Lien Filing Requirements

Chapter 12
Federal Tax Liens

Section 1
Lien Filing Requirements

5.12.1.1  (02-22-2000)
Responsibility

1. Technical Support has the responsibility for:
   • Processing and maintaining files of the Notice of Federal Tax Lien (NFTL),
   • Issuance of certificates relating to NFTLs such as discharges and subordinations.
2. Local management may designate some other function for input and retrieval of data on an automated lien system. Instructions in this section for forwarding documents to Technical Support includes the designated function.

5.12.1.1.1  (06-04-2002)
Management of the Lien Program and the Automated Lien System

1. Management is responsible for:
   1. Reviewing lien documents, for example, ensures that a name, address, and tax period information is present; verifies with revenue officer group manager or ACS manager that lien filing is correct when there is a low dollar amount (for example, the dollar amount is $500) recorder address is present, etc. (NOTE: Lien filing guidelines require that liens be filed on balances of $5000 or more unless there are extenuating circumstances.)
   2. Ensure that lien filing criteria is adhered to. (This procedure applies to managers of employees responsible for making lien filing determinations).
   3. Ensuring that all lien document requests are timely processed.
   4. Establishing positive lines of communication with Information Technology Systems management.
   5. Working requests for discharge, subordination, withdrawal, and non-attachment timely.
   6. Responding promptly to requests for lien payoff information.
   7. Ensuring that taxpayers receive copies of lien documents, when requested.
   8. Ensuring that the Automated Lien System is efficiently managed and that procedures are followed.
   9. Establishing liaisons between the Automated Call Site (ACS), Service Centers and the Area Office (AO) to enable problems associated with lien processing to be effectively and efficiently resolved.
   10. Ensuring that NMF liens on the Automated Lien System database are released timely.
   11. Establishing procedures which minimize manually created liens (i.e., liens created by revenue officers to hand carry to recording offices). Ensure that manually created liens are prepared in accordance with IRM procedures.
   12. Establishing a quality review of all liens prior to recording.
   13. Ensuring that all ALS reports are generated and worked timely.
   14. Ensuring that RRA 98 (Collection Due Process) notices are mailed timely.
   15. Maintain current and accurate employee access to the database.
2. Managers will review audit trails on ALS monthly. Use the Maintraud Screen to research information.
3. If "requested by unknown" is displayed, use the ALS data base to determine the identity of the requestor.
4. Document the requestors identity and take appropriate managerial actions, as necessary.

5.12.1.2  (06-04-2002)
Creation and Duration of Lien

1. A Federal Tax Lien (FTL) is created by statute and attaches to a taxpayer's property and rights to property for the amount of the liability. This is the "statutory" or "silent" FTL. Requirements for establishing the FTL are contained in IRC 6321. The following must happen:
   1. An assessment must have been made;
   2. A demand for payment must have been made;
   3. The taxpayer must have neglected or refused to pay within 10 days of notification.
2. The FTL will continue until the liability is satisfied or becomes unenforceable by lapse of time or a bond is accepted in the amount of the liability.

5.12.1.3  (02-22-2000)
Approval Process

1. A determination to file a Notice of Federal Tax Lien by revenue officers below GS-9 must be reviewed and approved by the supervisor prior to the notice actually being filed.
2. Appropriate disciplinary action may be taken against the employee or supervisor if review procedures are not adhered to.

5.12.1.3.1  (02-22-2000)
Review Process

1. The supervisor of revenue officers below GS-9 is required to:
   • Review the taxpayer's information,
   • Verify that a balance is due, and
   • Affirm that the lien filing is appropriate given the taxpayer's circumstances, considering the amount due and the value of the property or rights to property.
2. In all cases revenue officers must document the following information:
   • A summary of any information the taxpayer provides that may affect the decision to file a lien;
   • If the taxpayer provided information, an explanation of the employee's review and findings; and
   • Verification that the amount is owed, e.g., the balance due has been checked on IDRS;
3. Consider the following when determining if lien filing is appropriate:
   • The taxpayer's responsiveness to attempts at contact and collection;
   • Information known about the taxpayer's financial condition;
   • The taxpayer's history of delinquency,
   • The taxpayer's efforts to pay the tax,
   • Whether current taxes are being paid or there are returns not filed,
   • Whether there is a lien already filed.

   NOTE:

   This information must be clearly marked in the history.

5.12.1.3.2  (02-22-2000)
Approving the NFTL

1. Revenue Officer group managers will note their review and approval using the manager's queue on their automated systems.
2. Liens filed by Dyed Fuel Compliance Officers below GS-9 will be reviewed and signed by the Examination supervisor.
3. When it is necessary that a manual (typed or handwritten) NFTL be prepared, supervisors will sign the NFTL for employees below GS-9.
4. In all cases, document the case file.

