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Part 5. Collecting Process

Chapter 12. Federal Tax Liens

Section 3. Certificates Relating to Liens and Claims for Damages Under IRC § 7432 (Cont. 1)

5.12.3  Certificates Relating to Liens and Claims for Damages Under IRC § 7432 (Cont. 1)

5.12.3.12 
Discharge of Property

5.12.3.12.3 
Civil Action --Substitution of Value

5.12.3.12.3.3  (09-07-2006)
Suspension of Running of the Statute

  1. IRC § 6503(f) directs that the running of the period of limitations under IRC § 6502 will be suspended for the period beginning on the date the person becomes entitled to a certificate of discharge and ending on the date that is 30 days after the earlier of:

    • the earliest date on which the Secretary no longer holds any amount as a deposit or bond under § 6325(b)(4) by reason of such deposit or bond being used to satisfy the unpaid tax or is being refunded or released, or

    • the date the judgment secured under IRC § 7426(b)(5) becomes final.

  2. The running of the statute of limitations will be suspended only with respect to the amount of the assessment equal to the value of the interest of the government in the property plus interest, penalties, additions to tax and any additional associated amount.

5.12.3.13  (09-07-2006)
Subordination of Lien

  1. IRC § 6325(d)(1) and (2) provide for the subordination of any NFTL on any part of the property subject to the NFTL. This includes subordination of IRC § 6324 estate tax liens.

  2. Certain criteria must be met:

    If Then
    there is paid over to the Service an amount, on a dollar for dollar basis, equal to the amount of the NFTL or interest to be subordinated, issue Certificate of Subordination (Form 669–D). Typically, the NFTL would be subordinated to a lender loaning money to the taxpayer and securing the loan with a mortgage or deed of trust.
    it is determined that the interest of the United States in any part of the property covered by the NFTL will ultimately be increased by the subordination and ultimate collection of the outstanding liability will thereby be facilitated, issue Form 669-D. It is intended that this authority will be used by the Service under conditions similar to those under which an ordinary, prudent businessman would subordinate rights in a debtors property in order to secure additional long run benefits.
    it is determined that the United States will be adequately secured after subordination of a lien imposed by IRC § 6324. issue Certificate of Subordination of Federal Estate Tax Lien (Form 669–F) in the case of any lien imposed by § 6324.

  3. IRC § 6325(d)(3) provides a more liberalized criteria for subordinating IRC § 6324 liens only.

  4. Taxpayers will seek subordination of the federal tax lien in connection with refinancing mortgages. If the requested subordination is for the purpose of securing a loan to refinance a senior lien, the Service will apply § 6325(d)(2). Issuance of a subordination for the purpose of allowing a taxpayer to refinance an existing mortgage is allowable only if it can be shown that doing so will ultimately result in an increase in the amount realizable by the U.S. in the property (or any other property owned by the taxpayer), or that the ultimate collection of the tax liability will be facilitated by the subordination. Such a finding must be documented in the case history.

  5. If a taxpayer seeks a certificate of subordination for the purpose of obtaining cash or paying other debts not secured by a senior lien on the property (for example, in the case of a home equity loan), the Service will apply IRC § 6325(d)(1). In the case of entireties property, the Service generally will treat the value of the taxpayer’s interest as one-half of the value of the entireties property. The Service will issue a certificate of subordination upon payment of one-half of the amount of the lien or interest to which the federal tax lien will be subordinated.

  6. A subordination of the government's lien interest in current and/or future accounts receivable to the security interest of a lender, is allowable under IRC § 6325(d)(1) or (2). However, a subordination of the government's interest in current and future accounts receivable to a purchaser of accounts receivable as part of a factoring agreement, is ineffective to allow for the sale of the accounts receivable without the need for a discharge of the accounts receivable from the NFTL. Issuance of a subordination certificate that purports to allow for the sale of future accounts receivable without the need for a discharge should not be approved. If a NFTL prevents a taxpayer from entering into a factoring agreement that is needed to fund continuing business operations, pay current taxes, and make installment payments, withdrawal of the lien should be considered. (See IRM 5.12.3.30).

  7. If a taxpayer seeks a certificate of subordination for the purpose of financing the purchase of property financed by a purchase money mortgage or a purchase money security interest which qualifies for priority over a previously filed notice of federal tax lien as explained in Revenue Ruling 68-57, provide the taxpayer with Publication 785, Purchase Money Mortgages, Purchase Money Security Interests, and Subordination of the Federal Tax Lien , which explains why a certificate of subordination is not needed and will not be provided if applied for.

5.12.3.14  (09-07-2006)
Applications for Discharge & Subordination Certificates

  1. Any person desiring a certificate will submit a written application executed under penalties of perjury. The form and content of the applications are contained in the following publications:

    1. Discharge - Pub. 783, Instructions on how to apply for a Certificate of Discharge of Property From Federal Tax Lien,

    2. Subordination - Pub. 784, How to Prepare an Application for a Certificate of Subordination of Federal Tax Lien

    3. Subordination of Estate Tax Lien - Pub. 1153, How to Apply for Certificate of Subordination of Estate Tax Lien Under IRC 6325(d)(3)

    4. Nonattachment - Pub. 1024, How to Prepare an Application for a Certificate of Nonattachment of Federal Tax Lien

5.12.3.14.1  (09-07-2006)
Submission of Applications

  1. Applications for certificates, together with all necessary evidence, will be submitted directly to the Advisory Group Manager.

  2. Examine each application for completeness. If the application is incomplete or improper, the applicant should be promptly advised.

  3. Do not reject applications for incompleteness unless the missing information will not allow for a thorough investigation. Every effort should be made to accept the application, provided the information submitted would enable a proper investigation to be conducted.

  4. The Advisory Group Manager may waive the appraisal requirement if other acceptable evidence of the value of the property is submitted.

  5. See IRM 5.5.8 for guidance on evaluating discharge and subordination applications relating to estate tax liens.

  6. Use ICS to control and monitor the case. In the case of an application relating to a foreclosure proceeding, the investigation shall be completed within 7 days after receipt of the application and, in all other cases, within 30 days. Document any cause of delay in the ICS history.

5.12.3.14.2  (09-07-2006)
Investigation of Discharge and Subordination Applications

  1. Advisory will use all available resources to determine whether to issue a certificate of discharge or subordination. Unless there is evidence the process might not involve an arms length transaction, the appraisals submitted will normally be accepted and a separate investigation to determine the value of the property is not needed.

  2. Verify the information submitted in the application by contacting the:

    • Service employee assigned the delinquent account

    • applicant,

    • applicants representative,

    • taxpayer,

    • taxpayers representative,

    • real estate firms, title companies,

    • holders of encumbrances, or

    • any other person or entity that might have relevant information.

    If Then
    it is determined that a Field investigation is required before a final decision can be made to discharge the property or to subordinate the lien, An OI will be initiated. Revenue Officers will complete Form 3033, Investigation of Discharge or Subordination, on each investigation completed.
    the application is under IRC § 6325(b)(2) and relates to a foreclosure proceeding, the application should be flagged to indicate that the revenue officers report must be returned to Advisory within 7 days.

  3. Applications which require a field investigation will be investigated promptly by a revenue officer. The revenue officer assigned the investigation of the application will investigate and verify each item contained in the application, or which should have been contained in the application.

