Opinion ID: 70400
Heading Depth: 1
Heading Rank: 5

Heading: R.C. Sec. 6325 governs the release of federal tax liens:

Text: (a) Release of lien.--Subject to such regulations as the Secretary may prescribe, the Secretary shall issue a certificate of release of any lien imposed with respect to any internal revenue tax not later than 30 days after the day on which-- (1) Liability satisfied or unenforceable.--The Secretary finds that the liability for the amount assessed, together with all interest in respect thereof, has been fully satisfied or has become legally unenforceable.... Id. 2 I.R.C. Sec. 7432 waives the government's sovereign immunity for private causes of action for civil damages resulting from the IRS's failure to release a lien. The statute provides: (a) In general.--If any officer or employee of the Internal Revenue Service knowingly, or by reason of negligence, fails to release a lien under section 6325 on property of the taxpayer, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. .... (e) Notice of failure to release lien.--The Secretary shall by regulation prescribe reasonable procedures for a taxpayer to notify the Secretary of the failure to release a lien under section 6325 on property of the taxpayer. Id. 3 The parties, reflecting the language of the statutes and regulations, refer to filing of the notices of federal tax lien and of the certificates of release. As is common in real estate transactions, we will often refer to filing as recording; these terms will be used interchangeably throughout this opinion 4 Interestingly, one of the liens filed against Griswold was for an assessment from the tax period ending December 31, 1979. Nowhere in the settlement agreement or in the materials submitted to us is it stated that an assessment was made against Griswold for the fourth quarter of 1979 5 In its original order, the district court erred in concluding that this lien had been released. See Griswold v. United States, 73 A.F.T.R.2d 94-1379, 94-1381, 1994 WL 245223 (M.D.Fla.1994), reconsideration denied, 73 A.F.T.R.2d 94-1936, 1994 WL 264644 (M.D.Fla.1994). The district court misread the record at R1-17-Exh. J. Those records give notice of what had been filed during the relevant time period, not of what remains of record. Although the district court conceded its error upon Griswold's motion for reconsideration, the court dismissed the effect of that error as harmless. Griswold, 73 A.F.T.R.2d at 94-1937 6 Griswold apparently lost a business opportunity as a result of Notice No. 3's remaining of record. The president of Paks, Inc., with whom Griswold had engaged in business negotiations, declined to participate in the venture because of the IRS liens. He wrote: As we advised, regardless of the documentation you have presented, which indicates you have satisfied your liabilities with the Internal Revenue Service; the lien filings that remain active--prohibit us from associating with you. Even as you state, the IRS has failed to release some liens in error--or through negligence; such active liens would attach to anything of value. Regretfully, for all of us--we had to pass on this. R1-1-Exh. N. 7 We have stated: [S]ection 6323 ... operates to protect holders of perfected security interests from unfiled tax liens or so-called 'secret liens'.... The filing requirement is critical: even a holder of a security interest who has actual knowledge of an unfiled tax lien will prevail over the government. In re Haas, 31 F.3d at 1084; see id. at 1084 n. 4. 8 While the IRS Manual does not have the force of law, see Anderson v. United States, 44 F.3d 795, 799 (9th Cir.1995), the manual provisions do constitute persuasive authority as to the IRS's interpretation of the statute and the regulations 9 Senate Report No. 1708 on the Federal Tax Lien Act of 1966 stated: Since the adoption of the Federal income tax in 1913, the nature of commercial financial transactions has changed appreciably. Business practices have been substantially revised and, as a result, many new types of secured transactions have been developed. In an attempt to take into account these changed commercial transactions, and to secure greater uniformity among the several States, a Uniform Commercial Code was promulgated somewhat over 10 years ago by the American Law Institute and the National Conference of Commissioners on Uniform State Laws. A revised version of this code is already law in over 40 States and could well be adopted by many of the remaining States in the near future. Under the Commercial Code, priority now is afforded new types of commercial secured creditors not previously protected. This bill is in part an attempt to conform the lien provisions of the internal revenue laws to the concepts developed in the Uniform Commercial Code. It represents an effort to adjust the provisions in the internal revenue laws relating to the collection of taxes of delinquent persons to the more recent developments in commercial practice (permitted and protected under State law) and to deal with a multitude of technical problems which have arisen over the past 50 years. The bill represents the culmination of a project initiated approximately 10 years ago by those concerned with the relationship of the tax lien provisions to the interests of other creditors. S.Rep. No. 1708, 89th Cong., 2d Sess. 1-2 (1966), reprinted in 1966 U.S.C.C.A.N. 3722, 3722-23 (emphasis added). 