26 USC 6323 - Validity and priority against certain persons

U.S Code last checked for updates: Nov 25, 2024

§ 6323.

Validity and priority against certain persons

(a)

Purchasers, holders of security interests, mechanic’s lienors, and judgment lien creditors

(b)

Protection for certain interests even though notice filed

Even though notice of a lien imposed by section 6321 has been filed, such lien shall not be valid—

(1)

Securities

With respect to a security (as defined in subsection (h)(4))—

(A)

as against a purchaser of such security who at the time of purchase did not have actual notice or knowledge of the existence of such lien; and

(B)

as against a holder of a security interest in such security who, at the time such interest came into existence, did not have actual notice or knowledge of the existence of such lien.

(2)

Motor vehicles

With respect to a motor vehicle (as defined in subsection (h)(3)), as against a purchaser of such motor vehicle, if—

(A)

at the time of the purchase such purchaser did not have actual notice or knowledge of the existence of such lien, and

(B)

before the purchaser obtains such notice or knowledge, he has acquired possession of such motor vehicle and has not thereafter relinquished possession of such motor vehicle to the seller or his agent.

(3)

Personal property purchased at retail

(4)

Personal property purchased in casual sale

(5)

Personal property subject to possessory lien

(6)

Real property tax and special assessment liens

With respect to real property, as against a holder of a lien upon such property, if such lien is entitled under local law to priority over security interests in such property which are prior in time, and such lien secures payment of—

(A)

a tax of general application levied by any taxing authority based upon the value of such property;

(B)

a special assessment imposed directly upon such property by any taxing authority, if such assessment is imposed for the purpose of defraying the cost of any public improvement; or

(C)

charges for utilities or public services furnished to such property by the United States, a State or political subdivision thereof, or an instrumentality of any one or more of the foregoing.

(7)

Residential property subject to a mechanic’s lien for certain repairs and improvements

(8)

Attorneys’ liens

(9)

Certain insurance contracts

With respect to a life insurance, endowment, or annuity contract, as against the organization which is the insurer under such contract, at any time—

(A)

before such organization had actual notice or knowledge of the existence of such lien;

(B)

after such organization had such notice or knowledge, with respect to advances required to be made automatically to maintain such contract in force under an agreement entered into before such organization had such notice or knowledge; or

(C)

after satisfaction of a levy pursuant to section 6332(b), unless and until the Secretary delivers to such organization a notice, executed after the date of such satisfaction, of the existence of such lien.

(10)

Deposit-secured loans

(c)

Protection for certain commercial transactions financing agreements, etc.

(1)

In general

To the extent provided in this subsection, even though notice of a lien imposed by section 6321 has been filed, such lien shall not be valid with respect to a security interest which came into existence after tax lien filing but which—

(A)

is in qualified property covered by the terms of a written agreement entered into before tax lien filing and constituting—

(i)

a commercial transactions financing agreement,

(ii)

a real property construction or improvement financing agreement, or

(iii)

an obligatory disbursement agreement, and

(B)

is protected under local law against a judgment lien arising, as of the time of tax lien filing, out of an unsecured obligation.

(2)

Commercial transactions financing agreement

For purposes of this subsection—

(A)

Definition

The term “commercial transactions financing agreement” means an agreement (entered into by a person in the course of his trade or business)—

(i)

to make loans to the taxpayer to be secured by commercial financing security acquired by the taxpayer in the ordinary course of his trade or business, or

(ii)

to purchase commercial financing security (other than inventory) acquired by the taxpayer in the ordinary course of his trade or business;

but such an agreement shall be treated as coming within the term only to the extent that such loan or purchase is made before the 46th day after the date of tax lien filing or (if earlier) before the lender or purchaser had actual notice or knowledge of such tax lien filing.

(B)

Limitation on qualified property

(C)

Commercial financing security defined

(D)

Purchaser treated as acquiring security interest

(3)

Real property construction or improvement financing agreement

For purposes of this subsection—

(A)

Definition

The term “real property construction or improvement financing agreement” means an agreement to make cash disbursements to finance—

(i)

the construction or improvement of real property,

(ii)

a contract to construct or improve real property, or

(iii)

the raising or harvesting of a farm crop or the raising of livestock or other animals.