5.12.1.4  (02-22-2000)
Taxpayer Contact

1. Make reasonable efforts, before filing the NFTL to contact the taxpayer to advise that a NFTL may be filed if payment is not made.
2. Contact may be made by:
   • telephone
   • delivered in person
   • mailing a notice or letter to the last known address.
3. Give the taxpayer an opportunity to make payment or other security arrangements. Explain the effect of the NFTL filing on normal business operations or their credit rating.
4. Certain restrictions have been placed on the Service regarding contact with taxpayers. See IRC Section 6304, Fair Tax Collection Practices.
5. If the taxpayer disagrees with the proposed lien filing advise the taxpayer of his right to appeal. Discuss both the Collection Appeals Process (CAP) and the Collection Due Process (CDP) under RRA 98. Advise the taxpayer that they will receive a 6320 notice. See IRM 5.12.3.

5.12.1.5  (02-22-2000)
Taxpayer Advocate Service

1. Taxpayer Advocate cases and Applications for Taxpayer Assistance Orders may be initiated because of lien actions. See new IRM 5.1 (General) for criteria and procedures.

5.12.1.6  (02-22-2000)
Estate and Gift Tax Liens

1. The Form 668(J) or Form 668(H) must be manually prepared .
2. Estate and gift tax liens are discussed in IRM 5.5, Section 8, Insolvency/Decedent Estate, and Estate Taxes Collecting Handbook.
3. Manually post estate tax lien recording fees if applicable. These fees may be different than those fees used for recording the Form 668(Y)(C).

5.12.1.7  (06-04-2002)
Recording Fees

1. Area offices are encouraged to arrange with local officials for the periodic billing of any recording fees, preferably on a monthly basis. Recording offices should be encouraged to submit a cover invoice and assign an invoice number.
2. Wthin five (5) work days of receipt from the recorder's office, date stamp the voucher when received in your office, verify the accuracy of the statement, i.e., correct number of documents listed, amount on statement matches our records, etc., and approve for payment. .
3. Billing vouchers must be verified by Technical Support or Case Processing and forwarded to the Finance Center in Beckley, WV for payment.

5.12.1.7.1  (04-30-2002)
Billing Methods

1. Three methods of payment have been established.
2. Direct Billing -- the direct billing estimate document must be annotated on the statement (e.g., ALS printout, vendor invoice, etc. Bulk estimates have already been established, no RTS entry is needed.
3. Imprest Fund -- have been established in several offices to provide for pre-payment when required by the local official.
4. Purchase Card -- annotate the statement with the bulk estimate document number. Bulk estimates have already been established, no RTS entry is needed.
5. Annotate the appropriate finance identification number for method of payment. These numbers change each fiscal year and can be obtained from each local SB/SE budget office. Refer to the Management and Finance guidelines in the SB/SE website for local budget information contacts.

5.12.1.8  (02-22-2000)
Designated Payment Code

1. A designated payment is a voluntary payment designated by the taxpayer to be applied in a particular manner, i.e., kind of tax, specific tax period, etc. These designations are normally followed by the Service.
2. In the absence of a designation by the taxpayer, payments will be applied in a manner consistent with the provisions of Rev. Rul 73-305, unless a specific statute, regulation or procedure designates otherwise.
3. A designated payment code (DPC) is mandatory on all Collection initiated posting vouchers for transaction codes 640, 670, 680, 690, 693 and 700. DPCs serve three purposes:
   1. They are used to identify payments that are designated for trust fund or non-trust fund employment and excise taxes.
   2. DPCs are used to indicate application of payments for a specific liability.
   3. DPCs also identify the event which resulted in the payment.
4. Use DPC 07 when applying payments secured for the release of a notice of federal tax lien or to secure a certificate of discharge or subordination.

   NOTE:

   The mere fact that a lien has been filed does not indicate that the payment is due to the filing of a NFTL. In this case, the appropriate DPC should be used.

5.12.1.9  (02-22-2000)
Lien Priorities

1. The Federal Tax Lien (FTL) is not valid against purchasers, holders of security interests, mechanics lienors, and judgment lien creditors until a Notice of Federal Tax Lien (NFTL) has been filed. The filing of the NFTL notifies creditors that the FTL exists. The FTL is valid against certain creditors named at the time the lien is filed. Refer to IRC 6321. The exception to this is the ten "superpriorities."
   • Securities
   • Motor vehicles
   • Retail purchases
   • Casual sales
   • Possessory liens
   • Real property tax and special assessment liens
   • Small repairs and improvements of residential real property
   • Attorneys liens
   • Certain insurance contracts
   • Passbook loans
2. These priorities are fully defined in the LRG.
3. Purchase money security interests and purchase money mortgages have priority over a previously filed NFTL, if protected under local law. (Refer to Rev. Rul. 68-57).
4. RRA 98 provides that for tax years beginning in 1999 and thereafter, the higher exemption amounts will be indexed annually for inflation (consistent with the cost-of-living adjustment (COLA) amounts for the applicable tax year) and rounded to the nearest multiple of $10.

