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Section 2. Lien Filing Requirements

5.12.2  Lien Filing Requirements

  • 5.12.2.1   Purpose and Effect of Filing a Notice of Federal Tax Lien (NFTL).
  • 5.12.2.2   Creation and Duration
  • 5.12.2.3   Taxpayer Contact
  • 5.12.2.4   Notice of Federal Tax Lien Determination
  • 5.12.2.5   Lien Filing Approval
  • 5.12.2.6   Preparing the NFTL
  • 5.12.2.7   Mutual Collection Assistance Requests (MCAR)
  • 5.12.2.8   Place for Filing of Notice of Federal Tax Lien
  • 5.12.2.9   Liens Filed in Other Areas
  • 5.12.2.10   Filing Outside the U.S.
  • 5.12.2.11   Filing the NFTL by Mail
  • 5.12.2.12   Distributing the NFTL
  • 5.12.2.13   Lien Filed Indicator
  • 5.12.2.14  Special Rules
  • 5.12.2.15   Requests for Disclosure of Outstanding Lien Amount
  • 5.12.2.16   Lien Priorities
  • 5.12.2.17   Priority of Certain Other Interests - Advances, Interest and Expenses
  • 5.12.2.18   Lien Fees
  • 5.12.2.19   Refiling the NFTL
  • 5.12.2.20   Designated Payment Code
  • 5.12.2.21   Cost of Living Adjustment
  • 5.12.2.22   Resolution of NFTL Related Unpostable Transactions
  • Exhibit 5.12.2-1   Notice of Claim of Lien- Required by the Coast Guard
  • Exhibit 5.12.2-2   Satisfaction of Mortgage
  • Exhibit 5.12.2-3   Notice of Federal Tax Lien (MCAR)
  • Exhibit 5.12.2-4   Lien Refiling Chart
  • Exhibit 5.12.2-5   Form 668(F)

5.12.2.1  (05-20-2005)
Purpose and Effect of Filing a Notice of Federal Tax Lien (NFTL).

  • The purpose of filing the NFTL is to protect the Government’s right of priority against certain third parties, typically a purchaser, holder of a security interest, mechanic’s lienor, or judgment lien creditor (For additional information see IRM 5.17.2, the Legal Reference Guide for Federal Tax Liens).

Note:

The NFTL is not a negotiating tool and is to be used only in accordance with IRM 5.17.2 and 5.12.

5.12.2.2  (05-20-2005)
Creation and Duration

  • A Federal Tax Lien (FTL) is created by statute and attaches to a taxpayer ’s property and rights to property for the amount of the liability. This is the "statutory" or "silent" FTL. Requirements for creating a FTL are contained in IRC 6321. The following must occur for the FTL to arise:
    • An assessment must have been made.
    • A demand for payment must have been made.
    • The taxpayer must have neglected or refused to pay. (As a matter of IRS policy the taxpayer is normally given 10 days from notification to pay the amount due.)

Note:

In jeopardy situations the 10 day period may not always apply. You should confer with your manager and local Counsel.

  • The FTL will continue until the liability is satisfied or becomes unenforceable by lapse of time or a bond is accepted in the amount of the liability.

5.12.2.3  (05-20-2005)
Taxpayer Contact

  • The Service is required to make reasonable efforts to contact the taxpayer before filing a NFTL. The efforts to contact the taxpayer are to advise that a NFTL may be filed if full payment is not made when requested. Issuance of the statutory assessment notice and the balance due notices sent during the collection process will constitute reasonable efforts. Publication 594 (IRS Collection Process), CP 501 (Balance Due - Reminder), CP 504 (Balance Due - Urgent Notice), and Letter 1058 (Final Notice - Intent to Levy), advises the taxpayer that a NFTL may be filed. Also the ACS letters LT-39 (Reminder Notice) and LT-11 (Final Notice of Intent to Levy and Your Notice of Your Right to Hearing) warns taxpayers of possible NFTL filing.
  • While the notices sent in the notice stream are sufficient for filing a NFTL, generally when a NFTL has not been previously filed the revenue officer’s determination with respect to the filing of the NFTL will be done in conjunction with the initial contact or initial contact attempt. Contact (request for full payment) may be made by:
    • field contact (preferably).
    • telephone.
    • mailing a notice or letter to the last known address (when appropriate).
  • If full payment is not received during initial contact, explain to the taxpayer that a lien may be filed. See below 5.12.2.4.1 for lien filing criteria. Explain the possible effects of the NFTL filing on normal business operations and/or their credit rating.
  • If the taxpayer disagrees with the proposed lien filing, advise the taxpayer of their right to appeal under the Collection Appeals Program (CAP). Also explain to the taxpayer their right to appeal under the Collection Due Process (CDP) under IRC 6320once the lien has been filed. See IRM 5.12.1

5.12.2.4  (05-20-2005)
Notice of Federal Tax Lien Determination

  • A NFTL filing determination must be made on all balance due cases including reactivated balance due cases within established time frames. The request for lien filing or the appropriate non-filing documentation must be prepared within 10 calendar days of initial or attempted contact, with the taxpayer or taxpayer representative. See IRM 5.1.10.3.2 (3), General Handbook, for established time frames.
  • If the taxpayer has not made full payment or other security arrangements (such as a Bond) to satisfy the liability, a lien determination will be made.
  • When making a determination to file a NFTL, consider whether issuance of the L-1058 is also warranted, if it was not sent previously.
    For Example:Issuance of the L-1058 is appropriate when a taxpayer has been given a deadline and was advised of levy action for failure to comply. This action should only occur when a L - 1058 was not previously issued for the module(s) in question.

Note:

By issuing the L-1058 at the same time the NFTL is being filed, the taxpayer will receive CDP hearing rights for the lien and levy concurrently. If the taxpayer chooses to exercise their CDP rights, both the lien and levy issues can and should be addressed together in Appeals

  • The taxpayer’s filing and payment compliance should always be considered when the non-filing of a notice of Federal Tax Lien is being determined.
  • When considering an extension of time to pay (up to 120 days) in accordance with IRM 5.14.5.5, NFTL(s) should be filed unless the case meets the criteria of IRM 5.12.2.4.2 below.

5.12.2.4.1  (05-20-2005)
Criteria for Filing a NFTL

  • In general, a NFTL should be filed in the following situations:

If

Then

there is an Unpaid Balance of Assessment (UBA) below $5,000 and filing the lien will promote payment compliance.

you may file a NFTL.

Note:

This will also apply to additional assessments on currently open cases and those being reported as currently not collectable. You should take into account if assets are owned or the possibility of future assets being acquired during the collection statute period. In the case of accrual only liens, consider the amount of the accruals. (Accrual liens are discussed further in IRM 5.12.2.6(2).

If there is a UBA of any amount for an entity and the entity is not adhering to compliance requirements such as federal tax deposits, return filings, etc.

file a NFTL.

the aggregate UBA is $5,000 or more

file a NFTL

Note:

Determine the need to file a NFTL when there are additional assessments. Use the transaction code date as the date of assessment for the liability.

an installment agreement does not meet streamlined, guaranteed, or in-business trust fund express criteria

file a NFTL.

an open account with an aggregate UBA of $5,000 or more is being reported as currently not collectible

file a NFTL.

a case involving both assessed and unassessed periods will be reported currently not collectible

the NFTL filing may be held up to include both period types on the NFTL.

Note:

You may also choose to file a NFTL on the current assessments and wait for the unassessed periods to be assessed, and then file for those periods as well.

the property is exempt by the Federal Bankruptcy Code or state insolvency proceeding

file a NFTL to protect the government’s interest.

the taxpayer resides outside the U.S. and has known assets

file a NFTL. Contact requirements are waived.

