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Section 3. Certificates Relating to Liens and Claims for Damages

5.12.3 Certificates Relating to Liens and Claims for Damages

5.12.3.1 Certificates of Release (Overview)
5.12.3.2 Conditions of Release
5.12.3.3 Request for Release of Lien by Taxpayer
5.12.3.4 Request for Release
5.12.3.5 Erroneously Filed Notice of Federal Tax Lien
5.12.3.6 Certificate of Release
5.12.3.7 Disposition of Certificate of Release=
5.12.3.8 Partial Lien Release
5.12.3.9 Authority to Execute Certificate of Release of Lien
5.12.3.10 Civil Cause for Action for Failure to Release Liens Under IRC 6325
5.12.3.11 Other Certificates Relating to Liens (Overview)
5.12.3.12 Discharge of Property
5.12.3.13 Subordination of Lien
5.12.3.14 Applications for Certificates
5.12.3.15 Preparation of Certificates
5.12.3.16 Certificate of Discharge in Foreclosure Proceedings
5.12.3.17 Certain Government Agency Discharges
5.12.3.18 Applications for Discharge (VA, SBA, or FHA)
5.12.3.19 Issuance of Certificate of Discharge (VA, SBA, FHA)
5.12.3.20 Issuance of Certificate of Discharge or Subordination
5.12.3.21 Revocation of Certificates

5.12.3.1 (07-15-2003)
Certificates of Release (Overview)

IRC 6325(a) requires the issuance of a release of Federal Tax Lien within 30 days of the date on which:

The liability is satisfied,
The liability becomes unenforceable due to lapse of time, or
A bond is accepted.

Employees authorized to execute the release must verify that the liability is satisfied or unenforceable.
Employees must use designated payment code (DPC) 07 when posting payments that are the result of a NFTL.

5.12.3.2 (06-13-2005)
Conditions of Release

Systemic releases will be generated when all modules on a NFTL are satisfied. Module satisfied notices are generated by master file whenever a module containing a TC 582 has been satisfied. Satisfied notices are produced weekly and must be processed within 48 hours of receipt. An analysis of the ALS database is completed systemically to determine if the Notice of Federal Tax Lien should be released.
Systemic releases will not be generated on NMF Accounts. Revenue officers must request a manual release through the centralized Lien Processing Unit (LPU) for all assigned NMF cases.

5.12.3.2.1 (06-13-2005)
Liability is Satisfied

Issue a certificate of release of a NFTL within 30 days after determining that the taxpayer’s outstanding obligation covered by the lien (including any interest, additional amount, addition to the tax, or assessable penalty, together with any additional costs that may have accrued) is fully satisfied by payment or by abatement. See IRM 5.17, Legal Reference Guide for Revenue Officers and IRC 6325(a)(1).
Where payment is made by personal check, the 30-day release period will begin after 15 working days from receipt. This will permit sufficient time for the check to clear. A release may be issued immediately upon presentation of the canceled check.
If a credit line check is received, the 30 day release period will begin after 15 working days from receipt. However, if the credit line check is certified, issue an immediate release.
Accounts satisfied by cash, postal money order, certified check, cashiers check, official bank checks or guaranteed draft drawn on any organization that is authorized to do business under state or federal laws relating to financial institutions, may be released immediately upon payment.

Note:

Accept official bank checks and guaranteed drafts for immediate release.

If	Then
there is reason to doubt the financial stability of an institution,	reject the tender of the institution’s guaranteed draft.
a guaranteed draft is not duly paid,	the United States will have a lien on all assets of the drawee institution in the amount of the draft.
payment is received to secure a release, certificate of discharge or subordination,	use designated payment code 07 (DPC–07) when preparing the posting voucher.

5.12.3.2.2 (02-02-1999)
Liability is Unenforceable

The word "unenforceable" means unenforceable as a matter of law, and not merely uncollectible. See IRM 25.17.14.11 regarding the release of lien in bankruptcy cases.
NFTL filed on forms revised 12/82 or later do not require that a separate certificate of release be issued when the statutory period for collection has expired unless the NFTL has been refiled or a request is made for a separate release.
NFTL refiled on Form 668–F, Notice of Federal Tax Lien, are not self-releasing. A certificate of release must be filed when the liability becomes unenforceable.

5.12.3.2.3 (06-13-2005)
Acceptance of a Bond

Issue a release of a NFTL within 30 days of accepting a bond based on the payment of the amount assessed (including any interest, addition to tax, assessable penalty, together with any accrued costs) within the time agreed to in the bond, but not later than six months before the expiration of the statutory period for collection. See IRC 6325(a)(2).
The bond must be executed by a surety company holding a certificate of authority from the Secretary of the Treasury, or, in the discretion of the area director, collateral may be accepted within established limits (see IRC 7101 and 7102). The acceptability of a surety, other than a Treasury approved surety, will be determined on a case by case basis.

5.12.3.2.4 (06-13-2005)
Acceptance of an Offer

When an offer in compromise, including a collateral agreement, is accepted, the NFTL will be released, when:

the payment of offered amount, including any accrued interest, has been paid;
all other terms and conditions of the offer are in compliance at the time the release is requested. This includes refund recoupment, collateral and future compliance issues.

Requests for the issuance of a certificate of release may be made by those OIC Units with ALS access.
OIC managers with access to ALS may approve the issuance of a certificate of release on the ALS system for a joint liability only when the OIC was granted for both taxpayers.
OIC Units without ALS access will FAX a document to the centralized LPU containing the following information:

Name of Taxpayer
TIN
Tax Period to be released
Name and ID number of employee requesting the release

OIC Unit managers may not issue a certificate of release when extenuating circumstances exist, e.g., innocent spouse, non-petitioning spouse, co-obligors, etc. See Exhibit 5.12.3–2. Use the procedures in (4) above for requesting the release.

5.12.3.2.4.1 (06-13-2005)
OIC Funded by Lending Institutions

When the offered amount is paid by a lending institution, request that the certificate of release be prepared. The designated employee will sign the certificate of release. Do not date, the certificate will be dated upon receipt of payment.

Note:

The Lien Processing Unit must be instructed not to mail the certificate of release to the recording office.

Forward the certificate of release to the assigned revenue officer at the time the taxpayer is informed that the offer is accepted.
The revenue officer will secure the full offer amount and provide a copy of the release to the lending institution and the taxpayer.
Provide the taxpayer Notice 48 that explains the process to have the certificate of release recorded.
Forward a copy of the certificate of release to the Lien Processing Unit to update the ALS database.

5.12.3.2.5 (02-02-1999)
Trust Fund Recovery Penalty

Issue a Certificate of Release of Federal Tax Lien to the nonpaying officer(s) on a trust fund recovery penalty assessment when one officer has fully paid the liability. This will be done even though the liability has not been abated pending the expiration of the statutory period within which a claim for refund by the paying officer may be made.

5.12.3.2.6 (07-15-2003)
Bankruptcy Discharge of One Party on a Jointly Filed Lien

When one party of a jointly filed NFTL files bankruptcy and is discharged, a transaction code 400 will be used to adjust the joint account.
The TC 400 will not cause the module to go to master file status 12 and therefore the module will not cause a notification of satisfaction to be passed to the Automated Lien System (ALS). The jointly filed NFTL will not be released.
A Certificate of Release will be manually prepared. See Exhibit 5.12.3–1 and 5.12.3–2.

5.12.3.2.7 (07-15-2003)
Innocent Spouse Determinations

IRC 6015 grants relief to a spouse when it is determined that he/she is not responsible for the liability.
Issue a release for the taxpayer that is not responsible for the liability.
Use the Automated Lien System to generate the release. Specific wording has been added to the database to clearly identify the innocent spouse.

5.12.3.3 (02-02-1999)
Request for Release of Lien by Taxpayer

Procedures for preparing a certificate of release requested by the taxpayer are described in this section.

5.12.3.3.1 (06-13-2005)
Processing Taxpayer Requests for Lien Release

Issue a certificate of release as soon as it is determined that the lien is satisfied, after receipt of a properly completed request, in the area where the NFTL is filed. Any request which is incorrect or incomplete will not trigger the release.
Requests received by fax for a certificate of release may be accepted if contact has been made with the taxpayer by phone or in person and the taxpayer history file is documented with the date of contact and notation is made that the taxpayer will send the request by fax.
Notify the taxpayer when additional information is needed to identify the NFTL to be released or give the reason why a certificate of release will not be issued.
Timely release of the NFTL is essential. Under the Taxpayer Bill of Rights, Section 6240 (new IRC 7432), taxpayers are provided with the right to sue the Federal Government if the Service knowingly or negligently fails to release a NFTL. Recovery is limited to actual, direct economic damages sustained by the taxpayer which, but for the actions of the IRS, would not have been sustained, plus the costs of the action.
Prior to being awarded damages, the taxpayer is required to request a release of NFTL in writing.
Publication 1450, Request for Release of Federal Tax Lien, describes the conditions under which a Certificate of Release of Federal Tax Lien may be issued and the required content of the request.
An immediate or expedite release is one requested when the liability has been satisfied for a period beyond 30 days from the date of satisfaction or when the taxpayer wants to pay the liability to secure a release for such things as the transfer of property or the completion of other financial transactions. See IRM 5.12.3.2.1(4) for acceptable payments.
Occasionally, the Service may erroneously file a duplicate NFTL and the taxpayer may request the release of the duplicate. If the liability has not been satisfied, respond to the taxpayer using Pattern Letter P–2411. This pattern letter will act as a release and filing will be at the option of the taxpayer. See Exhibit 5.12.3–3.

5.12.3.3.2 (06-13-2005)
Satisfied or Unenforceable Taxpayer Accounts

Follow these procedures:

If	Then
the taxpayer states that the liability is satisfied or unenforceable	check ALS to determine if a release has been issued.
a release has not been issued, the liability satisfied and the last date for refile or CSED has not passed	check IDRS to determine if the modules on the notice of lien are in status 12 and 30 days (45 days for personal checks) have elapsed from the date of payment.
	1.	Prepare a manual release.
	2.	Forward a copy to the LPU to update the database.
the module is unenforceable,	1.	Prepare a manual release.
	2.	Forward a copy to the LPU to update the database.
there is no record that the NFTL has been satisfied on ALS or IDRS	1.	Request that the taxpayer submit a written request to the attention of the Lien Processing Unit Manager in the area where the NFTL was filed.
	2.	Provide the taxpayer with Publication 1450, Request for Release of Federal Tax Lien.

5.12.3.3.3 (06-13-2005)
Full Payment in Exchange for Immediate Lien Release

When a taxpayer wants to pay the liability in full to secure immediate release, do the following:

Ensure that payment is made by a method described in IRM 5.12.3.2.1(4).
Prepare a manual release.
Forward a copy to the LPU to update the database;
Provide Notice 48 to the taxpayer.
Advise the taxpayer that he/she will have to file the certificate and pay a recording fee, if the release needs to be recorded immediately.

5.12.3.3.4 (06-13-2005)
Electronic and Credit Card Payments

DO NOT issue an immediate release when credit or debit cards are used to full pay the tax liability. Credit and a debit cards are barred for immediate release of lien because of the possibility of chargeback of such payments over a period of months. It is unlikely that a release will be requested from a credit or debit card payment because the Service may accept such payments only within three years after assessment. See IRM 5.14.10.5. However, if a debit or credit card is accepted to satisfy a tax year and a request for release is received, the lien may not be released until the period for chargeback has run. The maximum period for chargeback is 120 days for payment by credit card under 15 U.S.C. Section1666, and 100 days for payment by credit card under 15 U.S.C. Section 1693f.
Issue a certificate of release when full payment of the liability is made by electronic funds transfer (EFT) . These payments become irrevocable in a short period of time.

5.12.3.4 (06-13-2005)
Request for Release

Area offices are notified by the Service Campus that accounts have been satisfied by means of a module satisfied notice. These notices are generated for all full paid modules that were in balance due or suspended status and a Lien Filed Indicator (LFI) input to the module. The majority of NFTL releases are generated by the systemic processing of the module satisfied notice.
The ALS systemic release module is used to enter lien release information not covered by a module satisfied notice. Basic audit trail data as well as how the lien was satisfied, the requesting employee, and the approving official is also displayed using the program. The lien release is assigned to the manager’s queue for electronic signature and is produced when it has been approved.
If a liability is satisfied by cash, certified or cashiers check, an immediate release of the NFTL is required, provide the satisfying information to the Lien Processing Manager where the release will be prepared without waiting for the module satisfied notice to be received.
The need to request immediate release of liens should be restricted to:

taxpayer requests, or
pending property transactions that would be delayed by normal processing.

When the LFI is not present on a module, provide a copy of the Form 668(Y) to the Lien Processing Unit with supporting documentation, to generate the release.
Provide sufficient documentation to identify periods to be released on a NFTL with multiple periods listed where one or more of the periods were satisfied prior to January 1988. A module satisfied notice will be issued to set the satisfied indicator in the lien database to systemically release the NFTL when the last period is satisfied.

5.12.3.4.1 (06-13-2005)
Request for Release in Another Area

An out-of-area release will be generated by a module satisfied tape or file sent to each area office that had previously requested input of a TC 582. A systemic release will be generated automatically and forwarded to the proper recording office.
A telephone call will be made to the Lien Processing Unit when immediate release is needed.
The receiving area will generate the release through the automated system and forward it to the proper recording office.

5.12.3.5 (06-13-2005)
Erroneously Filed Notice of Federal Tax Lien

The definition of an erroneously filed NFTL (IRC 6326) is a NFTL filed during the presence of one of the following conditions:

the liability was satisfied prior to the NFTL filing;
any tax liability which was assessed in violation of deficiency procedures in IRC 6213;
the statute of limitations for collection expired prior to filing of the NFTL.

When an erroneous filing situation is identified, a Form 668Z, Certificate of Release of Federal Tax Lien and Letter 544, (Exhibit 5.12.2-4) must be issued by Technical Services within 14 days, where practical. A memorandum outlining the facts should be prepared immediately and forwarded to Technical Services.
When circumstances dictate immediate action, the facts of the case should be given to Technical Services by telephone for preparation of the letter. The memorandum must still be prepared and forwarded to Technical Services.
The letter should be signed by the Technical Services Group Manager or other persons authorized to sign on his/her behalf.
At the taxpayer’s written request a copy of the release and letter of apology may be furnished to creditors or credit bureaus. Instruct the taxpayer to provide names, mailing addresses, and authority to disclose the information.
Filing and release fees will be abated on erroneously filed NFTLs.