  4. Escrow funds, a potential payment source, should be considered and accounted for when working discharge investigations. However, if during the course of the investigation it is disclosed that the first encumbrance(s) exceeds the value of the property, it will not be necessary for the revenue officer to investigate and verify subsequent encumbrances, even though they were recorded prior to the filing of the NFTL.

  5. When investigating applications in which the property is encumbered by a home equity line of credit:

    1. In cases where the credit line is drawn down after the Notice of Federal Tax Lien is filed, it is necessary to determine if the mortgagee/lender has a security interest in the real property in question. Often, a credit line is approved for a specific amount, but that entire amount is not turned over to the taxpayer. The taxpayer may draw against this amount as he wants. Also, the credit line may be approved for a specific amount and the entire amount was passed onto the taxpayer, but was done so some time ago and the taxpayer has paid down the amount owed. In these cases, the mortgage is recorded showing the encumbrance as the approved amount of the credit line, not the amount actually borrowed.

    2. The amount of money or money’s worth that changed hands should always be verified. To be a holder of a security interest the mortgagee must first meet the two-pronged test of IRC § 6323(h)(1). (See IRM 5.17 for further explanation.) It is also necessary to determine the timing of disbursements on a line of credit. Although the mortgage or deed of trust will reflect the full amount of the line of credit, only the amount disbursed prior to the period ending 45 days after the recording of the NFTL (or sooner if actual notice of the lien is given) will have priority over the NFTL. A possible exception to the above is when the funds are specifically earmarked for construction or improvement of real property and the agreement was entered into prior to the NFTL filing.

5.12.3.14.3  (09-07-2006)
Applications for Discharge Which Include Requests for Payment of Real Estate Transfer Tax

  1. The Service has been advised that at least one state has enacted a real estate transfer tax equal to 3.5 percent of certain commercial real estate transactions. The Service has also been advised that the state insists that an amount equal to the prospective tax liability be remitted at closing. In cases where a filed notice of federal tax lien has perfected the interest of the United States in such property, the Service is asked to issue a certificate of discharge of federal tax lien to allow payment of the state’s claim at closing. It is the Service’s position that such taxes have no priority status under IRC § 6323(b)(6) against the filed notice of federal tax lien. The cited section applies to general real property ad valorem taxes, special assessments for public improvements or the cost of public utilities. As a prospective liability at the time of transfer, a transfer tax has no status as an assessed liability perfected as a security interest with respect to the filed notice of federal tax lien. At least one state asserts that it has a right to the proceeds of sale prior to distribution of proceeds at closing. The Service contends that the state has no such right. Priority of the federal tax lien is defined exclusively in IRC § 6323. Under no circumstances will a discharge of federal tax lien be issued for less than the full value of the Service’s claim on the equity in the subject property. The transfer tax will not be accorded priority status or treated as an expense of sale. Applications that include such provisions will be rejected.

5.12.3.14.4  (09-07-2006)
Request for Relocation Expense Allowance

  1. In certain situations, when selling a principal residence, taxpayers will be allowed limited funds from sale proceeds to pay relocation costs. Payment of these costs will be considered if the taxpayer demonstrates a need for this relief.

    Note:

    It is important to remember that funds received under the relocation expense allowance provision will not reduce the taxpayer’s tax liability.

  2. The relocation allowance will be deducted from the Service’s interest in the property. Junior lien holders are not impacted and have no entitlement to the funds.

  3. Use the following criteria when considering the relocation expenses allowance:

    • Property is limited to principal residences only.

    • Requests from taxpayers owning multiple pieces of real property generally will not be considered.

    • Taxpayers must demonstrate an "inability to pay" relocation costs and provide documentation for specific expenses on Form 12451, Request for Relocation Expense Allowance. Relocation expenses are subject to limitations based on the local standard "cost of living" locality tables, for the location of the new residence,

    • The IRS must receive a partial payment of the tax liability." No value" discharges will not be considered for relocation allowance.

5.12.3.14.4.1  (03-22-2000)
Procedures for Consideration of Relocation Expense Allowance

  1. To receive consideration, taxpayers must provide supporting documentation for expenses as an attachment to Form 12451, Request for Relocation Expenses Allowance. Supporting documentation may consist of:

    • Proposed rental agreement

    • Estimates from moving companies

    • Truck rental estimates

    • Utility hookups, etc.

  2. Reviewers will examine Form 12451 and the attached documentation for completeness and contact the taxpayer for any additional information.

  3. A determination will be made as to whether the taxpayer has sufficient funds available to pay reasonable relocation expenses. Information such as financial statements, recent bank statements, and last filed return can be used in this determination. Generally, cases in hardship 53 status (excluding closing codes 03 and 12) do not require another "hardship" determination.

  4. The relocation allowance should be calculated by multiplying the National Standard for the new residence locale and family size times a factor of 2.5. (See IRM Exhibit 5.15.1-2, National Standards).

    Note:

    As a general rule, this will be the maximum allowance considered.

    Example:

    $1,000 Amount allowed for " Family of 3" from National Standards Table
    x 2.5 Established Factor
    $2,500 Maximum relocation allowance

  5. The relocation allowance will be the lesser of actual relocation expenses approved or the National Standard amount determined by the above formula. Adjustments in the maximum allowance may be considered on a case-by-case basis if extenuating circumstances exist, such as age, health, disability, etc.

  6. If the taxpayer is moving within the same locale, the 2.5 factor will still apply.

  7. In all instances, there must be net proceeds available to apply to the tax liability.

5.12.3.14.5  (09-07-2006)
Form 3033, Investigation of Request for Certificate of Discharge or Subordination

  1. All revenue officer reports of investigation will be promptly entered on Form 3033, Investigation of Request for Certificate of Discharge or Subordination. The application should be carefully examined to make certain that the property is adequately and properly described.

  2. The revenue officer will submit the report, together with the copy of the application and all exhibits, to the Advisory Group Manager, for review and approval.

  3. In the case of an application relating to a foreclosure proceeding, the report shall be completed within 7 days after receipt of the investigation and, in all other cases, within 30 days.

  4. Advisors will either complete Form 3033 or summarize the computation of the government’s interest in the ICS history, supported by documentation in the case file.

5.12.3.15  (09-07-2006)
Issuance of Discharge and Subordination Commitment Letters

  1. If issuance of a commitment letter is necessary, use the following form letters, as applicable

    • Letter 402, Conditional Commitment to Discharge Certain Property from Federal Tax Lien

    • Letter 403, Conditional Commitment to Discharge Certain Property from Federal Tax Lien (Value)

    • Letter 4053, Conditional Commitment to Subordinate Federal Tax Lien

  2. If required documentation and payment are not submitted by the applicant within 30 days from the date of commitment, the ICS Advisory case file should be closed. Reopen the case and issue the certificate if documentation and payment are received after the case has been closed.

5.12.3.16  (09-07-2006)
Preparation and Issuance of Discharge and Subordination Certificates

  1. Prepare Forms 669–A through F in duplicate. The unused area in the description portion of the form will be blocked or lined out so as to prevent the insertion of a description of other property.

  2. If the certificate relates to a Notice of Federal Tax Lien on which an SSN was redacted, then redact the SSN on the certificate.

  3. Deliver the original of executed Forms 669 to applicants after all requirements listed in the conditional commitment letter have been met. If payment is required, the certificate may be issued upon payment by a method described at IRM 5.12.3.2.1(4). Otherwise, withhold issuance of the certificate until it is verified that the payment has cleared.

