Creation and Duration of Lien

1. A Federal Tax Lien (FTL) is created by statute and attaches to a taxpayer's property and rights to property for the amount of the liability. This is the "statutory" or "silent" FTL. Requirements for establishing the FTL are contained in IRC 6321. The following must happen:
   1. An assessment must have been made;
   2. A demand for payment must have been made;
   3. The taxpayer must have neglected or refused to pay.
2. The FTL will continue until the liability is satisfied or becomes unenforceable by lapse of time.

Taxpayer Contact

1. Make reasonable efforts, before filing the NFTL to contact the taxpayer to advise that a NFTL may be filed if payment is not made.
2. Contact may be made by:
   • telephone
   • delivered in person
   • mailing a notice or letter to the last known address.
3. Give the taxpayer an opportunity to make payment or other security arrangements. Explain the effect of the NFTL filing on normal business operations or their credit rating.
4. Certain restrictions have been placed on the Service regarding contact with taxpayers. See IRC Section 6304, Fair Tax Collection Practices.
5. If the taxpayer disagrees with the proposed lien filing advise the taxpayer of his right to appeal. Discuss both the Collection Appeals Process (CAP) and the Collection Due Process (CDP) under RRA 98. Advise the taxpayer that they will receive a 6320 notice. See IRM 5.12.3.

[5.12] 1.5  (02-22-2000)
Problem Resolution Program

1. Taxpayer Advocate cases and Applications for Taxpayer Assistance Orders may be initiated because of lien actions. See new IRM 5.1 (General) for criteria and procedures.

[5.12] 1.9  (02-22-2000)
Lien Priorities

1. The Federal Tax Lien (FTL) is not valid against purchasers, holders of security interests, mechanics lienors, and judgment lien creditors until a Notice of Federal Tax Lien (NFTL) has been filed. The filing of the NFTL notifies creditors that the FTL exists. The FTL is valid against certain creditors named at the time the lien is filed. Refer to IRC 6321. The exception to this is the ten "superpriorities."
   • Securities
   • Motor vehicles
   • Retail purchases
   • Casual sales
   • Possessory liens
   • Real property tax and special assessment liens
   • Small repairs and improvements of residential real property
   • Attorneys liens
   • Certain insurance contracts
   • Passbook loans
2. These priorities are fully defined in the LRG.
3. Purchase money security interests and purchase money mortgages have priority over a previously filed NFTL, if protected under local law. (Refer to Rev. Rul. 68-57).
4. RRA 98 provides that for tax years beginning in 1999 and thereafter, the higher exemption amounts will be indexed annually for inflation (consistent with the cost-of-living adjustment (COLA) amounts for the applicable tax year) and rounded to the nearest multiple of $10.

[5.12] 1.9.1  (02-22-2000)
Priority of Certain Other Interests

1. Advances made after or property coming into existence after the NFTL is filed have priority if granted by local law. Protection under local law must be the same that is provided against a judgment lien creditor at the time the NFTL is filed.
2. The priority position of unrecorded instruments, particularly mortgages, should be governed by local law. See LRG 242.
3. Home Equity Line of Credit--it is advisable to investigate the facts of the case to determine how the funds were used to determine the priority of the Federal Tax Lien. If the funds are drawn after the NFTL is filed, determine if the mortgage/lender has a security interest in the real property. Verify the amount of money or money's worth that changed hands. Determine if:
   1. The entire amount was turned over to the taxpayer;
   2. The taxpayer is allowed to draw against the funds as he wants;
   3. A specific amount was approved;
   4. The taxpayer paid down the amount owed.

[5.12] 1.9.2  (02-22-2000)
45-Day Disbursement Period

1. The FTL generally has priority with respect to security interests in property held before the NFTL is filed, if the filing is a result of disbursements made after the 46th day after the filing of the NFTL. See LRG 258.5.

[5.12] 1.9.3  (02-22-2000)
Priority of Interest and Expenses

1. Interest and certain expenses have the same priority as the related lien or security interest. See IRC 6323(e) and LRG 259.

[5.12] 1.10  (02-22-2000)
Considerations Before Filing

1. The employee assigned the TDA is responsible for safeguarding the government's interest. There are no rules to meet all Notice of Federal Tax Lien (NFTL) filing situations.
2. Persons assigned TDAs must exercise judgment in deciding whether or not a NFTL should be filed.

[5.12] 1.11  (02-22-2000)
Filing Outside the U.S.

