OPINION OF THE COURT
LEWIS, Circuit Judge.Title 26 U.S.C. § 6331(a) authorizes the government to enforce a lien on a taxpayer’s property or rights to property by initiating an administrative levy. Here, we are asked to determine whether a taxpayer retains a property interest in monies held by a factoring agent as collateral for loans. We hold that he does, and that such funds are subject to attachment by tax levy under section 6331. Accordingly, we will affirm the district court’s order granting the government’s motion for summary judgment.
I.
A.
Gabriel Gruber and Lawrence Herman were controlling officers in the Seegull Manufacturing Company (“Seegull”), a maker of boys apparel.1 In January 1987, Seegull filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Pennsylvania. Later, the bankruptcy court authorized Seegull to enter into a factoring agreement with Congress Talcott Corporation (“Congress”), a factoring company. Under the terms of this agreement, Congress would loan Seegull up to $250,000.2
In return for the loans from Congress, Seegull assigned its accounts receivable to Congress, granted Congress a security interest in its inventory and entered various other agreements. In a rider to the factoring agreement, the parties agreed that Gruber and Herman would pledge the sum of $100,-000 as an additional guarantee of Seegull’s obligations.
On March 16, 1987, Gruber and Herman signed identical cash collateral agreements to deposit funds with Congress to secure the loans extended under the factoring agreement. Pursuant to these agreements, Gru-ber deposited $89,510 and Herman deposited *317$10,000 with Congress.- Herman made further deposits, totaling $125,000, between March and December of 1987.
Several aspects of the cash collateral agreements are important to the resolution of this case. First, the factoring agreement is incorporated by reference into the cash collateral agreements. Second, the cash collateral agreements provided Congress with discretion to “appropriate or apply all or any part of the balance” of the monies deposited by Gruber and Herman as payment for Congress’ obligations under the factoring agreement or any related agreement. The agreements vested Congress with discretion to appropriate the cash collateral for the satisfaction of claims “at any time” without prior notification to Gruber or Herman.
Another significant aspect of the cash collateral agreements was that interest which accrued on the collateral was added to the fund. Last, and perhaps most significant, the agreements provided that upon satisfaction of its obligation under the agreements, Congress would return any portion of the collateral fund still on deposit to Gruber and Herman.
The sums Gruber and Herman deposited with Congress were placed in a general operating account at Chemical Bank in New York. Neither Gruber nor Herman had access to this account. Congress established an internal accounting system to monitor all debits and deposits made on behalf of Gruber and Herman; it set up two internal accounts in their names and issued monthly statements reflecting debits, deposits and interest accrued.
B.
The IRS made several tax assessments against Gruber and Herman in connection with employment taxes withheld from the employees of Giles Apparel, Inc., another company for which Herman and Gruber acted as controlling officers. It filed notices of tax liens against Gruber and Herman in October 1988, January 1989 and March 1989.
On December 27, 1988, the IRS served a notice of levy on Congress for “[a]ll property, rights to property, money, credits, and bank deposits now in [Congress’] possession and belonging, to [Gruber as the delinquent taxpayer].” (Congress had not yet been served with a notice of levy on Herman’s account.) The amount of taxes owed by Gruber totaled $120,320.74. When Congress received the notice of, levy, Gruber’s account balance was $53,920.99. Herman’s account balance was $145,593.59. Congress responded to the notice by informing the IRS that it had a superior , security interest in Gruber’s deposits because of the cash collateral agreement and would comply with the levy only after Seegull’s debt to Congress had been repaid.
Four months later, Congress withdrew $126,361.37 from the deposited funds in full satisfaction of Seegull’s debts and obligations. Congress debited Gruber’s internal account by $55,652.65, leaving a zero balance, and debited Herman’s account by $70,708.72, leaving a balance of $69,378.49.
Fearing that an additional notice of levy on Herman’s portion of the funds was imminent, Congress filed an interpleader action in the district court against the defendants-appel-lees, Gruber, Herman and the United States of America, claiming that it was subject to multiple liability for the $69,378.49 remaining in the deposited fund and seeking a determination of ownership of the funds.