  4. All payments received in conjunction with certificate applications will be posted on the date of receipt.

  5. As stated in conditional commitment letters, issuance of certificates are conditioned upon the taxpayer's agreement that payments will be applied in the best interest of the government as determined by the Service.

  6. It is the responsibility of the applicant to record the certificate unless a particular recording agency will only record certificates presented by the IRS. If Advisory must record the certificate, no recording fee need be collected from the applicant.

5.12.3.16.1  (09-07-2006)
Certificate of Discharge in Bankruptcy Court Sales

  1. The bankruptcy court has inherent power to sell property within its jurisdiction free and clear of liens. Therefore, when a sale is made upon the order of a bankruptcy court, its purchaser takes the property unencumbered by the federal tax lien, and the federal tax lien should be considered transferred to the proceeds of the sale.

  2. When property is sold upon the order of a bankruptcy court, and the purchaser requests a certificate of discharge of federal tax lien, the purchaser, or other interested party will be advised to submit an affidavit to Advisory containing:

    • a statement of the facts concerning the sale,

    • a legal description of the property, and

    • attach a properly certified copy of the court order.

  3. If it is determined that the application is sufficient, issue a certificate using the appropriate form.

5.12.3.17  (09-07-2006)
Certificate of Discharge in Foreclosure Proceedings

  1. Foreclosing mortgagees taking title to property by a deed in lieu of foreclosure when the government's lien interest is valueless, should be encouraged to request discharges under IRC § 6325(b)(2)(B) rather than join the United States in a judicial proceeding. It is to their advantage because it eliminates the government's right of redemption, and it allows the government to avoid costly litigation proceedings.

  2. Issue the certificate upon receipt of proof that the taxpayer's right, title or interest in the property has been eliminated, and that the government's lien interest is valueless.

  3. Do not issue a certificate of discharge during the pendency of a judicial foreclosure proceeding. Notify the U.S. attorney of the request for a certificate.

  4. Do not consider a request for a certificate of discharge from a party who has nonjudicially foreclosed and has given adequate notice to the Advisory Group Manager under IRC § 7425. If they wish to eliminate the governments right of redemption, advise them of the procedures for obtaining a release of that right. Instructions for application are in Publication 487, How to Prepare Application to Release Property Secured by Federal Tax Lien

5.12.3.18  (09-07-2006)
Certain Government Agency Discharges

  1. To reduce litigation costs and make property readily marketable, the Veterans Administration (VA), Small Business Administration (SBA), and Federal Housing Administration (FHA) have agreed to accept title to property subject to a junior federal tax lien, provided the payment (if any) required to secure a discharge of property from the tax lien does not exceed the increased cost which would be incurred by them if a mortgagee elected to foreclose by a judicial, rather than by a nonjudicial, proceeding.

  2. Upon receipt of such requests, the Service will cooperate in discharging from junior federal tax liens, property acquired by these agencies in connection with their Loan Guaranty or Direct Loan Salvage operations.

  3. The procedures described in this section apply only to applications received from the VA, SBA, or FHA requesting discharge of property from a junior federal tax lien which has been or is to be acquired by one of those agencies.

  4. Issue a certificate of discharge if a federal agency has foreclosed nonjudicially and given adequate notice when the agency considers the NFTL to be a cloud on the title.

  5. These procedures do not apply when the United States has already been joined as a party to a judicial foreclosure proceeding or when the insured mortgagee forecloses and has not assigned the mortgage or deed of trust to the VA, SBA or FHA.

5.12.3.19  (09-07-2006)
Applications for Discharge (VA, SBA, or FHA)

  1. Applications for certificates of discharge will be submitted by the VA, SBA, or FHA when they have been notified that the mortgagee has acquired the property and has conveyed it or elected to convey it to the VA, SBA or FHA.

  2. The property will have been appraised by a designated or staff appraiser of the appropriate agency based on the market value of the property at the time of foreclosure. The appraisal will be accepted as the fair market value of the property in determining the government's interest under the federal tax lien. A Field investigation will not be required.

  3. The amount shown in the concluding paragraph of the application serves only to place a ceiling on the amount the particular agency may pay for the issuance of a discharge. If it is determined that the federal tax lien interest has value in excess of the amount which the agency is legally permitted to pay, they should be advised and the discharge application file closed.

  4. In accordance with an agreement with VA or FHA, when it has been determined that a notice of lien had been filed more than 30 days prior to a nonjudicial sale, an application for the discharge of the property will be made. No notice will be given under IRC § 7425 in these cases.

5.12.3.20  (09-07-2006)
Issuance of Certificate of Discharge (VA, SBA, or FHA)

  1. If it is found that the federal tax lien is valueless, deliver Form 669–C to the VA, SBA, or FHA.

  2. If it is determined that the federal tax lien interest has value, Advisory will prepare in quadruplicate a statement stating the exact amount required for the requested discharge. The original and two copies of the statement will be sent to the VA, SBA, or FHA.

  3. When a statement signed by the responsible agency official is received, stating that the amount required for the issuance of the discharge is satisfactory, deliver Form 669–B. No payment will be made at the time of delivery, but will be deferred until the certificate is filed with the proper recording official.

    1. After the certificate is properly filed, the VA, SBA , or FHA will remit payment in the form of a U.S. Treasury Check to the Advisory Group Manager.

    2. If payment is not received within 60 days after the date the certificate was delivered, a follow up will be made to determine when payment will be remitted.

  4. In the event the VA, SBA, or FHA does not acquire the property or agree to accept it from the mortgagee, the certificate will be returned to the area director for cancellation. The canceled certificate will be associated with the application for discharge.

5.12.3.21  (09-07-2006)
Applications for Discharge Involving a Claim of Equitable Subrogation

  1. Applications for discharge under IRC § 6325(b)(2)(A) or IRC § 6325(b)(2)(B) are sometimes submitted by third parties who either purchased property without having discovered a previously recorded NFTL or who purchased property at a foreclosure sale without the government having been properly noticed under IRC § 7425. These buyers will claim a right of equitable subrogation to the extent of encumbrances they paid that had priority over the NFTL prior to the sale.

  2. The doctrine of equitable subrogation is expressly recognized by IRC § 6323(I)(2), to the extent it exists under state law. Since subrogation laws vary from state to state, advisors must be familiar with applicable state laws and consult with Area Counsel in order to determine the government’s interest in property when a claim of equitable subrogation is made.

  3. Few third parties in the above situations would meet the definition of a party entitled to rights of subrogation as defined by any state’s law. However, courts are highly inclined to expand the definition if it can be shown that a failure to do so will result in the unjust enrichment of one party at the expense of another. Therefore, unless the facts do not support an argument for equitable subrogation, or where such argument is clearly not supported by state law, claims of equitable subrogation in these cases will be recognized when calculating the government’s lien interest, unless, based on local law, Area Counsel advises otherwise.

  4. In determining the government’s lien interest, the following general guidelines apply:

    1. A third party purchased property without recognizing the existence of the NFTL - Calculate the amount that would have been required for a discharge had an application been submitted prior to sale. Then, using forced sale value, deduct the amount of the prior encumbrance(s) paid by the purchaser. Do not deduct expenses of sale. The calculation that results in the higher amount, if any, will be the government’s interest that must be paid in order for a discharge to be issued. Accepting a lesser amount for the certificate then would have been required had the application been made prior to the sale would unacceptably reward the applicant for not taking action to obtain a discharge certificate until after the property was sold.