Note:

  • Even though there is no mandatory NFTL filing requirement prior to service of a Notice of Levy, before levying the Service should consider, for purposes of lien priority, filing a NFTL.
  • Accrued interest and penalties added to tax should be collected during the limitation period for collecting the tax. Therefore a NFTL may be filed on accruals only modules if all assessed liabilities have been full paid. The limitation period does not apply to bad checks, fraud penalty or certain other penalties that carry a separate collection statute expiration date.
  • Examples of when it is appropriate to file a notice of Federal Tax Lien are listed below:
    • After your initial analysis of a law firm with three quarters of Form 941 liabilities, you determine that all notices requesting payment have been sent. You then make a field visit on 4/3/2004 to the taxpayer at the last known address. The office is closed and you leave a 2246 (calling card) with Publication 1 and 594 in a sealed envelope under the door. The calling card instructs the taxpayer to contact you by 4/12/2004. On 4/13/2004 you still do not receive any communication from the taxpayer. In this situation it is appropriate to file the Notice of Federal Tax Lien.
    • During a field visit to a self employed taxpayer you request full payment of the tax liability of $4,000. As part of your compliance check you also inform the taxpayer that they are not current with their estimated tax payments and they must make those payments as well. The taxpayer makes payment for a portion of the tax liability ($1,000) and tells you they will make their estimated payments in 30 days. In this situation since the taxpayer is not in compliance and has not made full payment of the liability a NFTL may be filed.

5.12.2.4.2  (06-09-2005)
Criteria for Not Filing the NFTL

  • When considering the non-filing of a NFTL determine if the taxpayer is in filing and payment (Federal Tax Deposits, estimated tax payments, notice accounts, etc.) compliance. You should also consider :
    • The use of a collateral agreement(see IRM 5.6.1 for additional information).
    • The subordination of the lien (for loan and financing situations)
    • The discharge of the property (for removing specific property from the Federal Tax Lien)

in lieu of not filing a NFTL (see IRM 5.12.3).

  • In general, liens should not be filed when:
    • The taxpayer is a defunct corporation whose assets have been previously liquidated.
    • The taxpayer is deceased and there are no known assets in an estate.
    • The taxpayer resides abroad and has no known assets in the United States.
  • Liens should not be filed in the following circumstances:
    • The taxpayer is a corporate entity that has gone through a liquidating bankruptcy or receivership regardless of dollar amount. Document the proceeding number in the case history.
    • When a non-paying officer has been assessed the Trust Fund Recovery Penalty (TFRP) and an adjustment to the TFRP is pending because the assessment has been paid by another officer.
    • There is an indication that the liability has been satisfied or that credits are available to satisfy the liability.
    • The taxpayer is a financial institution under control of the Resolution Trust Corporation (RTC). See the section on "Withdrawal of Filed Notice of Federal Tax Lien" if a NFTL has been filed.
    • The taxpayer is in bankruptcy and the NFTL relates to liabilities incurred before the taxpayer filed for bankruptcy. Section 362(a) of the Bankruptcy Code imposes an automatic stay that prohibits all creditors from taking certain collection actions against debtors in bankruptcy. A NFTL may be filed once the stay is lifted. In some circumstances, a NFTL may be filed for liabilities incurred after the taxpayer filed for bankruptcy. Consult Counsel to determine if a NFTL may be filed.
    • There is genuine doubt as to the validity of the liability. But the revenue officer must document the taxpayer’s justification and the method of resolution (payment tracer, amended return, credit transfer etc.).
  • A decision may be made to defer or not file a NFTL when, the revenue officer can document a reasonable certainty that filing the NFTL will hamper collection.

Example:

Following are examples of when it is appropriate to delay or not file a NFTL:

    • During a field visit on 5/01/2003 to a "Not for Profit" taxpayer you are asked not to file a NFTL and consider an in-business installment agreement. It is explained that if a NFTL is filed, state funding, which is the principle funding source for the entity will be eliminated and they will not be able to make installment payments. You agree to delay filing the NFTL and request appropriate documentation from the entity be sent to you by 05/12/2003 and you will consider the IA or a NFTL will be filed. On 05/09/2003 you receive the documents and are able to document a reasonable certainty that the NFTL would hamper collection of the liability and determine not to file the NFTL and place the taxpayer in a manually monitored IA. You inform the taxpayer of the IA and the condition that a NFTL will be filed if they default on the installment agreement.
    • During a field visit to a taxpayer who is in the business of selling vacation time shares. You determine that the tax liability cannot be paid immediately and that in all likelihood an installment agreement may resolve the unpaid balance. However, in order to obtain the funds to make the installment payments and pay other operating expenses, the taxpayer must sell accounts receivable to a factor on a weekly basis. The factor also requires that the taxpayer gives a security interest in all current and future accounts receivable. Filing a NFTL in this case would end the factoring arrangement. You agree to withhold the filing of the NFTL provided the taxpayer provides a copy of the contract, and remains cooperative and compliantwhile the installment agreement is being considered. You inform the taxpayer that not complying with the provisions will result in your immediate filing of the NFTL.

Example:

Below are examples of when it is not appropriate to delay or not file a NFTL:

• During a field visit a taxpayer asks that you do not file a NFTL because it will negatively affect their credit. You ask if they can prove that the negative affect on their credit rating will "hamper" their ability to pay the liability. They inform you that they cannot prove that it will. In this situation filing the NFTL would be appropriate.
  • During a field visit, the taxpayer informs you that they are planning to purchase a new car or possibly lease one to replace their current vehicle and the filing of the NFTL will negatively affect their credit. They ask you not file the NFTL. You ask if the car is essential to generate income to assist in the payment of the liability. The taxpayer informs you that the car is not essential for them to generate income. It would be appropriate to file a NFTL in this case.
  • During a field visit on 4/1/2003 a taxpayer informs you that he/she has applied for a loan to pay the liability and other operating expenses of the business and requests that you do not file a NFTL. He/she explains that the loan agreement has a clause which indicates any additional lien filings will cause the proposed agreement to be null and void. You agree to delay filing a NFTL if the taxpayer supplies you with back up documentation for the completed financial statement and loan agreement from his financial institution by 4/15/2003 and become current with all FTD deposits. You also inform the taxpayer that if the documents are not received by the 15th, you will file the NFTL. You return to your office on 4/2/2003 and document your case history with the reason why you delayed filing the NFTL and indicate a follow up date of 4/15/2003. On 4/16/2003 you still have not received the documentation from the taxpayer or confirmation of the FTD payments. Since the taxpayer did not meet the specified deadline it is appropriate to file the Notice of Federal Tax Lien at this time without further contact with the taxpayer.
  • After returning to the office from a field visit the previous day you have determined to file a NFTL because the taxpayer did not make full payment and they were not in compliance. The taxpayer calls you and asks that you not file the lien because they are selling their current home to full pay the liability and avoid enforcement actions. You tell the taxpayer that the lien is going to be filed to protect the Government’s interest in the home. The taxpayer tells you that the sale will not go through because of the lien. You then tell the taxpayer that a Release of Lien can be issued at the time full payment is made at the sale.
  • After your initial analysis of a BMF taxpayer you plan to visit in the field tomorrow, you determine that they have not file several 941 returns and has not made federal tax deposits (FTD) for the current quarter. During your field visit the taxpayer informs you that they are currently under contract to sell their rights to a patent for a product they developed and the sale will more than pay the liability and the amount they estimate will be owed for the delinquent returns. They tell you that part of the agreement for sale is that there can be no liens associated with the patent and ask that you do not file a NFTL, at least until after the sale in 15 days. You review the contract and confirm the taxpayer’s claim. You tell them that you will delay the filing of the NFTL if they file all delinquent returns and pay all delinquent FTD within 10 days. On the tenth day you receive all delinquent returns but do not receive any of the funds promised for the FTD. Filing the NFTL in this situation would be appropriate due to the taxpayer ’s non compliance and failure to meet the deadline set.
  • During a field visit to the Power of Attorney’s office, the POA informs you that filing a NFTL will embarrass the taxpayer in their business community. In this case it would be appropriate to file the NFTL, unless the POA can prove that the NFTL would hamper the payment of the liability.
  • During a field visit to an IMF taxpayer you request full payment of the $200,000 liability. The taxpayer tells you that they are in negotiations to sell their home (primary residence) but there is only $100,000 of equity in the home so they can’t full pay even with the sale. They ask that you not file the NFTL because it will ruin the sale. You ask the taxpayer to supply you with the appropriate documents (these may very by location) to confirm their statement. They say that they cannot. In this situation it would be appropriate to file the NFTL and inform the taxpayer that they may request a discharge of the specific property when they are prepared to go to sale.
  • The filing of a NFTL may affect a taxpayer’s credit rating, and in and of itself, this is not sufficient reason to withhold filing the NFTL.
  • When a revenue officer determines not to file a NFTL temporarily, the action must be supported by an Integrated Collection System (ICS) history entry that clearly states why filing a NFTL is not proper at that time. The entry must also include a follow-up date by which the revenue officer will receive the requested information and/or payment, or the date the NFTL will be filed.
  • The revenue officer will withhold filing the NFTL if the taxpayer has entered into a collateral agreement with the Service as provided in IRM 5.6. Revenue officers should document their case files and consult with Technical Services to ensure legal sufficiency.
  • A taxpayer may submit a faxed request for non-filing of the NFTL if the revenue officer has made contact with the taxpayer by phone or in person. The revenue officer should document the case history with the date of contact and note the reasons why the taxpayer wishes the NFTL not to be filed. The revenue officer should also include the faxed document in the case file.

