Priority of IRS Tax Liens: IRS liens cannot and do not take exception to the “first in time, first in right” rule. A Federal Tax Lien maintains its priority by the date on the Notice on the Tax Lien. An IRS Lien cannot jump ahead of other previously filed liens or security interest simply because it is an IRS Lien.
Internal Revenue Code, Section 6321 provides that upon activation of the lien, it attaches to “all property and rights to property, whether real or personal, belonging to the person liable to pay any tax.”
Liens Specific to Name on the tax Lien:
More specifically, a lien can only attach to property in the name of the taxpayer. Many cases support the position that a lien only attaches to assets owned by the person or entity whose name is on the lien. i.e. United States v. Clark, 1981 WL 1790 (S.D.Fla1981).
Case law clarifies that in order for an IRS Lien to apply to a party other than the original entity whom the Lien was filed against, the IRS is required to update their Liens with the name of the additional party. The District Court stated that when the IRS knows that taxpayer has changed her name the IRS must also change the name on the Lien in order for the Lien to apply to another name, see (Davis v. United States, 705 F.Supp. 446 (C.D. Ill 1989).
IRS Is Required To Update Liens:
In Davis v. United States, 705 F. Supp. 446, 451 (C.D. Ill. 1989), the IRS filed a lien against Gillian Rongey in 1981. Gillian Rongey changed her name to Gillian Renslow in 1982. Gillian Renslow (new name) then obtained title to real property in 1982 in her new name. The IRS was aware of Gillian’s name change. Subsequently, Gillian sold her real property. The IRS did not receive any of the proceeds from the sale of the real property. The IRS alleged that since they were not paid on the Lien, the IRS’ Lien transferred over to the property held by her new name.
The Court stated, the IRS failed to comply with its own regulation by failing to amend the Lien to include the taxpayer’s new name, Gillian Renslow. The Internal Revenue Code § 6323 requires the IRS to provide the “name” or “identity” of the taxpayer. The Court stated that this Code Section requires the IRS to amend the Lien with the taxpayer’s new name. Failure to do so meant that the Lien did not attach to the real property in her new name. The Court went on to say that, where the IRS has notice that a delinquent taxpayer has changed his or her name, and where the notice of tax lien was filed under the taxpayer’s original name, the IRS is under an affirmative duty to refile the notice of tax lien to show the taxpayer’s new name. Davis v. United States, 705 F. Supp. 446, 453 (C.D. Ill. 1989).Please Like or Share if you like this.