A title examiner may presume that real estate, including after acquired land, is free of a Federal General Tax Lien, notice of which has been filed in the town clerk’s office where the land is located when:
A. There is recorded in the town clerk’s office a certificate of release, certificate of discharge or certificate of non-attachment pursuant to IRC §6325; or
B. Ten years and thirty days after the date of the tax assessment, provided no extension and no notice of lien has been refiled in the town clerk’s office.
Comment 1. The Federal General Tax Lien arises after assessment, demand for payment and the taxpayer’s failure to pay. See IRC §6321. Such liens are valid even if they are not filed, except against certain specified protected classes, including purchasers, holders of security interests, mechanic’s lienors and judgment creditors under IRC §6323(a). Even where a tax lien is properly filed, holders of security interests can be free of tax liens for security interests which arise after the filing of the tax lien under certain specified circumstances.
Comment 2. The notice of lien prepared by the IRS includes a date which operates as a certificate of release if a re-filing is not made as of that date.
Comment 3. The ten (10) year lien period may be extended in several ways. See IRC §6502. However, for certain protected classes of third parties (purchasers, security interest holders, mechanics lienor, judgment lien creditors) the extensions are not effective as to those persons, unless the Lien has been refiled within the one (1) year period ending ten (10) years and thirty (30) days after the assessment, or within the last year of every subsequent ten (10) year period. See IRC §6323(g).
Comment 4: Title 9 V.S.A. §2051 requires that notices of liens upon real or personal property for taxes or other obligations payable to the United States of America, certificates and notices affecting the liens when required to be filed, be filed in the office of the town clerk of the town where the property is situated.
Comment 5: Title 9 V.S.A. §2052 requires the town clerk to record all notices of federal liens
in a book kept for that purpose, the date and hour of filing the lien, and to index those notices or liens. When a certificate of discharge of a federal lien is filed, the town clerk shall enter the same upon the same page of the record where the notice of lien is filed, and permanently attach the original certificate of discharge to the original notice of lien. See §2053. The practitioner should be aware that the failure to index a notice of lien in the general index of land records as required by 9 V.S.A. §2052 and 24 V.S.A. §116, may not render a lien unenforceable as a result of the ruling in Haner v. Bruce, 146 Vt. 262 (1985).
Comment 6 In United States v. Craft, 535 U.S. 274 (2002), the Court held that a federal tax lien arising under §6321 of the IRC on “all property and rights to property” of a delinquent taxpayer attaches to the rights of the taxpayer in property held as a tenancy by the entirety (entireties property), even when state law insulates entireties property from the claims of creditors of only one spouse. The Court stated that while state law determines what rights a taxpayer has in property, federal law determines whether the state-defined rights are “property” or “rights to property” for purposes of §6321.
See IRS Bulletin: 2003-39 for a discussion of, and FAQ related to, “Collection Issues Related to Entireties Property”.
Comment 7. Reference is made to IRS Publication 785 regarding the priority of purchase money mortgages over a previously filed IRS Lien.
September 26, 2008:
- This standard was added.
- Comment 6 was added.
- Comment 7 was added.