DEPARTMENT OF THE TREASURY 

EXECUTIVE OFFICE FOR ASSET FORFEITURE 

DIRECTIVE NO. 12 

DATE: August 20, 2015 

SUBJECT: Payment of Taxes, Liens and Mortgages on Forfeited Real Property 

1.PURPOSE. This Department of the Treasury Executive Office for Asset Forfeiture (TEOAF) Directive 

No. 12 establishes the policies and procedures for making payments from the Treasury Forfeiture Fund 

(TFF) for tax liens, non-tax liens and mortgages associated with forfeited real property. 

This policy Is intended to ensure the expeditious payment of tax liens, non-tax liens and mortgages 

associated with forfeited property so that the Department of Treasury may timely obtain clear title, and 

promptly dispose of forfeited real property. 

2. SCOPE. This Directive applies to all seizing agencies participating in the Treasury Forfeiture Fund 

(TFF) and TEOAF and its contractors. 

3. POLICY. In all forfeiture cases, it is the policy of the Department of Treasury that as a general matter, 

state and local real property tax liens, plus Interest that accrues up to the date of the entry of a final order 

of forfeiture, should be timely paid. Generally. all other types of liens such as mortgage liens, plus 

interest that accrues on those liens up to the date payment is made, will also be paid. However, under no 

circumstance may any lien payment amount exceed the value of the property at the time of seizure.1 

Further, a lien that exceeds the net sales proceeds from the sale of such property may be paid only with 

TEOAF approval. 

4, RESPONSIBILITIES. 

A. It is the responslblllty of the seizing agency to confirm that a final order of forfeiture Is recorded with 

the appropriate county or municipal officials prior to issuing instructions to TEOAF's national seized real 

property contractor for the disposition of forfeited property. Disposition instructions sent to TEOAF's 

national seized real property contractor prompts the contractor to verify lien amounts and to seek 

payment from the TFF. 

The filing or recording of the final order and the lifting of any associated iis pendens is normally the 

responsibility of the United States Attorney·s Office (USAO). Nevertheless, it is in the best Interests of the 

Department of Treasury to ensure that all final orders of forfeiture are timely filed or recorded at the 

county level. Thus, in those judicial districts where the USAO does not perform this function, the TFF 

participating agency or TEOAF's national seized real property contractor may file and record documents 

as needed. 

1 See 31 U.S.C. § 9705(b)(1 )(limiting payment of liens to the value of the properly at the time of seizure). 
B. The TFF participating agency shall onsuro that the Disposition Order, copies of any court documents, 

and the agency's instructions are provided to the national seized real property contractor as soon as is 

practicable after learning that the final order has been recorded with the appropriate county or municipal 

office(s ), but no later than 20 days from entry of a final order of forfeiture by the court. 

C. Upon receipt of those items set forth In 4(B) above, the national seized property contractor will verify 

lien, mortgage, and tax information, conduct appropriate title and appraisal actions; and advise the TFF 

participating agency of any discrepancies Iha! may require resolution by the TFF participating agency. 

D. If the national seized real property conlraclor does not find any discrepancy that could delay the sale 

and closing of the properly, ii will send a letter lo the TFF participating agency requesting its concurrence 

with the payment of taxes, liens and mortgages, and the initiation of sale. Under no circumstance may 

the amount of any lien request exceed the value of the properly at the time of seizure. See 31 U.S.C. § 

9705(b)(1). 

E. The seizing agency shall return the letter of concurrence to the national seized real property 

contractor within 1 O calendar days. If the TFF participating agency does not concur with the national 

seized real property contractor's proposed payment of taxes, liens and mortgages, it shall promptly 

contact the national seized real properly contractor's district office to resolve any issues such that 

concurrence can be timely granted. 

F. Upon receipt of the leller of concurrence from the TFF participating agency, the national seized real 

property contractor shall send copies of the signed concurrence document, as well as final tax and lien 

payoff information to TEOAF for review and funding approval. TEOAF will not approve any lien request 

that exceeds the value of the property at the lime of seizure. See 31 U.S.C. §9705(b){1 ). 