5.12.3.6 (06-13-2005)
Certificate of Release

Issue a Certificate of Release only after all assessments covered by the NFTL meet the criteria for release even though a certificate could be issued when each assessment is satisfied or becomes unenforceable.
If a specific request is received from a taxpayer for the issuance of a release of satisfied or unenforceable modules on NFTLs recorded with multiple modules, forward the request to the LPU for a partial release of the NFTL.

5.12.3.7 (07-15-2003)
Disposition of Certificate of Release

Form 668(Z) will be mailed or presented to the proper recording office.
Attach Form 3915, Processing Notices and Releases of Federal Tax Lien and Other Related Certificates, and mark the appropriate block on the form, when certificates are mailed and a transmittal document is necessary.
A self-addressed, postage and fee paid envelope will accompany certificates of release if a receipt is requested.
In some instances the taxpayer may insist upon personally recording the release. In those cases, the fee for filing the certificate of release of lien will not be collected from the taxpayer. Notice 48 is provided for transmitting certificates to taxpayers.
The payment of release fees should be handled in the same manner as filing fees.

5.12.3.8 (07-15-2003)
Partial Lien Release

There is no provision in the Code or the Regulations for the issuance of a partial release. However, circumstances sometimes dictate that a partial release of the NFTL is necessary.
When one taxpayer on a jointly filed return is determined not to be liable for the tax debt a certificate of release for that taxpayer must be issued. For example, a partial release is issued when there is a discharge in bankruptcy and only one person petitioned the court, an offer-in-compromise is requested by one party and the offered amount is accepted, or there is an innocent spouse determination
Issue the certificate of release in the name of the taxpayer that is not liable for the tax debt.
A partial lien release may be generated when there are multiple tax periods and the taxpayer requests a release for a specific tax period.
The partial lien release can be prepared using ALS. The ALS allows the user to select a paragraph, clearly identifying the non-liable taxpayer, to be printed on the front of Form 668(Z).
Do not post TC 583 to the still liable taxpayer’s master file account.

5.12.3.9 (07-15-2003)
Authority to Execute Certificate of Release of Lien

The Secretary may redelegate (IRC 6325) the authority to issue Certificates of Release of Federal Tax Liens.
Authority may be redelegated to the following officers. See Delegation Order 5-4 for a complete list.

Field Territory Manager,
Field Group managers,
Technical Services Group Managers,
Revenue officers Grade 9 and above,
Advisors Grade 11 and above,
Campus Offer in Compromise Managers.

Facsimile signature stamps may be used for large volumes of releases.

5.12.3.10 (06-13-2005)
Civil Cause for Action for Failure to Release Liens Under IRC 6325

Taxpayers have the right to sue the Federal Government for damages in federal district court if any officer or employee of the Internal Revenue Service knowingly or by reason of negligence, fails to release a filed Notice of Federal Tax Lien. See IRC 7432.
Taxpayers must exhaust all administrative remedies available within the IRS prior to initiating a civil action in federal district court.
Taxpayers must:

submit a written request for a release of the NFTL to the area office where the NFTL was filed; and
submit an administrative claim for damages (IRC 7432).

5.12.3.10.1 (06-13-2005)
Administrative Claim Procedures

Title 26, Part 301, Section 7432-1 of the Code of Federal Regulations (CFR) contains the administrative claim procedures of Internal Revenue Code Section 7432.
Send the administrative claim to the Technical Services Group Manager in the area office where the taxpayer currently resides or the Technical Services Group Manager where the Notice of Federal Tax Lien was filed. There is no standard form used in preparing a claim. It must contain the following information:

The name, current address, current home and work telephone numbers and any convenient times to be contacted and the taxpayer identification number of the taxpayer making the claim.
A copy of the NFTL affecting the taxpayer’s property, if available.
A copy of the request for the release of lien made in accordance with section 401.6325-1(f) of the Code of Federal Regulations.
The grounds, in reasonable detail, for the claim (include copies of any available substantiating documentation or correspondence with the Internal Revenue Service);
A description of the damages incurred by the taxpayer filing the claim (including copies of any available substantiating documentation or evidence);
The dollar amount of the claim, including any damages that have not yet been incurred but that are reasonably foreseeable (including copies of any available substantiating documentation or evidence); and
The signature of the taxpayer or the taxpayer’s duly authorized representative.

Each claim will be reviewed by Technical Services to insure that it contains the required information.
Within 14 days of receipt, notify the taxpayer in writing either of deficiencies or that the claim is not processable, when the claim does not contain the information required in (1) above.

Note:

This is not considered a rejection of the claim because a claim meeting the requirements of Treasury Regulation 301.7432-1 has not been filed.

Use Letter 2730 (See Exhibit 5.12.3-18) to notify the taxpayer of any claim deficiencies.
If the claim was for a NFTL filed in another area office, forward the claim and all supporting documentation to that area office.
Notify the taxpayer that the claim is being forwarded to another area office using Letter 2731 (See Exhibit 5.12.3-19).
Administrative review of the claim must be completed within 30 days of receipt of a processable claim.

Note:

The taxpayer may bring suit either upon:

a decision on the claim, or
30-days after the filing of a processable claim.

A taxpayer must file an action in federal district court within two years after the cause of action occurs. If the taxpayer files an administrative claim within the last 30 days of the two-year period of limitations, the taxpayer may file an action in federal district court any time after the administrative claim is filed.
Use Letter 2732 (Exhibit 5.12.3-20) or Letter 2733 (Exhibit 5.12.3-21) to notify the taxpayer of the results of the administrative review of the claim. If only a portion of the claim is approved, both pattern letters will be sent to the taxpayer at the same time. Authority to sign these letters should be delegated no lower than the Technical Services Group Manager.
There is no further administrative appeal of a claim for damages under this section is the claim if denied. The remedy provided by the statute is the institution of a suit.

5.12.3.10.2 (06-13-2005)
Evaluation of Claim for Damages Under IRC 7432

Date stamp the claim upon receipt. Technical services should complete the review within 30 days of receipt.
Open an OI on ICS under 101- Claim Other. Review the closed files for any prior claims.
The statutory elements contained in IRC 7432 must be applied to each processable claim. Address the following issues in determining if a claim is administratively allowable:

Should the IRS have released the NFTL under the provisions of IR Code section 6325?
Did an outstanding NFTL against the taxpayer cause the taxpayer to sustain direct, economic damages?
Are any damages reducible by any amount that could have reasonably been avoided or mitigated by the taxpayer?
Has there been a finding under Section 6325(a)(1) that the liability for the amount assessed, together with all interest, has been fully satisfied or has become legally unenforceable. Such a finding is treated as made on the earlier of: the date the appropriate official makes this finding or the date on which the Service receives a request for a certificate of release of lien in accordance with Treasury Regulation 401.6325-2(f), together with any information that is reasonably necessary to conclude that the lien has been fully satisfied or is legally unenforceable.

Evaluate the facts and circumstances of each case.
If the claim is made without proof or proper substantiation of damages, the taxpayer should be contacted immediately and told of the requirement to provide verification that these damages have been incurred. The Technical Services employee charged with reviewing and making the initial determination should approach this task with the recognition that it is possible that actual economic damages can accrue as a result of untimely NFTL releases. When faced with issues that do not present a clear-cut solution, discuss with area counsel.
The reviewer must determine if the IRS knowingly or negligently failed to release a NFTL under IRC section 6325 and whether the failure caused direct economic damages which the taxpayer could not avoid. The failure to release the lien is negligent.

Note:

Negligence means the appropriate IRS employee failed to use due diligence, or act as a reasonable person would, to release the lien.

The reviewer must ascertain when, in time, the taxpayer became aware of the violation only for purposes of determining if the claim should be rejected for timeliness.

Claims filed more than two years after the violation must receive special scrutiny. This means that the violation occurred more than two years before the filing date of the claim. The taxpayer has two years in which to file a claim.
The taxpayer’s two-year limitation to bring suit begins at the point when the taxpayer has had a reasonable opportunity to discover all essential elements in a possible cause of action.
The reviewer must determine when the taxpayer knew or should have known of IRS’ failure knowing or negligent failure to release the NFTL.
Claims filed outside the two-year limitation will be rejected.

Certain criteria guide the amount of an administrative settlement, if any authorized, under this section. For example:

the amount of the award is to be reduced by the amount of such damages which could have reasonably been lessened by the taxpayer;
only actual, direct economic damages are recoverable in an administrative claim. No litigation or administrative costs are recoverable in an administrative claim. To the extent that any costs are recoverable under section 7432, such costs are recoverable only in a court proceeding.

The determination to accept or reject each claim will be reviewed by Area Counsel for agreement.
Release the NFTL when it is determined the IRS knowingly or negligently failed to release the NFTL under IRC 6325.
The reviewer will provide written notification to the taxpayer of the determination.

Note:

Your letter should not state any specific statute of limitations determination other than the claim was rejected because of timeliness. If the claim is rejected for any other reason, the letter should inform the taxpayer that a suit may be filed within the applicable limitations period found in IRC 7432(d).

5.12.3.10.3 (03-01-2004)
Reimbursement of Damages and Costs for Failure to Release Lien Under IRC 6325.

If an administrative claim is submitted to the approving official, Compliance personnel involved with the filing of the NFTL may be asked to prepare a memo explaining the facts of the case. This should include any documentation which confirms or contradicts the taxpayer’s statements.
When a claim is approved, prepare an original and three copies of:

FMS Form 195 - Judgment Fund Payment Request (Admin. Award) (Exhibit 5.12.3-22)
FMS Form 196 - Judgment Fund Award Data Sheet (Exhibit 5.12.3-23)
FMS Form 197 - Voucher for Payment of Judgements, Compromise Settlements and Administrative Awards (Exhibit 5.12.3-24)
FMS Form 198 - Judgment Fund Award Data Sheet - Additional Deductions (complete this form only if appropriate) (Exhibit 5.12.3-25)

Forward the original voucher (FMS Form 197) to the taxpayer under cover of Letter 2733 (See Exhibit 5.12.3-24).
When the form is signed by the taxpayer, the approving official will sign FMS Form 197.
Mail a copy of the signed form to the taxpayer.
Use Letter 2734 (Exhibit 5.12.3-15) to forward the original and three copies with the forms described in (2) above to the Judgment Fund Branch, Funds Management Division, Financial Management Service, Department of the Treasury, Room 6N34, US GAO Building, 441 G Street, NW, Washington, DC 20548.
In cases where the taxpayer requests a check in lieu of electronic deposit, FMS will return the check to the contact person listed on Form 196 for reimbursement to the taxpayer.
Mail the check to the taxpayer with a cover letter (locally designed) that specifies the date and the amount of the check.

5.12.3.11 (06-13-2005)
Other Certificates Relating to Liens (Overview)

There are a number of certificates that relate to the lien. The distinction between the certificates are:

Release—operates to completely extinguish the lien.
Discharge—removes the tax lien from specific property.
Subordination—elevates another creditor’s lien to the Service’s priority position and makes the Service’s lien junior to that creditor’s lien.
Non-attachment—denotes that a person of like or similar name is not, in fact, the taxpayer.
Revocation—removes the NFTL from public records abandoning the priority under IRC 6323(a) but does not disturb the underlying tax lien against the taxpayer under IRC 6321.

5.12.3.12 (06-13-2005)
Discharge of Property

After the "discharge" of property from a Federal Tax Lien from certain specifically described realty or personalty the lien continues in full force and effect on all other property or rights to property of the taxpayer.
When making discharge determinations in states that are " entireties" , the government’s interest will generally be determined to be one half of the value of the property.
Types of discharges are:

Internal Revenue Code (IRC) Section 6325(b)(1) permits discharge if the remaining property of the taxpayer has a fair market value double the sum of the amount of the FTL. Issue Form 669–A.
The IRC 6325(b)(2)(A) permits discharge on partial satisfaction of the liability determined to be not less than the value of the government’s interest in the property. If a taxpayer applies for a discharge when entireties property is to be sold by the taxpayer, then the taxpayer generally must pay the Service one-half the proceeds of the sale in partial satisfaction of the liability secured by the FTL. To qualify the requesting taxpayer must be divested of all interest in the property after the sale. Issue Form 669–B.
IRC 6325(b)(2)(B) permits discharge on evidence that the property of the taxpayer has no value. To qualify the taxpayer must be divested of all interest in the property. Issue Form 669–C.
IRC 6325(b)(3) permits discharge on the proceeds of the sale being held as a fund subject to the liens and claims of the government in the same manner and priority as the property that was discharged. To qualify the taxpayer must be divested of all interest in the property after the sale. Issue Form 669-H.
IRC 6325(b)(4) permits discharge after the third party owner, not the taxpayer, deposits the value of the government’s interest in the property in cash or an acceptable bond. In connection with an application for discharge of former entireties property under this provision, the Service will generally determine the value of the government’s interest to be one-half the value of the property. Issue Form 669-G.

Because making an application and deposit (or providing a bond) under Section 6325(b)(4) provides a judicial remedy not available for an application and payment made under Section 6325(b)(2)(A), third party owners of property wishing to apply for a certificate of discharge under Section 6325(b)(2)(A) must waive, in writing, their rights to make a deposit allowed under Section 6325(b)(4) and to file suit for return of the deposit or accepted bond allowed under Section 7426(a)(4).
Unless the waiver has been provided in writing, the Service will treat an application made by an owner of the property (other than the taxpayer) as an application made under Section 6325(b)(4), with all funds treated as a deposit. For the required waiver language, see IRM 5.12.3.12.2.2

5.12.3.12.1 (06-13-2005)
When to Issue a Certificate of Discharge

There are several provisions for issuing a certificate of discharge. Those provisions are discussed below.

5.12.3.12.1.1 (06-13-2005)
Property Double the Amount of the Liability

You may issue a certificate of discharge if you determine whether the property remaining subject to the lien has a fair market value of at least double the amount of the unsatisfied tax liability secured by the NFTL, plus double the amount of all other liens and encumbrances having priority over the Governments lien.

Compute the amount necessary to issue a Form 669-A, Certificate of discharge under IRC 6325(b)(1) as follows:

EXAMPLE:
$1,000 Federal Tax Lien
$5,000 Prior Encumbrances (Senior to the Federal Tax Lien)
+100Real Estate Tax Lien (Superpriority)
$6,100
$12,200 Fair Market Value Necessary for Discharge Under IRC 6325(b)(1)

5.12.3.12.1.2 (06-13-2005)
Part Payment/No value

Issue Form 669–B, Certificate of Discharge Under 6325(b)(2)(A), covering any part of the property subject to the federal tax lien if an amount is paid in part satisfaction of the liability secured by the lien. The amount should not be less than the value of the government’s interest in the property to be discharged and the taxpayer must be divested of all interest in the property.

Note:

Consider all facts and circumstances of the case when determining the amount to be paid, including all other liens and encumbrances with priority over the government’s lien.