In its answer, the government denied that Congress would be exposed to multiple liability if it complied with the levy. The government also filed a counterclaim and a cross-claim. In Count I of the counterclaim, the government asserted that Congress was liable to the United States for all property and rights to property in its possession which, on the date of the levy, belonged to Gruber. In Count II, the government sought to foreclose on all duly perfected “tax liens upon all property and rights to property of Gabriel Gruber and Lawrence R. Herman including the in-terpleader fund in [Congress’] possession-” Eighteen months later, the government was granted leave to assert an additional count for the wrongful conversion of funds subject to the tax liens, based on the claim that Congress continued to debit the interpled funds to pay its attorneys’ fees.
The district court granted the government’s motion for default judgment against *318Gruber on December 13, 1990, and against Herman on March 19, 1992. On January 13, 1992, the government moved for summary judgment against Congress on the grounds that Congress had improperly refused to honor an IRS levy, that the government was entitled to foreclose its federal tax liens against the interpled fund, and that Congress had tortiously converted the tax liens that attached to the interpled fund when it debited the fund to pay attorneys’ fees.
The district court ultimately held Congress liable for the $53,920.99, which represented Gruber’s portion of the deposited funds. Once served with a tax levy notice, the court reasoned, Congress’ only means of redress was either to surrender the funds to the government and file an administrative claim with the IRS, or file a wrongful levy suit against the IRS. The district court held that Congress could not bypass the legislative scheme on grounds that it had a superior interest in the property. Thus, as a possessor of Gruber’s property when it was subject to federal tax lien, Congress was liable to the government for the sums it withheld plus interest from the date the levy was issued.
Congress appeals from the district court’s order granting the government’s motion for summary judgment. The district court had subject matter jurisdiction in this case pursuant to 28 U.S.C. §§ 1331, 1340 and 2410. We have appellate jurisdiction under 28 U.S.C. § 1291. An order granting a motion for summary judgment is subject to plenary review. Resolution Trust Corp. v. Gill, 960 F.2d 336, 340 (3d Cir.1992).
II.
A.
The key issue is whether Gruber retained any cognizable property interest in the deposited funds which would subject them to attachment by tax levy. Our analysis requires an application of the statutory principles concerning compliance with a federal tax levy issued pursuant to 26 U.S.C. §§ 6331-2. We begin our discussion with a brief review of the levy statutes.
When a taxpayer is delinquent in paying taxes, section 6321 of the Internal Revenue Code places the government in the position of a secured creditor and empowers it to impose a lien on “all property and rights to property” belonging to the taxpayer. 26 U.S.C. § 6321. To enforce its lien, the government may initiate an administrative levy under section 6331(a). When a taxpayer’s property is held by a third party, section 6332(a) authorizes the government to serve a notice' of levy on the third party.3 Section 6332(a) provides:
any person in possession of ... property or rights to property subject to levy upon which a levy has been made shall, upon demand ... surrender such property or rights to the [government], except such part of the property or rights as is, at the time of such demand, subject to an attachment or execution under any judicial process.
A third party who honors the levy and surrenders the property has no liability to the delinquent taxpayer; however, failure to surrender the property upon service of a tax levy will render the third party personally liable to the government for the value of the property and for additional penalties if the noncompliance was not reasonable. See 26 U.S.C. § 6332(c)(2). Individuals served with a notice of levy may respond either by surrendering the property and instituting a wrongful levy action under 26 U.S.C. § 7426, or by filing an administrative claim with the IRS under 26 U.S.C. § 6843.
*319The Supreme Court has recognized only two defenses for a party who fails to comply with a tax levy. United States v. National Bank of Commerce, 472 U.S. 713, 721-22, 105 S.Ct. 2919, 2924-25, 86 L.Ed.2d 565 (1985). First, it is a defense that the property is already subject to “judicial attachment or execution” as set out in section 6332(a). Id. Second, a person holding property may defend by arguing that the levied property is not the taxpayer’s “property or rights to property.” Id. Under the second defense, even if others claim an interest in the property and the taxpayer’s interest may be quantified as but a modicum, the property remains subject to attachment by levy and must be surrendered until ultimate ownership can be resolved. Id. Because federal law defines the consequences which attach to rights created under state law, it is commonly understood that in a levy proceeding, “the IRS steps into the taxpayer’s shoes.” Id. at 725, 105 S.Ct. at 2927 (citations omitted). Thus, “the IRS acquires whatever rights the taxpayer himself possesses.” Id.