10 This regulation provides: (e) Notice of a Federal tax lien which lists multiple liabilities. When a notice of Federal tax liens lists multiple tax liabilities, the district director shall issue a certificate of release when all of the tax liabilities listed in the notice of Federal tax lien have been fully satisfied or have become legally unenforceable. In addition, if the taxpayer requests that a certificate of release be issued with respect to one or more tax liabilities listed in the notice of Federal tax lien and such liability has been fully satisfied or has become legally unenforceable, the district director shall issue a certificate of release. For example, if a notice of Federal tax lien lists two separate liabilities and one of the liabilities is satisfied, the taxpayer may request the issuance of a certificate of release with respect to the satisfied tax liability and the district director shall issue a release. Tempt.Treas.Reg. 401.6325-1(e) (emphasis added). Evidently, notices of federal tax liens often list more than one lien. 11 The IRS, by taking portions of this regulation and a portion of the relevant IRS Manual provisions out of context, see Appellee's Brief at 25-26 & n. 4, misrepresented to us that the taxpayer always needs to request a certificate of release if the taxpayer desires a certificate of release for a notice of federal tax lien which has been filed. These partially cited provisions, when read in full, require only that the taxpayer make such a request when the underlying tax obligation of one lien listed on a notice of federal tax lien has been satisfied or is unenforceable and the notice listing that lien also lists liens which continue to be valid 12 This statement is made by the IRS repeatedly in the record. R1-9-3 (IRS's Memorandum in Support of Motion for Summary Judgment) (On March 30, 1992, all of the tax liens identified in the four Notices of Federal Tax Lien filed in Hillsborough County were released by the Internal Revenue Service by virtue of the filing of certificates of release. (emphasis added)); R1-9-4 (Section 6325 requires the United States to release a tax lien within 30 days of the liability having become satisfied or unenforceable as a matter of law. The United States maintains that it satisfied its obligations under Section 6325 by timely filing Certificates of Release of Federal Tax Lien identifying the tax liabilities that had been fully paid.); R1-24-2 (Joint Pretrial Statement) (3a. Theory of the United States' Case[;] The United States maintains that it satisfied its obligations under Section 6325 by timely filing Certificates of Release of Federal Tax Lien identifying the tax liabilities that had been fully paid.); R1-10-Exh. 1-2 (Declaration of Toney Altieri) ([A] tax lien ... is released when a certificate of release Form 668(Z) is filed for the appropriate tax periods.); Appellee's Brief at 7 ([T]he United States contend[s] that it ... satisfied the requirements of I.R.C. Sec. 6325 by timely filing certificates of release of Federal Tax Liens which identified those tax liabilities which had been satisfied, thereby resulting in the release of the liens.) 13 Separate certificates of release were filed for each notice, and the certificates listed accordingly the differing assessment amounts. See R-1-17-Exhs. C, D, Appendix A: Notice Nos. 1 & 2(c); R1-17-Exhs. C-1, D-1, Appendix B: Release Nos. 1 & 2(c) 14 This may be because the IRS's manual provides that the refiled notice of federal tax lien should reflect the current unpaid balance of assessment. IRS Manual Sec. 535(11). 71 (Apr. 29, 1992) 15 Cf. United States v. Union Cent. Life Ins. Co., 368 U.S. 291, 294, 82 S.Ct. 349, 351, 7 L.Ed.2d 294 (1961) (While Sec. 3672(a)(1) unquestionably requires notice of a federal lien to be filed in a state office when the State authoritatively designates an office for that purpose, the section does not purport to permit the State to prescribe the form or the contents of that notice. Since such an authorization might well result in radically differing forms of federal tax notices for the various States, it would run counter to the principle of uniformity which has long been the accepted practice in the field of federal taxation.) 