No value. Issue Form 669–C, when no equity determinations are made.
Foreclosing mortgagees may use the administrative provisions rather than joining the United States as a party in a judicial foreclosure action. IRC 6325(b)(2)(A) or IRC 6325(b)(2)(B). Discharge of lien eliminates the government’s right of redemption if the United States were joined as a party defendant. See 28 U.S.C. 2410(c). Further, the United States need not become involved in unnecessary litigation.

Note:

The government has the discretion to issue a certificate of discharge under these subsections.

In determining the value of the government’s interest in property to be discharged from a Federal tax lien under IRC 6325(b)(2), consideration will be given to the "forced value," as distinguished from the "fair market value" of the property. The Service will determine the value of the government’s interest to be one-half the value of the property. IRC 6325(b)(2)

5.12.3.12.1.3 (06-13-2005)
Substitution of Proceeds for Sale

Issue a certificate of discharge under IRC 6325(b)(3) on any part of the property subject to a tax lien if the property is sold and, it’s agreed to by the Internal Revenue Service, that the proceeds of the sale are to be held, as a fund subject to the liens and claims of the United States, in the same manner and with the same priority as such liens and claims had with respect to the discharged property. IRC 6325(b)(3)
If property has been sold pursuant to a substituted sales agreement with the Service, any third party who claims an interest to all or any part of the funds within nine months after the date of the agreement may bring suit in a district court of the United States under Section 74269(a)(3).
Reasonable and necessary expenses incurred in connection with the sale of the property or administration of the sale proceeds will be paid from the proceeds of the sale before the satisfaction of any claims.
Refer to IRM 5.12.3.14.3 if taxpayers request consideration of "relocation expenses" as part of their discharge application under IRC 6325(b)(2)(A) and 6325(b)(3).

5.12.3.12.2 (06-13-2005)
Right of Substitution of Value

The third party owner has the right under IRC 6325(b)(4), to receive a certificate of discharge on any property subject to a lien if the third party owner:

deposits an amount equal to the value of the government’s interest in the property, or,
furnishes an acceptable bond in a like amount sufficient to cover the government’s interest in the property.

All amounts received based on third-party applications for the issuance of a discharge will be treated as deposits under IRC 6325(b)(4), unless a written waiver is received.
Follow established procedures for processing and disposition of the bond (IRM 5.6.1.2.1). Technical Services procedures are found in IRM 5.6.1.5.
The third party owner may request the return of the deposit or a release of the bond on the grounds that the Service’s determination of value is incorrect.

If the third party owner makes such a request, he should be requested to provide specific reasons why he disagrees with the Service’s determination.
If a request is made, the Service’s determination should be reconsidered in light of any arguments or proof presented by the third party.
If the Service determines that the actual value is less than the prior determination of value, then the deposit should be returned or the bond released in accordance with the reconsidered determination, provided the redetermination is made before the Service applies the amount deposited to the tax liability or collects on the bond.

Third party owners have 120 days after the day the certificate of discharge is issued to file a civil suit. If suit is not filed, the Service has 60 days to apply the deposit, collect on the bond, or refund any excess amount. See IRM 5.12.3.12.3.1.

Note:

The applicant should be advised that the provisions of IRC 7426(a)(4) are the exclusive remedy for seeking the return of funds deposited under IRC 6325(b)(4). The administrative refund claim or refund suit filed in district court is not available to seek return of the deposit.

If you receive a cashier’s check, cash, or other type of certified funds:

Prepare a memo detailing circumstances of the case.
Prepare posting document and deposit money into Account 4730, Miscellaneous Deposit Fund Account.
Transmit all of the above to the Campus attached to Form 3210.
Retain a copy of all documents in Technical Services for follow-up.

A control number will be assigned by the Campus. Associate receipted copy of Form 3210 with Technical Services file for future follow-up.
When the case is resolved prepare necessary documentation to either have the money refunded to the third party or applied to the taxpayer’s account.

5.12.3.12.2.1 (03-22-2000)
Area Counsel Approval

Area Counsel must approve all third-party requests for discharge prior to issuance of the certificate.

5.12.3.12.2.2 (06-13-2005)
Applications for Discharge

Follow procedures outlined in 5.12.3.13 and Publication 783, How to Apply for a Certificate of Discharge from Federal Tax Lien, when providing information regarding applications for discharge of property under IRC 6325(b)(4).
Inform third-party property owners of the requirement of a written waiver of their rights under Sections 6325(b)(4) and 7426(a)(4) if they elect to request a discharge under Section 6325(b)(2)(A), The signed and dated waiver must state:
"I understand that an application and payment made under Section 6325(b)(2)(A) does not provide the remedy available under Section 7426(a)(4). In making such an application/payment, I waive the option to have the payment treated as a deposit under Section 6325(b)(4) and waive the right to request the return of funds and to bring an action under Section 7426(a)(4). "

5.12.3.12.2.3 (03-22-2000)
Refund Deposit with Interest

The government will refund the difference between the Service’s estimated value and the actual value of that interest (at the overpayment rate) and will release the bond if it is determined that:

the unsatisfied liability giving rise to the lien can be satisfied from a source other than such property, or
the value of the government’s interest in the property is less than the Secretary’s prior determination.

5.12.3.12.2.4 (03-22-2000)
Processing the Refund

Use established procedures for processing overpayments.
Interest must be paid at the prevailing overpayment rate on any amount refunded.

5.12.3.12.2.5 (02-02-1999)
Use of Deposit If Action to Contest Lien Not Filed

If no action is taken within 120 days after the certificate is issued under IRC 7426(a)(4) to contest the filing of the lien, within 60 days after the end of the 120 day period:

Apply the amount deposited or collect on the bond, the amount necessary to satisfy the liability secured by the lien.
Refund with interest at the overpayment rate, any amount that is not used to satisfy the liability.

Exception:

If the property is owned by the person with the unsatisfied liability on which the lien is based then the right for substitution does not apply.

5.12.3.12.2.6 (06-13-2005)
Discharge of Property Involving a Claim of Equitable Subrogation

Applications for discharge under IRC 6325(b)(2)(A) or IRC 6325(b)(2)(B) are sometimes submitted by third parties who either purchased property without having discovered a previously recorded NFTL or who purchased property at a foreclosure sale without the government having been properly noticed under IRC 7425. These buyers will claim a right of equitable subrogation to the extent of encumbrances they paid that had priority over the NFTL prior to the sale.
The doctrine of equitable subrogation is expressly recognized by IRC 6323(I)(2), to the extent it exists under State law. Since subrogation laws vary from state to state, Advisors must be familiar with the applicable state laws and consult with Area Counsel in order to determine the government’s interest in property when a claim of equitable subrogation is made.
Few third parties in the above situations would meet the definition of a party entitled to rights of subrogation as defined by any state’s law. However, courts are highly inclined to expand the definition if it can be shown that a failure to do so will result in the unjust enrichment of one party at the expense of another. Therefore, unless the facts do not support an argument for equitable subrogation, or where such argument is clearly not supported by state law, claims of equitable subrogation in these cases will be recognized when calculating the government’s lien interest, unless, based on local law, Area Counsel advises otherwise.
In determining the government’s lien interest, the following general guidelines apply:

Third party purchased property without recognizing the existence of the NFTL - Calculate the amount that would have been required for a discharge had an application been submitted prior to sale. Then, using forced sale value, deduct the amount of the prior encumbrance(s) paid by the purchaser. Do not deduct expenses of sale. The calculation that results in the higher amount, if any, will be the government’s interest that must be paid in order for a discharge to be issued. Accepting a lesser amount for the certificate then would have been required had the application been made prior to the sale, would unacceptably reward the applicant for not taking action to obtain a discharge certificate until after the property was sold.

EXAMPLE:One month after the sale of property the purchaser discovers that a NFTL in the amount of $50,000 against the seller was recorded prior to the sale and applies for a discharge. The property sold for its fair market value of $100,000. Prior encumbrances and reasonable expenses of sale totaled $70,000 and $10,000 respectively. If the application for discharge had been made at the time of the sale, a payment of $20,000 ($100,000 - $80,000 = $20,000) would have been required in order for a certificate of discharge to be issued. If the government forecloses the lien, and assuming the property would be sold for its forced sale value of $80,000, and if Counsel advises that the purchaser would likely be granted subrogation rights equal to the $70,000 prior mortgage that was paid when the property was purchased, $10,000 will be realized from a lien foreclosure ($80,000 - $70,000 = $10,000). Nonetheless, a payment of $20,000 must be paid in order for a discharge certificate to be issued.
EXAMPLE: Same facts as the above example, but the seller does not apply for a discharge until 2 years after the sale. The value of the property has risen and the forced sale value of the property is now $100,000. If the government forecloses the lien $30,000 will be realized from the foreclosure ($100,000 - $70,000 = $30,000). Therefore, a payment of $30,000 must be paid in order for a discharge certificate to be issued.

Third party purchased property at a foreclosure sale without the government having been properly noticed under IRC 7425 - Using the forced sale value, deduct the amount of the prior encumbrance(s) paid by the purchaser. The result is the amount of the government’s interest that must be paid in order for a discharge to be issued.

EXAMPLE: At its own foreclosure sale a bank bid $95,000 (the amount of the delinquent mortgage) and purchases property with a fair market value of $100,000 and a forced sale value of $80,000. The bank then discovers that proper notice of the foreclosure was not given to the government leaving a NFTL undisturbed. The bank applies for a discharge. Since the forced sale value of the property is less then the amount of the mortgage that had priority over the NFTL, a discharge certificate may be issued without requiring any payment.
EXAMPLE: Same facts as the above example but the delinquent mortgage was $70,000 and that is the amount paid for the property at the foreclosure sale. A payment of $10,000 ($80,000 - $70,000 = $10,000) must be made in order for a discharge certificate to be issued.

See IRM 5.17.2.6.3.1 for additional information regarding issues of subrogation.

5.12.3.12.3 (03-22-2000)
Civil Action --Substitution of Value

If a certificate of discharge is issued (IRC 6325(b)(4)) to any person for any property, then within 120 days of the certificate being issued, the person may bring civil action against the government in a district court of the United States, for a determination of whether the value of the governments interest in the property is less than the value determined by the Secretary.
No other action may be used for this determination.

5.12.3.12.3.1 (02-02-1999)
Form of Relief—Substitution for Value

If the court determines that the Secretary’s determination of the value in the property under IRM 5.12.3.12.2, exceeds the actual value of the governments interest in the property under IRC 6325(b)(4), then the court will grant a judgment ordering:

A refund of the amount deposited,
A release of a bond to the extent that the aggregate amount exceeds the value determined by the court.

5.12.3.12.3.2 (02-02-1999)
Interest Allowed on Refund of Deposit

In the case of a judgment which orders a refund of any amount, the Secretary will pay interest from the date the amount was received to the date of payment of the judgment.

5.12.3.12.3.3 (02-02-1999)
Suspension of Running of the Statute

Suspend the collection statute of limitations where any assessment has been made for which a lien has been filed on any property. IRC 6503(f) states that the running of the period of limitations under IRC 6502 will be suspended for a period equal to the period beginning on the date the person becomes entitled to a certificate of discharge and ending on the date that is 30 days after the earlier of:

the earliest date on which the Secretary no longer holds any amount as a deposit or bond under section 6325(b)(4) by reason of such deposit or bond being used to satisfy the unpaid tax or is being refunded or released, or
the date the judgment secured under IRC 7426(b)(5) becomes final.

The running of the statute of limitations will be suspended only with respect to the amount of the assessment equal to the value of the interest of the government in the property plus interest, penalties, additions to tax and any additional associated amount.

5.12.3.13 (06-13-2005)
Subordination of Lien

IRC 6325(d)(1) and (2) provides for the subordination of any NFTL on any part of the property subject to the NFTL. This includes subordination of IRC 6324A liens.
These three criteria are as follows:

If	Then
there is paid over to the Service an amount, on a dollar for dollar basis, equal to the amount of the NFTL or interest to be subordinated,	issue Certificate of Subordination (Form 669–D). The typical situation would be the subordination of the lien to one who would furnish private financing on a part of the property.
it is determined that the interest of the United States in any part of the property covered by the NFTL will ultimately be increased by the subordination and ultimate collection of the outstanding liability will thereby be facilitated,	issue Certificate of Subordination of Federal Tax Lien (Form 669–E). It is intended that this authority will be used by the Service under conditions similar to those under which an ordinary, prudent businessman would subordinate rights in a debtors property in order to secure additional long run benefits.
it is determined that the United States will be adequately secured after subordination of a lien imposed by IRC 6324B liens only.	issue Certificate of Subordination of Federal Estate Tax Lien (Form 669–F) in the case of any lien imposed by Section 6324B.

IRC 6325(d)(3) provides a more liberalized criteria for subordinating IRC 6324B liens only.
Taxpayers will seek subordination of the federal tax lien in connection with refinancing mortgages on entireties property. If the requested subordination is for the purpose of securing a loan to refinance a senior lien, the Service will apply section 6325(d)(2). The Service will generally issue a certificate of subordination if the terms of the refinance loan, as compared to the terms of the loan secured by the senior lien, ultimately will enhance the taxpayer’s equity or facilitate collection of the tax from other property or income of the taxpayer.
If a taxpayer seeks a certificate of subordination for the purpose of obtaining cash or paying other debts not secured by a senior lien on the property (for example, in the case of a home equity loan), the Service will apply 6325(d)(1). The Service generally will treat the value of the taxpayer’s interest as one-half of the value of the entireties property. The Service would issue a certificate of subordination upon payment of one-half of the amount of the lien or interest to which the federal tax lien will be subordinated.

5.12.3.14 (07-15-2003)
Applications for Certificates

Any person desiring a certificate will submit to the Technical Services Group Manager, where the property is located, a written application in duplicate, executed under penalties of perjury. The form and content of the applications are contained in the following Publications:

Discharge—Pub. 783
Subordination—Pub. 784
Subordination of Estate Tax Lien—Pub. 1153
Non-attachment—Pub. 1024

5.12.3.14.1 (07-15-2003)
Submission of Applications

Applications for certificates, together with all necessary evidence, will be submitted directly to the Technical Services Group Manager.
Examine each application for completeness. Publication 1153, How to Prepare Application for Certificate of Subordination of Federal Estate Tax Lien Under Section 6325(d)(3) of the Internal Revenue Code, requires two appraisals or estimates be submitted.

one of the estimated value of the property to be subordinated
one of the estimated value of the property remaining subject to the estate tax lien.

