Period Of Duration Of A Federal Tax Lien

Title 26 U.S.C.A. section 6322 provides as follows:

Unless another date is specifically fixed by law, the lien imposed by section 6321 shall arise at the time the assessment is made and shall continue until the liability for the amount so assessed or a judgment against the taxpayer unenforceable by reason of lapse of time.

In essence, the period of existence of a valid lien (other than for estate or gift taxes) is from the date the assessment of liability is formally made to the date the amount assessed is satisfied or becomes unenforceable by lapse of time. The Ominbus Reconciliation Budget Act of 1990 (H.R. 5835) became effective November 5, 1990. This Act extended the time that federal tax lien notices are effective (from six years and thirty days to ten years and thirty days). Under this Act, the federal tax lien notice is effective for a period of ten years and thirty days after assessment, unless prior to expiration of this period of limitations, the lien is properly refiled within the time allowed by law. The refiling continues the federal tax lien notice for an additional ten year period. The refiling must occur within the last year that the original filing is effective. In the alternate, if the assessment is properly and timely reduced to a judgment, the lien continues during the period in which the judgment is enforceable. There appears to be no federal period of limitations on enforceability of a judgment for taxes.

Company Policy: Require releases or discharges of all federal tax lien notices that have not expired. Also require releases or discharges of federal tax lien notices that state they expire on or after November 5, 1990, unless ten years and thirty days pass from date of assessment and unless the IRS does not refile the notice. For convenience, you may rely upon the recording date of the federal tax lien to calculate the time the notice is effective. If you rely upon recording dates, assume that the initial filing of federal tax lien is effective ten years and thirty days and assume the refiling is effective eleven years.

Any federal tax lien ceases to be a lien on real property upon the happening of any of the following:

  • The expiration, without refiling, of the period of duration of the lien.
  • The issuance by the District Director of Internal Revenue of a certificate of release, discharge, subordination, or nonattachment.

The above possibilities must be supported by these findings of record: that proceedings were not instituted to enforce the lien and that the lien was not refiled within the time allowed by law.

The elimination of the lien by a final, nonappealable decree of a court of competent jurisdiction in a suit to quiet title, a partition suit, a condemnation suit, or a suit in the nature of an interpleader, if the United States has been made a party defendant and has been properly served.

The elimination of the lien through the proper completion of judicial proceedings in the enforcement of a superior lien.

Note: The federal government has a one-year period to redeem, state law notwithstanding.

The two possibilities above must be supported by the following findings of record:

  • "The United States did not exercise its right of redemption within the time allowed by law."
  • The specific consent of the United States that the property be sold free of its liens and the proceeds divided.

In view of the numerous instances in which the ten-year period may be tolled and for the purpose of considering the lien as discharged, Title Insurance companies disregard completely the time of assessment of a federal tax lien and rely exclusively on the time of recording of the notice of the lien.

All content on Virtual Underwriter is subject to the terms shown here.