proposition that even the dissent is not willing to advance. See post, at 2152, 2153, n. 2, 2159. More importantly, we believe that the better analogy in this case is not to the traditional rights of lienholders, but to the traditional powers of a taxing authority in an in rem enforcement proceeding. See supra, at 2143.

*703 **2148 IV

Although we have held that the Supremacy Clause allows the federal tax collector to convert a non-delinquent spouse's *704 homestead estate into its fair cash value, and that such a conversion satisfies the requirements of due process, we are not blind to the fact that in practical terms financial compensation may not always be a completely adequate substitute for a roof over one's head. Cf. United States v. 564.54 Acres of Land, 441 U.S. 506, 510-513, 99 S.Ct. 1854, 1856-1858, 60 L.Ed.2d 435 (1979). This problem seems particularly acute in the case of a homestead interest. First, the nature of the market for life estates or the market for rental property may be such that the value of a homestead interest, calculated as some fraction of the total value of a home, would be less than the price demanded by the market for a lifetime's interest in an equivalent home. Second, any calculation of the cash value of a homestead interest must of necessity be based on actuarial statistics, and will unavoidably undercompensate persons who end up living longer than the average. Indeed, it is precisely because of problems such as these that a number of courts, in eminent domain cases involving property divided between a homestead interest and underlying ownership rights or between a life estate and a remainder interest, have refused to distribute the proceeds*705 according to an actuarial formula, and have instead placed the entire award in trust (or reinvested it in a new parcel of property) with the income (or use) going to the life-estate holder during his or her lifetime, and the corpus vesting in the holder of the remainder interest upon the death of the life-estate holder.

If the sale and distribution provided for in § 7403 were mandatory, the practical problems we have just described would be of little legal consequence. The statute provides, however, that the court in a § 7403 proceeding “shall ... proceed to adjudicate all matters involved therein and **2149 finally determine the merits of all claims to and liens upon the property, and, in all cases where a claim or interest of the United States therein is established, may decree a sale of such property ...” (emphasis added), and respondents argue that this language allows a district court hearing a § 7403 proceeding to exercise a degree of equitable discretion and refuse to authorize a forced sale in a particular case. See Tillery v. Parks, 630 F.2d 775 (CA10 1980); United States v. Eaves, 499 F.2d 869, 870-871 (CA10 1974); United States v. Hershberger, 475 F.2d, at 679-680; United States v. Overman, 424 F.2d, at 1146; United States v. Morrison, 247 F.2d 285, 289-291 (CA5 1957). The Court of Appeals agreed *706 with this interpretation of the statute, although it does not appear to have relied on it, 649 F.2d, at 1125, and in any event neither it nor the District Court undertook any particularized equitable assessment of the cases now before us. We find the question to be close, but on balance, we too conclude that § 7403 does not require a district court to authorize a forced sale under absolutely all circumstances, and that some limited room is left in the statute for the exercise of reasoned discretion.

The word “may,” when used in a statute, usually implies some degree of discretion. This common-sense principle of statutory construction is by no means invariable, however, see Mason v. Fearson, 50 U.S. (9 How.) 248, 258-260, 13 L.Ed. 125 (1850); see generally United States ex rel. Siegel v. Thoman, 156 U.S. 353, 359-360, 15 S.Ct. 378, 380, 39 L.Ed. 450 (1895), and cases cited, and can be defeated by indications of legislative intent to the contrary or by obvious inferences from the structure and purpose of the statute, see ibid.

In this case, we have little to go on in discerning Congress's intent except for one crucial fact: before 1936, the predecessor statute to § 7403 used the word “shall” rather than the word “may” in describing the court's role in ordering a forced sale of property in which a claim or interest of the United States had been shown. Revenue Act of 1926, Pub.L. No. 20, § 1127, 44 Stat. 9, 123-124 (Part 2). In 1936, as one of a number of amendments in the text of the provision, Congress changed “shall” to “may.” Revenue Act of 1936, Pub.L. No. 740, § 802, 49 Stat. 1648, 1743-1744. The other changes-specifically, expanding the scope of § 7403 to include personal as well as real property, and adding the receivership option *707 now embodied in § 7403(d), see supra, at 2-are explained in the legislative history. There is no direct explanation for the change from “shall” to “may.”