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

[5.12] 1.13  (02-22-2000)
Filing Notice Guidelines

1. A NFTL filing determination must be made on all assigned cases including reactivated TDAs within established time frames, at least 10 calendar days after taxpayer contact. When possible, verbally advise the taxpayer of the NFTL filing.
2. Determining when to file a NFTL:

   If	Then
   the aggregate unpaid balance of assessment (UBA) is $5,000 or more	file a NFTL. Note:   Determine the need to file a NFTL when an additional assessment is posted to the TDA from the Daily Transaction Register. Use the transaction code date as the date of assessment for the liability when filing the NFTL.
   an installment agreement is $25,000 or more	file a NFTL.
   an open account with an aggregate UBA of $5,000 or more is being reported as currently not collectible	file a NFTL. NOTE: Due to Collection Due Process Appeal Rights hold case for 45 days before closing or archiving case file.
   a case involving both assessed and preassessed periods will be reported currently not collectible	the NFTL filing may be held up to include both periods on the NFTL.
   the property is exempt by the Federal Bankruptcy Code or state insolvency proceeding	file a NFTL to protect the government's interest.
   the taxpayer resides outside the U.S. and has known assets,	file a NFTL. Contact requirements are waived.
   the party on which a levy is to be served is likely to file a priority claim under IRC 6323(a) or (c)	file a NFTL even though there is no mandatory NFTL filing requirement prior to service of the notice of levy on wage, salaries, commissions, etc.

3. No history is required to support the following nonfilings. Exceptions to these may be made when it is in the best interest of the government. Do not file if:
   1. The aggregate unpaid balance of assessment is less than $5,000.
   2. A NFTL has already been filed and the subsequent liability is less than $2000. (NOTE: when subsequent liabilities reach $5000 file a lien.)
   3. The taxpayer is a corporate entity has gone through a liquidating bankruptcy or receivership regardless of dollar amount.
   4. The taxpayer is a defunct corporation, unless it is necessary to protect the government's interest in the liquidation of assets.
   5. A nonpaying officer when an adjustment to the Trust Fund Recovery Penalty is pending because the assessment has been paid by more than one officer.
   6. A taxpayer is deceased and there are no assets. SPF will make the decision to file in asset cases.
   7. The taxpayer resides abroad and has no known assets in the U.S.
   8. There is an indication that the liability has been satisfied or that credits are available to satisfy the liability.
   9. The taxpayer is a financial institution under control of the Resolution Trust corporation (RTC). See the section on WITHDRAWAL OF FILED NOTICE OF FEDERAL TAX LIEN, if a NFTL has been filed.
   10. The taxpayer has filed bankruptcy. Section 362(a) of the Bankruptcy code imposes an automatic stay that includes all creditors. A NFTL may be filed once the stay is lifted and SPF concurs.
4. If a NFTL is filed and the taxpayer used another person's SSN, the service center entity control unit will provide a temporary SSN for use when correcting the Notice of Federal Tax Lien.
5. Accrued interest and penalties added to tax should be collected during the limitation period for collecting the tax. This limitation period does not apply to bad checks, fraud penalty or certain other penalties that carry a separate collection statute expiration date.

[5.12] 1.15  (02-22-2000)
Nonfiling of Notices of Lien

1. A decision not to file a Notice of Federal Tax Lien will be supported by a history entry that clearly states the reasons why the filing of the NFTL will either hamper collection, is not proper due to doubt as to liability or when, in the revenue officer's judgment, information forthcoming, could lead to either of the above. Decisions to nonfile will be kept to these categories.
2. The history must also contain a follow-up date by which the revenue officer will receive information needed or by which a NFTL will be filed.
3. Managerial approval will not be required.
4. The acceptance of other collateral to ensure payment such as a surety bond or mortgage for the forbearance by the district director from the filing of the Notice of Federal Tax Lien should be fully considered.
5. A recommendation for nonfiling should be reevaluated upon receipt of another TDA or an additional assessment.

[5.12] 1.16  (02-22-2000)
Special Rules

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

[5.12] 1.16.1  (02-22-2000)
Actual Notice or Knowledge of Lien Requirement

1. IRC 6323(l) defines actual notice or knowledge of a Federal tax lien. The burden is on the Internal Revenue Service to show the existence of actual notice or knowledge whether such notice is material in determining the priority of a Federal tax lien as against a competing lien or interest.
2. Section 1-201 of the Uniform Commercial Code is cited in part for your guidance for when a person has knowledge or received notice.
3. ''(25) A person has 'notice' of a fact when
4. ''(a) he has actual knowledge of it; or
5. ''(b) he has received a notice or notification of it; or
6. "(c) from all the facts and circumstances known to him at the time in question he has reason to know that it exists." A person 'knows' or has 'knowledge' of a fact when he has actual knowledge of it. 'Discover' or 'learn' or a word or phrase of similar import refers to knowledge rather than to reason to know. The time and circumstances under which a notice or notification may cease to be effective are not determined by this subtitle.
7. ''(26) A person 'notifies' or 'gives' a notice or notification to another by taking such steps as may be reasonably required to inform the other in ordinary course whether or not such other actually comes to know of it. A person 'receives' a notice or notification when
8. ''(a) it comes to his attention; or
9. "(b) it is duly delivered at the place of business through which the contact was made or at any other place held out by him as the place for receipt of such communications."