The Technical Services Group Manager may waive the appraisal requirement.
If the application is incomplete or improper, the applicant should be promptly advised.
Do not reject applications for incompleteness unless the missing information will not allow for a thorough investigation. Every effort should be made to accept the application, provided the information submitted would enable a proper investigation to be conducted.
Any request for discharge of property subject to the lien imposed by IRC 6324A or 6324B received by Technical Services will be forwarded immediately to the Estate and Gift tax group manager for review and approval. If the request is approved, the Estate and Gift tax manager will advise Technical Services by memorandum. The memorandum shall contain sufficient information to enable preparation of Pattern Letter 1886(P).
Use the ICS to control and monitor the case.

5.12.3.14.2 (07-15-2003)
Investigation of Applications

Technical Services will use all available resources to determine whether to issue a certificate of discharge or subordination. Unless there is evidence the process might not involve an arms length transaction, the appraisals submitted will normally be accepted and a separate investigation to determine the value of the property need not be conducted.
Verify the information submitted in the application by contacting the:

Service employee assigned the delinquent account
applicant,
applicants representative,
taxpayer,
taxpayers representative,
real estate firms, title companies,
holders of encumbrances, or
any other person or entity that might have relevant information.

If	Then
it is determined that a Field investigation is required before a final decision can be made to discharge the property or to subordinate the lien,	Form 2209, will be initiated. Technical Services will complete Form 3033, Investigation of Discharge or Subordination, on each investigation completed in Technical Services.
the assessment was made in a foreign area,	promptly notify the Technical Services Group Manager for the area with the assessment that an investigation has been initiated and request the status of the NFTL(s) from which the discharge is sought.
the application is under IRC 6325(b)(2) and relates to a foreclosure proceeding,	the application should be flagged to indicate that the revenue officers report must be returned to the Technical Services within 7 days.

Applications which require a field investigation will be investigated promptly by a revenue officer. The revenue officer assigned the investigation of the application will investigate and verify each item contained in the application, or which should have been contained in the application.
Escrow funds, a potential payment source, should be considered and accounted for when working discharge investigations. However, if, during the course of the investigation, it is disclosed that the first encumbrance(s) exceeds the value of the property, it will not be necessary for the revenue officer to investigate and verify subsequent encumbrances, even though they were recorded prior to the filing of the NFTL.
With the creation of the Home Equity Line of Credit it is now advisable to investigate the facts of the case to determine the specific use of the mortgage funds when determining the priority of the Federal Tax Lien against the Home Equity Line of Credit.

In cases where the credit line is drawn down after the Notice of Federal Tax Lien is filed, it is necessary to determine if the mortgagee/lender has a security interest in the real property in question. Often, a credit line is approved for a specific amount, but that entire amount is not turned over to the taxpayer. The taxpayer may draw against this amount as he wants. Also, the credit line may be approved for a specific amount and the entire amount was passed onto the taxpayer, but was done so some time ago and the taxpayer has paid down the amount owed. In these cases, the mortgage is recorded showing the encumbrance as the approved amount of the credit line, not the amount actually borrowed.
The amount of money or money’s worth that changed hands should always be verified. To be a holder of a security interest the mortgagee must first meet the two-pronged test of IRC section 6323(h)(1). (See IRM 5.17 for further explanation.) A possible exception to the above is when the funds are specifically earmarked for construction or improvement of real property and the agreement was entered into prior to the NFTL filing.
If any payment is received while working the investigation, use designated payment code 07 (DPC–07) when preparing the posting voucher.

5.12.3.14.3 (07-15-2003)
Request for Relocation Expense Allowance

In certain situations, when selling a principal residence, taxpayers will be allowed limited funds from sale proceeds to pay relocation costs. Payment of these costs will be considered if the taxpayer demonstrates a need for this relief. Allowance of the expense would reduce taxpayer burden, increase the amount realized by the United States, facilitate the collection of the tax.

Note:

It is important to remember that funds received under the relocation expense allowance provision will not reduce the taxpayer’s tax liability.

The relocation allowance will be deducted from the Service’s interest in the property. Junior lien holders are not impacted and have no entitlement to the funds.
Use the following criteria when considering the relocation expenses allowance:

Property is limited to principal residences only,
Taxpayers owning multiple pieces of real property generally will not be considered,
Taxpayers must demonstrate an "inability to pay" relocation costs and provide documentation for specific expenses on Form 12451, Request for Relocation Expense Allowance. Relocation expenses are subject to limitations based on the local standard "cost of living" locality tables, for the location of the new residence,
IRS must receive a partial payment of the tax liability that will increase the amount realized and facilitate the collection of the liability. "No value" discharges will not be considered for relocation allowance.

5.12.3.14.3.1 (03-22-2000)
Procedures for Consideration of Relocation Expense Allowance

To receive consideration, taxpayers must provide supporting documentation for expenses as an attachment to Form 12451, Request for Relocation Expense Allowance. Supporting documentation may consist of:

Proposed rental agreement,
Estimates from moving companies,
Truck rental estimates,
Utility hook-ups, etc.

Reviewers will examine Form 12451 and attached documentation for completeness and contact taxpayers for any additional information.
A determination will be made to ascertain if the taxpayer has sufficient funds available to pay reasonable relocation expenses. Information such as financial statements, recent bank statements, and last filed return could be used in this determination. Generally, cases in hardship 53 status (excluding closing codes 03 and 12) would not require another "hardship " determination.
The relocation allowance should be calculated by multiplying the National Standard for the new residence locale and family size times a factor of 2.5. (See IRM Exhibit 5.1, National Standards).

Note:

As a general rule, this will be the maximum allowance considered.

Example:

$1,000	Amount allowed for " Family of 3" from National Standards Table
x 2.5	Established Factor
$2,500	Maximum relocation allowance

The relocation allowance will be the lesser of actual relocation expenses approved or the National Standard amount determined by the formula above. Adjustments in the maximum allowance may be considered on a case-by-case basis if extenuating circumstances exist, i.e., age, health, disability, etc.
If the taxpayer is moving within the same locale, the 2.5 factor still would apply.
In all instances, there must be net proceeds available to apply to the tax liability.

5.12.3.14.4 (07-01-2005)
Report of Investigation

All revenue officer reports of investigation will be prepared on Form 3033, Investigation of Request for Certificate of Discharge or Subordination, promptly upon completion of the investigation. The application should be carefully examined to make certain that the property is adequately and properly described.
The revenue officer will submit the report, together with the copy of the application and all exhibits, to the Technical Services Group Manager, for review and approval.
All reports will be submitted promptly upon completion. In the case of an application relating to a foreclosure proceeding, the report shall be completed within 7 days after receipt of the investigation and, in all other cases, within 30 days.
Technical Services will either complete Form 3033 or summarize the computations of the government’s interest in the ICS history, supported by documentation in the paper file.

5.12.3.15 (02-02-1999)
Preparation of Certificates

Prepare Forms 669–A (Exhibit 5.12.3–5) through F in duplicate. The unused area in the description portion of the form will be blocked or lined out so as to prevent the insertion of description of other property.
Deliver the original of executed Forms 669 to applicants.
If Forms 669–B or D are prepared, they should not be issued until the specified amount is received in the same form required for an immediate lien release.
Post payments using Designated Payment Code 07 (DPC–07) when preparing the posting voucher.
If the assessment is in an area other than that from which the certificate is issued, Forms 669 will be prepared in triplicate. The triplicate copy will be sent to the area with the assessment to be associated with the lien file.

5.12.3.15.1 (02-02-1999)
Certificate of Discharge in Bankruptcy Court Sales

The bankruptcy court has inherent power to sell property within its jurisdiction free and clear of liens. Therefore, when a sale is made by a bankruptcy court, its purchaser takes the property unencumbered by the Federal tax lien, and the Federal tax lien should be considered transferred to the proceeds of the sale.
When property is sold by a bankruptcy court, and the purchaser desires to obtain a certificate of discharge of Federal tax lien, the purchaser, or other interested party will be advised to submit an affidavit to Technical Services containing:

a statement of the facts concerning the sale,
a legal description of the property, and
attach a properly certified copy of the court order.

If it is determined that the application is sufficient, a certificate should be issued on the appropriate form.

5.12.3.16 (07-15-2003)
Certificate of Discharge in Foreclosure Proceedings

Foreclosing mortgagees should be encouraged to request discharges under IRC 6335(b)(2) rather than join the United States in a judicial proceeding. It would be to their advantage to eliminate the governments right of redemption and would eliminate costly litigation proceedings for the government.
Advise the foreclosing parties that they will be furnished a commitment letter within 30 days of receipt of their application.
Issue the certificate upon receipt of proof that the taxpayer has been removed of right, title or interest in the property.
Do not issue a certificate of discharge during the pendency of a suit. Notify the U.S. attorney of the request for a certificate.
Normally, a commitment letter should not be issued to parties who are nonjudicially foreclosing and have given adequate notice to the Technical Services Group Manager under IRC 7425. If they wish to eliminate the governments right of redemption, they should be advised of the procedures for obtaining a release of that right. Instructions for application are in Publication 487.
Issue a discharge if a federal agency has foreclosed nonjudicially and given adequate notice when the agency feels that the lien remains a cloud on the title.

5.12.3.17 (03-22-2000)
Certain Government Agency Discharges

To reduce litigation costs and make property readily marketable, the Veterans Administration (VA), Small Business Administration (SBA), and Federal Housing Administration (FHA) have agreed to accept title to property subject to a junior federal tax lien, provided the payment (if any) required to secure a discharge of property from the tax lien does not exceed the increased cost which would be incurred by them if a mortgagee elected to foreclose by a judicial, rather than by a nonjudicial, proceeding.
Upon receipt of such requests, the Service will cooperate in discharging from junior federal tax liens, property acquired by these agencies in connection with their Loan Guaranty or Direct Loan Salvage operations.
The procedures described in this section apply only to applications received from VA, SBA, or FHA requesting discharge from a junior federal tax lien on property which has been or is to be acquired by one of those agencies.
These procedures do not apply where the United States has already been joined as a party to a judicial foreclosure proceeding or when the insured mortgagee forecloses and has not assigned the mortgage or deed of trust to the VA, SBA or FHA.

5.12.3.18 (02-02-1999)
Applications for Discharge (VA, SBA, or FHA)

Applications for certificates of discharge submitted by the VA, SBA, or FHA will be submitted in duplicate, when they have been notified that the mortgagee has acquired the property and has conveyed it or elected to convey it to the VA, SBA or FHA.
The property will have been appraised by a designated or staff appraiser of the appropriate agency based on the market value of the property at the time of foreclosure. The appraisal will be accepted as the fair market value of the property in determining the governments interest under the federal tax lien. Field investigation will not be required.
The amount shown in the concluding paragraph of the application serves only to place a ceiling on the amount the particular agency may pay for the issuance of a discharge. If it is determined that the federal tax lien interest has value in excess of the amount which the agency is legally permitted to pay, they should be advised and the discharge application file closed.
In accordance with an agreement with VA or FHA, when it has been determined that a notice of lien had been filed more than 30 days prior to a nonjudicial sale, an application for the discharge of the property will be made. No notice will be given under IRC 7425 in these cases.

5.12.3.19 (07-15-2003)
Issuance of Certificate of Discharge (VA, SBA, FHA)

Form 669–C shall be delivered to the VA, SBA or FHA and the duplicate associated with the application, if it is found that the federal tax lien is valueless.
If it is determined that the federal tax lien interest has value, Technical Services will prepare in quadruplicate a statement stating the exact amount required for the requested discharge. The original and two copies of the statement will be sent to the VA, SBA, or FHA.
When a statement signed by the responsible agency official is received, stating that the amount required for the issuance of the discharge is satisfactory, deliver Form 669–B. No payment will be made at the time of delivery, but will be deferred until the certificate is filed with the proper recording official.

When the certificate is properly filed, the VA, SBA , or FHA will forward payment, in the form of a U.S. Treasury Check, to the Technical Services Group Manager.
If payment is not received within (60) sixty days after the date the certificate was delivered, a follow up will be made to determine the approximate time payment will be received.

In the event the VA, SBA, or FHA does not acquire the property or agree to accept it from the mortgagee, the certificate will be returned to the area director for cancellation. The canceled certificate will be associated with the application for discharge.

5.12.3.20 (07-15-2003)
Issuance of Certificate of Discharge or Subordination

Technical Services will review the revenue officer’s report to determine the priority of the Federal tax lien and ensure that the information furnished is sufficient to issue a certificate of discharge.
Issuance of the certificate is conditioned upon the taxpayer’s agreement that payments be applied in the best interest of the government as determined by the Service (Exhibit 5.12.3–6 or 5.12.3-7).
Issue certificates after approval of the revenue officers report.
Retain a copy of the application, revenue officer’s report, and other related documents in Technical Services.
Reports will be forwarded to Area Counsel only when an advisory legal opinion is needed on a specific issue. When the advisory legal opinion is received from Area Counsel, the Technical Services Group Manager, will advise the applicant of the decision.

5.12.3.21 (02-02-1999)
Revocation of Certificates

Revocation of a certificate of release or non-attachment and the reinstatement of the NFTL to which the certificate relates is provided by law. See IRC 6325(f)(2). (Exhibit 5.12.3-6)
A certificate of revocation may be issued when it has been determined that either the release of FTL was issued:

Erroneously,
Improvidently, or
In connection with a collateral agreement entered into in connection with a compromise under IRC 7122 which has been breached, and if the period of limitation on collection after assessment has not expired.

Issue a Certificate of Revocation to revoke a self-releasing NFTL in those instances when a new NFTL has been filed late.
Use Form 12474, Revocation of Certificate of Release of Federal Tax Lien (Exhibit 5.12.3-8) to revoke the release when the lien was not self-releasing.
Use Form 12474A, Revocation of Certificate of Release of Federal Tax Lien (Exhibit 5.12.3-27) to revoke a lien that self-released.
File a new Notice of Federal Tax Lien to protect the priority of the lien after the Certificate of Revocation is filed. See IRC 6323(a).
When revocation is in order, a request will be sent to Technical Services to have the Lien Processing Unit, prepare the certificate and to file a new NFTL.