5.12.1.9.1  (02-22-2000)
Priority of Certain Other Interests

1. Advances made after or property coming into existence after the NFTL is filed have priority if granted by local law. Protection under local law must be the same that is provided against a judgment lien creditor at the time the NFTL is filed.
2. The priority position of unrecorded instruments, particularly mortgages, should be governed by local law. See LRG 242.
3. Home Equity Line of Credit--it is advisable to investigate the facts of the case to determine how the funds were used to determine the priority of the Federal Tax Lien. If the funds are drawn after the NFTL is filed, determine if the mortgage/lender has a security interest in the real property. Verify the amount of money or money's worth that changed hands. Determine if:
   1. The entire amount was turned over to the taxpayer;
   2. The taxpayer is allowed to draw against the funds as he wants;
   3. A specific amount was approved;
   4. The taxpayer paid down the amount owed.

5.12.1.9.2  (02-22-2000)
45-Day Disbursement Period

1. The FTL generally has priority with respect to security interests in property held before the NFTL is filed, if the filing is a result of disbursements made after the 46th day after the filing of the NFTL. See LRG 258.5.

5.12.1.9.3  (02-22-2000)
Priority of Interest and Expenses

1. Interest and certain expenses have the same priority as the related lien or security interest. See IRC 6323(e) and LRG 259.

5.12.1.10  (02-22-2000)
Considerations Before Filing

1. The employee assigned the balance due is responsible for safeguarding the government's interest. There are no rules to meet all Notice of Federal Tax Lien (NFTL) filing situations.
2. Persons assigned balance dues must exercise judgment in deciding whether or not a NFTL should be filed.

5.12.1.11  (02-22-2000)
Filing Outside the U.S.

1. No collection activity can be taken against property located outside the U.S., its territories or possessions, without an agreement or treaty with the situs country.

5.12.1.12  (02-22-2000)
Procedural Guidelines (Overview)

1. The employee assigned the balance due is responsible for safeguarding the government's interest. There are no rules to meet all Notice of Federal Tax Lien (NFTL) filing situations, therefore, the person assigned the balance due must exercise judgment in deciding whether or not a NFTL should be filed.

5.12.1.13  (04-30-2002)
Filing Notice Guidelines

1. A NFTL filing determination must be made on all assigned cases including reactivated balance dues within established time frames. The request for lien filing or the appropriate non-filing documentation must be prepared within 10 calendar days of personal contact. If contact cannot be made within the established time frame, a filing determination must be made within 10 calendar days after that time frame. (See IRM 5.1 for established time frames.) When possible, verbally advise the taxpayer of the NFTL filing.
2. Determining when to file a NFTL:

5.12.1.14  (02-22-2000)
Notice Preparation (Overview)

1. The correct and timely preparation of the Notice of Federal Tax Lien (NFTL) is the responsibility of the employee assigned the case. All NFTLs must be filed through the Automated Lien System (ALS), unless there is an expedite situation. Refer to Section 1.24, Automated Lien System filing Requests.
2. Revenue officers will examine their assigned balance due inventory for accounts where the collection statute has been extended and determine if refiling is appropriate.
3. Technical Support will be responsible for NFTL refiling determinations on suspended cases:
   1. Proof of claim
   2. Judgment or other legal action
4. Technical Support is responsible for making waiver and NFTL refiling determinations on mandatory follow-ups for currently not collectible accounts when necessary.
5. The Automated Collection System is responsible for waiver and NFTL refiling on active ACS cases.
6. Use the Automated Lien System to refile NFTLs under normal circumstances.

5.12.1.14.1  (06-04-2002)
Notice Preparation

1. The following actions should be taken:
   1. Review the Notice of Federal Tax Lien for accuracy.
   2. Retain a copy of the filed NFTL in the case file, if manually prepared. (Part 2 after it has been returned from the recording office or an ALS facsimile).
   3. Mail Parts 1 and 2 to the recording office.
   4. Mail Part 3 to the taxpayer.
2. Multiple assessments against the same taxpayer may be included on one Form 668(Y).

5.12.1.14.2  (02-22-2000)
Use of Trade Names

1. The abbreviation "d/b/a/" for "doing business as" should be used only where an individual is actually doing business as a sole proprietor under a trade name, e.g., Edwin E. Kelly d/b/a Kelly's Garage. The abbreviation should never be used in a partnership situation.
2. The same degree of care should be exercised when using the abbreviation "t/a" for "trading as." This is used where a corporate or partnership entity operates under a trade name other than the corporate or partnership name, e.g., Werk Hard, Inc., t/a The Diggers.

5.12.1.14.3  (02-22-2000)
Name Changes

1. Taxpayers may change names after a NFTL has been filed. To avoid disputes over lien priority in subsequently acquired assets, file another NFTL reflecting the new name or alias.
   1. Place the new name on the first line.
   2. Place the previous name on the second name line, preceded by either "aka" for "also known as" or "fka" for "formerly known as."
   3. Add the following statement to reference the original NFTL: "This Notice of Federal Tax Lien is filed to modify Notice of Federal Tax Lien number (serial number), recorded (date), in Book _____ , Page _____ , by reflecting a new or proper name."
2. Use this procedure when the taxpayer's name has been misspelled. See 235 of IRM 5.17, Legal Reference Guide for Revenue Officers for guidelines on errors that make a NFTL defective.
3. With the advent of the DIAL interface, "amended" or "corrected" NFTLs should be rare. Amended or corrected NFTLs could affect the priority of the original NFTL.