[5.12] 1.17  (02-22-2000)
Refiling Notice of Lien

1. Refile the NFTL to maintain the continuity of priority established by the original filing when the collection period is extended.
2. Consider refiling the NFTL if the statute date has been extended or suspended by any action within the required refiling period.

   If	Then
   the form used for the original filing was earlier than 12/82,	failure to file at the appropriate time does not affect the validity of the filing. However, it does nullify the effect of the prior filing.
   Notices of Federal Tax Lien are filed on forms revised on 12/82 or later	the form "self-releases" unless timely refiled. These forms are considered as both a NFTL and a release.

3. Release of the NFTL is conclusive that the underlying, statutory FTL is extinguished. Follow procedures in Section 2 for revocation and reinstatement procedures.
4. Potential Refile Reports will be worked monthly.
5. Where applicable, ALS Units will route the appropriate information to the unit or employee responsible for the case for refiling determination.
6. SPF will make refile determinations for CNC mandatory follow-up and ACS cases.
7. Requests for refiles will be input through ALS.

[5.12] 1.17.1  (02-22-2000)
Criteria for Refiling

1. Before any NFTL is refiled, each assessment should be examined to determine that the statutory period for collection has been suspended or extended beyond the normal ten-year period beginning with the assessment date.
2. The normal collection statute may be suspended or extended by:
   1. Execution of Form 900, Tax Collection Waiver.
   2. Offer in compromise.
   3. Assets of taxpayer in custody of a court in certain types of proceedings.
   4. Judgment for the United States.
   5. Absence of taxpayer from United States.
   6. Military deferments.
   7. Appropriate actions suspending or extending the collection statute.
3. The extension of the statutory period for collection does not mean that a NFTL must be automatically refiled. Each case should be analyzed regarding present and future assets to which the refiled NFTL might attach. The present balance still due on the FTL would be another factor to be taken into consideration.

[5.12] 1.17.2  (02-22-2000)
Required Refiling Period

1. The time period for refiling NFTL have a starting and an ending date. Therefore, a refiled Notice of Federal Tax Lien is invalid if it is filed before the period for refiling as well as if it is filed after the period for refiling.
2. The refiling period lasts for 1 year. For the first refiling, the period begins nine years and 30 days from the date of assessment and ends 10 years and 30 days from the date of assessment. For example, if the assessment date is 3/1/85, the first refiling period will be 3/31/94--
   3/31/95. For subsequent refilings, each period begins nine years after the end of the previous refiling period and ends 1 year later. An example using the first refiling period above is that the second refile period would be 3/31/04--3/31/05.
3. As a general rule refiling should occur between July 1 and November 30 each year in order to allow sufficient time for processing a notice of change of address at the Service Center. For calculation of the required refiling period, see Exhibit 5.12.1-1.
4. The following is an example of the "Required Refiling Period" --On March 1, 1985, an assessment of tax was made against A, a delinquent taxpayer, and a FTL for the amount of the assessment arose on that date. On July 1, 1985, a NFTL was properly filed. The NFTL filed on July 1, 1985, is effective up to and including March 31, 1995. The first required refiling period for the NFTL begins on April 1, 1994, and ends on March 31, 1995. A refiling of NFTL during that period will extend the effectiveness of the NFTL filed on July 1, 1985, up to and including March 31, 2005. The second required refiling period for the NFTL begins on April 1, 2004, and ends on March 31, 2005.

[5.12] 1.17.3  (02-22-2000)
Place for Refiling

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

   If	Then
   the new residence is located outside the United States	refiling will be made in the District of Columbia. This refiling is extremely important in the case of personal property. If it is not accomplished as and when required, all other refilings are ineffective.
   more than one written notice of change of address is received on or before the 90th day,	the most recent one will be used for purposes of refiling, whether or not the taxpayer resides there on the date of refiling.

725 Norton St

Longboat Key FL 34228

3205 Kermit Hwy Ste 2

Odessa TX 79762

Telephone —

FL 941/387-0926

TX 432/367-3465

Fax —

FL 941/387-0823

TX 432/367-3465

On the Web: www.pro1040.com

License Jurisdictions —

CPA: FL, TX