G. Within seven days of granting a request to pay taxes, liens and mortgages from the TFF, TE OAF will 

submit a request to the National Finance Center (NFC) so that funds may be disbursed to the appropriate 

lien holders. TEOAF will also provide the national seized real property contractor with a copy of the 

request sent to NFC. 

H. The NFC ensures that approved payments are distributed within fourteen (14) calendar days from 

receipt of a request from TEO AF. The NFC notifies the national seized real properly contractor when any 

tax or lien payment is made. 

I. Upon sale and subsequent closing of real property, the national seized real properly contractor shall 

ensure that the gross proceeds of sale are provided to the NFC within five days of the date the funds are 

received from the closing agent. 

5. GUIDANCE. 

A. Payment of Real Property Tax Liens 

(1) As a general matter, state and local real property taxes that accrued up until the date of entry of a 

final order of forfeiture should be paid upon receipt of a valid tax bill by the national seized real 

properly contractor or the USAO. Under no circumstance may the lien payment amount exceed 

the value of the property at the lime of seizure. See 31 U.S.C. § 9705(b){1 ). On rare 

occurrences, taxes niay be paid at closing, with TEOAF approval. 

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(2) In limited circumstances, TEOAF may approve the payment of taxes which accrued up until the 

date the forfeiture order was recorded (as opposed to entered by lhe court) if a state or local 

taxing authority has already assessed such taxes and is unwilling to waive lhem after being 

requested to do so by TEOAF's national seized real properly contractor, provided such payment 

does not exceed the value of the property at the time of seizure. See 31 U.S.C. § 9705(b)(1). 

(3) In_ most instances, the Department of Treasury will only pay real properly tax liens up lo the 

amount realized from the sale of properly. TFF participating agencies shall coordinate with the 

USAO to ensure, lo the extent practicable, that any written agreements or orders prohibit lhe 

payment of real properly lax liens lhal exceed nel sales proceeds. Any payment of a real properly 

lax lien that exceeds lhe nel amount realized by lhe sale of the properly will require a written 

waiver from TE OAF. A waiver may be granted, on rare occasions, provided the payment amount 

will not exceed the value of the property al the time of seizure. See 31 U.S.C. § 9705(b)(1 ). 

B. Payment of Interest and Penalties on Real Property Tax Liens 

(1) The Department of Treasury will pay interest but not penalties on taxes that accrued up until the 

date the final order of forfeiture was entered by the court, provided such interest on taxes does 

nol exceed the value of lhe properly at the time of seizure. See 31 U.S.C. § 9705(b)(1 ). TFF 

participating agencies shall also coordinate with the USAO to ensure, to the extent practicable, 

that any written agreements or orders prohibit any payment of interest thal exceeds net sales 

proceeds. 

(2) In limited circumstances, TEOAF may approve the payment of interest on laxes thal accrued up 

until the date the forfeiture order was recorded (as opposed to entered by lhe court) if a slate or 

local taxing authority has already assessed such interest and is unwilling to waive il after being 

requested lo do so by TEOAFs national seized real properly contractor, provided such payment 

does not exceed the value of the properly at the time of seizure. See 31 U.S.C. § 9705(b)(1). 

(3) As a general rule, the Department of Treasury will pay interest at the rate set forth in 28 U.S.C. 

§ 1961(a). 

(4) In rare circumstances, higher rates of interest may be paid where (a) the taxing authority can 

show it incurred out-of-pocket interest expenses in excess of lhe rate specified by 28 U.S.C. 

§ 1961(a), such as where tax certificates have been sold to private Investors; or (bl the United 

Slates Attorney's Office agrees lo a higher rate of interest provided such higher rate is nol 

punitive. TFF participating agencies should coordinate such action with TEOAF counsel prior to 

the filing of such a motion, or entry into such an agreement, by the AUSA. 

(5) In most instances, the Department of Treasury will only pay interest up lo lhe nel amount 

realized from the sale of property. TFF participating agencies shall coordinate with the USAO to 

ensure, to the extent practicable, that any written agreements or orders prohibit any payment of 

interest on real property laxes that exceeds net sales proceeds. Any payment of interest which 

exceeds the amount realized by the sale of the properly will require a written waiver by TEOAF. 