      EXAMPLE: One month after the sale of property the purchaser discovers that a NFTL in the amount of $50,000 against the seller was recorded prior to the sale and applies for a discharge. The property sold for its fair market value of $100,000. Prior encumbrances and reasonable expenses of sale totaled $70,000 and $10,000 respectively. If the application for discharge had been made at the time of the sale, a payment of $20,000 ($100,000 - $80,000 = $20,000) would have been required in order for a discharge certificate to be issued. If the government forecloses the lien, and assuming the property would be sold for its forced sale value of $80,000, and if counsel advises that the purchaser would likely be granted subrogation rights equal to the $70,000 prior mortgage that was paid when the property was purchased, $10,000 will be realized from a lien foreclosure ($80,000 - $70,000 = $10,000). Nonetheless, a payment of $20,000 must be paid in order for a discharge certificate to be issued.

    2. A third party purchased property at a foreclosure sale without the government having been properly noticed under IRC § 7425 - Using the forced sale value, deduct the amount of the prior encumbrance(s) paid by the purchaser. The result is the amount of the government’s interest that must be paid in order for a discharge to be issued.

      Example:At its own foreclosure sale a bank bids $95,000 (the amount of the delinquent mortgage) and purchases property with a fair market value of $100,000 and a forced sale value of $80,000. The bank then discovers that proper notice of the foreclosure was not given to the government leaving a NFTL undisturbed. The bank applies for a discharge. Since the forced sale value of the property is less than the amount of the mortgage that had priority over the NFTL, a discharge certificate may be issued without requiring any payment.

      Example:Same facts as the above example but the delinquent mortgage was $70,000 and that is the amount paid for the property at the foreclosure sale. A payment of $10,000 ($80,000 - $70,000 = $10,000) must be made in order for a discharge certificate to be issued.

      Note:

      See IRM 5.17.2.6.3.1 for additional information regarding issues of subrogation.

5.12.3.22  (09-07-2006)
Denial of Applications for Discharge or Subordination

  1. A determination to deny an application for discharge or subordination may be communicated verbally to the applicant.

  2. Ensure the applicant is aware of appeal rights as explained in Publication 1660,Collection Appeal Rights.

  3. If the denial determination is communicated to the applicant in writing, use the following letters:

    1. Letter 4025, Letter Advising of Action on Application for Discharge of Property From Federal Tax Lien, or

    2. Letter 4027 - Letter Advising of Action on Application for Subordination of Federal Tax Lien

5.12.3.23  (09-07-2006)
Revocation of Certificate of Release or Nonattachment

  1. IRC § 6325(f)(2) provides for a revocation of a certificate of release or nonattachment and the reinstatement of the NFTL to which the certificate relates.

  2. A certificate of revocation may be issued when it has been determined that a release of FTL or a certificate of nonattachment was issued:

    1. erroneously,

    2. improvidently, or

    3. in connection with a collateral agreement entered into in connection with a compromise under IRC § 7122 which has been breached, and if the period of limitation on collection after assessment has not expired.

  3. Issue a Certificate of Revocation to revoke a self-releasing NFTL in those instances when a new NFTL has been filed late.

  4. Use Form 12474, Revocation of Certificate of Release of Federal Tax Lien to revoke the release when the lien was not self-releasing.

  5. Use Form 12474-A, Revocation of Certificate of Release of Federal Tax Lien to revoke a lien that self-released.

  6. A new Notice of Federal Tax Lien should be filed to protect the priority of the lien after the Certificate of Revocation is filed. See IRM 5.12.3.25.

  7. When revocation is required, a request will be sent to Advisory to have the Lien Processing Unit, prepare the certificate and file a new NFTL.

5.12.3.24  (09-07-2006)
Certificate of Nonattachment

  1. A person will submit an application for a certificate of nonattachment when, due to a similarity of names, there is uncertainty whether a filed NFTL attaches to the applicant's property.

  2. Persons wishing to obtain a certificate of nonattachment should be furnished a copy of Publication 1024, How to Prepare an Application for a Certificate of Nonattachment of Federal Tax Lien.

  3. Applications are referred directly to the Advisory Group Manager for review.

  4. Advisory will determine from the information furnished and from internal sources whether a certificate should be issued. An OI may be issued if a field investigation is required, and Area Counsel may be asked for an opinion if necessary.

5.12.3.24.1  (09-07-2006)
Issuance of Certificate of Nonattachment

  1. If it is determined that the applicant is not the taxpayer whose name appears on the NFTL and that the NFTL did not attach or does not now attach to the applicant's property, the Advisory Group Manager will prepare Letter 1628, Certificate of Nonattachment of Federal Tax Lien.

  2. Provide the applicant with the certificate with instructions to record it, unless the applicant requests that the Service perform the recording.

  3. The cost for recording will not be collected from the applicant or the taxpayer. The Service will absorb the cost unless the applicant chooses to record the certificate.

5.12.3.25  (09-07-2006)
Reinstatement of Lien

  1. After a certificate of release has been revoked, the NFTL may be reinstated by:

    1. Mailing notice of the revocation to the last known address of the person against whom the tax was assessed, and

    2. By filing notice of the revocation in the same office(s) in which the related NFTL was filed.

  2. A reinstated FTL will be effective on the date the notice of revocation is mailed to the taxpayer but not before the date the notice is filed.

  3. On the effective date of reinstatement, a reinstated FTL has the same force and effect as a general tax lien for a period not longer than the period of limitation on collection after assessment of the tax liability to which it relates.

  4. Reinstated FTLs will not be valid against any lien or interest described in IRC § 6323(a) until a new NFTL has been filed subsequent to the time the reinstated FTL became effective. This requires the filing of a new NFTL. The date of the new filing is the date from which priorities will be determined as against IRC § 6323(a) interests.

  5. When reinstating a FTL, care must be taken to insure the proper NFTL is filed. For example:

    If And Then
    an erroneous release was issued the collection period remaining is still within the original 10 year statute a new 668(Y)(c) reflecting the same refile date that was contained on the original notice of lien is required.
    a refiled NFTL was not timely filed the original NFTL self-released, update the CSED on ALS. The new NFTL will show "N/A" in column E, Last Day for Refiling.
    an original NFTL was not filed during the initial 10 year statute,   the extended CSED should be input into ALS. The NFTL will reflect "N/A" in Column E, Last Day for Refiling.

  6. The amount to be shown on the "new" NFTL should be the total balance due at the time of filing the "new" notice.

  7. When there has been a revocation of a release of a NFTL, the taxpayer is entitled to a lien collection due process notice if a new NFTL is filed.

5.12.3.26  (09-07-2006)
Filing of Revocation Certificates and Notices

  1. All certificates and notices will be filed in the same office where the original filing took place, unless the state has since redesignated its filing office for the specific type of property. The Uniform Federal Lien Act of the state should be checked to confirm where to file the certificate or notice.

  2. Expenses related to the filing or recording of certificates will be borne by the government.

  3. In the event that these certificates and notices may not be filed in the office designated by State law, they are to be filed in the office of the clerk of the United States district court for the judicial district in the State office where the NFTL is filed.