5.12.3 Certificates Relating to Liens and Claims for Damages (Cont. 1)

5.12.3.22 Non-attachment of Lien
5.12.3.23 Reinstatement of Lien
5.12.3.24 Filing of Certificates and Notices
5.12.3.25 Withdrawal of the Filed Notice of Federal Tax Lien (Overview)
5.12.3.26 Filing of the Notice Was Premature
5.12.3.27 Installment Agreements and the Notice of Withdrawal
5.12.3.28 Notice of Lien Withdrawal Will Facilitate Collection
5.12.3.29 Best Interest Withdrawal Provisions
5.12.3.30 Taxpayer Requests
5.12.3.31 Recommending Withdrawal of the NFTL
5.12.3.32 Approving the Withdrawal Request
5.12.3.33 Denying the Withdrawal Request
5.12.3.34 Partial Withdrawal
5.12.3.35 Requests for Withdrawal When the NFTL is Released
5.12.3.36 Administrative Appeal Rights - Erroneous Lien Filings
5.12.3.37 Damages - Civil Cause of Action on Unauthorized Collection Action
5.12.3.38 Claims for Damages by Third Parties
5.12.3.39 Data for Defense of Suits
5.12.3.40 Subpoenas and Requests for IRS Personnel to Testify or Produce Records

5.12.3.22 (02-02-1999)
Non-attachment of Lien

Persons wishing to obtain a Certificate of Non-attachment should be furnished a copy of Publication 1024.
Applications will be referred directly to the Technical Services Group Manager for review and consideration.
Issue a Certificate of Non-attachment when a NFTL has been filed and there has been a confusion of names. The person (other than the person against whom the tax was assessed) may be injured by the appearance that a NFTL has been filed.

5.12.3.22.1 (02-02-1999)
Certificate of Non-attachment

A person may submit an application for a Certificate of Non-attachment when there has been confusion, such as similarity in names, resulting in the appearance that a Notice of Federal Tax Lien has been filed against that person. If the determination is made that this condition did occur, the Service may issue a Certificate of Non-attachment of Federal Tax Lien certifying that the property of an individual is free from a NFTL. Innocent spouse determinations are also handled by partial release. See 5.12.3.2.7.
The Manager, Technical Services will determine from the information furnished and from data available in the area office whether a certificate should be issued.

If	Then
it is determined that a field investigation is required before a final decision can be made,	a Form 2209, Courtesy Investigation, will be prepared and sent to the appropriate office.
any doubt exists,	refer the matter to Area Counsel for an advisory legal opinion,

5.12.3.22.2 (02-02-1999)
Issuance of Certificate of Non-attachment

When it is determined that the Federal tax lien did not attach or does not now attach to the property, the Technical Services Group Manager will prepare, in duplicate, a certificate of non-attachment (Exhibit 5.12.3–9).
Mail or present the original to the proper recording office in the same manner as a lien release.
Cost for recording will not be collected from the requester or taxpayer. The Service will absorb the cost.

5.12.3.23 (02-02-1999)
Reinstatement of Lien

When a certificate of release has been revoked under the above conditions, the NFTL may be reinstated by:

Mailing notice of the revocation to the person against whom the tax was assessed at the last known address, and
By filing notice of the revocation in the same office in which the NFTL relates to was filed.

A reinstated FTL will be effective on the date the notice of revocation is mailed to the taxpayer but not before the date the notice is filed in accordance with (1)b. above.
On the effective date of reinstatement, a reinstated FTL has the same force and effect as a general tax lien for a period not longer than the period of limitation on collection after assessment of the tax liability to which it relates.
Reinstated FTLs will not be valid against any lien or interest described in IRC 6323(a) until a new NFTL has been filed subsequent to the time the reinstated FTL became effective. This requires the filing of a new NFTL. The date of the new filing is the date from which priorities will be determined as against the category of persons in the cited Code section.
When reinstating a FTL, care must be taken to insure the proper NFTL is filed. For example:

If	And	Then
an erroneous release was issued	the collection period remaining is still within the original 10 year statute	a new 668(Y) reflecting the same refile date that was contained on the original notice of lien is required.
a refiled NFTL was not timely filed	the original NFTL self-released,	update the CSED on ALS. The new 668(Y) will show "N/A" in column E, Last Day for Refiling.
an original NFTL was not filed during the initial 10 year statute,		the extended CSED should be input into ALS. The printed document will reflect " N/A" in Column E, Last Day for Refiling.

The amount to be shown on the "new" NFTL should be the total balance due at the time of filing the "new" notice.

5.12.3.24 (02-02-1999)
Filing of Certificates and Notices

All certificates and notices will be filed in the same office where the original filing took place, unless the state has redesignated its filing office for the specific type of property. The Uniform Federal Lien Act of the state should be checked to confirm where to file the certificate or notice.
Expenses related to the filing or recording of certificates will be borne by the Government. Duplicates will be associated with the applications held by Technical Services.
In the event that these certificates and notices may not be filed in the office designated by State law, they are to be filed in the office of the clerk of the United States district court for the judicial district in the State office where the NFTL is filed.
When filing a Certificate of Revocation and a new Notice of Federal Tax Lien, documents must be recorded in the proper order to be valid. The Certificate of Revocation must be recorded prior to the new Notice of Federal Tax Lien.

5.12.3.25 (06-13-2005)
Withdrawal of the Filed Notice of Federal Tax Lien (Overview)

IRC 6323(j) gives the Service the authority to withdraw Notices of Federal Tax Liens (NFTL) under certain circumstances as well as provide notice to credit agencies. The NFTL may be withdrawn under the following conditions:

the filing of the notice was premature or otherwise not in accordance with the Services administrative procedures;
the taxpayer entered into an agreement under Section 6159 to satisfy the tax liability for which the lien was imposed by means of installment payments, unless such agreement provides otherwise,
withdrawal of such notice will facilitate the collection of the tax liability, or
with the consent of the taxpayer or the National Taxpayer Advocate, the withdrawal of such notice would be in the best interest of the taxpayer (as determined by the National Taxpayer Advocate) and the United States.

It is necessary that a Withdrawal of the Notice of Federal Tax Lien be prepared rather than a Certificate of Release of Federal Tax Lien, since the Certificate of Release releases both the NFTL (paper document) and extinguishes the statutory tax lien
Withdrawal notices may be used if:

the responsible unit has knowledge that the taxpayer has a credit available that would satisfy the lien (i.e., carryback, overpayment, adjustment, etc.),
the taxpayer has filed for bankruptcy and the Federal Tax Lien was filed when the automatic stay was in effect (filing is not in compliance with the Bankruptcy Code),
the lien is filed against institutions under control of the FDIC as successor to the Resolution Trust Corporation (RTC).

Requests for withdrawals will be considered regardless of the date the notice of lien was filed.
Withdrawal of the Notice of Federal Tax Lien is not mandatory except where the NFTL was filed in violation of the automatic stay in bankruptcy. See IRM 25.17.5.7.1.
When there has been a revocation of a release of a Notice of Federal Tax Lien, the taxpayer is entitled to a lien collection due process notice, if a new NFTL is filed.

5.12.3.26 (06-13-2005)
Filing of the Notice Was Premature

A NFTL may be withdrawn if the filing was premature or otherwise not in accordance with administrative procedures.

EXAMPLE: The person responsible for the filing of the NFTL has knowledge that the taxpayer has an undisputed credit available as the result of a filed return that will satisfy the liabilities on the lien, such as a carryback, overpayment, adjustment, etc. Filing of the NFTL is premature.
EXAMPLE: The taxpayer has filed bankruptcy and the NFTL is filed while the automatic stay is in effect. Filing of the NFTL is not in accordance with the Service’s administrative procedures and it should be withdrawn.
EXAMPLE: A revenue officer is assigned a bal due for collection. CP 501 (Balance Due - Reminder) was sent to the taxpayer. NFTLs have been previously filed for other liabilities owed by the taxpayer. The CP 501 constitutes a reasonable effort to contact the taxpayer and filing of the NFTL for the additional bal due would not be premature. (IRM 5.12.2.3). Unless it can be shown that withdrawal will enhance collection of the liability or is otherwise in the best interest of the taxpayer and the United States, it should not be withdrawn.
EXAMPLE: A taxpayer has submitted an offer in compromise. During the course of the investigation a NFTL is filed because it becomes known that the taxpayer is dissipating assets and rejection of the OIC appears likely. Because the taxpayer previously received notices warning that a NFTL could be filed at any time, the recording of the NFTL was not premature. Unless it can be shown that withdrawal will facilitate collection of the liability or is otherwise in the best interest of the taxpayer and the United States, it should not be withdrawn.

Withdrawal of the NFTL is mandatory when the NFTL is filed in violation of the automatic stay in bankruptcy. When the person filing a NFTL knows or should have known about available credits as in example 1 above, the NFTL should be withdrawn. In all other cases, even though filing of the NFTL may have been premature or otherwise not in accordance with the Service’s administrative procedures, it should not be withdrawn unless it is also determined that withdrawal will facilitate collection, or that withdrawal is in the best interest of the taxpayer and the United States.
Follow the procedures outlined in Sections 5.12.3.31 or 3.33, once a determination has been made.

5.12.3.27 (06-13-2005)
Installment Agreements and the Notice of Withdrawal

Consider whether the NFTL was inadvertently filed or whether this is a case in which the filing should be maintained.

If	Then
the installment agreement provided for the notice,	a request for withdrawal may not be granted.
	*Note:*	Withdrawal may be appropriate under one of the other provisions of the Taxpayer Bill of Rights.
the NFTL was not addressed in the installment agreement,	withdrawal may be considered, but is not mandatory.
the agreement provides for the NFTL to be filed as an additional condition to the agreement,	a request for withdrawal may not be granted.
	*Caution:*	There is a separate box on the agreement which may be used for additional conditions.
the NFTL was not addressed as an additional condition,	withdrawal may be considered, but is not mandatory.

EXAMPLE: A taxpayer enters into an installment agreement that provides for the filing of a NFTL if the taxpayer defaults. The taxpayer pays the installments each month and has not defaulted. Ten months after entering into the agreement, a NFTL is filed. Because the taxpayer has entered into an installment agreement and has not defaulted, the NFTL should be withdrawn because the taxpayer is in compliance with the terms of the agreement.
Follow the procedures in 5.12.3.31 or 3.33 once a determination has been made.

5.12.3.28 (06-13-2005)
Notice of Lien Withdrawal Will Facilitate Collection

Determine if withdrawal of the NFTL will facilitate collection of the tax liability, by considering the following:

Will the amount realizable by the U.S. increase the chances of collecting the tax liability?
If the NFTL was not already filed, do the conditions exist that would have allowed for lien forbearance? (See IRM 5.12.2.4.2)
Will the Service receive a payment against the liability? If so, would withdrawal of the NFTL to obtain a partial payment hamper the collection of the remaining balance due?
Will withdrawal enhance the taxpayer’s ability to obtain additional credit; and how will additional credit affect the taxpayers ability to pay the liability?
Is the NFTL the result of a defaulted installment agreement? If a condition of the installment agreement was that a NFTL would be filed in case of default, generally the NFTL should not be withdrawn.
Is there any possibility that a bankruptcy may be filed if the withdrawal is not obtained? If so, consider how the taxes would be treated in a bankruptcy proceeding. Are they dischargeable? Does the taxpayer own assets so that the filing of the NFTL would enhance the government’s position as a secured creditor? Would the taxes be more or less collectible if the taxpayer filed bankruptcy?
Is the taxpayer pyramiding liabilities? Are all required returns filed? A NFTL should not be withdrawn if the taxpayer is not in compliance with filing and deposit requirements.
Will a lien subordination or discharge achieve the same result as a withdrawal? If so, a lien withdrawal would not be appropriate.
Can the taxpayer furnish the government with a bond or other acceptable security if the NFTL is withdrawn?

EXAMPLE: A NFTL has been filed in the name of a taxpayer who has no assets, is unlikely to ever acquire assets of any real value, and has no other secured creditors. The taxpayer agrees to pay the balance of tax due through payroll deductions at a rate higher than the Service could obtain through a wage levy in order to get the NFTL withdrawn. The NFTL may be withdrawn because doing so will facilitate collection of the tax liability.
EXAMPLE: A NFTL has been filed in the name of a taxpayer who is in the business of selling vacation time shares. The Service determines that the tax liability can only be paid by an installment agreement and the taxpayer, who has no other assets or secured creditors, agrees. However, in order to obtain the funds to make the installment payments, the taxpayer must sell accounts receivable to a factor on a weekly basis. The factor also requires that the taxpayer give the factor a security interest in all unpurchased and future accounts receivables to indemnify against the purchase of possible uncollectible accounts receivables. Such an agreement is not possible because of the NFTL. The NFTL may be withdrawn because doing so will facilitate collection of the tax liability.
EXAMPLE: A NFTL has been filed in the name of a taxpayer owning minimal distrainable assets who is currently unemployed. The taxpayer is offered employment provided she is bondable. However, the bonding company refuses to issue a bond because the NFTL reduces the taxpayer’s credit score to an unacceptable level. The taxpayer agrees to pay the balance of tax due through payroll deductions if the NFTL is withdrawn and she is able to begin working. The NFTL may be withdrawn, with the provision that it would be filed again in case of default, because doing so will facilitate collection of the tax liability.
EXAMPLE: A taxpayer requests withdrawal of a NFTL so that she can improve her credit score and purchase a new vehicle. The new vehicle is not necessary for her to perform her job duties or generate income which would assist in satisfying the liability. Withdrawal of the NFTL is not appropriate because doing so would not facilitate collection of the tax liability.
EXAMPLE: A taxpayer has been making installment payments for the past year and has two years of payments remaining. The taxpayer is a salesman and needs to purchase a new automobile in order to continue to generate the income that is being used to make the installment payments. The taxpayer verifies that he can not obtain a new car loan or a lease because the existence of the NFTL causes his credit score to fall below an acceptable level. The NFTL may be withdrawn, with the provision that it would be filed again in case of default, because doing so will facilitate collection of the tax liability.

A determination that withdrawal will facilitate collection may originate with a Revenue Officer in the course of making a collection determination. Although a written request by the taxpayer for the withdrawal would not be needed in such a circumstance, the taxpayer must concur that the withdrawal is in his/her best interest.
Follow the procedures outlined in Sections 5.12.3.31 or 3.33, once a determination has been made.

5.12.3.29 (06-13-2005)
Best Interest Withdrawal Provisions

Two determinations are required:

one by the National Taxpayer Advocate (TPA) or the designee for the National Taxpayer Advocate, with respect to the taxpayer and
one by the Secretary or the designee for the Secretary.

A determination that withdrawal is in the best interest of the United States may be made by collection employees.
A taxpayer may request the withdrawal on the basis that it is in his or her best interest and the best interest of the United States without specifically requesting that the TPA make the determination on his or her behalf. A collection employee may also make a best interest determination independently of a taxpayer request provided the taxpayer or the TPA acting on behalf of the taxpayer consents to the withdrawal.
There is no way every scenario you encounter can be covered. Apply your knowledge and experience to the case and use your judgment in making a determination. In making "best interest" determinations consider the following:

What will be the effect of withdrawing the notice of lien? Are there claims currently subordinate to the Federal Tax Lien which will become superior?
What is the likelihood that the taxpayer will dispose of the property if the notice is withdrawn? Is there sufficient equity for this to be a concern?
Will tax collection be undermined if the notice is withdrawn and the taxpayer files for bankruptcy protection?
Are there other tools available, for example discharge or subordination, that will alleviate the taxpayer’s problem without eliminating the protection offered by the filed notice of lien.