5.12.2.4.2.1  (05-20-2005)
Integrated Collection System (ICS) Documentation When Not Filing the NFTL

  1. A decision not to file a NFTL must be supported by a history entry that clearly states why filing a NFTL is not appropriate.
  2. When the decision not to file the NFTL is made the revenue officer should ensure that the ICS lien determination field is properly updated on the case summary screen for each module.

5.12.2.4.2.2  (05-20-2005)
Extension of the Lien Determination Date

  1. The extension of the Lien Determination Date is not the same as deferring the filing of the NFTL. The Lien Determination Date extension is used only when a determination cannot be made prior to the lien determination date indicated on ICS when the entity or module is first received. This may occur in situations such as when the revenue officer has generally had no contact with the taxpayer and:
    1. Inventory is assigned and the revenue officer is placed on a detail assignment.
    2. Inventory is assigned and the revenue officer is attending training.
    3. Inventory is reassigned or transferred to the revenue officer.
    4. The revenue officer is out due to illness or planned leave.

Example:

This is an example of when it is appropriate to extend the lien determination date:
A revenue officer receives five new Bal. Due cases (all X coded for contact within 30 days) on Monday 4/11/2003. The lien determination date is indicated on ICS as 5/22/2003. The revenue officer is assigned a long term detail and is to report on Monday 4/25/2003 and will not return to their POD until Monday 6/13/2003. In this situation the lien determination date may be extended for a reasonable time frame allowing the RO to make an appropriate determination.
In the above situation the RO should also have an appropriate history entry explaining why the initial contact was not timely.

5.12.2.5  (03-01-2004)
Lien Filing Approval

  1. Revenue officer group managers will note their review and approval using the manager’s queue on their automated systems for revenue officers below the GS-9 level.
  2. Liens filed by Dyed Fuel Compliance Officers below GS-9 will be reviewed and approved by a designated Examination manager.
  3. When it is necessary that a manual (typed or handwritten) NFTL be prepared, managers will sign the NFTL for employees below GS-9.
  4. In all cases document the case file.

5.12.2.5.1  (05-20-2005)
Approving the NFTL Determination

  1. A determination to file a NFTL by revenue officers below GS-9 must be approved by the manager prior to the NFTL actually being filed.

5.12.2.5.2  (03-01-2004)
The Manager’s Review Process

  1. Managers of revenue officers below GS-9 are required to:
    1. review the taxpayer’s information
    2. verify that a balance is due, and
    3. affirm that the lien filing is appropriate given the taxpayer’s circumstances, considering the amount due and the value of the property or rights to property.
  2. In all cases revenue officers must document the following information:
    1. A summary of any information the taxpayer provides that may affect the decision to file a lien.
    2. If the taxpayer provided information, the employee is to explain their review of the information and findings; and
    3. Verification that the amount is owed, e.g., the balance has been checked on IDRS.

5.12.2.6  (03-01-2004)
Preparing the NFTL

  1. The correct and timely preparation of the NFTL is the responsibility of the person assigned the balance due. All NFTLs must be filed through the Automated Lien System (ALS) unless there is an expedite situation.

Note:

Functional managers may at their discretion have lower graded employees input NFTLs to the Automated Lien System. The manager is responsible for the accuracy of those documents.

  1. Multiple assessments against the same taxpayer may be included on one Form 668(Y)(c)

If

Then

there are one or more balance dues with multiple assessments

prepare a separate entry in each column for each balance due. The dollar amount for each unpaid balance of assessment will be shown.

there are multiple assessments on one balance due

show the assessment dates and unpaid balance of all unpaid assessments including those penalties which carry a separate collection statute.

an unassessed accrued amount remains outstanding and the assessed amount is paid

file a NFTL on the total accrued amount as of the date the NFTL is requested.

the taxpayer’s name on the balance due is incorrect

the NFTL should state the taxpayer’s name correctly. Take the actions necessary to correct masterfile.

Note:

There may be instances when the name on the NFTL does not agree with what is on the balance due, e.g., if the statute has been extended on one taxpayer on a joint assessment, only the name of the still liable taxpayer should appear on the NFTL.

the balance due has the name of a third party, i.e., accountant, attorney, etc., and a NFTL is being filed

ensure that the address on the NFTL is the taxpayer’ s. A NFTL should never show the name and/or address of a third party or the names of corporate officers. When dealing with "c/o" be sure that the name and address on the NFTL is that of the taxpayer.

  1. Where a partnership is the taxpayer and employment taxes are involved, the NFTL should be prepared showing the words "a partnership " after the partnership name and list the names of known general partners, e.g.,
    1. XYZ, a partnership
    2. A, a partner
    3. B, a partner
    4. C, a partner

Note:

When a general partner is listed on the NFTL, a copy of L3172 must be provided. See IRM 5.12.1.

  1. File a NFTL in the jurisdiction where each general partner resides as well as where the partnership is located. When the place of filing changes, file a separate NFTL, i.e., file two NFTLs if the partnership and one of the general partners lives in a different jurisdiction, etc. Provide multiple address information, if appropriate.
  2. The NFTL should be prepared showing the words "a corporation " after the corporate name, e.g., XYZ, Inc., a corporation.
  3. Revenue officers at the GS-9 level and above have the authority to issue Form 668(Y)(c). The employee’s name and identification number should be typed in the lower portion of the form and the title inserted in the appropriate block.
  4. Signatures are not required. However, documents generated by the ALS have facsimile signatures.
  5. Use the period when beginning (07-01-92) rather than the ending date (06-30-93) when preparing a NFTL for a Form 2290, Heavy Vehicle Use Tax Return. This is very important when there is more than one period for a specific TIN. The period beginnings must be used to separate each assessment to ensure that we receive the module satisfaction indicator from the masterfile when each module is satisfied.

5.12.2.6.1  (03-01-2004)
Use of Trade Names

  1. The abbreviation ‘d/b/a’ for ‘doing business as’ should be used only when an individual is actually doing business as a sole proprietor under a trade name, i.e., Edwin E. Kelly d/b/a Kelly’s Garage. The abbreviation should never be used in a partnership situation.
  2. The same degree of care should be exercised when using the abbreviation ‘t/a’ for ‘trading as’. This is used where a corporate or partnership entity operates under a trade name other than the corporate or partnership name, e.g., Werk Hard, Inc., t/a The Diggers.

5.12.2.6.2  (03-01-2004)
Partnership

  1. General partners are individually liable for partnership debts, and separate assessments against them are not essential to sustain their individual liability. The separate liability of the partners is not an issue unless the partnership neglects or fails to pay the assessed liability. See IRC 6332 and 6303.
  2. Partnerships normally have one employer identification number (EIN).

If

Then

a single partnership has multiple outlets or businesses

one EIN should be assigned to that partnership.

the same person established several partnerships

each partnership should be assigned a different EIN.

there is any doubt that a change in name will effect the entity

request an advisory opinion from Area Counsel through appropriate channels. See IRM 5.1 (General), Request for Entity Change, for entity change procedures. BMF must reflect the name change.