For purposes of clause (iii), the furnishing of goods and services shall be treated as the disbursement of cash.

(B)

Limitation on qualified property

The term “qualified property”, when used with respect to a real property construction or improvement financing agreement, includes only—

(i)

in the case of subparagraph (A)(i), the real property with respect to which the construction or improvement has been or is to be made,

(ii)

in the case of subparagraph (A)(ii), the proceeds of the contract described therein, and

(iii)

in the case of subparagraph (A)(iii), property subject to the lien imposed by section 6321 at the time of tax lien filing and the crop or the livestock or other animals referred to in subparagraph (A)(iii).

(4)

Obligatory disbursement agreement

For purposes of this subsection—

(A)

Definition

(B)

Limitation on qualified property

(C)

Special rules for surety agreements

Where the obligatory disbursement agreement is an agreement ensuring the performance of a contract between the taxpayer and another person—

(i)

the term “qualified property” shall be treated as also including the proceeds of the contract the performance of which was ensured, and

(ii)

if the contract the performance of which was ensured was a contract to construct or improve real property, to produce goods, or to furnish services, the term “qualified property” shall be treated as also including any tangible personal property used by the taxpayer in the performance of such ensured contract.

(d)

45-day period for making disbursements

Even though notice of a lien imposed by section 6321 has been filed, such lien shall not be valid with respect to a security interest which came into existence after tax lien filing by reason of disbursements made before the 46th day after the date of tax lien filing, or (if earlier) before the person making such disbursements had actual notice or knowledge of tax lien filing, but only if such security interest—

(1)

is in property (A) subject, at the time of tax lien filing, to the lien imposed by section 6321, and (B) covered by the terms of a written agreement entered into before tax lien filing, and

(2)

is protected under local law against a judgment lien arising, as of the time of tax lien filing, out of an unsecured obligation.

(e)

Priority of interest and expenses

If the lien imposed by section 6321 is not valid as against a lien or security interest, the priority of such lien or security interest shall extend to—

(1)

any interest or carrying charges upon the obligation secured,

(2)

the reasonable charges and expenses of an indenture trustee or agent holding the security interest for the benefit of the holder of the security interest,

(3)

the reasonable expenses, including reasonable compensation for attorneys, actually incurred in collecting or enforcing the obligation secured,

(4)

the reasonable costs of insuring, preserving, or repairing the property to which the lien or security interest relates,

(5)

the reasonable costs of insuring payment of the obligation secured, and

(6)

amounts paid to satisfy any lien on the property to which the lien or security interest relates, but only if the lien so satisfied is entitled to priority over the lien imposed by section 6321,

to the extent that, under local law, any such item has the same priority as the lien or security interest to which it relates.

(f)

Place for filing notice; form

(1)

Place for filing

The notice referred to in subsection (a) shall be filed—

(A)

Under State laws

(i)

Real property

(ii)

Personal property

(B)

With clerk of district court

(C)

With Recorder of Deeds of the District of Columbia

(2)

Situs of property subject to lien

For purposes of paragraphs (1) and (4), property shall be deemed to be situated—

(A)

Real property

(B)

Personal property

For purposes of paragraph (2)(B), the residence of a corporation or partnership shall be deemed to be the place at which the principal executive office of the business is located, and the residence of a taxpayer whose residence is without the United States shall be deemed to be in the District of Columbia.

(3)

Form

(4)

Indexing required with respect to certain real property

In the case of real property, if—

(A)

under the laws of the State in which the real property is located, a deed is not valid as against a purchaser of the property who (at the time of purchase) does not have actual notice or knowledge of the existence of such deed unless the fact of filing of such deed has been entered and recorded in a public index at the place of filing in such a manner that a reasonable inspection of the index will reveal the existence of the deed, and

(B)

there is maintained (at the applicable office under paragraph (1)) an adequate system for the public indexing of Federal tax liens,

then the notice of lien referred to in subsection (a) shall not be treated as meeting the filing requirements under paragraph (1) unless the fact of filing is entered and recorded in the index referred to in subparagraph (B) in such a manner that a reasonable inspection of the index will reveal the existence of the lien.

