Source: http://taxalmanac.org/index.php/REG-141998-06.html
Timestamp: 2020-06-05 12:08:59
Document Index: 225187938

Matched Legal Cases: ['§301', '§301', '§301', '§301', '§6334', '§301', '§301', '§301', '§301', 'in casu', '§301', '§301', '§301', '§301', '§301', '§301', '§301', '§301', '§301', '§301', '§301', '§301', '§301']

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Notice of Proposed Rulemaking Withdrawal of Regulations Under Old Section 6323(b)(10)
7.3 I. Adjustment of Dollar Amounts
7.4 II. Removal of Protection for Passbook Loans
7.5 III. Clarification of Language Authorizing IRS
7.6 IV. Revision of Language on Late Refiling of NFTLs
7.7 V. Revision of References to 6-Year Collection Period
7.8 VI. Incidental Updates
7.9 Proposed Effective Date
7.10 Special Analyses
7.11 Comments and Requests for Public Hearing
This document contains proposed regulations related to the validity and priority of the Federal tax lien against certain persons under section 6323 of the Internal Revenue Code (the Code). The proposed regulations update the corresponding Treasury Regulations in various respects. The proposed regulations reflect the adjustment within section 6323(b) of certain dollar amounts as well as the amendment of section 6323(b)(10) by the IRS Restructuring and Reform Act of 1998 (RRA 1998). In addition, the proposed regulations amend the existing regulations under section 6323(c), (g), and (h) to reflect that a notice of Federal tax lien (NFTL) is not treated as meeting the filing requirements until it is both filed and indexed in the office designated by the state (in the case of real property located in a state where a deed is not valid against a purchaser until the filing of such deed has been entered and recorded in the public index); the lien will be extinguished if an NFTL contains a certificate of release and the NFTL is not timely refiled; and current law provides the IRS with a 10-year period to collect an assessed tax. The proposed regulations also make changes to the existing regulations under section 6323(f) to clarify the IRS’s authority to file NFTLs electronically. Finally, the proposed regulations make incidental changes throughout the existing regulations under section 6323 to make the dates in the examples more contemporaneous with the present and to remove language deemed no longer necessary.
Written or electronic comments and requests for a public hearing must be received by June 16, 2008.
Send submissions to CC:PA:LPD:PR (REG-141998-06), room 5203, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-141998-06), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, 20224, or via the Federal eRulemaking Portal at www.regulations.gov (IRS-REG-141998-06).
Concerning the regulations, Debra A. Kohn at (202) 622-7985; concerning submissions of comments and the hearing, Regina Johnson at (202) 622-7180 (not toll-free numbers).
There have also been several changes to IRS practice that are not reflected in the existing regulations. Section 301.6323(f)-1(d)(2) of the existing regulations provides that an NFTL may be filed electronically if the state in which it is being filed permits electronic filing. Whether a state “permits” electronic filing of NFTLs has been subject to varying interpretations, thus casting doubt on the validity of NFTLs filed electronically in jurisdictions that do not specifically provide for electronic filing. However, the requirements for proper filing of liens are a matter of Federal, not state, law. United States v. Union Cent. Life Ins. Co., 368 U.S. 291, 82 S. Ct. 349, 7 L. Ed. 2d 294 (1961). Thus, the IRS already possesses the authority to dictate the form and content of its NFTLs. The proposed regulations remove the “permits” language so that they correctly reflect the IRS’s authority to file NFTLs electronically.
Section 6323(b)(7) protects a mechanic’s lienor with respect to residential property subject to the mechanic’s lien. In 1976, the protection extended to such property was limited to an amount not more than $1,000. The limit of $1,000 is reflected in §301.6323(b)-1(g)(1) and in the examples contained in §301.6323(b)-1(g)(2). This amount was raised to $5,000 in the most recent amendment to section 6323(b)(7). The statutory limit is indexed annually for inflation. After indexing, the amount for 2008 is $6,600. The proposed regulations update §301.6323(b)-1(d) and (g) to make the dollar limits consistent with those applicable under the current version of section 6323(b)(4) and (7).