Note:

Although a change in name due to a change in membership of a partnership resulting from death, withdrawal, substitution or addition of a partner does not, in itself, effect a termination of a partnership for FICA or FUTA purposes, it does have an effect on the composition of the entity at law insofar as the collection of debts from the separate partners is concerned.

Area Counsel advises that a new form should be submitted

prepare either a Form SS-4, Application for Employer Identification Number or Form 2363, Master File Entity Change.

adding to or changing a partnership entity

list all partners adding "PTR" following the name of the last partner.

  1. A supplemental assessment will not be required when adding a general partner’s name to the partnership assessment. The Service will rely on the proposition that the assessment against the partnership creates a FTL against each general partner.

5.12.2.6.3  (03-01-2004)
Limited Liability Company (LLC)

  1. When filing an NFTL on a single member owner disregarded LLC entity, only the name of the single member owner should appear on the lien document. Do not include the name of the disregarded LLC. Such action would indicate to a potential creditor that the government has perfected a lien interest in the assets of the LLC. Including the name of the LLC would create a situation parallel to a "doing business as" or "trading as" secondary name line. IRM 5.12.2.6.1 does not apply to single member LLCs.
  2. When a NFTL is filed in the name of the disregarded LLC, file a new NFTL in the name of the single member owner.
  3. Withdraw the previously filed NFTL where the name of the disregarded entity was used.
    1. Do not release a previously filed NFTL filed in the name of the disregarded entity. This action would extinguish the underlying statutory lien.
    2. Filing under the correct name will not preserve the priority of the NFTL filed under the name of the disregarded LLC.
  4. The EIN used in the assessment should be used for the lien, despite the resulting mismatch between the entity name and the EIN, to ensure systemic notifications for the lien release in the Automated Lien system.
  5. The entity type for the single member owner will dictate where the NFTL is filed with regard to the recording official specified in a state’s version of the Uniform Federal Lien Registration Act.

If the single member owner is

then the NFTL filing location is the

a corporation

Secretary of State or equivalent official specified in state law.

a partnership

location provided for partnership filing in state law.

an individual

residence of the individual (for personal property).

Note:

To perfect the lien against real property, owned by the single member owner, state law generally requires filing with the jurisdiction where the property is physically located.

another LLC

location specified for the tax status elected by LLC or owner status if owner LLC is also disregarded.

5.12.2.6.4  (03-01-2004)
Nominee Liens

  1. A nominee is someone designated to act for another. As used in the federal tax lien context, a nominee is generally a third person who holds legal title to property of a taxpayer while the taxpayer enjoys full use and benefit of that property. The FTL extends to property actually owned by the taxpayer even though a third person holds legal title. The third person can be any person listed in IRC 7701 (a) (1).
  2. A nominee situation normally involves a fraudulent conveyance or transfer of a taxpayer’s property to avoid legal obligations. To establish a nominee lien situation, it must be shown that while a third party may have legal title to the property, it is the taxpayer that owns the property and who enjoys the full use and benefits.
  3. Request Area Counsel advice before filing a nominee lien. Consider the following circumstances when developing your case:
    1. the taxpayer is paying maintenance expenses,
    2. the taxpayer is using the property as collateral for loans,
    3. the taxpayer is paying state and local taxes on the property,
    4. other use or benefit from the property
    5. other relevant facts.
  4. You may not file a nominee lien without the written approval of Area Counsel.
    1. Cases should be developed to withstand court challenge (with minimal additional development).
    2. Focus should be for advice as to the need for a supplemental assessment, a new notice and demand and the language to be incorporated in the NFTL.
    3. Prepare a report containing all of the facts of the case to accompany the request.
    4. Request Area Counsel direction regarding enforcement of the lien.
  5. Subsequent enforcement action is at the Area Office’s discretion once Area Counsel has approved application of the nominee theory.
  6. In determining what additional enforcement action should be taken, consideration must be given to the confusion in the chain of title and redemption rights of the taxpayer. These conditions may depress the sale of the property.
  7. A judicial lien foreclosure or seizure followed by suit to foreclose the NFTL will generally bring a greater sale price particularly for real property.
  8. The administrative seizure and sale process may be used if prompt action is needed to protect the government’s interest. If there is any doubt, request an opinion from Area Counsel.
  9. See IRM 5.17.2 for additional information.

5.12.2.6.5  (05-20-2005)
Alter-Ego Liens

  1. The "‘alter-ego’" (second self) doctrine has been summarized as follows: The obligation of a corporation will be recognized as those of another person, and vice versa, where it appears that the corporation is not only influenced and governed by that person, but there is such a unity of interest and ownership that the individuality or separateness, of the person and the corporation has ceased. Also the facts are such that an adherence to the fiction of the separate existence of the corporation would, under the particular circumstances, sanction a fraud or promote an injustice.

Note:

It is generally more difficult to establish alter-ego relationships than a nominee situation.

  1. There are two elements to the alter ego doctrine:
    1. Unity of ownership and interest,
    2. Fraud or inequity would result from the failure to disregard the corporate entity.
  2. Some factors pertinent to a determination to disregard the corporate entity are whether the individual:
    1. is in a position of control or authority over the entity;
    2. controls the entity to shield himself from personal liability;
    3. uses the business entity for his or her own financial benefit;
    4. uses the business entity as a shield from personal liability;
    5. uses the business entity to assume personal debts, or debts of another, or
    6. uses personal funds to pay the business entity’s debts.
  3. Some facts establishing the factors in (3) above are:
    1. commingling of funds and other assets,
    2. failure to segregate funds of the separate entities,
    3. an unauthorized diversion of corporate funds or assets to other than corporate uses,
    4. treatment by an individual of the assets of the corporation as his own,
    5. failure to obtain authority to issue stock or to subscribe to or issue the same,
    6. holding out by an individual that he or she is personally liable for the debts of the corporation,
    7. failure to maintain minutes or adequate corporate records, and the confusion of records of separate entities,
    8. the identical equitable ownership in two entities,
    9. the failure to adequately capitalize a corporation, the total absence of corporate assets, and under capitalization,
  4. Explore the possibility of using the administrative process of jeopardy transferee assessment, nominee lien, emergency lien foreclosure action or emergency transferee or fraudulent conveyance suit before filing a NFTL in the name of an alter-ego.
  5. Do not file a NFTL in the name of an alter-ego without legal review, advice, and written direction from Area Counsel as to:
    1. the need for a supplemental assessment,
    2. a new notice and demand, and
    3. the language to be incorporated in the NFTL.
  6. Refer to the Legal Reference Guide, 5.17.2.4, for additional information.

5.12.2.6.6  (03-01-2004)
Transferee Liens

  1. There are two methods the government can use to collect an unpaid tax liability where a taxpayer (the transferor) has transferred property to a third party (the transferee) prior to or after the assessment of the tax. Collection of the tax is based on finding that the transfer was a fraudulent conveyance. However, liability may arise under contract, various federal liability statutes or state statutes governing bulk sales, corporate dissolutions, and corporate reorganizations.
    1. The first method, a suit to set aside a fraudulent conveyance, the government collects the transferrers tax from the transferred property. This is done by filing a civil action in U.S. District Court. See IRM 5.17.14.
    2. The second method is administratively imposing transferee liability, which results in the imposition of personal liability for a tax on a third party. The liability is then collected from the third party’s property. To do this, the Commissioner mails a notice of transferee liability to the transferee, then, if a tax court petition is not filed or the liability is sustained by the Tax Court, assesses the tax against the transferee under the authority of IRC 6901.
    3. Once the assessment is made, a notice of demand and payment is issued, and if the transferee does not pay, a NFTL may be issued.
  2. You will find many of the same issues in transferee situations that are found in nominee and alter-ego situations. Refer to IRM 5.17.14 for additional information on fraudulent conveyances and transferee liability.
  3. Contact local Counsel for written authorization before issuing a transferee lien.