When making the best interest determination the expectation is that the government and the taxpayer will benefit from withdrawal of the notice.

If	Then
withdrawal is in the government’s and taxpayer’s best interest, (subject to approval at the managerial level),	the employee should follow the withdrawal procedures outlined above.
it is determined that withdrawal would not be in the best interest of the government,	notify the taxpayer of the determination and explain his/her appeal rights.
the case involves imminent, significant hardship,	the National Taxpayer Advocate may resolve disagreements by issuing a Taxpayer Assistance Order (TAO), when (s)he determines that it is in the best interest of the taxpayer.

EXAMPLE: One of the taxpayers in the examples under 5.12.3.28 above, contacts the Taxpayer Advocate and requests that the NFTL filed in their name be withdrawn because it is in their best interest as well as in the best interest of the government. The Taxpayer Advocate determines that it is in the best interest of the taxpayer that the NFTL be withdrawn. The Taxpayer Advocate contacts Compliance, requests that the NFTL be withdrawn, and, upon review, Compliance determines that it is in the best interest of the government that the NFTL be withdrawn. Because the Taxpayer Advocate, representing the taxpayer, and the Service agree that it is in the best interests of both, the NFTL may be withdrawn.
Example: A taxpayer requests that the NFTL be withdrawn so that he can refinance his home mortgage. In addition to refinancing the existing first mortgage, the taxpayer offers to borrow an additional amount to be applied as a partial payment of the liabilities listed on the NFTL. The taxpayer’s lender will not make the loan unless the NFTL is withdrawn. Although withdrawal of the NFTL would be in the best interest of the taxpayer, and withdrawal of the NFTL would result in partial payment, it is not in the best interest of the government to withdraw the NFTL. A subordination certificate will better protect the government’s interest by allowing for partial payment of the liability while continuing to secure the government’s interest for the remaining taxes due.
Example: The taxpayer in the above example requests that the NFTL be withdrawn so that he can refinance his home mortgage. In addition to refinancing the existing mortgage, the taxpayer offers to borrow an additional amount and full pay the liabilities listed on the NFTL. The taxpayer states that his lender will not make the loan unless the NFTL is withdrawn, even though a payoff statement is provided, the lender is aware that the NFTL will be paid off from the loan proceeds, and a revenue officer offers to attend the loan closing and provide an immediate lien release upon receipt of full payment. Further questioning of the taxpayer reveals that the NFTL is preventing the taxpayer’s mortgage broker from placing the taxpayer’s loan with a lender because the NFTL is lowering his credit score to an unacceptable level. Although other secured creditors have refused to give up their secured status in exchange for a promise of full payment, the taxpayer is hopeful that the government will agree to do so. Although withdrawal of the NFTL is in the best interest of the taxpayer, it is not a good business practice nor is it in the best interest of the government to relinquish its secured creditor status in exchange for a promise to pay.
Example: A taxpayer enters into a 2 year installment agreement conditioned upon the recording of a NFTL. One year later she requests withdrawal of the NFTL. All payments have been made timely and the taxpayer is requesting the withdrawal because it is harming her credit worthiness. Although withdrawal of the NFTL is in the best interest of the taxpayer, it is not a good business practice nor is it in the best interest of the government to relinquish its secured creditor status.
Follow the procedures in 5.12.3.31 or 3.33 once a determination has been made.

5.12.3.30 (06-13-2005)
Taxpayer Requests

All requests for withdrawal of the Notice of Federal Tax Lien must be in writing. Taxpayers may use Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien. (see Exhibit 5.12.3-28). A request may be accepted by fax if contact has been made with the taxpayer by phone and the taxpayer history file is documented with the date of the contact and notation is made that the taxpayer wishes to send the request by fax. Requests must contain the following:

taxpayer’s name,
current address,
taxpayer’s identification number,
a copy of the NFTL affecting the property, if available, and
statement or basis for the withdrawal request.

Taxpayers must provide written authorization for disclosure of information to creditors, credit reporting agencies and financial institutions.
Route taxpayer requests to the office with control of the case.
Forward cases to Technical Services in the area where the taxpayer lives or has its principal place of business when there is no open case in Collection.
If the taxpayer claims the NFTL was filed in violation of a bankruptcy stay, forward the withdrawal request to the Insolvency unit where the taxpayer lives or has its principal place of business when there is no open case in Collection.
Subsequent requests for copies of approved withdrawal notices to be sent to creditors or financial institutions will contain the same information outlined in (1) above.

5.12.3.31 (06-13-2005)
Recommending Withdrawal of the NFTL

When a request is received from the taxpayer for a withdrawal of the NFTL, review the case history as well as the documentation provided by the taxpayer.
Determine if sufficient documentation is provided to substantiate the withdrawal recommendation.
Withdrawal may be granted under any of the four provisions provided by the Internal Revenue Code as outlined above. (See 5.12.3.25.1)
Prepare a memorandum outlining the facts of the case.
Forward the memorandum with the case file through the group manager to the appropriate approving official for signature.

5.12.3.32 (06-13-2005)
Approving the Withdrawal Request

Technical Services Advisory Group Managers, and Insolvency Group Managers have the authority to approve withdrawals.
When the recommendation for withdrawal is approved, for those offices with local lien units, prepare Form 10916(c), Withdrawal of Filed Notice of Federal Tax Lien, and a cover letter to the taxpayer (exhibits 5.12.3-10 and 5.12.3-11) and process through the local lien unit.
The withdrawal notice will also be used when filings are in violation of the automatic stay in bankruptcy. Insolvency requests should be sent directly to the local lien unit. For those offices whose lien processing has been centralized, the appropriate referral form should be utilized for requesting issuance of the Form 10916(c) by the centralized lien unit. Upon issuance, the centralized lien unit will return a copy of the Form 10916(c) to the requestor for inclusion with the cover letter to the taxpayer and creditors. The requesting office is responsible for generation and distribution of the cover letter.
The withdrawal notice must include any refile, amended, or corrected NFTL associated with the original filing, if applicable.
Prepare the withdrawal notice in triplicate and file in the appropriate recording office within 10 days of notification from the taxpayer. The Service will bear the cost of filing.
When the Service’s copy is returned note the recording information in the ALS history screen.
Forward a copy of the signed notice and a cover letter to the taxpayer after signature.
Provide copies of the withdrawal notice to creditors, credit reporting agencies, or any financial institution with a written request from the taxpayer. This request must also contain the authority to disclose the information.
Retain a copy of the withdrawal if you did not prepare the withdrawal using ALS.
Input TC 583 to reverse the lien filed indicator, if you did not use ALS.

5.12.3.33 (06-13-2005)
Denying the Withdrawal Request

Employees assigned the case are authorized to deny withdrawal of the notice of federal tax lien.
Notify the taxpayer that the request is denied.
Inform the taxpayer of his or her appeal rights as well as their right to discuss the denial with the immediate manager.
Provide the taxpayer with:

Publication 1660, Collection Appeal Rights for Liens, Levies, Seizures and Installment Agreement Terminations, and
Form 9423, Collection Appeal Request.

Note the history with the reason for denial.

5.12.3.34 (06-13-2005)
Partial Withdrawal

Issue a partial withdrawal when a taxpayer was not responsible for the liability and should not have been included on the NFTL.
Only the name of the non-liable taxpayer should be entered on the form. The NFTL is valid against the still liable taxpayer.
Record the document in the proper recording office.
The Service will bear the cost of the filing fee.
Do not post a TC 583 to the still liable taxpayer’s master file account.

5.12.3.35 (06-13-2005)
Requests for Withdrawal When the NFTL is Released

On occasion you will receive requests from taxpayers for withdrawal of the NFTL when the NFTL has already been released.
If a release has been issued there is no NFTL to withdraw. Withdrawing the NFTL, in most cases, means the Service did not intend to issue the NFTL but there is still a liability.
Explain to the taxpayer that issuing the certificate of withdrawal after the certificate of release may cause confusion for the person receiving the documents.

5.12.3.36 (07-15-2003)
Administrative Appeal Rights - Erroneous Lien Filings

Persons against whom a Notice of Federal Tax Lien (NFTL) was filed have the right to appeal the filing of the NFTL. The appeal is the administrative remedy to correct erroneous NFTL filings. (See IRC 6326).
Requests must be handled expeditiously and should be addressed to the Technical Services Group Manager, in the area office where the NFTL was filed.
The administrative appeals process:

may not be used to challenge the underlying deficiency leading to the encumbrance of the NFTL.
must be appealed within one year after the taxpayer becomes aware of the erroneously filed NFTL

All collection actions will be withheld during the administrative appeals process, unless collection is in jeopardy.
The Service must issue a Certificate of Release within 14 days after determining the filing was erroneous.
The release must include a statement that the filing of the NFTL was erroneous. This ensures that the public records contain a statement that the filing was not attributable to the taxpayer and will assist in repairing the taxpayers credit or other financial records. A Certificate of Release must be issued on any erroneously filed NFTL whether or not it is challenged in administrative review procedures.
Taxpayers may request an appeal under the Collection Appeals Program (CAP) and may also be entitled to a Collection Due Process Appeal (CDP). See IRM 5.12.1.

5.12.3.36.1 (03-22-2000)
Request for Administrative Appeal

Requests for an administrative appeal under IRC 6326 must meet the following requirements:

be in writing,
provide the taxpayers name, current address and TIN,
include a copy of the NFTL as filed, if available,
state the grounds on which the request is made (notice of deficiency was mailed to the wrong address, etc.),
provide the canceled check or other evidence of payment, if liability satisfaction is claimed.
provide information identifying the bankruptcy court, docket number and petition date.

If	Then
the request does not meet the administrative appeal criteria,	respond to the appealing party using Pattern Letter 2424. See Exhibit 5.12.3–12.
a request disputes the tax, penalty or interest due,	attempt to secure the basis for the claim from the taxpayer.
you can adjust the liability,	make the adjustment.
the taxpayer does not provide adequate substantiation that the assessment is incorrect	advise the taxpayer to pay the liability and file a claim.
the request does not meet the administrative appeal criteria and the taxpayer believes the filing is incorrect and identifies another issue (i.e., math error),	process the request.

Follow the steps listed below to process the request for appeal.

Research IDRS to determine the status of the liability,
Respond to the taxpayer using Pattern Letter 2423 to identify the reason the request does not meet the administrative appeal criteria and that his/her request is being referred to another function for action. See Exhibit 5.12.3–13.
Obtain the name and telephone number of the contact point to be used in the letter.

If	Then
the liability on the NFTL is in ACS inventory or in the queue	forward the request to the ACS call site.
the liability on the NFTL is in notice status (e.g., reactivated TC 530 case),	input a CC STAUP to IDRS for the appropriate number of cycles and reference the receipt of a request for lien release in the IDRS history section. Technical Services should research and resolve the request or refer the request to the appropriate function for resolution.
the liability on the NFTL has been assigned to CFf,	forward the request to CFf, attention of the revenue officer assigned the balance due.
the liability on the NFTL is not present on IDRS,	it may have aged off IDRS and is in an inactive status present on the master file (e.g., CNC, below tolerance). Use the CFOL commands, IMFOL and BMFOL to view the accounts. Technical Services should then resolve the request or refer the request to the appropriate functional area for resolution.
the request meets the administrative appeal criteria,	establish and maintain a control record of all applicable requests.
the request cannot be immediately resolved,	research IDRS to determine the status of the liability and advise the employee/function assigned to the case of the taxpayers request.
the liability on the NFTL is not present on IDRS,	it may have aged off IDRS and is in an inactive status present on the master file (e.g., CNC, below tolerance). Initiate the request for a master file transcript by the input of CC MFTRD. This will bring the tax module data down onto IDRS within 24 hours. Technical Services should monitor the master file status of this liability with a weekly input of CC MFTRD until the resolution of the request.
during the resolution period of the request, the deferred tax module becomes active,	notify the appropriate function of the request received.

Technical Services will respond to all requests that meet the criteria within 30 days.

If	Then
the taxpayer has provided proof that the liability was satisfied prior to the filing of NFTL,	follow the procedures shown in IRM 5341 for adjustment and payment tracer action.
the liability was assessed in violation of the automatic stay in bankruptcy (Title 11),	prepare a Form 3870, Request for Adjustment to abate the assessment.
the statute of limitations has expired prior to the filing of the NFTL,	issue a certificate of release.
it is determined that a NFTL was erroneously filed,	issue a certificate of release.
	*Note:*	It is not necessary to delay issuance of the release until after the credit or abatement appears on IDRS. See Exhibit 5.12.3–14 for the additional statement that should be typed on the front of the Form 668(Z). All reference to IRC section 6325 should be blocked out.

Provide the appealing party with a copy of the certificate of release attached to Pattern Letter 544. See Exhibit 5.12.3–4.

Reverse the Lien Filed Indicator.

If	Then
the liability was in ACS inventory or in the queue,	notify the ACS call site of the determination;
the liability is in notice status,	notify the Campus revenue officer or Compliance Services Collection Operations manager of the determination;
the liability is assigned to CFf,	inform the revenue officer of the issuance of the certificate of release.
the liability was not present on IDRS (e.g., CNC, below tolerance) and was being monitored by Technical Services,	take the appropriate corrective action to resolve the liability.

Update the control record to reflect the nature, date of determination and date of the certificate of release.
Issue the certificate of release expeditiously, to the extent practical, within 14 days after the determination that the filing of the NFTL was erroneous. See IRC section 6326(b).
Inform the taxpayer using Pattern Letter 2424, Exhibit 5.12.3–12, when a valid determination is made.

Determine further case action as follows:

Reverse any CC STAUP on notice status accounts.

If	Then
the liability is in ACS inventory or in the queue,	notify the ACS call site of the determination.
the liability has been assigned to CFf	inform the revenue officer of the determination.
there are in any inactive liabilities being monitored by Technical Services,	it should remain in the current master file status.

Update the control record to reflect the nature and date of the determination.
Responses to taxpayer correspondence must be initiated within 30 calendar days from the earliest "I.R.S. RECEIVED" date (See IRM 5.1 (General)). However, every effort should be made to provide quality responses in less time.
The action office must initiate an interim reply letter within 30 days, when it is not possible to meet the 30 day "I.R.S. RECEIVED " date. Additional interim letters will be sent if necessary. An interim letter must:

Identify the reason a final response is delayed.
Specify when the final response will be mailed.
Include the name, telephone number, and organizational code symbols for reference purposes as a contact point. Where feasible, the contact point should be someone familiar with the issues.