  4. When filing a Certificate of Revocation and a new Notice of Federal Tax Lien, documents must be recorded in the proper order to be valid. The Certificate of Revocation must be recorded prior to the new Notice of Federal Tax Lien.

5.12.3.27  (09-07-2006)
Withdrawal of the Filed Notice of Federal Tax Lien (Overview)

  1. IRC § 6323(j) gives the Service the authority to withdraw a Notice of Federal Tax Lien (NFTL) under certain circumstances, and to provide notice of the withdrawal to credit agencies. The NFTL may be withdrawn under the following conditions:

    1. the filing of the notice was premature or otherwise not in accordance with the Service's administrative procedures;

    2. the taxpayer entered into an agreement under IRC § 6159 to satisfy the tax liability for which the lien was imposed by means of installment payments, unless such agreement provides otherwise,

    3. withdrawal of such notice will facilitate the collection of the tax liability, or

    4. with the consent of the taxpayer or the National Taxpayer Advocate, the withdrawal of such notice would be in the best interest of the taxpayer (as determined by the National Taxpayer Advocate) and the United States.

  2. It is necessary that a Withdrawal of the Notice of Federal Tax Lien be prepared rather than a Certificate of Release of Federal Tax Lien, since the Certificate of Release releases both the NFTL (paper document) and extinguishes the statutory tax lien.

  3. Withdrawal notices may be used if:

    1. the responsible unit has knowledge that the taxpayer has a credit available that will satisfy the lien (i.e., carryback, overpayment, adjustment, etc.),

    2. the taxpayer has filed for bankruptcy and the NFTL was filed when the automatic stay was in effect (filing is not in compliance with the Bankruptcy Code),

    3. the lien is filed against institutions under control of the FDIC as successor to the Resolution Trust Corporation (RTC).

  4. Requests for withdrawals will be considered regardless of the date the notice of lien was filed.

  5. Withdrawal of the NFTLis not mandatory except when the NFTL was filed in violation of the automatic stay in bankruptcy.

5.12.3.28  (09-07-2006)
Filing of the Notice Was Premature

  1. A NFTL may be withdrawn if the filing was premature or otherwise not in accordance with administrative procedures.

    EXAMPLE: The person responsible for the filing of the NFTL has knowledge that the taxpayer has an undisputed credit available as the result of a filed return that will satisfy the liabilities on the lien, such as a carryback, overpayment, adjustment, etc. Filing of the NFTL is premature.

    EXAMPLE: The taxpayer has filed bankruptcy and the NFTL is filed while the automatic stay is in effect. Filing of the NFTL is not in accordance with the Service’s administrative procedures and it should be withdrawn.

    EXAMPLE: A revenue officer is assigned a bal due for collection. A CP 501 (Balance Due - Reminder) was sent to the taxpayer. NFTLs have been previously filed for other liabilities owed by the taxpayer. The CP 501 constitutes a reasonable effort to contact the taxpayer and filing of the NFTL for the additional balance due would not be premature. (IRM 5.12.2.3). Unless it can be shown that withdrawal will enhance collection of the liability or is otherwise in the best interest of the taxpayer and the United States, it should not be withdrawn.

    EXAMPLE: A taxpayer has submitted an offer in compromise. During the course of the investigation a NFTL is filed because it becomes known that the taxpayer is dissipating assets and rejection of the OIC appears likely. Because the taxpayer previously received notices warning that a NFTL could be filed at any time, the recording of the NFTL was not premature. Unless it can be shown that withdrawal will facilitate collection of the liability or is otherwise in the best interest of the taxpayer and the United States, it should not be withdrawn.

  2. Withdrawal of the NFTL is mandatory when the NFTL is filed in violation of the automatic stay in bankruptcy. When the person filing a NFTL knows or should have known about available credits as in example 1 above, the NFTL should be withdrawn. In all other cases, even though filing of the NFTL may have been premature or otherwise not in accordance with the Service’s administrative procedures, it should not be withdrawn unless it is also determined that withdrawal will facilitate collection, or that withdrawal is in the best interest of the taxpayer and the United States.

  3. Follow the procedures outlined in Sections 5.12.3.34 or 3.35, once a determination has been made.

5.12.3.29  (09-07-2006)
Installment Agreements and the Notice of Withdrawal

  1. Consider whether the NFTL was inadvertently filed or whether this is a case in which the filing should be maintained.

    If Then
    the installment agreement provided for the notice, a request for withdrawal may not be granted.
      Note: Withdrawal may be appropriate under one of the other provisions of the Taxpayer Bill of Rights.
    the NFTL was not addressed in the installment agreement, withdrawal may be considered, but is not mandatory.
    the agreement provides for the NFTL to be filed as an additional condition of the agreement, a request for withdrawal may not be granted.
      Caution: There is a separate box on the agreement which may be used for additional conditions.
    the NFTL was not addressed as an additional condition, withdrawal may be considered, but is not mandatory.

    EXAMPLE: A taxpayer enters into an installment agreement that provides for the filing of a NFTL if the taxpayer defaults. The taxpayer pays the installments each month and has not defaulted. Ten months after entering into the agreement a NFTL is filed. Because the taxpayer has entered into an installment agreement and has not defaulted, the NFTL should be withdrawn because the taxpayer is in compliance with the terms of the agreement.

  2. Follow the procedures in IRM 5.12.3.34 or 3.35 once a determination has been made.

5.12.3.30  (09-07-2006)
Notice of Lien Withdrawal Will Facilitate Collection

  1. Determine if withdrawal of the NFTL will facilitate collection of the tax liability by considering the following:

    1. Will the amount realizable by the U.S. increase the chances of collecting the tax liability?

    2. If the NFTL was not already filed, do the conditions exist that would have allowed for lien forbearance? (See IRM 5.12.2.4.2)

    3. Will the Service receive a payment against the liability? If so, would withdrawal of the NFTL to obtain a partial payment hamper the collection of the remaining balance due?

    4. Will withdrawal enhance the taxpayer’s ability to obtain additional credit; and how will additional credit affect the taxpayer's ability to pay the liability?

    5. Is the NFTL the result of a defaulted installment agreement? If a condition of the installment agreement was that a NFTL would be filed in case of default, generally the NFTL should not be withdrawn.

    6. Is there any possibility that a bankruptcy may be filed if the withdrawal is not obtained? If so, consider how the taxes would be treated in a bankruptcy proceeding. Are they dischargeable? Does the taxpayer own assets so that the filing of the NFTL would enhance the government’s position as a secured creditor? Would the taxes be more or less collectible if the taxpayer filed bankruptcy?

    7. Is the taxpayer pyramiding liabilities? Are all required returns filed? A NFTL should not be withdrawn if the taxpayer is not in compliance with filing and deposit requirements.

    8. Will a lien subordination or discharge achieve the same result as a withdrawal? If so, a lien withdrawal is not appropriate.

    9. Can the taxpayer furnish the government with a bond or other acceptable security if the NFTL is withdrawn?

    EXAMPLE: A NFTL has been filed in the name of a taxpayer who has no assets, is unlikely to ever acquire assets of any real value, and has no other secured creditors. The taxpayer agrees to pay the balance of tax due through payroll deductions at a rate higher than the Service could obtain through a wage levy in order to get the NFTL withdrawn. The NFTL may be withdrawn because doing so will facilitate collection of the tax liability.