5.12.1.15  (02-22-2000)
Nonfiling of Notices of Lien

1. A decision not to file a Notice of Federal Tax Lien will be supported by a history entry that clearly states the reasons why the filing of the NFTL will either hamper collection, is not proper due to doubt as to liability or when, in the revenue officer's judgment, information forthcoming, could lead to either of the above. Decisions to nonfile will be kept to these categories.
2. The history must also contain a follow-up date by which the revenue officer will receive information needed or by which a NFTL will be filed.
3. Managerial approval will not be required.
4. The acceptance of other collateral to ensure payment such as a surety bond or mortgage for the forbearance by the area director from the filing of the Notice of Federal Tax Lien should be fully considered.
5. A recommendation for nonfiling should be reevaluated upon receipt of another balance due or an additional assessment.

5.12.1.16  (02-22-2000)
Special Rules

1. Special rules apply in some instances when filing a Notice of Federal Tax Lien.

5.12.1.16.1  (02-22-2000)
Actual Notice or Knowledge of Lien Requirement

1. IRC 6323(l) defines actual notice or knowledge of a Federal tax lien. The burden is on the Internal Revenue Service to show the existence of actual notice or knowledge whether such notice is material in determining the priority of a Federal tax lien as against a competing lien or interest.
2. Section 1-201 of the Uniform Commercial Code is cited in part for your guidance for when a person has knowledge or received notice.
3. ''(25) A person has 'notice' of a fact when
4. ''(a) he has actual knowledge of it; or
5. ''(b) he has received a notice or notification of it; or
6. "(c) from all the facts and circumstances known to him at the time in question he has reason to know that it exists." A person 'knows' or has 'knowledge' of a fact when he has actual knowledge of it. 'Discover' or 'learn' or a word or phrase of similar import refers to knowledge rather than to reason to know. The time and circumstances under which a notice or notification may cease to be effective are not determined by this subtitle.
7. ''(26) A person 'notifies' or 'gives' a notice or notification to another by taking such steps as may be reasonably required to inform the other in ordinary course whether or not such other actually comes to know of it. A person 'receives' a notice or notification when
8. ''(a) it comes to his attention; or
9. "(b) it is duly delivered at the place of business through which the contact was made or at any other place held out by him as the place for receipt of such communications."

5.12.1.17  (02-22-2000)
Refiling Notice of Lien

1. Refile the NFTL to maintain the continuity of priority established by the original filing when the collection period is extended.
2. Consider refiling the NFTL if the statute date has been extended or suspended by any action within the required refiling period.

5.12.1.17.1  (02-22-2000)
Criteria for Refiling

1. Before any NFTL is refiled, each assessment should be examined to determine that the statutory period for collection has been suspended or extended beyond the normal ten-year period beginning with the assessment date.
2. The normal collection statute may be suspended or extended by:
   1. Execution of Form 900, Tax Collection Waiver.
   2. Offer in compromise.
   3. Assets of taxpayer in custody of a court in certain types of proceedings.
   4. Judgment for the United States.
   5. Absence of taxpayer from United States.
   6. Military deferments.
   7. Appropriate actions suspending or extending the collection statute.
3. The extension of the statutory period for collection does not mean that a NFTL must be automatically refiled. Each case should be analyzed regarding present and future assets to which the refiled NFTL might attach. The present balance still due on the FTL would be another factor to be taken into consideration.

5.12.1.17.2  (02-22-2000)
Required Refiling Period

1. The time period for refiling NFTL have a starting and an ending date. Therefore, a refiled Notice of Federal Tax Lien is invalid if it is filed before the period for refiling as well as if it is filed after the period for refiling.
2. The refiling period lasts for 1 year. For the first refiling, the period begins nine years and 30 days from the date of assessment and ends 10 years and 30 days from the date of assessment. For example, if the assessment date is 3/1/85, the first refiling period will be 3/31/94--
   3/31/95. For subsequent refilings, each period begins nine years after the end of the previous refiling period and ends 1 year later. An example using the first refiling period above is that the second refile period would be 3/31/04--3/31/05.
3. As a general rule refiling should occur between July 1 and November 30 each year in order to allow sufficient time for processing a notice of change of address at the Service Center. For calculation of the required refiling period, see Exhibit 5.12.1-1.
4. The following is an example of the "Required Refiling Period" --On March 1, 1985, an assessment of tax was made against A, a delinquent taxpayer, and a FTL for the amount of the assessment arose on that date. On July 1, 1985, a NFTL was properly filed. The NFTL filed on July 1, 1985, is effective up to and including March 31, 1995. The first required refiling period for the NFTL begins on April 1, 1994, and ends on March 31, 1995. A refiling of NFTL during that period will extend the effectiveness of the NFTL filed on July 1, 1985, up to and including March 31, 2005. The second required refiling period for the NFTL begins on April 1, 2004, and ends on March 31, 2005.

