1. The Federal Tax lien
Keith Fogg

2. Lien acquisition The FTL arises upon the occurrence of three events:
(1) assessment of federal taxes
(2) issuance of notice and demand for payment of the assessed taxes; and
(3) failure to pay the taxes after notice and demand

3. assessment
Assessment in this context is a term of art that should be used with care
Assessing taxes simply describes the process of recording a liability

4. Permission to assess Filing of Return Math Error Consent
Tax Court – default or decision
Restitution

5. Notice and Demand
Section 6303 requires that “as soon as practicable, and within 60 days after the making of an assessment … gives notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof.
Notice shall be left at the dwelling or usual place of business of such person, or shall be sent by mail to such person’s last known address.”

6. Failure to make notice and demand
Does not invalidate notice
Prevents formation of lien until issued

7. Failure to pay
If taxpayer fails to pay within 10 days of assessment after proper issuance of notice and demand
THEN
The federal tax lien comes into existence and relates back the date of assessment

8. Scope of lien The lien attaches to
(1) All property and rights to property, whether real or personal, belonging to such person
(2) All after acquired property
Supreme Court has said Congress could not have created a broader lien – Drye and Craft

9. State Law Determines Property Interest Federal Law Determines Priority
But
Federal Law Determines Priority

10. Duration of FTL Last until collection statute of limitations expires
If IRS obtains a judgment, can last forever

11. Priority of unperfected lien
Section 6323(a)
Congress identified four parties who can defeat the unfiled federal lien:
(1) holders of a security interest;
(2) mechanic’s lienholders;
(3) purchasers; and
(4) judgment lien creditors

12. Perfection of lien
File Notice in City or County of Taxpayer’s Residence for personal property
File Notice in City or County of Taxpayer’s Real Property

13. Priority of perfected lien
General Rule – first in time first in right, but 10 statutory exceptions:
(1) Securities
(2) Motor vehicles
(3) Personal property purchased at retail
(4) Personal property purchased in a casual sale
(5) Personal property subject to possessory lien
(6) Real property tax and special assessment liens
(7) Residential property subject to a mechanic’s lien for certain repairs and improvements
(8) Attorney’s liens
(9) Certain insurance contracts
(10) Deposit secured loans

14. Transferee, nominee, and alter ego situations
IRS files placeholder liens to tie up property
IRS generally will not take administrative collection action against property subject to these liens because of clouded title but will bring a suit to foreclose its lien

15. Removing liens Withdrawal Release Discharge Subordination
Non-Attachment

16. Estate tax lien Arises automatically at death
IRS does not file the estate tax lien

17. Federal insolvency statute
Generally does not defeat prior liens after Romano case

18. bankruptcy
If IRS has valid notice filed before bankruptcy which attaches to equity in property, it has secured claim in bankruptcy