    EXAMPLE: A NFTL has been filed in the name of a taxpayer who is in the business of selling vacation time shares. The Service determines that the tax liability can only be paid by an installment agreement and the taxpayer, who has no other assets or secured creditors, agrees. However, in order to obtain the funds to make the installment payments, the taxpayer must sell accounts receivable to a factor on a weekly basis. The factor also requires that the taxpayer give the factor a security interest in all unpurchased and future accounts receivables to indemnify against the purchase of possible uncollectible accounts receivables. Such an agreement is not possible because of the NFTL. The NFTL may be withdrawn because doing so will facilitate collection of the tax liability.

    EXAMPLE: A NFTL has been filed in the name of a taxpayer owning minimal distrainable assets who is currently unemployed. The taxpayer is offered employment provided she is bondable. However, the bonding company refuses to issue a bond because the NFTL reduces the taxpayer’s credit score to an unacceptable level. The taxpayer agrees to pay the balance of tax due through payroll deductions if the NFTL is withdrawn and she is able to begin working. The NFTL may be withdrawn, with the provision that it would be filed again in case of default, because doing so will facilitate collection of the tax liability.

    EXAMPLE : A taxpayer requests withdrawal of a NFTL so that she can improve her credit score and purchase a new vehicle. The new vehicle is not necessary for her to perform her job duties or generate income which would assist in satisfying the liability. Withdrawal of the NFTL is not appropriate because doing so would not facilitate collection of the tax liability.

    EXAMPLE: A taxpayer has been making installment payments for the past year and has two years of payments remaining. The taxpayer is a salesman and needs to purchase a new automobile in order to continue to generate the income that is being used to make the installment payments. The taxpayer verifies that he cannot obtain a new car loan or a lease because the existence of the NFTL causes his credit score to fall below an acceptable level. The NFTL may be withdrawn, with the provision that it would be filed again in case of default, because doing so will facilitate collection of the tax liability.

  2. A determination that withdrawal will facilitate collection may originate with a Revenue Officer in the course of making a collection determination. Although a written request by the taxpayer for the withdrawal would not be needed in such a circumstance, the taxpayer must concur that the withdrawal is in his/her best interest.

  3. Follow the procedures outlined in IRM 5.12.3.34 or 3.35, once a determination has been made.

5.12.3.31  (09-07-2006)
Best Interest Withdrawal Provisions

  1. Two determinations are required:

    • one by the National Taxpayer Advocate (TPA) or the designee for the National Taxpayer Advocate, with respect to the taxpayer and

    • one by the Secretary or the designee for the Secretary.

  2. A determination that withdrawal is in the best interest of the United States may be made by collection employees.

  3. A taxpayer may request the withdrawal on the basis that it is in his or her best interest and the best interest of the United States without specifically requesting that the TPA make the determination on his or her behalf. A collection employee may also make a best interest determination independent of a taxpayer request provided the taxpayer or the TPA acting on behalf of the taxpayer consents to the withdrawal.

  4. There is no way every scenario you encounter can be covered. Apply your knowledge and experience to the case and use your judgment in making a determination. In making "best interest" determinations consider the following:

    1. What will be the effect of withdrawing the notice of lien? Are there claims currently subordinate to the federal tax lien which will become superior?

    2. What is the likelihood that the taxpayer will dispose of the property if the notice is withdrawn? Is there sufficient equity for this to be a concern?

    3. Will tax collection be undermined if the notice is withdrawn and the taxpayer files for bankruptcy protection?

    4. Are there other tools available, such as discharge or subordination, that will alleviate the taxpayer’s problem without eliminating the protection offered by the filed notice of lien.

  5. When making the best interest determination the expectation is that the government and the taxpayer will benefit from withdrawal of the notice.

    If Then
    withdrawal is in the government’s and taxpayer’s best interest, (subject to approval at the managerial level), the employee should follow the withdrawal procedures outlined above.
    it is determined that withdrawal would not be in the best interest of the government, notify the taxpayer of the determination and explain his/her appeal rights.
    the case involves imminent, significant hardship, the National Taxpayer Advocate may resolve disagreements by issuing a Taxpayer Assistance Order (TAO), when (s)he determines that it is in the best interest of the taxpayer.

    EXAMPLE: One of the taxpayers in the examples in IRM 5.12.3.32 above, contacts the Taxpayer Advocate and requests that the NFTL filed in their name be withdrawn because it is in their best interest as well as in the best interest of the government. The Taxpayer Advocate determines that it is in the best interest of the taxpayer that the NFTL be withdrawn. The Taxpayer Advocate contacts Compliance, requests that the NFTL be withdrawn, and, upon review, Compliance determines that it is in the best interest of the government that the NFTL be withdrawn. Because the Taxpayer Advocate, representing the taxpayer, and the Service agree that it is in the best interests of both, the NFTL may be withdrawn.

    EXAMPLE: A taxpayer requests that the NFTL be withdrawn so that he can refinance his home mortgage. In addition to refinancing the existing first mortgage, the taxpayer offers to borrow an additional amount to be applied as a partial payment of the liabilities listed on the NFTL. The taxpayer’s lender will not make the loan unless the NFTL is withdrawn. Although withdrawal of the NFTL would be in the best interest of the taxpayer, and withdrawal of the NFTL would result in partial payment, it is not in the best interest of the government to withdraw the NFTL. A subordination certificate will better protect the government’s interest by allowing for partial payment of the liability while continuing to secure the government’s interest for the remaining taxes due.

    EXAMPLE: The taxpayer in the above example requests that the NFTL be withdrawn so that he can refinance his home mortgage. In addition to refinancing the existing mortgage, the taxpayer offers to borrow an additional amount and full pay the liabilities listed on the NFTL. The taxpayer states that his lender will not make the loan unless the NFTL is withdrawn, even though a payoff statement is provided, the lender is aware that the NFTL will be paid off from the loan proceeds, and a revenue officer offers to attend the loan closing and provide an immediate lien release upon receipt of full payment. Further questioning of the taxpayer reveals that the NFTL is preventing the taxpayer’s mortgage broker from placing the taxpayer’s loan with a lender because the NFTL is lowering his credit score to an unacceptable level. Although other secured creditors have refused to give up their secured status in exchange for a promise of full payment, the taxpayer is hopeful that the government will agree to do so. Although withdrawal of the NFTL is in the best interest of the taxpayer, it is not a good business practice nor is it in the best interest of the government to relinquish its secured creditor status in exchange for a promise to pay.

    EXAMPLE: A taxpayer enters into a 2 year installment agreement conditioned upon the recording of a NFTL. One year later she requests withdrawal of the NFTL. All payments have been made timely and the taxpayer is requesting the withdrawal because it is harming her credit worthiness. Although withdrawal of the NFTL is in the best interest of the taxpayer, it is not a good business practice nor is it in the best interest of the government to relinquish its secured creditor status.

  6. Follow the procedures in IRM 5.12.3.34 or 3.35 once a determination has been made.

5.12.3.32  (09-07-2006)
Taxpayer Requests for Withdrawal

  1. All requests for withdrawal of the Notice of Federal Tax Lien must be in writing. Taxpayers may use Form 12277, Application for Withdrawal of Filed Form 668(Y)(c), Notice of Federal Tax Lien. A request may be accepted by fax if contact has been made with the taxpayer by phone and the taxpayer history file is documented with the date of the contact and notation is made that the taxpayer wishes to send the request by fax. Requests must contain the following:

    • taxpayer’s name,

    • current address,

    • taxpayer’s identification number,

    • a copy of the NFTL affecting the property, if available, and

    • statement or basis for the withdrawal request.