In this ease, Congress refused to surrender the funds Gruber had deposited; instead, it debited those funds to satisfy the Seegull debt. The parties concede that the levied funds were not subject to prior judicial attachment. Therefore, the only defense available to Congress for failure to honor the levy is that the deposited funds were not “property or rights to property” belonging to Gruber at the time the notice of levy was served. Id. at 722, 105 S.Ct. at 2925.
Courts must apply state law to determine what interest, if any, the taxpayer has in levied property. Aquilino v. United States, 363 U.S. 509, 513, 80 S.Ct. 1277, 1280, 4 L.Ed.2d 1365 (1960). Although state law governs this issue, as we have noted, federal law assigns consequences to rights created by local law. United States v. Bess, 357 U.S. 51, 55, 78 S.Ct. 1054, 1057, 2 L.Ed.2d 1135 (1958). Thus, because the United States Congress meant to attach a broad meaning to the statutory language “all property and rights to property,” National Bank of Commerce, 472 U.S. at 719-20, 105 S.Ct. at 2924, courts must liberally identify property rights created under state law.
B.
Congress’ principal argument is that it had a right to set-off the debts owed by Seegull with collateral supplied by Gruber under the cash collateral agreement. Congress claims that the Seegull debt had matured, and that Congress had already obtained full right, title and interest in the funds by the date of the levy. If Gruber no longer had an interest in the property, the funds were not subject to attachment by federal levy.
In the absence of an agreement to the contrary, New York law requires that deposits made to a special account are to be returned to the depositor if they are not used for the purpose which underlies the special account.4 Noah’s Ark Auto Accessories, Inc. v. First Nat’l Bank of Rochester, 64 Misc.2d 944, 316 N.Y.S.2d 663 (Sup.Ct.1970). A federal tax levy may attach such a contingent interest. United States v. Marine Midland Bank, 675 F.Supp. 775, 780 (W.D.N.Y.1987). Thus, the question here is whether Gruber intended to transfer his interest in the funds outright or whether he merely intended to pledge the funds as collateral.
Under common law, a pledge is perceived as “a security interest in a chattel or in an intangible represented by an indispensable instrument, the interest being created by a bailment for the purpose of securing the payment of a debt....” See Duncan Box & Lumber Co. v. Applied Energies, 165 W.Va. 473, 270 S.E.2d 140, 145 (1980) {citing Restatement of Security, § 1). By a pledge, “the pledgor retains the general title himself, and parts with possession for a special purpose .... A pledge differs from a mortgage of personal property in being a lien upon property, and not a legal title to it.” Applied *320Energies, 270 S.E.2d at 144 (citing Jones, Pledges, § 1).
The cash collateral agreement between Congress and Gruber makes clear that although Congress had absolute control and discretion over the use of the funds, Congress was to return to Gruber any amount not applied to Seegull’s debt once the debt was satisfied. Under the factoring agreement, Congress was assigned Seegull’s accounts receivable. In the event Congress was able to collect all that it was due on those accounts, Congress was to return the balance of the collateral to Gruber and Herman. Thus, the arrangement between Congress and Gruber constituted a pledge.
In Marine Midland, the court addressed an almost identical issue under New York law. In that case, the bank had purchased installment contracts from a delinquent taxpayer. Marine Midland, 675 F.Supp. at 776. The parties agreed that the bank would apply a percentage of the credit service charges under the installment contracts to special reserve accounts established on the bank’s books in the taxpayer’s name. The taxpayer was not entitled to payment from the special reserve accounts unless the accounts’ balances exceeded 10 percent of the unpaid balances of the installment contracts purchased by the bank. The bank argued that the reserve accounts “represented amounts not then payable to the [taxpayer] and which the [taxpayer] might or might not receive in the future depending on the bank’s experience with the contracts it purchased.” Id. at 780. The bank claimed that these contingent future interests were not “property” subject to levy.