5.12.1.17.3  (02-22-2000)
Place for Refiling

1. During the required refiling period, the NFTL is to be refiled:
   1. In all cases in every office in which a prior NFTL (including a refiled notice) was filed, and
   2. In the proper office in the State where a new residence is located, if, 90 days or more prior to the date of refiling, the Service receives written information concerning a change in the taxpayer's residence.

5.12.1.17.4  (02-22-2000)
Address Change Procedures Affecting Refiling

1. Except as provided below, a notice of change of a taxpayer's residence will be effective only if it is received in writing from the taxpayer or his/her representative (Form 8822, Change of Address), relates to an unpaid tax liability of the taxpayer, and states the taxpayer's name and the address of the new residence.
2. The notice of change of a taxpayer's residence will be effective if it is contained in a return or amended return of the same type of tax filed with the Internal Revenue Service by the taxpayer.
3. The return or amended return must indicate that it is a change of address and correctly state the taxpayer's name, address of present residence and identification number required by IRC 6109.
4. Other than the means specified above, no communication, either written or oral, will be considered as notice of a change of a taxpayer's residence.

5.12.1.17.5  (04-30-2002)
Procedures and Responsibilities for Refiling

1. Under normal refile circumstances, the Automated Lien System (ALS) should be used.
2. At times, circumstances may exist that do not allow time for a refiled NFTL to be created through ALS. In these cases Form 668-F should be prepared as shown in Exhibit 5.12.1-2.
3. ALS Units will print the Potential Refile Report and forward information on suspended cases to the appropriate function or employee for a refile determination. ACS and Form 53 mandatory follow-up determinations will be made by Technical Support.
4. Prior to refiling, all balances must be updated to reflect the current unpaid balance of assessment. Satisfied modules should not appear on a refiled NFTL.

5.12.1.17.5.1  (06-04-2002)
Integrated Collection System (ICS) Notification)

1. Entity changes are systemically made when an address is updated on IDRS.
2. All module balances in Status 26 are systemically uploaded from IDRS to ICS.

5.12.1.17.6  (02-22-2000)
Release of Refiled Notice of Federal Tax Lien

1. The Form 668-F, used to refile a NFTL, is not self-releasing. File a certificate of release when an extended statutory period for collection has expired.
2. Filing Form 668(Z), will extinguish the NFTL and remove all notices from the record. Each refile, amended or corrective associated with an original NFTL must be identified on the certificate of release.

5.12.1.17.7  (02-22-2000)
Original Notice of Lien After Refiling Period

1. Occasionally it is necessary to refile an original NFTL after the end of the first refiling period. The ALS system will prompt you for the CSED. When the NFTL document is printed, ALS will print "N/A" in the "last day for refiling" block.

5.12.1.18  (06-04-2002)
Special Notice of Federal Tax Liens Filing Conditions (Overview)

1. Revenue Officers may encounter situations where the taxpayer has transferred property and circumstances indicate actual or constructive fraud. Property may have been acquired in the name of another person or entity and the taxpayer controls the property to such an extent that the title holder is possessed of only "color of title." This may result in an administrative transferee assessment, suit to assert a transferee liability, or a suit to set aside a fraudulent conveyance.
2. Persons determined to be an nominees or alter--egos are not entitled to collection due process appeal rights. You must issue L3177 and related publications after a lien has been filed. See IRM 5.12.3.4.4 for more information and Exhibit 5.12.3-12.

5.12.1.18.1  (02-22-2000)
Transferee and Nominee Cases

1. A transferee Notice of Federal Tax Lien (NFTL) may be used to subject property to the government's Federal Tax Lien (FTL) when property has been transferred or acquired in the name of a third party with the taxpayer's funds. Some state laws may not recognize transferee NFTL without the judicial process or it may not be possible to show that the taxpayer acquired the property.
2. If the transferee NFTL is not possible, but facts show that the taxpayer treats the property as his or her own, a nominee NFTL may be filed. Area Counsel will advise which type of NFTL to file. Consider the following circumstances in developing your case:
   • the taxpayer is paying maintenance expenses
   • using the property as collateral for loans
   • paying state and local taxes on the property.
3. You may not file a nominee or transferee NFTL without the written approval of Area Counsel.
   • Cases should be developed to withstand court challenge.
   • Focus on the conveyance of the title.
   • Requests should be for advice as to the need for a supplemental assessment, a new notice and demand and the language to be incorporated in the NFTL or levy.
   • Prepare a report containing all of the facts of the case to accompany the request.
4. Subsequent enforcement action is at the area's discretion once Area Counsel has approved application of the nominee or transferee theory in a case.
5. In determining what additional enforcement action should be taken, consideration much given to the confusion in the chain of title and redemption rights by the taxpayer. These circumstances may depress the sale of the property.
6. A judicial lien foreclosure or seizure followed by suit to foreclose the NFTL will generally bring a greater sale price particularly for real property.
7. The administrative seizure and sale process may be used if prompt action is needed to protect the government's interest. If there is any doubt, request an opinion from Area Counsel.