  2. Taxpayers must provide written authorization for disclosure of information to creditors, credit reporting agencies and financial institutions.

  3. Route taxpayer requests to the office with control of the case.

  4. Forward cases to Advisory in the area where the taxpayer lives or has its principal place of business when there is no open case in Collection.

  5. If the taxpayer claims the NFTL was filed in violation of a bankruptcy stay, forward the withdrawal request to the Insolvency unit where the taxpayer lives or has its principal place of business when there is no open case in Collection.

  6. Subsequent requests for copies of approved withdrawal notices to be sent to creditors or financial institutions will contain the same information outlined in (1) above.

5.12.3.33  (09-07-2006)
Recommending Withdrawal of the NFTL

  1. When a request is received from the taxpayer for a withdrawal of the NFTL, review the case history as well as the documentation provided by the taxpayer.

  2. Determine if sufficient documentation is provided to substantiate the withdrawal recommendation.

  3. Withdrawal may be granted under any of the four provisions provided by the Internal Revenue Code as outlined above. (See 5.12.3.27)

  4. Prepare a memorandum outlining the facts of the case.

  5. Forward the memorandum with the case file through the group manager to the appropriate approving official for signature.

5.12.3.34  (09-07-2006)
Approving the Withdrawal Request

  1. Advisory Group Managers, and Insolvency Group Managers have the authority to approve withdrawals.

  2. The appropriate referral form should be utilized for requesting issuance by the Centralized Case Processing Lien Unit(CCP-LU) of Form 10916(c), Withdrawal of Filed Notice of Federal Tax Lien. Upon issuance, the CCP-LU will return a copy of the Form 10916(c) to the requestor for inclusion with Letter 3044, Withdrawal Cover Letter, to be sent to the taxpayer and creditors. The requesting office is responsible for generation and distribution of the cover letter.

  3. The withdrawal notice must include any applicable refiled, amended, or corrected NFTLs associated with the original filing.

  4. Prepare the withdrawal notice in triplicate and file in the appropriate recording office within 10 days of notification from the taxpayer. The Service will bear the cost of filing.

  5. When the Service’s copy is returned, note the recording information in the ALS history screen.

  6. Forward a copy of the signed notice and a cover letter to the taxpayer after signature.

  7. Provide copies of the withdrawal notice to creditors, credit reporting agencies, or any financial institution if requested in writing by the taxpayer. This request must also contain authority to disclose the information.

  8. Retain a copy of the withdrawal if you did not prepare the withdrawal using ALS.

  9. Input TC 583 to reverse the lien filed indicator, if you did not use ALS.

5.12.3.35  (09-07-2006)
Denying the Withdrawal Request

  1. The employee assigned the case is authorized to deny withdrawal of the notice of federal tax lien.

  2. Notify the taxpayer that the request is denied.

  3. Inform the taxpayer of his or her appeal rights as well as their right to discuss the denial with the immediate manager.

  4. Provide the taxpayer with:

    • Publication 1660, Collection Appeal Rights for Liens, Levies, Seizures and Installment Agreement Terminations, and

    • Form 9423, Collection Appeal Request.

  5. Note the history with the reason for denial.

5.12.3.36  (09-07-2006)
Partial Withdrawal

  1. When a taxpayer was never assessed the liability and should not have been included on the NFTL, follow the procedures at IRM 5.12.2.6.11 to file a corrected NFTL removing the non liable taxpayer's name from the original lien. Although unnecessary, issue a partial withdrawal if one is requested.

  2. Only the name of the non liable taxpayer should be entered on the form. The NFTL is valid against the still liable taxpayer.

  3. Record the document in the proper recording office.

  4. The Service will bear the cost of the filing fee.

  5. Do not post a TC 583 to the still liable taxpayer’s master file account.

5.12.3.37  (09-07-2006)
Requests for Withdrawal After the NFTL Has Been Released

  1. A request for the withdrawal of a NFTL that has already been released, will be rejected.

  2. If it is determined that an already released NFTL was filed erroneously, improvidently, or inadvertently, and, but for the fact that the lien has already been released, withdrawal of the NFTL would have been warranted because the filing of the notice was premature or otherwise not in accordance with the Service's administrative procedures, then provide the taxpayer with Letter 544, Letter of Apology - Improvident/Erroneous Filing of Notice of Federal Tax Lien.

  3. Explain to the taxpayer that issuing the certificate of withdrawal after the certificate of release may cause confusion for the person receiving the documents because the withdrawal certificate states that the underlying lien remains in effect while the lien release states it has been released.

5.12.3.38  (09-07-2006)
Administrative Appeal Rights - Erroneous Lien Filings

  1. IRC § 6326 provides the right for a person against whom a NFTL has been filed to appeal for the release of the NFTL if they allege the filing was erroneous.

  2. Requests must be handled expeditiously and should be addressed to the Advisory Group Manager, in the area office where the NFTL was filed.

  3. The administrative appeals process:

    • may not be used to challenge the underlying deficiency leading to the encumbrance of the NFTL.

    • must be appealed within one year after the taxpayer becomes aware of the erroneously filed NFTL

  4. All collection actions will be withheld during the administrative appeals process, unless collection is in jeopardy.

  5. The Service must issue a Certificate of Release within 14 days after determining the filing was erroneous.

  6. The release must include a statement that the filing of the NFTL was erroneous. This ensures that the public records contain a statement that the filing was not attributable to the taxpayer and will assist in repairing the taxpayers credit or other financial records. A Certificate of Release must be issued on any erroneously filed NFTL.

  7. Taxpayers may request an appeal under the Collection Appeals Program (CAP) and may also be entitled to a Collection Due Process Appeal (CDP). See IRM 5.12.1.

5.12.3.38.1  (09-07-2006)
Request for Administrative Appeal Under IRC § 6326

  1. Requests for an administrative appeal under IRC § 6326 must:

    1. be in writing,

    2. provide the taxpayers name, current address and TIN,

    3. include a copy of the NFTL, if available,

    4. state the grounds on which the request is made (notice of deficiency was mailed to the wrong address, etc.),

    5. provide the canceled check or other evidence of payment, if liability satisfaction is claimed.

    6. provide information identifying the bankruptcy court, docket number and petition date if a bankruptcy stay violation is claimed.

    If Then
    The request does not meet the administrative appeal criteria, respond to the appealing party using Letter 2423, Acknowledgement of Administrative Appeals Request.
    A request disputes the tax, penalty or interest due, attempt to secure the basis for the claim from the taxpayer.
    You can adjust the liability, make the adjustment.
    The taxpayer does not provide adequate substantiation that the assessment is incorrect, advise the taxpayer to pay the liability and file a claim.
    The request does not meet the administrative appeal criteria and the taxpayer believes the filing is incorrect and identifies another issue (i.e., math error), process the request.

  2. Follow the steps listed below to process the request for appeal.

    1. Research IDRS to determine the status of the liability.

    2. Respond to the taxpayer using Letter 2423, Acknowledgement of Administrative Appeals Request, to identify the reason the request does not meet the administrative appeal criteria or that the request is being referred to another function for action.