5.12.2.6.7  (03-01-2004)
Estate and Gift Tax

  • Estate and Gift Tax Liens are discussed in IRM 5.5, Insolvency/Decedent Estate, Estate Taxes Collecting Handbook.
  • To file a notice of the estate tax lien, Form 668(J) or Form 668(H) must be manually prepared
  • Manually post estate tax lien recording fees if applicable. These fees may be different than those fees used for recording Form 668(Y)(c).

5.12.2.6.8  (07-01-2005)
Special NFTL Conditions

  1. Revenue Officers may encounter situations where the taxpayer has transferred property and circumstances indicate actual or constructive fraud. Property may have been acquired in the name of another person or entity and the taxpayer controls the property to such an extent that the title holder is possessed of ‘color of title’. This may result in an administrative transferee assessment, suit to assert a transferee liability, or a suit to set aside a fraudulent conveyance.
  2. Persons determined to be nominees or alter-egos are not entitled to collection due process appeal rights.
  3. Issue L-3177 and related publications after the lien has been filed. These taxpayers are entitled to appeal under the Collection Appeals Program (CAP).
  4. The taxpayer against whose liabilities the nominee liens were filed is entitled a collection due process hearing.
  5. Issue L3886, Notice to Taxpayer of Nominee/Alter Ego Federal Tax Lien Filing, only if the taxpayer has not received CDP notification (L3172) previously for the identified periods.
  6. L3886 is not generated by the Automated Lien System and must be manually prepared.
  7. Notification must be made by certified mail within five business days.
  8. See IRM 5.12.1 for more information on lien appeals.

5.12.2.6.9  (03-01-2004)
Name Changes

  1. Taxpayers may change names after the NFTL has been filed. To avoid disputes over lien priority in subsequently acquired assets, file another NFTL reflecting the name or alias.
    1. Place the new name on the first line.
    2. Place the previous name on the second name line, preceded by either ‘aka’ for ‘formerly known as’.
  2. Add the following statement to reference the original NFTL: This Notice of Federal Tax Lien is filed to modify Notice of Federal Tax Lien number (serial number), recorded (date), in Book ___, Page ___,by reflecting a new or proper name.
  3. Use this procedure when the taxpayer’s name has been misspelled. See IRM 5.17, Legal Reference Guide for Revenue Officers for guidelines on errors that make a NFTL defective.
  4. With the advent of the DIAL interface, amended or corrected NFTLs should be rare. Amended or corrected NFTLs could affect the priority of the original NFTL.

5.12.2.6.10  (03-01-2004)
Correcting Lien Notices

  1. Some errors, such as an incorrect name, will make the NFTL invalid while other errors such as TIN, MFT and period will prevent the module satisfaction notification from posting.
  2. Incorrect NFTLs must be linked to corrected NFTLs and/or corrected information.
  3. Module satisfaction notification must be associated with correct TIN/name control and MFT/period and tied back to the incorrect NFTL so that the Certificate of Release can be generated for BOTH the correct and incorrect notice upon satisfaction or expiration. A "dummy" lien is prepared by the ALS Unit to do this.
  4. Guidance is provided in IRM 5.17, Legal Reference Guide, regarding errors in the taxpayer’s name as it appears on the notice.

If

Then

it is determined that the NFTL should be corrected

file a new NFTL.

the error on the original NFTL was made to the name control portion of the name line only and a new NFTL is not filed

change the name control on the original NFTL record.

5.12.2.6.11  (03-01-2004)
Other Types of Errors

  1. Listed below is a chart that explains how to correct other types of errors.

ERROR TYPE

EXPLANATION

Taxpayer Identification Number (TIN)

This error type does not require a corrected NFTL document. Prepare a "dummy NFTL" in the database.

MFT

This type of error does not require a corrected NFTL document. Prepare a "dummy lien" in the database.

Tax Period

Based on provisions of IRC 6320, taxpayers are entitled to collection due process appeal rights for each tax period with a liability for which a NFTL has been filed. File a new NFTL when the tax period is incorrect.

Assessment Date

A corrected NFTL document is required. The life of the NFTL is directly related to this date. The last day for refining is computed within ALS based on the assessment date. If the assessment date is incorrect, the last day for refiling will be computed incorrectly. Do not file a dummy lien.

Dollar Amount

Amend the NFTL when there is a substantial increase or decrease to the dollar amount as the result of an audit or keystroke (input) error.

Address

No action is required to correct the original NFTL. If the city, state and/or zip code are incorrect, a new NFTL may have to be filed in the correct recording office.

Note:

  1. Add this statement to an amended NFTL.THIS NOTICE OF FEDERAL TAX LIEN IS FILED TO CORRECT(insert what is being corrected, i.e., tax period, assessment date, MFT, minor misspelling) ON THE ORIGINAL LIEN RECORDED (insert date of filing) AS RECORDING NUMBER (insert recorder’s number). ALL OTHER INFORMATION ON THE ORIGINAL NOTICE FILED IS CORRECT AND THAT INSTRUMENT REMAINS IN FULL FORCE AND EFFECT.
  2. Type AMENDED LIEN at the top of your NFTL to draw attention to the purpose of the additional lien filing.

5.12.2.7  (05-20-2005)
Mutual Collection Assistance Requests (MCAR)

  1. Certain tax treaties have clauses where our treaty partners can request assistance from the Service to collect taxes owed them by individuals residing in the United States. The mutual collection treaty partners are France, Sweden, Denmark, Canada and the Netherlands.
  2. All MCARs from the treaty partners are received and processed by the Chief, International Operations SB/SE.
  3. The Service can take distraint action against U.S. assets to collect these foreign taxes. To do this, it may be necessary to file a Notice of Federal Tax Lien.

5.12.2.7.1  (03-01-2006)
Preparation of MCARs on Form 668(Y)

  1. Process all MCARs lien requests as follows:
    1. Use the format shown in Exhibit 5.12.1-3 as a guide to prepare Form 668(Y), Notice of Federal Tax Lien. The information needed to complete Form 668(Y) is provided with the MCAR investigation sent to the revenue officer group.
    2. International will provide the serial number for the NFTL. Do not use any other number.
    3. Use the Taxpayer Control Number (TCN) assigned to the MCAR assessment by International as the identifying number on Form 668(Y), if the taxpayer identification number (TIN) is not known.
    4. Use the Last Day for Refiling collection statute date provided by International.
  2. The NFTL will be filed in the appropriate recording office. Return a copy of the NFTL to International.
  3. Do not request input of TC 582 or TC 360 for the NFTL filing fee. NFTL fees are not assessed against MCAR taxpayers.

5.12.2.7.2  (03-01-2006)
Procedures for Refiling and Release

  1. International will be responsible for determining whether to refile these NFTLs and for requesting the release.
  2. Notices of Federal Tax Lien for refiling and certificates of release will be:
    1. Prepared by International and
    2. Forwarded to the appropriate revenue officer group for recording.
  3. No TC 582 or TC 360 will be input and no NFTL fees will be assessed against MCAR taxpayers.

5.12.2.8  (03-01-2004)
Place for Filing of Notice of Federal Tax Lien

  1. Under state laws:
    1. Real Property - file in one office within the state (or county, or other governmental subdivision), as designated by the laws of the state, where the property is located. See Section 1.15 and IRC 6323(f)(1)(A)(ii).
    2. Personal Property - whether tangible or intangible, file in one office designated by the laws of the state, where the property is located (located at the residence of the taxpayer at the time the NFTL is filed). See IRC 6323(f)(1)(A)(ii).
  2. With clerk of district court - File in the office of the clerk of the United States district court for the judicial district where the property subject to the FTL is located, whenever the State has not by law designated one office which meets the requirements of (1) above; or
  3. With the recorder of deeds of the District of Columbia - Personal property whether tangible or intangible, is deemed to be located in the District of Columbia if the taxpayer’s residence is located there or outside the United States at the time the notice of lien is filed.
  4. A NFTL encumbers motor vehicles, airplanes and vessels in the same manner as other personal property when a NFTL is filed in the recording office designated by state law as the residence of the taxpayer. Do not file Form 668(Y)(c) with Departments of Vehicles, FAA, or the U.S. Coast Guard or similar agencies. (See IRC 6323(f)(5)).