5.12.1.18.2  (02-22-2000)
"Alter Ego" Doctrine--Corporations

1. The "alter ego" (other self) doctrine has been summarized as follows: The obligation of a corporation will be recognized as those of another person, and vice versa, where it appears that the corporation is not only influenced and governed by that person, but there is such a unity of interest and ownership that the individuality, or separateness, of the person and the corporation has ceased. Also the facts are such that an adherence to the fiction of the separate existence of the corporation would, under the particular circumstances, sanction a fraud or promote an injustice.
2. There are two elements to the alter ego doctrine:
   1. Unity of ownership and interest,
   2. Fraud or inequity would result from the failure to disregard the corporate entity.
3. There is no exact formula as to when the doctrine can be applied. Some factors pertinent to a determination to disregard the corporate entity are:
   1. commingling of funds and other assets,
   2. failure to segregate funds of the separate entities,
   3. an unauthorized diversion of corporate funds or assets to other than corporate uses,
   4. treatment by an individual of the assets of the corporation as his own,
   5. failure to obtain authority to issue stock or to subscribe to or issue the same,
   6. holding out by an individual that he or she is personally liable for the debts of the corporation,
   7. failure to maintain minutes or adequate corporate records, and the confusion of records of separate entities,
   8. the identical equitable ownership in two entities,
   9. the failure to adequately capitalize a corporation, the total absence of corporate assets, and undercapitalization.
4. Explore the possibility of using the administrative process of a jeopardy transferee assessment, emergency lien foreclosure action or emergency transferee or fraudulent conveyance suit before filing a NFTL in the name of an alter ego.
5. Do not file a NFTL in the name of an alter ego without legal review, advice and written direction from Area Counsel as to:
   • the need for a supplemental assessment,
   • a new notice and demand, and
   • the language to be incorporated in the NFTL and levy.

5.12.1.18.3  (02-22-2000)
Partnership

1. Partners are individually liable for partnership debts, and separate assessments against them are not essential to sustain their individual liability. The separate liability of the partners is not an issue unless the partnership neglects or fails to pay the assessed liability. See IRC 6321 and 6303.
2. Partnerships normally have one employer identification number (EIN).

5.12.1.18.4  (06-04-2002)
Limited Liability Company

1. Only the name of the members/owners of a single-member limited liability company (LLC) should be on the notice of federal tax lien when the LLC is disregarded for tax purposes under the "check the box" regulations because the member/owner is directly liable for employment tax debts incurred by the LLC. See Notice 99-6, 1999-3 I.R.B. 12. In contrast, however, when an LLC is treated as a corporation or a partnership, the name of the LLC should be on the notice of federal tax lien.
2. Use the "sole proprietor" option when requesting liens through ALS.

5.12.1.19  (02-22-2000)
Place for Filing of Notice of Federal Tax Lien (Overview)

1. A Notice of Federal Tax Lien (NFTL) encumbers motor vehicles, airplanes and vessels in the same manner as other personal property when a NFTL is filed in the recording office designated by state law as the residence of the taxpayer.
2. Do not file Form 668(Y) with Departments of Vehicles, FAA or the U.S. Coast Guard or similar agencies. (See IRC 6323(f)(5).)

5.12.1.19.1  (02-22-2000)
Place for Filing of Notice

1. Under state laws:
   1. Real property--file in one office within the state (or county, or other governmental subdivision) as designated by the laws of the state, where the property subject to the Federal Tax Lien (FTL) is located.
   2. Personal property--whether tangible or intangible, file in one office within the state (or county, or other governmental subdivision), as designated by the laws of the state, where the property is located (located at the residence of the taxpayer at the time the NFTL is filed). See Section 1.15 and IRC 6323(f)(1)(A)(ii).
2. With clerk of district court--File in the office of the clerk of the United States district court for the judicial district where the property subject to the FTL is located, whenever the State has not by law designated one office which meets the requirements of (1) above; or
3. With recorder of deeds of the District of Columbia--File in the office of the Recorder of Deeds of the District of Columbia, if the property subject to the lien is situated in the District of Columbia.

5.12.1.19.2  (02-22-2000)
Filing of Notice by Mail

1. Arrange with local officials for the acceptance (for filing) of NFTL by mail. If necessary, have a transmittal accompany Parts 1 and 2 of the NFTL, Form 3915, Processing Notices and Releases of Federal Tax Lien and Other Related Certificates. A self-addressed postage paid envelope, E-25C, will be enclosed for the return of Part 2.
2. If arrangements cannot be made with local officials to accept NFTL for filing by mail or circumstances dictate immediate action, NFTL should be delivered personally to the proper recording official.
3. Receipted copies will be returned to Technical Support or other designated function at the area's discretion.
4. Part 3 will be sent to the taxpayer as notification of filing.