Section 301.6323(b)-1(d)(3), Example 3, references a $500 limit on household goods exempt from levy, citing Treas. Reg. §301.6334-1(a)(2). Section 301.6334-1(a)(2) is the regulation under I.R.C. §6334(a)(2). The amount reflected in section 6334(a)(2) as set forth in the most recent version of the Code is $6,250. The amounts in both section 6334(a)(2) and the corresponding regulation are indexed annually for inflation. After indexing, the applicable amount for 2008 is $7,900. Accordingly, §301.6323(b)-1(d)(3), Example 3, is amended to make the reference to the limit on household goods exempt from levy consistent with the amounts applicable in section 6334(a)(2) and §301.6334-1(a)(2).
Section 6323(b)(10) currently protects from a Federal tax lien certain institutions holding deposit-secured loans, to the extent of any loan made without actual notice or knowledge of the Federal tax lien. Prior to the enactment of RRA 1998, section 6323(b)(10) was entitled “passbook loans” and protected from a Federal tax lien an institution granting a loan without actual notice or knowledge of the Federal tax lien, if the loan was secured by an account evidenced by a passbook and if the lending institution was continuously in possession of the passbook from the time the loan was made. Section 301.6323(b)-1(j) reflects this language and, in addition, includes both a definition of “passbook” and an example of the provision’s operation.
III. Clarification of Language Authorizing IRS
to File NFTLs Electronically Section 301.6323(f)-1(d)(2) sets forth a definition of a Form 668, the form that, when filed, serves as an NFTL. This section includes NFTLs filed by electronic or magnetic media “if a state in which [an NFTL] is filed permits a notice of Federal tax lien to be filed by the use of an electronic or magnetic medium.”
Most local recording offices now have the technological capability to accept electronically-filed NFTLs. The proposed regulations amend §301.6323(f)-1(d)(2) to provide that a Form 668 may be filed either in paper form or electronically. In addition, the proposed regulations specifically define transmission by fax and e-mail as electronic, as opposed to paper, filings. The regulations as amended reflect the IRS’s authority to file NFTLs electronically in all situations and allow the IRS to work with local jurisdictions to receive electronically-filed NFTLs if they have the capacity to do so without obtaining permission from the state.
2. Paragraphs (d)(3) Example 1 and (d)(3) Example 3 are revised.
3. Paragraphs (g)(1) and (g)(2) Example 1 through Example 3 are revised.
§301.6323(b)-1 Protection for certain interests even though notice filed. * * * * *
(d) Personal property purchased in casual sale—(1) In general. Even though a notice of lien imposed by section 6321 is filed in accordance with §301.6323(f)-1, the lien is not valid against a purchaser (as defined in §301.6323(h)-1(f)) of household goods, personal effects, or other tangible personal property of a type described in §301.6334-1 (which includes wearing apparel, school books, fuel, provisions, furniture, arms for personal use, livestock, and poultry (whether or not the seller is the head of a family); and books and tools of a trade, business, or profession (whether or not the trade, business, or profession of the seller)), purchased, other than for resale, in a casual sale for less than $1,320, effective for 2008 and adjusted each year based on the rate of inflation (excluding interest and expenses described in §301.6323(e)-1).
Example 1. A, an attorney’s widow, sells a set of law books for $200 to B, for B’s own use. Prior to the sale a notice of lien was filed with respect to A’s delinquent tax liability in accordance with §301.6323(f)-1. B has no actual notice or knowledge of the tax lien. In addition, B does not know that the sale is one of a series of sales. Because the sale is a casual sale for less than $1,320 and involves books of a profession (tangible personal property of a type described in §301.6334-1, irrespective of the fact that A has never engaged in the legal profession), the tax lien is not valid against B even though a notice of lien was filed prior to the time of B’s purchase.
Example 3. In an advertisement appearing in a local newspaper, G indicates that he is offering for sale a lawn mower, a used television set, a desk, a refrigerator, and certain used dining room furniture. In response to the advertisement, H purchases the dining room furniture for $200. H does not receive any information which would impart notice of a lien, or that the sale is one of a series of sales, beyond the information contained in the advertisement. Prior to the sale, a notice of lien was filed with respect to G’s delinquent tax liability in accordance with §301.6323(f)-1. Because H had no actual notice or knowledge that substantially all of G’s household goods were being sold or that the sale is one of a series of sales, and because the sale is a casual sale for less than $1,320, H does not purchase the dining room furniture subject to the lien. The household goods are of a type described in §301.6334-1(a)(2) irrespective of whether G is the head of a family or whether all such household goods offered for sale exceed $7,900 in value.