5.12.2.9  (03-01-2004)
Liens Filed in Other Areas

  1. A NFTL may be filed in any Internal Revenue area, regardless of where the assessment is outstanding. Form 2209, Courtesy Investigation, should be prepared to request an out-of-area NFTL filing and can be faxed. The receiving area will prepare and file form 668(Y) through ALS. A TC 582 will be automatically generated.
  2. Form 2209 will contain sufficient information to enable the receiving area to properly prepare the NFTL and determine the proper place of filing. The Form 2209 must also indicate whether the NFTL is to reach real or personal property or both. This is necessary as the recording official may be different in certain states.
  3. After recording, the receiving office should input the recording data onto their database and transmit Part 2 of the NFTL with the recording data to the originating office.
  4. The Form 2209 and Part 2 of the Form 668(Y) will be associated with the related balance due file.
  5. Use ALS to file these liens, whenever possible. The identification information of the requesting employee will be shown on the NFTL and the collection due process notice. The NFTL will be printed in the receiving area office while the collection due process notice will be printed in the originating area office.
  6. Once modules are satisfied, a module satisfied notice will be generated to each area that previously requested a TC 582. A systemic release will be generated automatically and forwarded to the proper recording office.

5.12.2.10  (03-01-2004)
Filing Outside the U.S.

  1. No collection activity can be taken against property located outside the U.S., its territories or possessions, without an agreement or treaty with the situs country.

5.12.2.11  (03-01-2004)
Filing the NFTL by Mail

  1. Arrange with local officials for the acceptance (for filing) of NFTL by mail. If necessary, have a transmittal accompany Parts 1 and 2 of the NFTL, Form 3915, Processing Notices and Releases of Federal Tax Lien and Other Related Certificates. A self-addressed postage paid envelope, E-25C, will be enclosed for the return of Part 2.
  2. If arrangements cannot be made with local officials to accept NFTL filing by mail or circumstances dictate immediate action, the NFTL should be delivered personally to the proper recording official.
  3. Receipted copies will be returned to Case Processing.

5.12.2.12  (03-01-2004)
Distributing the NFTL

  1. The Form 668Y(c), Notice of Federal Tax Lien, is a multi-part form. Distribute the form in the following manner:
    1. Mail Parts 1 and 2 to the recording office. If manually prepared, retain a copy in the case file prior to mailing.
    2. Part 2 will be returned by the recording office with the appropriate recording information documented.
    3. Mail Part 3 to the taxpayer. (Effective 1/19/1999, taxpayer copies of the NFTL are sent certified mail with the collection due process notice.

5.12.2.13  (03-01-2004)
Lien Filed Indicator

  1. A lien filed indicator (LFI) should appear on any module that has a TC 582 posted.
  2. The lien filed indicator on ALS generated NFTLs will be systemically input through IDRS to all tax modules that are included on a Notice of Federal Tax Lien. The LFI is the primary means by which areas are notified that modules are satisfied and that a release of the NFTL is in order.
  3. The input of LFIs is accomplished by having the automated system generate and forward a file to the servicing campus. The file is generated weekly and will include ACS NFTLs to take advantage of the LFI upload file.
  4. TC 582 is not generated to NMF accounts.
  5. Request input of TC 582 for a lien file indicator and TC 360 for recording fees for all manually prepared liens, including estate tax liens, if applicable.

5.12.2.13.1  (03-01-2004)
Removing LFI Indicators

  1. Whenever an FTL is released, the related LFI must be removed from IDRS/master file. However, if the balance due is non-master file and no LFI is present for that module on IDRS, no action is necessary.
  2. The LFI is removed when the automated system generates a file to the servicing campus for the input of TC 583.

5.12.2.14  (03-01-2004)
Special Rules

  1. Special rules apply in some instances when filing a Notice of Federal Tax Lien

5.12.2.14.1  (03-01-2004)
Actual Notice or Knowledge of Lien Requirement

  1. The federal tax lien generally has priority over all interests created after the NFTL is filed. However, the Code provides that certain interests are senior to the Service’s interest despite the earlier filing of the NFTL. See IRM 5.17.2.5.1, Superpriorities; IRM 5.17.2.5.3.1, Commercial Transactions Financing Agreements; and IRM 5.17.2.5.3.4, 45 - day Period for Making Disbursements.
  2. In some cases, the perfection of these interests may be disrupted if the third party asserting the interest has actual notice of knowledge.
  3. Third parties that should receive a copy of the filed NFTL include.
    1. Intended purchases (if known) of the taxpayer’s stocks, bonds, or other marketable securities.
    2. Intended purchases (if known) of taxpayer’s motor vehicles.
    3. Any insurer under a life insurance, endowment, or annuity contract with the taxpayer.
    4. Any financial institution holding an account for the taxpayer.
    5. Any lender or potential lender to the taxpayer or the taxpayer’s business.

Note:

In most cases, notice to third parties will not be possible because these third parties will not be known.

5.12.2.15  (03-01-2004)
Requests for Disclosure of Outstanding Lien Amount

  1. See Delegation Order 11-2 for a list of employees authorized to disclose information concerning the amount of the outstanding obligation secured by the NFTL. Disclosure may be made to any person who demonstrates that he/she possesses a right or intends to obtain right in the property. See IRM 11. 3.1.10, Disclosure of Amount of Outstanding Lien.
  2. Employees listed in Delegation Order 11-2 have the authority to determine whether or not to disclose the requested information under the authority of IRC 6103(k)(2).
  3. Any person, other than the taxpayer or their designee, desiring information as to the amount of the outstanding obligation in order to decide whether to acquire the property covered by the NFTL (when a NFTL has been filed) must submit a written request stating the reasons the information is desired and properly identifying the NFTL in question. A prospective purchaser should attach a copy of the sales contract or a lender a loan application.
  4. The requested information will be furnished using Letter 1038(DO), Response to Inquiries About Release of Federal Tax Lien.

5.12.2.15.1  (03-01-2004)
Disclosure to Escrow and Title Companies

  1. When a completed Form 8821, Taxpayer Information Authorization, is provided, employees designated the authority to execute Forms 668(Y)(c), may disclose the amount of the outstanding obligation secured by the NFTL to escrow agents, title companies, lending institutions, etc., (See IRC 6103(c)).
  2. The Form 8821 must be completed prior to the taxpayer signing it and should authorize disclosure of lien information on the specific piece of property for sale.
  3. The following information should be provided:
    1. The taxpayer’s name, address, taxpayer identification number, or any combination of these three.
    2. The information to be disclosed, for example, the amount shown on the NFTL, including the address of the real property subject to the filed NFTL.
    3. The identity of the company or escrow agent authorized to receive the information. It is not necessary to name an individual
    4. The taxpayer’s signature and date.
    5. It is not necessary to specify tax type or tax year.
  4. Taxpayers may also authorize disclosure telephonically. Verify the taxpayer’s identity using approved functional procedures and document the information in writing.
    1. The information to be disclosed; for example, the amount shown on the NFTL, including the address of the property subject to the NFTL.
    2. The identity of the escrow agent or title company authorized to receive the information.
    3. The date of the consent. For example, "John Doe on 03/05/03 consents to disclose the payoff amount of all filed NFTLs on 134 Maple Boulevard to XYZ Title."
  5. Disclosure of lien information not subject to a filed NFTL should not occur without obtaining the taxpayer’s authorization either orally or in writing. Obtain and document the information referred to (4) above.
  6. In situations where the taxpayer’s authorization cannot be obtained, seek advice from Area Counsel; for example, taxpayer is medically incapacitated, is on vacation outside the U.S. and cannot be reached, etc.

5.12.2.16  (03-01-2004)
Lien Priorities

  1. The Federal Tax Lien (FTL) is not valid against purchasers, holders of security interests, mechanics lienors, and judgment lien creditors until a Notice of Federal Tax Lien (NFTL) has been filed. The filing of the NFTL notifies creditors that the FTL exists. The FTL becomes valid against those creditors discussed above at the time the NFTL is filed. Refer to IRC 6323. Exceptions exist for ten "superpriorities."
    1. Securities
    2. Motor Vehicles
    3. Retail purchases
    4. Casual sales
    5. Possessory liens
    6. Real property tax and special assessment liens
    7. Small repairs and improvements of residential real property.
    8. Attorney liens
    9. Certain insurance contracts
    10. Deposit secured loans
  2. These priorities are fully defined in the IRM, 5.17.2, Legal Reference Guide (LRG) for Revenue Officers.
  3. Purchase money security interests and purchase money mortgages have priority over a previously filed NFTL, if protected under local law. See Rev. Rul. 68-57).