5.12.1.19.3  (06-04-2002)
Liens Filed in Other Areas (ACS)

1. A NFTL may be filed in any Internal Revenue area, regardless of where the assessment is outstanding. Form 2209, Courtesy Investigation, should be prepared to request an out-of-area NFTL filing, unless, because of time, a telephone or teletype request is necessary. The receiving area will prepare and file Form 668(Y), Notice of Federal Tax Lien through ALS. A TC 582 will automatically be generated.
2. The Form 2209 will contain sufficient information to enable the receiving area to properly prepare the NFTL and determine the proper place of filing. The Form 2209 must also indicate whether the NFTL is to reach real or personal property or both. This is necessary as the recording official may be different in certain states.
3. After recording, the receiving office should input the recording data onto their data base and transmit Part 2 of the NFTL with the recording data to the originating office.
4. The Form 2209 and Part 2 of the Form 668(Y) will be associated with the related balance due file.
5. Once modules are satisfied, a module satisfied notice will be generated to each area that previously requested a TC582. A systemic release will be generated automatically and forwarded to the proper recording office.

5.12.1.19.3.1  (02-22-2000)
ALS Other Area Lien Filing

1. Out of area liens may be filed using the Automated Lien System.
2. Call the receiving area to obtain the court identification number and the exact spelling of the recording office (including whether the input should be upper case, lower case, or initial caps).
3. The Form 668(Y) will be printed in the receiving area with the name and phone number of the employee requesting the lien filing.
4. The appropriate lien notice (L3171 or L3172) will be generated and mailed from the originating area.

5.12.1.20  (02-22-2000)
Notice of Claim--Documented Vessels

1. A documented vessel:
   • at a minimum weighs over 5 tons,
   • is used for commercial purposes, and
   • is owned by a United States citizen.
2. These vessels are registered with the U.S. Coast Guard under the vessels name rather than the name of the owner.

5.12.1.20.1  (02-22-2000)
Documented Vessel Abstract

1. An abstract obtained from the National Vessel Documentation Center (NVDC) will provide the:
   • history of the vessel
   • bills of sale
   • Maritime liens,
   • satisfaction of mortgage
   • assignments and amendments on file.
2. A payment of $25 (money order only) must accompany each request for an abstract that is obtained from the National Vessel Documentation Center (NVDC).
3. Prepare a letter or FAX to NVDC with the following information:
   • official number of vessel, if known,
   • Service employee's name and telephone number,
   • location where the abstract should be sent
   • owner's name, hull number and name of vessel
4. If requesting an abstract via FAX or by telephone, contact the NVDC at (800) 799-8362 to obtain payment instructions,
5. Written requests should be sent to National Vessel Documentation Center, 2039 Stonewall Jackson Drive, Falling Waters, West Virginia 25419-9502.

5.12.1.20.2  (02-22-2000)
Notice of Claim

1. Determinations to file a Notice of Federal Tax Lien on taxpayers who own documented vessels requires that a Notice of Claim (Exhibit 5.12.1-3) be filed with the U.S. Coast Guard with a copy of the Notice of Federal Tax Lien attached.
2. Filing a Notice of Claim assures that the documented vessel can be tied to the owner and that the vessel cannot be transferred out from under the Notice of Federal Tax Lien.

   NOTE:

   A Notice of Claim can be filed ONLY if a preferred mortgage exists on the vessel. The Notice of Federal Tax Lien does not constitute a preferred mortgage.

3. The Notice of Federal Tax Lien must be filed in accordance with IRC 6323(f) even though you are filing a Notice of Claim.
4. Prepare the Satisfaction of Mortgage document (Exhibit 5.12.1-4) when the liability is satisfied.
5. Forward the notarized document to the U.S. Coast Guard where the Notice of Claim was filed.

5.12.1.21  (02-22-2000)
Assistance Requests

1. Certain tax treaties have clauses where our treaty partners can request assistance from the Service to collect taxes owed them by individuals residing in the United States. The mutual collection treaty partners are France, Sweden, Denmark, Canada and the Netherlands.
2. All MCARs from the treaty partners are received and processed by the Director, Small Business/Self Employed, Area 15 (International) Territory, Collection Group 13 (S:C:15:T1:C:13).
3. The Service can take distraint action against U.S. assets to collect these foreign taxes. To do this, it may be necessary to file a Notice of Federal Tax Lien.

5.12.1.21.1  (02-22-2000)
Procedures for Filing

1. The filing of the Notice of Federal Tax Lien (NFTL) will be limited to real property only, unless a seizure of personal property is anticipated. See IRM 5.1 (General).
2. A request for NFTL filing can be initiated by S:C:15:T1:C:13 via Form 2209, Courtesy Investigation, or by the area revenue officer working a MCAR investigation. These requests will not be processed through ALS. These NFTLs must be prepared manually.
3. S:C:CP:S will maintain a control file of all Notices of Federal Tax Lien that are filed on MCARs.

5.12.1.21.2  (02-22-2000)
Preparation of MCARs on Form 668(Y)

1. The area office will process all MCAR lien requests as follows:
   1. Use the format shown in Exhibit 5.12.1-5, as a guide to prepare Form 668(Y), Notice of Federal Tax Lien. The information needed to complete Form 668(Y) is provided with the MCAR investigation sent to the area office.
   2. Contact S:C:15:T1:C:13 to secure the serial number for the NFTL. CP:IN:D:C will keep a control log of all serial numbers issued. Do not use any other number except the serial number provided by S:C:15:T1:C:13.
   3. Use the Taxpayer Control Number (TCN) assigned to the MCAR assessment by S:C:15:T1:C:13 as the Identifying Number on Form 668(Y) if the Taxpayer Identification Number (TIN) is not known.
   4. Use the Last Day for Refiling collection statute date provided by the treaty partner.
2. The Notice of Federal Tax Lien will be filed in the appropriate recording office. Return a copy of the NFTL to S:C:15:T1:C:13.
3. Do not request input of TC 582 or TC 360 for the NFTL filing fee. NFTL fees are not assessed against MCAR taxpayers.