**2150 The Government argues that the only significance of the change from “shall” to “may” was that “Congress recognized it had specifically authorized sale of interests in property, sale of the entire property, and receivership. Employing the term ‘shall’ with respect to each may have been perceived as confusing insofar as it could be read as directing contradictory requirements.” Reply Brief 8, n. 5. *708 We find this explanation plausible, but not compelling. If Congress had really meant no more than to adjust the forced sale language to take into account the receivership option, it could have easily expressed that intention more clearly by language to the effect of “the court shall either decree the sale of such property ... or, upon the instance of the United States, appoint a receiver to enforce the lien, etc.” Moreover, the authors of an earlier, unpassed, otherwise virtually identical proposal introduced in the House, did not think it necessary to change “shall” to “may” in their version of the legislation. See nn. 35-36, supra.

Faced as we are with such an ambiguous legislative record, we come to rest with the natural meaning of the language enacted into law. In light of the fact that Congress did see fit to explain the other changes in the 1936 Act, we do not assert that Congress, without comment or explanation, intended to create equitable discretion where none existed before. On the other hand, there is support in our prior cases for the proposition that an unexplained change in statutory wording from “shall” to “may” is best construed as indicating a congressional belief that equitable discretion existed all along. Moore v. Illinois Central R. Co., 312 U.S. 630, 635, 61 S.Ct. 754, 756, 85 L.Ed. 1089 (1941); cf. Haig v. Agee, 453 U.S. 280, 294, n. 26, 101 S.Ct. 2766, 2775, n. 26, 69 L.Ed.2d 640 (1981).

In addition, reading “may” as either conferring or confirming a degree of equitable discretion conforms to the even more important principle of statutory construction that Congress should not lightly be assumed to have enacted a statutory scheme foreclosing a court of equity from the exercise of its traditional discretion. Weinberger v. Romero-Barcelo, 456 U.S. 305, 313, 102 S.Ct. 1798, 1803, 72 L.Ed.2d 91 (1982); Porter v. Warner Holding Co., 328 U.S. 395, 398, 66 S.Ct. 1086, 1089, 90 L.Ed. 1332 (1946); Hecht Co. v. Bowles, 321 U.S. 321, 330, 64 S.Ct. 587, 592, 88 L.Ed. 754 (1944). A § 7403 proceeding is by its nature a proceeding in equity, and judicial sales in general have traditionally *709 been accompanied by at least a limited degree of judicial discretion.

Finally, we are convinced that recognizing that district courts may exercise a degree**2151 of equitable discretion in § 7403 proceedings is consistent with the policies of the statute: unlike an absolute exception, which we rejected above, the exercise of limited equitable discretion in individual cases can take into account both the Government's interest in prompt and certain collection of delinquent taxes and the possibility that innocent third parties will be unduly harmed by that effort.

To say that district courts need not always go ahead with a forced sale authorized by § 7403 is not to say that they have unbridled discretion. We can think of virtually no circumstances, for example, in which it would be permissible to refuse to authorize a sale simply to protect the interests of the delinquent taxpayer himself or herself. And even when the interests of third parties are involved, we think that a *710 certain fairly limited set of considerations will almost always be paramount.