5.12.2.17  (05-20-2005)
Priority of Certain Other Interests - Advances, Interest and Expenses

  1. In some cases, advances made after or property coming into existence after the NFTL is filed have priority if granted by local law. Protection under local law must be the same that is provided against a judgment lien creditor at the time the NFTL is filed.
  2. The law provides priority generally with respect to security interests in property held before the notice of lien filing which arose as a result of advances made prior to the 46th day after the filing of a tax lien, unless actual notice or knowledge of the filing is obtained sooner. However, for the priority to exist in such cases, certain conditions must be met. See IRM 5.17.2.5.3.4.
  3. Home Equity Line of Credit - it is advisable to investigate the facts of the case to determine how the funds were used in order to determine the priority of the FTL. If the funds are drawn after the NFTL is filed, determine if the mortgage/lender has a security interest in the real property. Verify the amount of money or money’s worth that changed hands. Determine if:
    1. The entire amount was turned over to the taxpayer;
    2. The taxpayer is allowed to draw against the funds as he wants;
    3. A specific amount was approved;
    4. The taxpayer paid down the amount owed.
  4. Interest and certain expenses have the same priority as the related lien or security interest. See IRC 6323(e) and IRM 5.17.2.5.4.

5.12.2.18  (03-01-2006)
Lien Fees

  1. Input lien fees to file or release manually prepared NFTLs when the NFTL is forwarded for input.

Note:

TC 360 should will appear on the oldest module on the lien with a TC 582 lien filed indicator (LFI) present.

  1. Input of fees for systemically generated NFTLs is accomplished by having ALS generate a file to the servicing campus. Files are generated weekly on Friday and include fees through close of business Wednesday of the same week.
  2. A 24 hour delay of the transaction code going to the data file allows for corrections resulting from quality review of NFTL documents. Contact the Lien Unit to have the NFTL deleted if full payment is received within 24 hours.
  3. A listing will generate for TC 360 associated with NMF accounts. A request for posting MARS must be prepared and forwarded to the servicing campus on Form 3244, Payment Posting Voucher.
  4. Reverse the TC 360 when a NFTL is filed in error.
  5. See IRM 5.12.6, for information regarding billing methods.

5.12.2.19  (05-20-2005)
Refiling the NFTL

  1. Refile the NFTL to maintain the continuity of priority established by the original lien filing when the collection period is extended.
  2. Consider refiling the NFTL if the statute date has been extended or suspended by any action within the required refiling period. All NFTLs filed after 12/82 will self-release ten years after the assessment regardless of any extension or suspension of the collection statute, e.g., filing of a suit, consideration of an OIC, automatic stay in bankruptcy, etc.

If

Then

the form used for the original refiling was earlier than 12/1982,

failure to file at the appropriate time does not affect the validity of the filing. However, it does nullify the effect of the prior filing.

Notices of Federal Tax Lien are filed on forms revised on 12/1982 or later

the form "self-releases" unless timely refiled. These forms are considered as both a NFTL and a release.

  1. You may obtain a copy of the Potential Refile Report generated by the ALS upon request. The report may assist you in identifying those liens that are within the refile period. See IRM 5.12.6. for additional guidance.
  2. Refiling timely maintains the government’s priority amongst other creditors. Release of the NFTL is conclusive that the underlying, statutory FTL is extinguished. Follow procedures in IRM 5.12.3 for revocation and reinstatement procedures.
  3. All functions with active inventories are responsible for making timely refile determinations, as well as ensuring that the NFTL is refiled, if appropriate.
  4. Collection Technical Services will make refile determinations and request refiling of the NFTL for CNC mandatory follow-up and ACS cases.
  5. Designated employees in the Automated Collection System Unit are responsible for NFTL refiling on active ACS cases.
  6. The Lien Processing Unit will input refiles through ALS upon request.

5.12.2.19.1  (07-01-2005)
Criteria for Refiling

  • Before any NFTL is refiled, each assessment should be examined to determine that the statutory period for collection has been suspended or extended beyond the normal ten-year period beginning with the assessment date.
  • The normal collection statute may be suspended or extended by:
  1. Execution of Form 900, Tax Collection Waiver
  2. Offer in Compromise.
  3. Assets of taxpayers in custody of a court in certain types of proceedings.
  4. Judgment for the United States.
  5. Absence of taxpayer from the United States continuously for six months.
  6. Military deferments.
  7. Filing a suit.
  8. An extension executed between the taxpayer and the Service before a timely-filed levy is released after the CSED.
  9. Wrongful seizure or lien on property of a third party.
  10. Automatic stay in bankruptcy.
  • The extension of the statutory period for collection does not mean that a NFTL must be automatically refiled. Each case should be analyzed regarding present and future assets to which the refiled NFTL might attach. The present balance still due on the FTL would be another factor to be taken into consideration.

5.12.2.19.2  (03-01-2004)
Required Refiling Period

  • The time period for refiling the NFTL has a starting and ending date. Therefore, a refiled Notice of Federal Tax Lien is invalid if it is filed after the period for refiling.
  • The refiling period lasts for one year. For the first refiling, the period begins nine years and 30 days from the date of the assessment and ends 10 years and 30 days from the date of assessment. For example, if the assessment date is 3/1/85, the first refiling period 3/31/94 - 3/31/95. For subsequent refilings, each period begins nine years after the end of the previous refiling period and ends 1 year later. An example using the first refiling period above is that the second refile period would be 3/31/04 - 3/31/05.
  • The following is an example of the "Required Refiling Period" On March 1, 1985, an assessment of tax was made against A, a delinquent taxpayer, and a FTL for the amount of the assessment arose on that date. On July 1, 1985, a NFTL was properly filed. The NFTL filed on July 1, 1985, is effective up to and including March 31, 1995. The first required refiling period for the NFTL begins on April 1, 1994, and ends on March 31, 1995. A refiling of NFTL during that period will extend the effectiveness of the NFTL filed on July 1, 1985, up to and including March 31, 2005. The second required refiling period for the NFTL begins on April 1, 2004, and ends on March 31, 2005.
  • For calculations of the required refile period see Exhibit 5.12.2-4.

5.12.2.19.3  (03-01-2004)
Place for Refiling

  • During the required refiling period, the NFTL is to be refiled:
    • In all cases in every office in which a prior NFTL (including a refiled notice) was filed, and
    • In the proper office in the State where a new residence is located, if, 90 days or more prior to the date of refiling, the Service receives written information concerning a change in the taxpayer’s residence.

Note:

If the state has redesignated its filing location for the specific type of property, the NFTL should be refiled in the new office designated by the state. The Uniform Federal Lien Act of the state should be checked to confirm where to file the certificate or notice.


If

Then

the new residence is located outside the United States

refiling will be made in the District of Columbia. This refiling is extremely important in the case of personal property. If it is not accomplished as and when required, all other refilings are ineffective.

more than one written notice of change of address is received on or before the 90th day.

the most recent one will be used for purposes of refiling, whether or not the taxpayer resides there on the date of refiling.

5.12.2.19.4  (03-01-2004)
Address Change Procedures Affecting Refiling

  • Except as provided below, a notice of change of a taxpayer ’s residence will be effective only if it is received in writing from the taxpayer or his/her representative (Form 8822, Change of Address), and states the taxpayer’s name and the address of the new residence.
  • The notice of change of a taxpayer’s residence will be effective if it is contained in a return or amended return of the same type of tax filed with the Internal Revenue Service by the taxpayer.
  • The return or amended return must indicate that it is a change of address and correctly state the taxpayer’s name, address of present residence and identification number required by IRC 6109.
  • Other than the means specified above, no communication, either written or oral, will be considered as notice of a change of a taxpayer’s residence.