In rejecting this argument, the court observed that although the right to payment was a contingent interest, the taxpayer had a “beneficial interest” and a property right under New York law. Marine Midland, 675 F.Supp. at 780; see also Fine Fashions, Inc. v. U.S., 328 F.2d 419, 421-22 (2d Cir.1964). Applying the broad reading of the statutory language required by the Supreme Court in National Bank of Commerce, the Marine Midland court concluded that although the taxpayer did not have an unqualified right to withdraw the full amounts in the reserve accounts, the property interest it did have was sufficient to subject the funds to attachment by tax levy. Id.
Congress argues that Marine Midland is inapposite. It claims that the Seegull debt had matured and; as a result, Gruber had already been divested of his property interest when the levy was filed. To support its argument, Congress offers evidence of monthly statements on Seegull’s account which, it claims, indicate that the factoring relationship had ended because Congress had ceased advancing money. Congress also argues that the steadily increasing debit balance on the Seegull account indicates that Seegull had failed to repay the debt.
If Congress had produced evidence that Seegull was in default and its outstanding debts were greater than or equal to Gruber’s portion of the deposited funds, we would agree that any beneficial interest Gruber might have retained in the funds would be immaterial. In a levy action, if there is no balance remaining in a fund used to satisfy a creditor’s outstanding claims, the taxpayer will not be considered to have a “property interest” in the funds. Marine Midland, 675 F.Supp. at 780; see also Fine Fashions, 328 F.2d at 422.5
The evidence of a default by Seegull is scant at best, however. That Congress did not choose to debit the accounts before the notice of tax levy belies its position that Seegull was in default and that Gruber was divested of his interest in the levied funds before that time. Although under New York law a party may lose the right to retain amounts in holdback accounts for failure to act promptly upon default, Equimark Comm. Fin. Co. v. C.I.T. Fin. Serv. Corp., 812 F.2d 141, 145 (3d Cir.1987) (citing Emigrant Industrial Savings Bank v. Willow Builders, *321290 N.Y. 133, 48 N.E.2d 293, 299 (1943)), this concern, to the extent it ever existed, apparently failed to motivate Congress to debit the entirety of Gruber’s account upon receipt of the levy notice. Indeed, the only action taken by Congress at that time was to communicate to the IRS that Congress had a superior security interest in the deposit. Congress took no steps to withdraw the balance in Gruber’s account until four months after the levy was imposed.6
Although it is undisputed that the cash collateral agreement gave Congress unlimited discretion to apply the deposited funds in satisfaction of the Seegull debt, the important question is whether the parties intended to divest Gruber of his right, title and interest in the funds at the time he signed the cash collateral agreement and deposited the funds with Congress. The last paragraph of the agreement, which reserves in Gruber the right to recoup any monies not used in satisfaction of the debt, resolves that question in the government’s favor. We conclude that it was the parties’ intent that Gruber retain some interest, however small, in the funds.
Our conclusion is further supported by the payment and deposit scheme of the cash collateral agreements. Under those agreements, the parties gave Congress discretion to “appropriate or apply all or any part of the balance” of the monies deposited by Gruber and Herman as payment for Seegull’s loans under the factoring agreement. Thus, Congress could not acquire Gruber’s rights to the deposited fund until it debited monies to discharge SeegulPs obligations. Although the monthly statements indicate that Congress had ceased advancing money and that Seegull had not been paying its debt, Congress has failed to establish that Seegull had defaulted on its debt. Thus, when the levy was filed, Seegull could still satisfy its obligations and Congress had not extinguished all of Gruber’s rights to the fund by debiting his account. Gruber, therefore, retained an attachable property interest in the return of the deposited funds under New York law.
In sum, we conclude that under New York law, Gruber had a beneficial interest in the return of the monies on deposit contingent upon the full satisfaction of the Seegull debt. We hold that this beneficial interest is a property right subject to attachment by federal levy.7
*322III.
Questions of law control the disposition on summary judgment in this case. The district court properly identified the key issue as whether Gruber had sufficient interest in the deposited funds to subject those funds to attachment by tax levy. The uncontested facts demonstrate that he did. Under these circumstances, we conclude that the district court properly entered summary judgment in the government’s favor.
. Gruber was president of Seegull and Herman served as the company's secretary.