(5)

National filing systems

(g)

Refiling of notice

For purposes of this section—

(1)

General rule

(2)

Place for filing

A notice of lien refiled during the required refiling period shall be effective only—

(A)

if—

(i)

such notice of lien is refiled in the office in which the prior notice of lien was filed, and

(ii)

in the case of real property, the fact of refiling is entered and recorded in an index to the extent required by subsection (f)(4); and

(B)

in any case in which, 90 days or more prior to the date of a refiling of notice of lien under subparagraph (A), the Secretary received written information (in the manner prescribed in regulations issued by the Secretary) concerning a change in the taxpayer’s residence, if a notice of such lien is also filed in accordance with subsection (f) in the State in which such residence is located.

(3)

Required refiling period

In the case of any notice of lien, the term “required refiling period” means—

(A)

the one-year period ending 30 days after the expiration of 10 years after the date of the assessment of the tax, and

(B)

the one-year period ending with the expiration of 10 years after the close of the preceding required refiling period for such notice of lien.

(4)

Transitional rule

(h)

Definitions

For purposes of this section and section 6324—

(1)

Security interest

(2)

Mechanic’s lienor

(3)

Motor vehicle

(4)

Security

(5)

Tax lien filing

(6)

Purchaser

The term “purchaser” means a person who, for adequate and full consideration in money or money’s worth, acquires an interest (other than a lien or security interest) in property which is valid under local law against subsequent purchasers without actual notice. In applying the preceding sentence for purposes of subsection (a) of this section, and for purposes of section 6324—

(A)

a lease of property,

(B)

a written executory contract to purchase or lease property,

(C)

an option to purchase or lease property or any interest therein, or

(D)

an option to renew or extend a lease of property,

which is not a lien or security interest shall be treated as an interest in property.

(i)

Special rules

(1)

Actual notice or knowledge

(2)

Subrogation

(3)

Forfeitures

(4)

Cost-of-living adjustment

In the case of notices of liens imposed by section 6321 which are filed in any calendar year after 1998, each of the dollar amounts under paragraph (4) or (7) of subsection (b) shall be increased by an amount equal to—

(A)

such dollar amount, multiplied by

(B)

the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting “calendar year 1996” for “calendar year 2016” in subparagraph (A)(ii) thereof.

If any amount as adjusted under the preceding sentence is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10.

(j)

Withdrawal of notice in certain circumstances

(1)

In general

The Secretary may withdraw a notice of a lien filed under this section and this chapter shall be applied as if the withdrawn notice had not been filed, if the Secretary determines that—

(A)

the filing of such notice was premature or otherwise not in accordance with administrative procedures of the Secretary,

(B)

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

(C)

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

(D)

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

Any such withdrawal shall be made by filing notice at the same office as the withdrawn notice. A copy of such notice of withdrawal shall be provided to the taxpayer.

(2)

Notice to credit agencies, etc.

(Aug. 16, 1954, ch. 736, 68A Stat. 779; Pub. L. 88–272, title II, § 236(a), (c)(1), Feb. 26, 1964, 78 Stat. 127, 128; Pub. L. 89–493, § 17(a), July 5, 1966, 80 Stat. 266; Pub. L. 89–719, title I, § 101(a), Nov. 2, 1966, 80 Stat. 1125; Pub. L. 94–455, title XII, § 1202(h)(2), title XIX, § 1906(b)(13)(A), title XX, § 2008(c), Oct. 4, 1976, 90 Stat. 1688, 1834, 1892; Pub. L. 95–600, title VII, § 702(q)(1), (2), Nov. 6, 1978, 92 Stat. 2937, 2938; Pub. L. 99–514, title XV, § 1569(a), Oct. 22, 1986, 100 Stat. 2764; Pub. L. 100–647, title I, § 1015(s)(1), Nov. 10, 1988, 102 Stat. 3573; Pub. L. 101–508, title XI, §§ 11317(b), 11704(a)(26), Nov. 5, 1990, 104 Stat. 1388–458, 1388–519; Pub. L. 104–168, title V, § 501(a), July 30, 1996, 110 Stat. 1460; Pub. L. 105–206, title I, § 1102(d)(1)(A), title III, § 3435(a), (b), July 22, 1998, 112 Stat. 704, 760, 761; Pub. L. 115–97, title I, § 11002(d)(1)(HH), Dec. 22, 2017, 131 Stat. 2060.)

cite as: 26 USC 6323

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