16 The use of serial numbers and recording information are two reasonable ways of accomplishing this goal 17 Senate Report No. 1708, which preceded enactment of the Federal Tax Lien Act of 1966, unequivocally indicates Congress's purpose behind requiring refiling of the liens. The Senate report states: Public notice of the existence of a Federal tax lien is given under present law by the filing of a notice of the lien. As indicated previously, various interests may come ahead of a Federal tax lien if they arise before the filing of notice. Once the filing occurs, under present law the filing remains effective without any refiling of the notice. However, tax liens may expire, not only because the tax liability is satisfied, but also because they become unenforceable as a result of the running of the statute of limitations. Generally, the Federal Government has 6 years from the date of assessment to take action to collect the tax. As a result a potential creditor may well assume that if a notice of Federal Tax lien indicates that the assessment occurred more than 6 years before his search of the records, he may then act safely on the assumption that the Federal tax lien is no longer enforceable. As a result, he may feel secure in accepting the taxpayer's property as good security for the extension of credit. However, the 6-year statute of limitations on the collection of a Federal tax after assessment may be extended by agreement with the taxpayer or where the running of the statute of limitations is suspended such as where the taxpayer is out of the country for at least 6 months.... As a result, it is not unusual for a tax lien to be valid for more than 6 years after it arises. To remove this potential source of uncertainty for creditors, the bill as passed by the House provides that the [IRS] is to be required to refile its notice of lien in the same office where the original notice is filed.... The failure to refile the tax lien at the appropriate time is not to affect the validity of the lien itself. However, it nullifies the effect of the prior filing of the notice of the tax lien. Any timely refiling of a tax lien, in effect, represents a continuation of the prior filing, but any late refiling of a tax lien, in effect, constitutes a new filing. As a result, in the case of a late refiling, any security interest arising after the prior filing of the tax lien, but before the refiling, obtains a priority to the same extent and under the same conditions as if no tax lien had been filed prior to the time of the late refiling. S.Rep. No. 1708, 89th Cong., 2d Sess. 12 (1966), reprinted in 1966 U.S.C.C.A.N. 3722, 3733. Congress since has extended the statute of limitations to ten years. Sec. 6323(g)(3). 18 Notices of federal tax lien will expire without refiling and may be self-releasing. See generally Sec. 6323(g)(1); R1-17-Exh. D (IRS Form 668(Y)) (IMPORTANT RELEASE INFORMATION--With respect to each assessment listed below, unless notice of lien is refiled by the date given in column (e), this notice shall, on the day following such date, operate as a certificate of release as defined in IRC 6325(a). (emphasis added)) 19 Form 668(Y) is generally used to file original notices of federal tax lien. We note, however, that one of the refiled Griswold notices of federal tax lien is on Form 668(Y) instead of on the regular Form 668-F; yet, the refiling information was inserted by a computer printer on a standard notice of federal tax lien. The remaining refiled notices of federal tax lien, Notice Nos. 3 and 6, were filed on a preprinted Form 668-F 20 IRS Manual Sec. 5717.52 (Feb. 16, 1989) governs the Disposition of certificate of release. It states in pertinent part: (1) Form 668(z) or Part 3 of Form 668-F will be mailed or presented to the proper recording office. If the certificate is mailed to the recording office and it is necessary to have a transmittal accompany the certificate of release, Form 3915, Processing Notices and Releases of Federal Tax Lien and Other Related Certificates, will be used by checking the applicable blocks on the form. A self-addressed, indicia clause (postage and fees paid), envelope will also accompany the certificates of release if a receipt is requested. (2) In some instances, the taxpayer may insist upon personally recording the release. In these 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 taxpayer. Id. 21 The IRS attempted to argue that Griswold failed to give the IRS proper notice per Temp.Treas.Reg. 401.6325-1(f) to release the liens. The IRS had ample notice of its failure to release the liens and certainly had such knowledge before Griswold finally mailed them a copy of the offending notice of federal tax lien, as allegedly required by the regulation. The IRS's assertion is disingenuous considering that it still took the IRS over 10 months to release the lien after receiving that copy of the notice of federal tax lien