. A factoring agreement enables a firm such as Seegull to sell or transfer its accounts receivable to a factoring company, such as Congress. They have traditionally been associated with the garment industry. The agreement typically is one of accommodation, as the factor may provide loans in anticipation of sales, for example. That appears to be the type of agreement at issue here.
. An administrative levy authorized under section 6332 has been described as a "provisional remedy.” United States v. National Bank of Commerce, 472 U.S. 713, 721, 105 S.Ct. 2919, 2924, 86 L.Ed.2d 565 (1985). In contrast to a lien foreclosure suit, which is another enforcement mechanism available to the government under section 7403(a), an administrative levy does not determine whether the government’s rights to the property are superior to others'; it merely gives the government temporary custody of the property to protect against diversion until claims against the property are resolved. Id. Unlike United States v. McDermott, — U.S. -, 113 S.Ct. 1526, 123 L.Ed.2d 128 (1993), cited by the dissent, this case confronts the question of the imposition of a tax levy. We are not concerned with the problem of tax lien priority to which McDermott was addressed.
. Although the transactions at issue in this case have connections with both New York and Pennsylvania, the appellant did not raise the choice of law issue before the district court. Because New York has the most significant contacts with the transactions surrounding the cash collateral agreements, we will apply New York law to the question whether Gruber maintained any property interest in the levied funds. See Restatement (Second) Conflicts of Laws § 188.
. The dissent's approach requires the district court to determine the extent or priority of the taxpayer's interest in the levied fund as a preliminary step to the attachment of the levy. Under the statutory scheme, however, such a determination is provided for, after the levy is made, by the filing of a wrongful levy action, 26 U.S.C. § 7426. See Texas-Commerce Bank-Fort Worth, N.A. v. U.S., 896 F.2d 152, 156-57 (5th Cir.1990).
. In focusing on evidence of a possible default, the dissent argues that material issues of fact regarding Gruber's ownership and Congress’ security interests remain in dispute and preclude summary judgment. In our view, the dissent elevates the inquiry to a level of hyper-scrutiny that is neither consistent with nor contemplated by a clearly defined legislative scheme focused primarily on prohibiting the removal or conversion of a taxpayer's property. We are constrained to adopt a broad application of that scheme by National Bank of Commerce. In any event, we find it significant that the record is devoid of any persuasive evidence that Congress assumed Gruber’s interest in the fund because Seegull defaulted on its debt.
. The factoring agreement was authorized by the Bankruptcy Court for the Eastern District of Pennsylvania. The dissent expresses concern with the district court's failure to determine the appropriate state law which governed the agreement. This concern, however, is of no moment. The conclusion that Gruber had retained an interest in the deposited funds would have resulted even if we had found that Pennsylvania law, instead of New York law, governed the parties' agreements.
Under Pennsylvania law, a bank's automatic right of set-off extinguishes the taxpayer’s property rights in his or her account when the obligation to the bank matures. Pittsburgh Nat’l Bank v. United States, 657 F.2d 36 (3d Cir.1981). Unless the parties otherwise provide, a demand obligation is mature at the time a levy is served if the taxpayer’s debts exceed the funds then on deposit. United States v. First Nat. Bank and Trust Co., 695 F.Supp. 194, 195 (W.D.Pa.1988) (a demand obligation is one which is due and payable immediately at the option of the holder; it is a mature debt at all times following execution and delivery since payment may be due thereafter without any demand).
In this case, the cash collateral agreements do not make payment due upon demand; instead, they permit Congress, at any time and in its discretion, to debit Gruber’s account to satisfy Seegull’s obligations. In our view, this provision postponed Congress' right of set-off until it had actually debited Gruber’s account. See General Electric Credit Corp. v. Tarr, 457 F.Supp. 935 (W.D.Pa.1978) (parties to a demand note altered terms of demand obligation by contract; thus, where demand note specifically provided it would become "immediately due and payable” upon the happening of certain events, it was not mature until such events occurred). Since Congress did not debit Gruber’s account until four months after the government served the notice of levy, Congress had no right of set-off under *322Pennsylvania law which extinguished Gruber's rights to the deposited funds at the time the notice of levy was served.