    3. Obtain the name and telephone number of the contact point to be used in the letter.

      If Then
      the liability on the NFTL is in ACS inventory or in the queue forward the request to the ACS call site.
      the liability on the NFTL is in notice status (e.g., reactivated TC 530 case) input a CC STAUP to IDRS for the appropriate number of cycles and reference the receipt of a request for lien release in the IDRS history section. Advisory should research and resolve the request or refer the request to the appropriate function for resolution.
      the liability on the NFTL has been assigned to a revenue officer forward the request to the revenue officer assigned the balance due.
      the liability on the NFTL is not present on IDRS it may have aged off IDRS and is in an inactive status present on the master file (e.g., CNC, below tolerance). Use the CFOL commands, IMFOL and BMFOL to view the accounts. Advisory should then resolve the request or refer the request to the appropriate functional area for resolution.
      the request meets the administrative appeal criteria establish and maintain a control record of all applicable requests.
      the request cannot be immediately resolved research IDRS to determine the status of the liability and advise the employee/function assigned to the case of the taxpayers request.
      the liability on the NFTL is not present on IDRS it may have aged off IDRS and is in an inactive status present on the master file (e.g., CNC, below tolerance). Initiate the request for a master file transcript by the input of CC MFTRD. This will bring the tax module data down onto IDRS within 24 hours. Advisory should monitor the master file status of this liability with a weekly input of CC MFTRD until the resolution of the request.
      during the resolution period of the request, the deferred tax module becomes active notify the appropriate function of the request received.

    4. Advisory will respond within 30 days to all requests that meet the criteria.

    If Then
    the taxpayer has provided proof that the liability was satisfied prior to the filing of NFTL issue a certificate of release.
    the liability was assessed in violation of the automatic stay in bankruptcy (Title 11) process a Form 3870, Request for Adjustment to abate the assessment and release the lien.
    the statute of limitations expired prior to the filing of the NFTL issue a certificate of release.
    it is determined that a NFTL was erroneously filed issue a certificate of release.
      Note: It is not necessary to delay issuance of the release until after the credit or abatement appears on IDRS. See Exhibit 5.12.3–3 for the additional statement that should be typed on the front of the Form 668(Z). All reference to IRC § 6325 should be blocked out.

  3. Provide the appealing party with a copy of the certificate of release attached to Letter 544, Letter of Apology - Improvident/Erroneous Filing of Notice of Federal Tax Lien, .

    1. Reverse the Lien Filed Indicator.

      If Then
      the liability was in ACS inventory or in the queue notify the ACS call site of the determination
      the liability is in notice status notify the Campus revenue officer or Compliance Services Collection Operations manager of the determination
      the liability is assigned to a revenue officer inform the revenue officer of the issuance of the certificate of release.
      the liability was not present on IDRS (e.g., CNC, below tolerance) and was being monitored by Advisory, take the appropriate corrective action to resolve the liability.

    2. Update the control record to reflect the nature, date of determination, and date of the certificate of release.

    3. Issue the certificate of release as expeditiously as possible after the determination that the filing of the NFTL was erroneous. See IRC § 6326(b).

    4. If the appeal is denied, inform the taxpayer using Letter 2423, Acknowledgement of Administrative Appeals Request.

  4. Determine further case action as follows:

    1. Reverse any CC STAUP on notice status accounts.

    If Then
    the liability is in ACS inventory or in the queue, notify the ACS call site of the determination.
    the liability has been assigned to CFf inform the revenue officer of the determination.
    there are in any inactive liabilities being monitored by Advisory, it should remain in the current master file status.

  5. Update the control record to reflect the nature and date of the determination.

  6. Responses to taxpayer correspondence must be initiated within 30 calendar days from the earliest "I.R.S. RECEIVED" date (See IRM 5.1 (General)). However, every effort should be made to provide quality responses in less time.

  7. The action office must initiate an interim reply letter within 30 days, when it is not possible to meet the 30 day "I.R.S. RECEIVED " date. Additional interim letters will be sent if necessary. An interim letter must:

    1. Identify the reason a final response is delayed.

    2. Specify when the final response will be mailed.

    3. Include the name, telephone number, and organizational code symbols for reference purposes as a contact point. Where feasible, the contact point should be someone familiar with the issues.

5.12.3.38.2  (09-07-2006)
IRC § 6326 Appeals Referred to Examination

  1. All other appeals under IRC § 6326 of the filing of a NFTL that meet the appropriate criteria, should be forwarded to Examination for evaluation.

  2. This includes requests involving Substitute for Return (SFR) and CP 2000 cases.

    1. The referral should be made to Examination using Form 3449, Referral Report to Examination addressed to "PSP Support" .

    2. Identify on the top of the Form 3449 "Administrative Appeal of Lien" .

    3. Submit related cases, to the extent possible, to Examination together.

    4. Notate the CSED on the transmittal, Form 3449, for any case in which the period has less than 6 months to run.

    5. Transmit each case with an imminent statute date under a separate Form 3449.

    6. Identify the date of the referral to Examination on the control record for future follow-up. Forward Parts 1 and 2 to Examination with the appealing party’s request. Retain Part 3 for follow-up action.

    7. Issue Letter 2421, Acknowledgement of Administrative Appeal Request, advising the appealing party that their request has been received and provide the taxpayer with a contact point for any further inquiries relative to the request.

  3. Examination has 30 days from the referral date to return a determination on the validity of the assessment. A monthly review will be performed to identify any Examination referrals that are overage and require follow-up with Examination.

    If Examination determines that the Then
    NFTL was erroneously filed, they will return Part 2 of Form 3449 to Advisory indicating the nature and date of the determination.
      1. Advisory will issue a certificate of release.
      2. Perform any further case action as described above.
    assessment was incorrectly made, an abatement is necessary. Examination will provide a completed Form 3870, Request for Adjustment requiring IDRS input. The certificate of release may be issued prior to the abatement posting to IDRS.
    assessment is valid Examination will indicate this determination on Part of Form 3449. Upon receipt of this determination, perform further case action as described above.

  4. Update the control record to reflect the nature and date of the determination and the date of the certificate of release if appropriate.

5.12.3.39  (09-07-2006)
Administrative Appeal Rights - Lien Certificates

  1. Denials of applications for certificates of discharge, subordination, nonattachment, and withdrawal, are subject to appeal using Collection Appeal Program (CAP) procedures.

  2. Whether a determination to deny an application for one of these lien certificates is communicated to the applicant in writing or verbally, an explanation of the right to appeal the decision must be provided to the applicant. Issuance of Publication 1660, Collection Appeal Rightsmay be used for this purpose.

5.12.3.40  (09-07-2006)
Designated Payment Codes (DPC) Related to Liens and Lien Certificates

  1. Personnel other than Advisory employees, should use DPC 07 when posting voluntary payments received in order to obtain a lien release, or in direct conjunction with the issuance of any lien certificate.

  2. Advisory employees should use the following designated payment codes:

    • 53 - discharges

    • 55 - subordinations

    • 56 - lien withdrawals

    • 57 - judicial and non-judicial foreclosures

    • 58 - redemptions and releases of right of redemption

    • 59 - estate tax liens and payments as the result of the filing of a proof of claim in a probate proceeding.

Exhibit 5.12.3-1  (02-02-1999)
Form 668(Z)

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Exhibit 5.12.3-2  (02-02-1999)
Form 668(Z)

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Exhibit 5.12.3-3  (02-02-1999)
Form 668(Z)

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