5.12.1.21.3  (02-22-2000)
Procedures for Refiling and Release

1. S:C:15:T1:C:13 will be responsible for determining whether to refile these NFTLs and for requesting the release of NFTLs even though area offices file NFTLs for MCARs.
2. Notices of Federal Tax Lien for refiling and Certificates of Release will be:
   1. Prepared by S:C:15:T1:C:13 and
   2. Forwarded to the appropriate area office for recording.
3. No TC 582 or TC 360 will be input and no NFTL fees will be assessed against MCAR taxpayers.

5.12.1.22  (02-22-2000)
Copies of Notices to Third Parties

1. The Federal tax lien (FTL) under IRC 6321 attaches to "all property and rights to property" of the person or entity liable for the tax. This very broad statutory language has been interpreted as including all real, personal, and intangible property of greatly varying natures, as well as future interests, and property acquired by the taxpayer after the lien has come into existence.
2. Since the FTL attaches to after-acquired property the FTL may be enforced administratively by levy; that is, use of a levy to collect taxes is not limited to property or rights to property of the taxpayer in existence at the time the assessment is made.
3. The effect of a levy on other than wages and salary is not prospective; that is, service of a levy or notice of levy upon the taxpayer or a third person, respectively, results in a seizure of property or rights to property in possession of either party at the time of service of levy. Should property come into possession of the taxpayer or third party following such service, another levy should be made to seize the property, notwithstanding the fact that the Federal tax lien attaches itself automatically to such after-acquired property.
4. In order to establish uniformity in giving the required actual notice or knowledge, a copy of the appropriate Notice of Federal Tax Lien (NFTL) will be delivered to the person(s) requiring the notice.

5.12.1.22.1  (02-22-2000)
Insurance Companies

1. A copy of the filed NFTL lien should be furnished to an insurance company to meet the actual notice requirement described in Chapter 5.6.1.

5.12.1.23  (06-04-2002)
Disclosure of Outstanding Lien Amount

1. See Delegation Order 196 for a list of employees authorized to disclose information concerning the amount of the outstanding obligation secured by the FTL. Disclosure may be made to any person who demonstrates that he/she possesses a right or intends to obtain a right in the property. See IRM Part 11, Chapter 3, Section 11, Disclosure of Official Information.
2. Employees listed in Delegation Order 196 have the authority to determine whether or not to disclose the requested information under the authority of IRC 6103(k)(2).
3. Any person, other than the taxpayer or their designee, desiring information as to the amount of the obligation outstanding in order to decide whether to acquire the property covered by the FTL (when a NFTL has been filed) must submit a written request stating the reasons the information is desired and properly identifying the NFTL in question. (See IRM 5.12.1.23(6) -- (10)). A prospective purchaser should attach a copy of the sales contract or a lender a loan application.
4. The requested information will be furnished using Letter 1038(DO), Response to Inquiries About Release of Federal Tax Lien.

5.12.1.23.1  (04-30-2002)
Disclosure to Escrow and Title Companies

1. When a completed Form 8821, Tax Information Authorization, is provided the Manager, Technical Support and employees designated the authority to execute Forms 668(Y), may disclose the amount of the outstanding obligation secured by the NFTL to escrow agents, title companies, lending institutions, etc., (See IRC 6103(c)).
2. The Form 8821 must be completed prior to the taxpayer signing it and should authorize disclosure of lien information on the specific piece of property for sale.
3. The following information should be provided:
   • The taxpayer's identity information, i.e., name, address, taxpayer identification number, or any combination of these three.
   • The information to be disclosed, for example, the amount shown on the NFTL, including the address of the real property subject to the filed NFTL.
   • The identity of the company or escrow agent authorized to receive the information. It is not necessary to name an individual.
   • The taxpayer's signature and date.
   • It is not necessary to specify tax type or tax year.
4. Taxpayers may also authorize disclosure telephonically. Verify the taxpayer's identity using approved functional procedures and document the information in writing.
   • The information to be disclosed, for example the amount shown on the NFTL, including the address of the property subject to the NFTL.
   • The identity of the escrow agent or title company authorized to receive the information.
   • The date of the consent. For example, "John Doe on 03/05/00 consents to disclose the payoff on all filed NFTLs on 123 Maple Boulevard to XYZ Title."
5. Disclosure of lien information not subject to a filed NFTL should not occur without obtaining the taxpayer's authorization either orally or in writing. Obtain and document the information referred to above (4).
6. In situations where the taxpayer's authorization cannot be obtained, seek advice from area counsel.

5.12.1.24  (06-04-2002)
Automated Lien System Filing Requests