5.12.2.19.5  (03-01-2004)
Procedures and Responsibilities for Refiling

  • Under normal circumstances, the Automated Lien System (ALS) should be used.
  • At times, circumstances may exist that do not allow time for a refiled NFTL to be created through ALS. In these cases Form 668F should be prepared as shown in Exhibit 5.12.2-5
  • ALS Units will print the Potential Refile Report and forward information on suspended cases to the appropriate function or employee for a refile determination. ACS and Form 53 mandatory follow-up determinations will be made by Collection Technical Services.
  • Prior to refiling, all balances must be updated to reflect the current unpaid balance of assessment, Satisfied modules should not appear on a refiled NFTL.

If

Then

the refiled NFTL is prepared through ALS

ALS will automatically not include any satisfied modules.

the entire assessed amount has been paid, unassessed accrued amounts remain outstanding

enter the total amount of the accruals as of the date the refiled NFTL is requested. These amounts should be shown in column (f). Line through the words Unpaid Balance of Assessment and write in Outstanding Balance.

there us a de minimus amount due on the assessed balance and unassessed accruals

enter the total amount owed plus accruals as of the date the refiled NFTL is requested. Line through the words Unpaid Balance of Assessment and write in Outstanding Balance.

an original Notice of Federal Tax Lien lists more than one liability, and the assessment dates are different,

the refiled NFTL should list only the period(s) which meet the criteria for refiling.

there are multiple assessments within the same period, and the refile periods are different

care should be taken to only enter the balance for the assessment(s) being refiled. The Automated Lien System (ALS) will allow refiling of each specific assessment.

a Form 668(Y) was filed in a given jurisdiction, but because of a change of residence a NFTL is to be refiled during the refiling period in another jurisdiction.

use Form 668F for refiling, even though Form 668(Y) was never filed in that jurisdiction.

  • ALS will allow NFTLs to be refiled when the statute has expired against one person on a joint assessment.

5.12.2.19.6  (03-01-2004)
Release of Refiled NFTL

  • The Form 668F, used to refile a NFTL, is not self-releasing. File a certificate of release when an extended statutory period for collection has expired.
  • Filing Form 668Z, Certificate of Release of Federal Tax Lien, will extinguish the NFTL and remove all notices from the record. Each refiling, amendment or correction associated with an original NFTL must be identified on the certificate of release.

5.12.2.19.7  (03-01-2004)
Original Notice of Lien After Refiling Period

  • Occasionally it is necessary to refile an original NFTL after the end of the first refiling period. The ALS system will prompt you for the CSED. When the NFTL document is printed, ALS will print "N/A" in the "last day for refiling" block.

5.12.2.20  (03-01-2004)
Designated Payment Code

  • A designated payment is a voluntary payment designated by the taxpayer to be applied in a particular manner, i.e., kind of tax, specific tax period, etc. These designations are normally followed by the Service.
  • In the absence of a designation by the taxpayer, payments will be applied in a manner consistent with the provisions of Revenue Procedure 2002-26, unless a specific statute, regulation or procedure designates otherwise.
  • A designated payment code (DPC) is mandatory on all Collection initiated posting vouchers for transaction codes 640, 670, 680, 690, 693 and 700. DPCs serve three purposes.
    • They are used to identify payments that are designated for trust fund or non-trust fund employment and excise taxes.
    • DPCs are used to indicate application of payments for a specific liability.
    • DPCs also identify the event which resulted in the payment.
  • Use DPC 07 when applying payments secured for the release of a notice of federal tax lien or to secure a certificate of discharge or subordination.

Note:

The mere fact that a lien has been filed does not indicate that the payment is due to the filing of a NFTL. In this case, the appropriate DPC should be used.

5.12.2.21  (03-01-2004)
Cost of Living Adjustment

  • For those interests designated as "Superpriorities," RRA 98 provides that for tax years beginning in 1999 and thereafter, the higher superpriority amounts will be indexed annually for inflation (consistent with the cost-of-living adjustment (COLA) amounts for the applicable tax year) and rounded to the nearest multiple of $10. See 5.17.2, Legal Reference Guide.

5.12.2.22  (03-01-2004)
Resolution of NFTL Related Unpostable Transactions

  • There are a number of reasons why transactions do not post. Below we discuss the unposted transaction and how it should be resolved.

5.12.2.22.1  (03-01-2004)
End of Day (EOD) List

  • Weekly an upload is made to the Campus of all transaction codes (TC) 582 and 583 for the previous week’s created and released NFTL. These transactions are input to the Integrated Data Retrieval System (IDRS) and trough End of Day (EOD) processing. EOD processing is the first validity check that is performed on any transaction attempting to post to IDRS.
  • TC 582 and 583 transactions which drop from EOD processing will appear on an EOD control list. This list will be used by the area office to make appropriate corrections to allow the transaction to be reinput.
  • EOD control lists are created in Campus computer rooms and forwarded to the Compliance Services Collection Operations (CSCO) function. CSCO separates the records by area office and forwards the list to the Lien Processing Unit manager in the appropriate area.
  • Areas will review the dropped transactions, determine the reason the transaction dropped and take necessary corrective action to reinput. The most common errors will be name control/TIN and MFT/period mismatch, much like unpostables.
  • The list will show the following:

LINE...

WILL...

1

indicate that the record dropped from processing.

2

show the reason the record dropped.

3

have the following data fields marked:

 
    • Taxpayer Identification Number (TIN)
    • Masterfile Tax (MFT)
    • Tax Period
    • Name Control
    • Transaction Code, and
    • Area.

5.12.2.22.2  (03-01-2004)
Unpostable Resolution

  • Unpostable transactions will be resolved by the centralized lien processing unit. These transactions are found on EONS and Control D. However, revenue officers should review their ICS reject listings to ensure that unpostables are resolved timely. Ultimately, it is the initiating employees responsibility to ensure that the TC 582 posts.
  • In cases where the centralized lien processing unit determines that an account has not been established (prompt assessments), the IDRS control base will be closed and the revenue officer will be notified. The revenue officer is responsible for monitoring IDRS for establishment of the account and ensuring that the TC 582 is posted.
  • Uunpostable TC 360 will be received weekly from the ALS system in the centralized lien unit and resolved.
  • Unpostables will be worked within 5 workdays of receipt.
  • The most common unpostable conditions are TIN/name control mismatch. Some of the reasons these conditions occur are:
    • an input document was prepared incorrectly or data was transcribed incorrectly.
    • The NFTL request was prepared with in correct information and generated an incorrect systemic transaction record.

5.12.2.22.3  (03-01-2004)
Correcting the Unpostable Condition

  • To correct the unpostable condition, do the following:
    • Check the ALS to determine if the information on the unpostable record matches the corresponding information on the ALS NFTL record.
    • Make the appropriate corrections to the unpostable and reinput the transaction code with the correct information, if the information on the unpostable does not match.
    • Check IDRS and/or master file to attempt to determine what the correct information is if the information matches.
    • Reinput the unpostable record with the correct information.

Note:

If the ALS NFTL record is incorrect, refer to IRM 5.12.6 for correcting NFTLs for the appropriate procedures.

    • Take no further action to correct unpostable for TC 360 transaction ONLY, with an unpostable code of 197 (IMF) and unpostable code 347 (BMF). These transactions unposted because the TC 360 attempted to post to an inactive account. Reinput the income TC 360 unpostables and remove any UPC 197 and UPC 347.
    • Close the open IDRS control base as part of the resolution process. CSCO will send Technical Services a Case Control Age List Weekly of Technical Services cases by IDRS employee number and age of case. This listing may be used by Technical Services as a monitoring device that open control bases are being closed timely.
    • Technical Services will receive Accounts Maintenance Transcripts reflecting a TC 360 and there is no liability open on the module where the TC 360 posted. It should not be assumed that the TC 360 is automatically a NFTL fee. Upon receipt of the transcripts, do the following:
    • Research ALS to determine if the NFTL was filed for the taxpayer entity on the transcript.
    • Input TC 582 if necessary and correct the TC 360 posting if the NFTL is found for this entity.
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