Example 1. A owns a building containing four apartments, one of which he occupies as his personal residence. A notice of lien which affects the building is filed in accordance with §301.6323(f)-1. Thereafter, A enters into a contract with B in the amount of $800, which includes labor and materials, to repair the roof of the building. B purchases roofing shingles from C for $300. B completes the work and A fails to pay B the agreed amount. In turn, B fails to pay C for the shingles. Under local law, B and C acquire mechanic’s liens on A’s building.Because the contract price on the prime contract with A is not more than $6,600 and under local law B and C acquire mechanic’s liens on A’s building, the liens of B and C have priority over the Federal tax lien.
Example 2. Assume the same facts as in Example 1, except that the amount of the prime contract between A and B is $7,100. Because the amount of the prime contract with the owner, A, is in excess of $6,600, the tax lien has priority over the entire amount of each of the mechanic’s liens of B and C, even though the amount of the contract between B and C is $300.
Example 3. Assume the same facts as in Example 1, except that A and B do not agree in advance upon the amount due under the prime contract but agree that B will perform the work for the cost of materials and labor plus 10 percent of such cost. When the work is completed, it is determined that the total amount due is $850. Because the prime contract price is not more than $6,600 and under local law B and C acquire mechanic’s liens on A’s residence, the liens of B and C have priority over the Federal tax lien.
§301.6323(c)-2 Protection for real property construction or improvement financing agreements. * * * * *
§301.6323(f)-1 Place for filing notice; form. * * * * *
1. Paragraphs (a)(1), (a)(4), (b)(3) introductory text, (b)(3) Example 1, (b)(3) Example 5, and (c)(1) are revised.
4. Newly-designated paragraph (a)(3)(i) is revised.
7. Paragraphs (c)(1) through (c)(1)(ii) are revised.
8. Paragraph (c)(2) is removed.
9. Paragraph (c)(3) is redesignated as paragraph (c)(2) and revised.
10. Paragraph (d) is added.
§301.6323(g)-1 Refiling of notice of tax lien. (a) In general—(1) Requirement to refile. In order to continue the effect of a notice of lien, the notice must be refiled in the place described in paragraph (b) of this section during the required filing period (described in paragraph (c) of this section). If two or more notices of lien are filed with respect to a particular tax assessment, and each notice of lien contains a certificate of release that releases the lien when the required refiling period ends, the failure to comply with the provisions of paragraphs (b)(1)(i) and (c) of this section in respect to one of the notices of lien releases the lien and renders ineffective the refiling of any other notice of lien.
(3) Effect of failure to refile. (i) If the Internal Revenue Service fails to refile a notice of lien in the manner described in paragraphs (b) and (c) of this section, the notice of lien is not effective, after the expiration of the required filing period, as against any person without regard to when the interest of the person in the property subject to the lien was acquired. If a notice of lien contains a certificate of release that releases the lien at the end of the required refiling period and the notice of lien is not refiled during this period, the lien is extinguished and the notice of lien is ineffective with respect to—
(c) Required filing period—(1) In general. For the purpose of this section, except as provided in paragraph (c)(2) of this section, the term required filing period means—
§301.6323(h)-1 Definitions. (a) * * *
(3) Money or money’s worth. For purposes of this paragraph, the term money or money’s worth includes money, a security (as defined in paragraph (d) of this section), tangible or intangible property, services, and other consideration reducible to a money value. Money or money’s worth also includes any consideration which otherwise would constitute money or money’s worth under the preceding sentence which was parted with before the security interest would otherwise exist if, under local law, past consideration is sufficient to support an agreement giving rise to a security interest. A firm commitment to part with money, a security, tangible or intangible property, services, or other consideration reducible to a money value does not, in itself, constitute a consideration in money or money’s worth. A relinquishing or promised relinquishment of dower, curtesy, or of a statutory estate created in lieu of dower or curtesy, or of other marital rights is not a consideration in money or money’s worth. Nor is love and affection, promise of marriage, or any other consideration not reducible to a money value a consideration in money or money’s worth.
Note (Filed by the Office of the Federal Register on April 16, 2008, 8:45 a.m., and published in the issue of the Federal Register for April 17, 2008, 73 F.R. 20877)
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