5.12.3.36.2 (03-22-2000)
Other Referral Requests

All other requests for review under IRC 6326 for the filing of a NFTL that meet the appropriate criteria, should be forwarded to Examination for
determination.
This includes requests involving Substitute for Return (SFR) and CP 2000 cases.

Referral should be made to Examination using Form 3449, Referral Report to Examination addressed to "PSP Support" . See Exhibit 5.12.3–15.
Identify on the top of the Form 3449 "Administrative Appeal of Lien" .
Submit related cases, to the extent possible, to Examination together.
Place the CSED on the transmittal, Form 3449, for any case in which the period has less than 6 months to run.
Transmit each case with an imminent statute date under a separate Form 3449.
Identify the date of the referral to Examination on the control record for future follow-up. Forward Parts 1 and 2 to Examination with the appealing party’s request. Retain Part 3 for follow-up action.
Issue Pattern Letter 2421 advising the appealing party that his/her request has been received and provide the taxpayer with a contact point for any further inquiries relative to their request. See Exhibit 5.12.3–16.

Examination will have 30 days from the referral date to return a determination on the validity of the assessment. A monthly review will be performed to identify any Examination referrals that are overaged and follow-up with Examination.

If Examination determines that the	Then
NFTL was erroneously filed,	they will return Part 2 of Form 3449 to Technical Services indicating the nature and date of the determination.
	1.	Technical Services will issue a certificate of release.
	2.	Perform any further case action as described above.
assessment was incorrectly made,	an abatement is necessary. Examination will provide a completed Form 3870, Request for Adjustment requiring IDRS input. The certificate of release may be issued prior to the abatement posting to IDRS.
assessment is valid	Examination will indicate this determination on Part of Form 3449. Upon receipt of this determination, perform further case action as described above.

Update the control record to reflect the nature and date of the determination and the date of the certificate of release if appropriate.

5.12.3.37 (03-01-2004)
Damages - Civil Cause of Action on Unauthorized Collection Action

Section 7433 authorizes the filing of a damages action against the government in federal district court when, in connection with the collection of a tax, any officer or employee of the Internal Revenue Service recklessly, intentionally or negligently disregards any provision of the Internal Revenue Code or the related Treasury Regulations. The waiver of sovereign immunity applies to actions taken after November 10, 1988, the date of the enactment of this law.
Subsection (e) was added by RRA98 to allow taxpayers to petition the bankruptcy court for actual, direct economic damages and costs of the action if the IRS willfully violated the automatic stay or discharge injunction.
Employees, acting in the performance of their duties, whose actions are challenged under this Code section will not be held personally liable in such an action.
The taxpayer must exhaust all administrative remedies available within the Internal Revenue Service prior to initiating a civil action in federal district court.
In order to exhaust administrative remedies, the taxpayer must submit an administrative claim for damages in accordance with the regulations under section 7433.
If a taxpayer is successful in a court action, he or she may recover the lesser of $1,000,000 ($100,000 for negligence) or the sum of the actual, direct economic damages suffered by the taxpayer as the proximate result of the reckless, intentional or negligent action, plus the cost of the action. Injuries such as inconvenience, emotional distress and loss of reputation are compensable only to the extent they result in direct monetary losses.
Costs of the action payable from a suit under this provision are:

fees of the clerk and marshal
fees of the court reporter for all or part of any stenographic transcript necessary for use in the case;
costs of printing and witnesses;
costs for securing regular as well as certified true copies of documents used in the proceeding,
docket and filing fees; and
payments made to court appointed experts and interpreters.

Litigation and administrative costs, other than the costs of the action, are not recoverable under this section. Litigation costs which may include attorney’s fees, may be recoverable under Internal Revenue Code Section 7430, Awarding of Costs and Certain Fees. Administrative costs (including any costs incurred getting the Service to rectify its wrongful act and costs incurred pursuing an administrative claim for damages under section 7433) are not recoverable under section 7433. However, administrative costs incurred after the date a bankruptcy petition is filed may be awarded under section 7433(e) or violations of the automatic stay or discharge injunctions.
Payment Authority - Claims under this provision will be paid out of funds appropriated for judgments, awards and compromise settlements under section 1304 of Title 31 of the United States Code.

5.12.3.37.1 (03-01-2004)
Administrative Claim Procedures

Treasury Regulation section 301.7433-1 contains administrative claim procedures for IRC 7433. The administrative claim is to be sent to the Technical Services Group Manager of the area where the taxpayer currently resides or, when dealing with a corporate entity, the area where the corporate headquarters is located.
There is no standard form used in preparing a claim. The claim must contain the following information:

The name, current address, current home and work telephone numbers and any convenient times to be contacted, and the taxpayer identification number of the taxpayer making the claim;
The grounds, in reasonable detail, for the claim (including a complete description of the act and copies of available substantiating documentation or correspondence with the Internal Revenue Service);
A description of the damages incurred by the taxpayer filing the claim (including copies of any available substantiating documentation or evidence);
The dollar amount of the claim, including any damages that have not yet been incurred but which are reasonably foreseeable (including copies of any available substantiating documentation or evidence); and
The signature of the taxpayer or the taxpayer’s duly authorized representative.

Each claim will be reviewed by Technical Services to insure that it includes this information. A taxpayer whose claim does not include the information requested in (1) above will be notified in writing, within 14 days of the receipt of the claim, of the deficiencies and advised that the claim is not processable. This is not considered a rejection of the claim because a claim meeting the requirements of Treasury Regulation 301.7433-1 has not been filed. Pattern Letter 2730 (See Exhibit 5.12.3-18) should be used to notify the taxpayer of the deficiencies in the claim.
Administrative review of the claim should be completed as soon as possible but must be completed within 6 months of receipt of a processable claim. The taxpayer may bring suit either when a final decision is made on the claim or 6 months after the filing of a processable claim. A taxpayer must file an action in federal district court within two years after the cause of action occurs. If the taxpayer files an administrative claim within the last 6 months of the period of limitations, the taxpayer can file suit any time after the administrative claim is filed.
A cause of action occurs under this provision when the taxpayer has reasonable opportunity to discover all essential elements of a possible civil action for damages in federal district court under section 7433.
Pattern Letter 2732 (See Exhibit 5.12.3-20) or Pattern Letter 2733 (See Exhibit 5.12.3-21) is to be used to notify the taxpayer of the results of the administrative review of the claim. If only a portion of the claim is being approved, both pattern letters will be sent to the taxpayer at the same time. Authority to sign these letters should be delegated no lower than the Technical Services Group Manager.
There is no further administrative appeal of a claim for damages under this section if the claim is denied. The remedy provided by the statute is the institution of a suit.

5.12.3.37.2 (03-01-2004)
Administrative Remedies

A judgment for damages under Section 7433 will not be awarded unless the court determines that the plaintiff has exhausted all administrative remedies within the Internal Revenue Service.

5.12.3.37.3 (03-01-2004)
Payment Authority

Claims filed under Section 7433 will be paid from funds appropriated under section 1304 of Title 31, United States Code. Procedures for filing a claim remain unchanged.

5.12.3.37.4 (03-01-2004)
Evaluation of Claim for Damages Under IRC 7433

Date stamp the claim upon receipt. Technical Services should complete the initial review of the claim within 30 days of receipt.
Open an OI on ICS under 101 - Claim Other. Review the closed files for any prior claims.
The statutory elements contained in IRC 7433 must be applied to each processable claim. In determining whether a claim is administratively allowable the reviewer must determine whether:

an officer or employee of the IRS intentionally, negligently or recklessly disregarded any legal or regulatory provision of the Internal Revenue Code in connection with the collection of any federal tax ; and
the taxpayer sustained direct, economic damages as a result.

The facts and circumstances of each case must be evaluated. The reviewer must determine if the alleged infraction did, in fact, take place. He or she must also determine whether or not the infraction was a reckless, intentional or negligent disregard for the law, contained in (3) above.
The reviewer must also seek to ascertain when, in time, the taxpayer became aware of the violation or should have become aware of the violation. Claims filed more than two years after the violation must receive special scrutiny. The taxpayer’s two-year limitation to bring suit begins at the point when the taxpayer has had a reasonable opportunity to discover all essential elements in a possible cause of action. The reviewer must determine when the taxpayer knew or should have known of the violation. Claims filed outside the two-year limitation will be rejected.
Certain criteria guide the amount of an administrative settlement, under this section. For example:

the amount of the award is to be reduced by the damages that reasonably could have been avoided by the taxpayer;
only actual, direct economic damages are recoverable in an administrative claim. No litigation or administrative costs are recoverable in an administrative claim. To the extent that any costs are recoverable under section 7433, such costs are recoverable only in a court proceeding; and
the actual, direct economic damage reimbursement can not exceed $1,000,000 or $100,000 in the case of negligence.

Acceptance or rejection of each claim will be reviewed by Area Counsel for agreement. Include the Technical Services administrative file and all related information.
After concurrence by Area Counsel, submit the file to the Technical Services Territory Manager for approval.

5.12.3.37.5 (03-01-2004)
Reimbursement of Damages and Costs

If an administrative claim is submitted to the approving official, Collection personnel involved with the collection action may be asked to prepare a memo explaining the facts of the case. This should include any documentation which confirms or contradicts the taxpayer’s statements.
When a claim is approved, prepare an original and three copies of:

FMS Form 195 - Judgment Fund Payment Request (Admin. Award) (Exhibit 5.12.3-22)
FMS Form 196 - Judgment Fund Award Data Sheet (Exhibit 5.12.3-23).
FMS Form 197 - Voucher for Payment of Judgments, Compromise Settlements and Administrative Awards (Exhibit 5.12.3-24).
FMS Form 198 - Judgment Fund Award Data Sheet - Additional Deductions (complete this form only if appropriate) (Exhibit 5.12.3-25).

Forward the original voucher (FMS Form 197) to the taxpayer for signature under cover of Letter 2733 (Exhibit 5.12.3-21).

Note:

If a portion of the claim is approved, Letter 2732 is issued at the same time 2733 is issued.

When the form is received from the taxpayer, the approving official will sign FMS Form 197.
Send the taxpayer a copy of the signed Form 197.
Use Letter 2734 (Exhibit 5.12.3-26) to forward the original and three copies of the forms described above to the Judgment Funds Branch, Funds Management Division, Financial Management Service, Department of the Treasury, Room 6N34, US GAO Building, 441 G Street, NW, Washington, DC 20548.
In cases where the taxpayer requests a check in lieu of electronic deposit, FMS will return the check to the contact person listed on Form 196 for reimbursement to the taxpayer.
Mail the check to the taxpayer with a cover letter (locally designed) that specifies the date and the amount of the check.

5.12.3.37.6 (03-01-2004)
Notifying the Employee’s Manager of Unauthorized Collection Action

Advisors with the approval of the Technical Services Group Manager should contact the manager of the employee named in the damage claim once notification is made that unauthorized collection actions may have occurred.
Provide the employee’s manager with copies of supporting documentation.
Discussions regarding the findings will be held by the employee’s immediate supervisor.
The immediate supervisor will determine if NTEU representation is necessary.

5.12.3.37.7 (03-01-2004)
Administrative Claim Report

Prepare a quarterly report listing all claims paid. The report will provide the following information.

Quarter ending date,
Taxpayer name,
TIN,
Amount of check,
Date of check,

Forward reports to: Director, Technical and Insolvency, S:C:CP:PC:TI, 5000 Ellin Road, New Carrollton, MD 20706, Attn: Lien Analyst

5.12.3.38 (03-01-2004)
Claims for Damages by Third Parties

Under Section 7426, recovery of damages is permitted by a third party in a wrongful levy suit, if it is determined that any officer or employee of the Internal Revenue Service recklessly, intentionally or by reason of negligence, disregarded the provisions of the Code. The defendant will be liable to the plaintiff in an amount equal to the lesser of $1,000,000 ($100,000 in the case of negligence) or the sum of:

actual, direct economic damages sustained by the plaintiff as a result of the reckless, intentional or negligent disregard by the officer or employee (reduced by the amount of damages awarded under subsection (b) of Section 7426, and
the costs of the action.

5.12.3.39 (03-01-2004)
Data for Defense of Suits

The Technical Services Group Manager will see that any narrative report that is necessary to reflect the factual situation is prepared and that other data requested or required by Counsel are secured. Specific reporting forms are not prescribed for use in all types of defense suits. However, Form 4477, Form 4479, and Form 4480 will be used for interpleaders and suits in the nature of an interpleader and also for other defense suits when appropriate. Form 4481 will be used in all cases to transmit to Counsel the transcript, administrative files, reports and other documents required.
Upon receipt of a complaint and summons or a request for data, the Technical Services Manager will determine the periods of tax liability in question and take action to secure a transcript, if necessary.
Form 4844 will be prepared and forwarded to Centralized Services function to secure the administrative files.
The Technical Services Group Manager will determine the need for special document requirements from the complaint filed. These documents may include:

notices of lien filed and refiled - In cases where priority of lien is in issue (i.e., Section 2410, Title 28, USC cases).
Consent to Extend the Time to Assess Tax, Form 872, or Tax Collection Waiver, Form 900, in some cases where timeliness of assessment or collection is an issue.
copies of offers in compromise, proofs of claim, and data as to court proceedings - In cases where the collection statute may be in issue (i.e., discharge of tax liabilities under the provisions of the Bankruptcy Act).
other information or documents may include, but are not limited to notices of levy, seizure and sale documents, statutory notices (90-day letter for assessment notice and demand, etc.), data as to whether a jeopardy assessment is involved, data as to the existence and/or validity of competing liens and/or claims (including copies of instruments when necessary). Form 4479 may be used for this purpose.

In most cases the required data can and should be gathered before a request is received from the U. S. Attorney or Chief Counsel since Technical Services will normally have received notification of the pending suit through direct sources.
The Technical services Group Manager will immediately see that required data is secured and will follow-up on all requisitions for tax returns and requests for investigations. The data should be sent to area counsel no later than the 45th day after the complaint or petition was filed. Counsel should be advised of any delay by telephone.
If data or documents required are, in part, in another area office, the receiving office will expeditiously initiate action to secure the data and will be responsible for securing and furnishing the data to the requester.
If requests for data or documents are received which require all or substantially all documents to be secured from another Campus or area office, the receiving office (Technical Services) will promptly notify, by telephone, the Campus involved of the request and the documents required. The request for data will then be forwarded by mail. The office originating the request (U.S. Attorney or Area Counsel) should also be notified that the request has been transferred. The transferee will assume responsibility for securing and furnishing the data to the requester.
If a request from Counsel requires additional investigation or examination by either a revenue agent or revenue officer, the Technical Services Group Manager, will have a copy of the request handcarried to Examination or Collection, as applicable, and request that the investigation be given preferential treatment and that the information be furnished as soon as possible.