First, a court should consider the extent to which the Government's financial interests would be prejudiced if it were relegated to a forced sale of the partial interest actually liable for the delinquent taxes. Even the Government seems to concede that, if such a partial sale would not prejudice it at all (because the separate market value of the partial interest is likely to be equal to or greater than its value as a fraction of the total value of the entire property) then there would be no reason at all to authorize a sale of the entire property. Tr. of Oral Arg. 7, 13; Reply Brief 8, n. 5. We think that a natural extension of this principle, however, is that, even when the partial interest would be worth less sold separately than sold as part of the entire property, the possibility of prejudice to the Government can still be measured as a matter of degree. Simply put, the higher the expected market price, the less the prejudice, and the less weighty the Government's interest in going ahead with a sale of the entire property.

Second, a court should consider whether the third party with a non-liable separate interest in the property would, in the normal course of events (leaving aside § 7403 and eminent domain proceedings, of course), have a legally recognized expectation that that separate property would not be subject *711 to forced sale by the delinquent taxpayer or his or her creditors. If there is no such expectation, then there would seem to be little reason not to authorize the sale. Again, however, this factor is amenable to considerations of degree. The Texas homestead laws are almost absolute in their protections against forced sale. The usual cotenancy arrangement, which allows any cotenant to seek a judicial sale of the property and distribution of the proceeds, but which also allows the other cotenants to resist the sale and apply instead for a partition in kind, is further along the continuum. And a host of other types of property interests are arrayed between and beyond.

Third, a court should consider the likely prejudice to the third party, both in personal dislocation costs and in the sort of practical**2152 undercompensation described supra, at 2148.

Fourth, a court should consider the relative character and value of the non-liable and liable interests held in the property: if, for example, in the case of real property, the third party has no present possessory interest or fee interest in the property, there may be little reason not to allow the sale; if, on the other hand, the third party not only has a possessory interest or fee interest, but that interest is worth 99% of the value of the property, then there might well be virtually no reason to allow the sale to proceed.

We do not pretend that the factors we have just outlined constitute an exhaustive list; we certainly do not contemplate that they be used as a “mechanical checklist” to the exclusion of common sense and consideration of special circumstances. Cf. Moses H. Cone Hospital v. Mercury Construction Corp., 460 U.S. 1, ---, 103 S.Ct. 927, 937, 74 L.Ed.2d 765 (1983). We do emphasize, however, that the limited discretion accorded by § 7403 should be exercised rigorously and sparingly, keeping in mind the Government's paramount interest in prompt and certain collection of delinquent taxes.

*712 V

In these cases, no individualized equitable balance of the sort we have just outlined has yet been attempted. In the Rodgers case, the record before us, although it is quite clear as to the legal issues relevant to the second consideration noted above, affords us little guidance otherwise. In any event, we think that the task of exercising equitable discretion should be left to the District Court in the first instance.

The Ingram case is a bit more complicated, even leaving aside the fact of the stipulated sale by which we are constrained to treat the escrow fund now sitting in the registry of the District Court as if it were a house. First, as the Court of Appeals pointed out, there remains a question under Texas law as to whether Joerene Ingram abandoned the homestead by the time of the stipulated sale. Second, the Government, in addition to its lien for the individual debt of Donald Ingram, has a further lien for $283.33, plus interest, on the house, representing the joint liability of Donald and Joerene Ingram. Because Joerene Ingram is not a “third party” as to that joint liability, we can see no reason, as long as that amount remains unpaid, not to allow a “sale” of the “house” (i.e., a levy on the proceeds of the stipulated sale) for satisfaction of the debt. Moreover, once the dam is broken, there is no reason, under our interpretation of § 7403, not to allow the Government also to collect on the individual debt of Donald Ingram out of that portion of the proceeds of the sale representing property interests properly liable for the debt. On the other hand, it would certainly be to Mrs. Ingram's advantage to discharge her personal liability before the Government can proceed with its “sale,” in which event, assuming that she has not abandoned the homestead, the District Court will be obliged to strike an equitable balance on the same general principles as those that govern the Rodgers case.

The judgment of the Court of Appeals in Rodgers is reversed, its judgment in Ingram is vacated, and both cases *713 are remanded with directions that they be remanded to the District Court for further proceedings consistent with this opinion.

So ordered.