A waiver may be granted, on rare occasions, provided the payment amount will not exceed lhe 

value of lhe properly al the time of seizure. Seo 31 U.S.C. § 9705(b)(1 ). 

C. Payment of Mortgages and Other Non-Tax Liens 

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(1) As a general matter, mortgages and other non-tax liens are paid prior to sale after an appraisal 

confirms sufficient net equity exists to satisfy such lien. TFF parlicipating agencies shall 

coordinate with the USAO to ensure, to the extent practicable, that any written agreements or 

orders prohibit the payment of any non-tax lien or mortgage that exceeds net sales proceeds. 

Under no circumstance may the lien payment amount exceed the value of the property al the lime 

of seizure. See 31 U.S.C. § 9705(b)(1). If a court order or stipulated agreement directs a lien 

payment that exceeds the value of the property at the lime of seizure, TEOAF counsel should be 

promptly notified and requested lo lake any appropriate corrective action. 

(2) In limited circumstances, TE OAF may be required by either stipulated agreement or court order to 

pay mortgages and other non-tax liens absent sufficient net equity. TFF participating agencies 

should consult with USAOs to ensure that such agreements are made, or court orders granted, in 

only the rarest instance when it is in the public interest to do so. In the event that a written 

agreement or court order requires TEOAF lo satisfy a lien absent sufficient net equity, such 

payment will generally be paid at the time of sale. 

(3) In the event that a written agreement or order is silent or ambiguous on the issue of whether a 

lien payment must be made absent sufficient net equity, the national seized real property 

contractor or the USAO (at the request of the TFF participating agency or national seized real 

properly contractor) shall make every reasonable attempt to negotiate downward the amount of 

any lien payment such that the payment does not exceed net equity. 

( 4) Any payment of a mortgage or other non-tax lien which exceeds the net amount realized by the 

sale of the properly will require a written waiver by TEOAF. A waiver may be granted, on rare 

occasions, provided the payment amount will not exceed the value of the property al the lime of 

seizure. See 31 U.S.C. § 9705(b)(1). 

D. Lien Subordination 

(1) The disposition of forfeited property is an executive branch decision and not a matter for the 

court. Consequently, preliminary and final orders of forfeiture should include language directing 

forfeiture of the property "for disposition in accordance with the law." In addition, orders of 

forfeiture should specifically address any third party claims against forfeited property that are 

recognized by the United States. If the interests of claimants (lo include liens) are to be satisfied 

in whole or in part by payments from the proceeds of a sale of property by a TFF participating 

agency or its contractors, the proposed forfeiture order should provide specific guidance for 

Treasury or its contractors concerning such payments and, where possible, specify that such 

claims shall bo paid only after the costs of tho United States are recovered, and shall be paid only 

up to the amount realized from the proceeds of the forfeited property. 

6. AUTHORITY. 31 U.S.C. § 9705; 21 U.S.C. § 881(h); 18 U.S.C. § 981(1); Treasury Directive 27-03, 

"Organizations ang Function of the Office of the Assistant Secretary (Enforcement)"; Delegation 

Memorandum dated May 19, 1995, "Technical Correction to EOAF Delegation of Authority"; and Treasury 

Order 102-14, March 24, 2007, "Delegation of Authority with Respect to the Department of the Treasury 

Forfeiture Fund." 

7. INFORMATION CONTACT. Any inquiries pertaining lo this Directive should be directed to the 

TEOAF Real Properly Team al (202) 622-9600. 

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8. CANCELLATION. The following TEOAF Directives are hereby superseded: Directive No. 12, "Uabilily 

of the United States for State and Local Taxes on Seized and Forfeited Property," (July 11, 1994); 

Directive No. 14, "Expeditious Payment of Liens, Mortgages and Taxes by the Department of Treasury," 

(October 1, 1995); and Directive No. 28, "Payment of Interest and Penalties on Taxes on Real Property 

Forfeitures," (December 23, 1994). 

9. EFFECTIVE DATE. August 20, 2015. 

ISi 

John Farley 

Acting Director 

TEOAF 

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