5.12.3.40 (03-01-2004)
Subpoenas and Requests for IRS Personnel to Testify or Produce Records

Subpoenas and requests for Service personnel to testify or to produce records in all cases not involving the administration of Internal Revenue laws, should be routed as quickly as possible to the disclosure officer to which the employee is assigned, or in matters involving Headquarters employees, to the Office of Governmental Liaison and Disclosure, SE:S:Ctl:GLD:D. It is important that this information be provided without delay in order that necessary authorization be obtained within the time allowed by the court. If time is crucial, the matter should also be reported by telephone to the disclosure officer or Disclosure and Security Division, as appropriate. For further guidelines, see IRM 1.3, Disclosure of Official Information Handbook.
Requests by a government attorney for Service personnel to testify or produce records on behalf of the government in referred tax cases may be complied with and do not require prior approval.
Subpoenas and requests not served on behalf of the government for Service personnel to testify or produce records in referred tax cases (with the exception of Tax Court subpoenas) require authorization and should be routed as quickly as possible to the Area Counsel or the Office of Collection, Bankruptcy and Summons of the Office of Chief Counsel, depending on the nature of the case, so that necessary authorization may be obtained.
It is the Disclosure Officer’s responsibility to arrange for area counsel to assist, or an attorney of the Department of Justice (including U. S. Attorneys) to represent subpoenaed/requested employees, as necessary, so that arrangements may be made for a representative of Counsel or the U. S. Attorney’s office to brief the employee and to appear at the proceeding, as necessary.
see Delegation Order No. 11-2, for the managerial levels with the authority to determine whether an employee will be permitted to testify or produce Service documents subpoenaed or requested in connection with judicial and administrative proceedings. If the designated official determines that the employee may not testify or produce the records subpoenaed or requested (in whole or in part), area counsel or the representative of the U. S. Attorney’s office will, as necessary, appear before the court with the employee and inform the court that the information may not be disclosed and explain the reason for the information being protected.
If the delegated official’s instructions are not received by the time set for appearance, the employee will appear before the court, with the disclosure officer, area counsel or the representative of the U. S. Attorney’s office, as necessary. The court should be advised that, pursuant to 26 CFR 301.9000-1, the employee may not testify or produce Service documents until the delegated official has considered the contents of the subpoena or request and has authorized a Service employee to comply. The employee or the disclosure officer, area counsel or the representative of the U. S. Attorney’s office should request additional time in which to receive instructions. If the court does not grant the delay, the employee will decline to disclose the records or information sought. However, an attempt will be made to contact the party seeking the information prior to the appearance time so that continuance might be obtained, if appropriate.

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Section 3. Certificates Relating to Liens and Claims for Damages 5.12.3 Certificates Relating to Liens and Claims for Damages

5.12.3.1 (07-15-2003) Certificates of Release (Overview)

5.12.3.2 (06-13-2005) Conditions of Release

5.12.3.2.1 (06-13-2005) Liability is Satisfied

Note:

5.12.3.2.2 (02-02-1999) Liability is Unenforceable

5.12.3.2.3 (06-13-2005) Acceptance of a Bond

5.12.3.2.4 (06-13-2005) Acceptance of an Offer

5.12.3.2.4.1 (06-13-2005) OIC Funded by Lending Institutions

Note:

5.12.3.2.5 (02-02-1999) Trust Fund Recovery Penalty

5.12.3.2.6 (07-15-2003) Bankruptcy Discharge of One Party on a Jointly Filed Lien

5.12.3.2.7 (07-15-2003) Innocent Spouse Determinations

5.12.3.3 (02-02-1999) Request for Release of Lien by Taxpayer

5.12.3.3.1 (06-13-2005) Processing Taxpayer Requests for Lien Release

5.12.3.3.2 (06-13-2005) Satisfied or Unenforceable Taxpayer Accounts

5.12.3.3.3 (06-13-2005) Full Payment in Exchange for Immediate Lien Release

5.12.3.3.4 (06-13-2005) Electronic and Credit Card Payments

5.12.3.4 (06-13-2005) Request for Release

5.12.3.4.1 (06-13-2005) Request for Release in Another Area

5.12.3.5 (06-13-2005) Erroneously Filed Notice of Federal Tax Lien

5.12.3.6 (06-13-2005) Certificate of Release

5.12.3.7 (07-15-2003) Disposition of Certificate of Release

5.12.3.8 (07-15-2003) Partial Lien Release

5.12.3.9 (07-15-2003) Authority to Execute Certificate of Release of Lien

5.12.3.10 (06-13-2005) Civil Cause for Action for Failure to Release Liens Under IRC 6325

5.12.3.10.1 (06-13-2005) Administrative Claim Procedures

Note:

Note:

5.12.3.10.2 (06-13-2005) Evaluation of Claim for Damages Under IRC 7432

Note:

Note:

5.12.3.10.3 (03-01-2004) Reimbursement of Damages and Costs for Failure to Release Lien Under IRC 6325.

5.12.3.11 (06-13-2005) Other Certificates Relating to Liens (Overview)

5.12.3.12 (06-13-2005) Discharge of Property

5.12.3.12.1 (06-13-2005) When to Issue a Certificate of Discharge

5.12.3.12.1.1 (06-13-2005) Property Double the Amount of the Liability

5.12.3.12.1.2 (06-13-2005) Part Payment/No value

Note:

Note:

5.12.3.12.1.3 (06-13-2005) Substitution of Proceeds for Sale

5.12.3.12.2 (06-13-2005) Right of Substitution of Value

Note:

5.12.3.12.2.1 (03-22-2000) Area Counsel Approval

5.12.3.12.2.2 (06-13-2005) Applications for Discharge

5.12.3.12.2.3 (03-22-2000) Refund Deposit with Interest

5.12.3.12.2.4 (03-22-2000) Processing the Refund

5.12.3.12.2.5 (02-02-1999) Use of Deposit If Action to Contest Lien Not Filed

Exception:

5.12.3.12.2.6 (06-13-2005) Discharge of Property Involving a Claim of Equitable Subrogation

5.12.3.12.3 (03-22-2000) Civil Action --Substitution of Value

5.12.3.12.3.1 (02-02-1999) Form of Relief—Substitution for Value

5.12.3.12.3.2 (02-02-1999) Interest Allowed on Refund of Deposit

5.12.3.12.3.3 (02-02-1999) Suspension of Running of the Statute

5.12.3.13 (06-13-2005) Subordination of Lien

5.12.3.14 (07-15-2003) Applications for Certificates

5.12.3.14.1 (07-15-2003) Submission of Applications

5.12.3.14.2 (07-15-2003) Investigation of Applications

5.12.3.14.3 (07-15-2003) Request for Relocation Expense Allowance

Note:

5.12.3.14.3.1 (03-22-2000) Procedures for Consideration of Relocation Expense Allowance

Note:

Example:

5.12.3.14.4 (07-01-2005) Report of Investigation

5.12.3.15 (02-02-1999) Preparation of Certificates

5.12.3.15.1 (02-02-1999) Certificate of Discharge in Bankruptcy Court Sales

5.12.3.16 (07-15-2003) Certificate of Discharge in Foreclosure Proceedings

5.12.3.17 (03-22-2000) Certain Government Agency Discharges

5.12.3.18 (02-02-1999) Applications for Discharge (VA, SBA, or FHA)

5.12.3.19 (07-15-2003) Issuance of Certificate of Discharge (VA, SBA, FHA)

5.12.3.20 (07-15-2003) Issuance of Certificate of Discharge or Subordination

5.12.3.21 (02-02-1999) Revocation of Certificates

5.12.3 Certificates Relating to Liens and Claims for Damages (Cont. 1)

5.12.3.22 (02-02-1999) Non-attachment of Lien

5.12.3.22.1 (02-02-1999) Certificate of Non-attachment

5.12.3.22.2 (02-02-1999) Issuance of Certificate of Non-attachment

5.12.3.23 (02-02-1999) Reinstatement of Lien

5.12.3.24 (02-02-1999) Filing of Certificates and Notices

5.12.3.25 (06-13-2005) Withdrawal of the Filed Notice of Federal Tax Lien (Overview)

Section 3. Certificates Relating to Liens and Claims for Damages

5.12.3 Certificates Relating to Liens and Claims for Damages

5.12.3.1 (07-15-2003)
Certificates of Release (Overview)

5.12.3.2 (06-13-2005)
Conditions of Release

5.12.3.2.1 (06-13-2005)
Liability is Satisfied

5.12.3.2.2 (02-02-1999)
Liability is Unenforceable

5.12.3.2.3 (06-13-2005)
Acceptance of a Bond

5.12.3.2.4 (06-13-2005)
Acceptance of an Offer

5.12.3.2.4.1 (06-13-2005)
OIC Funded by Lending Institutions

5.12.3.2.5 (02-02-1999)
Trust Fund Recovery Penalty

5.12.3.2.6 (07-15-2003)
Bankruptcy Discharge of One Party on a Jointly Filed Lien

5.12.3.2.7 (07-15-2003)
Innocent Spouse Determinations

5.12.3.3 (02-02-1999)
Request for Release of Lien by Taxpayer

5.12.3.3.1 (06-13-2005)
Processing Taxpayer Requests for Lien Release

5.12.3.3.2 (06-13-2005)
Satisfied or Unenforceable Taxpayer Accounts

5.12.3.3.3 (06-13-2005)
Full Payment in Exchange for Immediate Lien Release

5.12.3.3.4 (06-13-2005)
Electronic and Credit Card Payments

5.12.3.4 (06-13-2005)
Request for Release

5.12.3.4.1 (06-13-2005)
Request for Release in Another Area

5.12.3.5 (06-13-2005)
Erroneously Filed Notice of Federal Tax Lien

5.12.3.6 (06-13-2005)
Certificate of Release

5.12.3.7 (07-15-2003)
Disposition of Certificate of Release

5.12.3.8 (07-15-2003)
Partial Lien Release

5.12.3.9 (07-15-2003)
Authority to Execute Certificate of Release of Lien

5.12.3.10 (06-13-2005)
Civil Cause for Action for Failure to Release Liens Under IRC 6325

5.12.3.10.1 (06-13-2005)
Administrative Claim Procedures

5.12.3.10.2 (06-13-2005)
Evaluation of Claim for Damages Under IRC 7432

5.12.3.10.3 (03-01-2004)
Reimbursement of Damages and Costs for Failure to Release Lien Under IRC 6325.

5.12.3.11 (06-13-2005)
Other Certificates Relating to Liens (Overview)

5.12.3.12 (06-13-2005)
Discharge of Property

5.12.3.12.1 (06-13-2005)
When to Issue a Certificate of Discharge

5.12.3.12.1.1 (06-13-2005)
Property Double the Amount of the Liability

5.12.3.12.1.2 (06-13-2005)
Part Payment/No value

5.12.3.12.1.3 (06-13-2005)
Substitution of Proceeds for Sale

5.12.3.12.2 (06-13-2005)
Right of Substitution of Value

5.12.3.12.2.1 (03-22-2000)
Area Counsel Approval

5.12.3.12.2.2 (06-13-2005)
Applications for Discharge

5.12.3.12.2.3 (03-22-2000)
Refund Deposit with Interest

5.12.3.12.2.4 (03-22-2000)
Processing the Refund

5.12.3.12.2.5 (02-02-1999)
Use of Deposit If Action to Contest Lien Not Filed

5.12.3.12.2.6 (06-13-2005)
Discharge of Property Involving a Claim of Equitable Subrogation

5.12.3.12.3 (03-22-2000)
Civil Action --Substitution of Value

5.12.3.12.3.1 (02-02-1999)
Form of Relief—Substitution for Value

5.12.3.12.3.2 (02-02-1999)
Interest Allowed on Refund of Deposit

5.12.3.12.3.3 (02-02-1999)
Suspension of Running of the Statute

5.12.3.13 (06-13-2005)
Subordination of Lien

5.12.3.14 (07-15-2003)
Applications for Certificates

5.12.3.14.1 (07-15-2003)
Submission of Applications

5.12.3.14.2 (07-15-2003)
Investigation of Applications

5.12.3.14.3 (07-15-2003)
Request for Relocation Expense Allowance

5.12.3.14.3.1 (03-22-2000)
Procedures for Consideration of Relocation Expense Allowance

5.12.3.14.4 (07-01-2005)
Report of Investigation

5.12.3.15 (02-02-1999)
Preparation of Certificates

5.12.3.15.1 (02-02-1999)
Certificate of Discharge in Bankruptcy Court Sales

5.12.3.16 (07-15-2003)
Certificate of Discharge in Foreclosure Proceedings

5.12.3.17 (03-22-2000)
Certain Government Agency Discharges

5.12.3.18 (02-02-1999)
Applications for Discharge (VA, SBA, or FHA)

5.12.3.19 (07-15-2003)
Issuance of Certificate of Discharge (VA, SBA, FHA)

5.12.3.20 (07-15-2003)
Issuance of Certificate of Discharge or Subordination

5.12.3.21 (02-02-1999)
Revocation of Certificates

5.12.3.22 (02-02-1999)
Non-attachment of Lien

5.12.3.22.1 (02-02-1999)
Certificate of Non-attachment

5.12.3.22.2 (02-02-1999)
Issuance of Certificate of Non-attachment

5.12.3.23 (02-02-1999)
Reinstatement of Lien

5.12.3.24 (02-02-1999)
Filing of Certificates and Notices

5.12.3.25 (06-13-2005)
Withdrawal of the Filed Notice of Federal Tax Lien (Overview)

5.12.3.26 (06-13-2005)
Filing of the Notice Was Premature

5.12.3.27 (06-13-2005)
Installment Agreements and the Notice of Withdrawal

5.12.3.28 (06-13-2005)
Notice of Lien Withdrawal Will Facilitate Collection

5.12.3.29 (06-13-2005)
Best Interest Withdrawal Provisions

5.12.3.30 (06-13-2005)
Taxpayer Requests

5.12.3.31 (06-13-2005)
Recommending Withdrawal of the NFTL

5.12.3.32 (06-13-2005)
Approving the Withdrawal Request

5.12.3.33 (06-13-2005)
Denying the Withdrawal Request

5.12.3.34 (06-13-2005)
Partial Withdrawal

5.12.3.35 (06-13-2005)
Requests for Withdrawal When the NFTL is Released

5.12.3.36 (07-15-2003)
Administrative Appeal Rights - Erroneous Lien Filings

5.12.3.36.1 (03-22-2000)
Request for Administrative Appeal

5.12.3.36.2 (03-22-2000)
Other Referral Requests

5.12.3.37 (03-01-2004)
Damages - Civil Cause of Action on Unauthorized Collection Action

5.12.3.37.1 (03-01-2004)
Administrative Claim Procedures