IRS Small Business/Self-Employed Policies and Procedures for NFTLs first filed after CSEDs, Including Release and Refiling Considerations, SBSE-05-1009-018, (Oct. 20, 2009)

2009ARD 202-3



DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE WASHINGTON. D.C. 20224

SMALL BUSINESS/SELF-EMPLOYED DIVISION

October 14, 2009
Control Number: SB/SE-05-1009-018

Expires: October 9, 2010

Impacted: IRM 5.12.2.20

MEMORANDUM FOR DIRECTORS, COLLECTION AREA OPERATIONS

FROM: Frederick W. Schindler /s/ Laura Hostelley (for) Director, Collection Policy

SUBJECT: Policies and Procedures for NFTLs first filed after CSEDs, Including Release and Refiling Considerations

The purpose of this memorandum is to raise awareness and provide procedures for handling rare instances of Notices of Federal Tax Lien (NFTL) filed, for the first time, on a date later than the original Collection Statute Expiration Date (CSED). These filings occur because the CSED was extended or suspended and a NFTL was not filed prior to that original CSED. The Service used the term “Portland Liens” because the issue was identified in Portland, Oregon. Beginning with this memorandum, these liens are called NFTL After Original CSED (NAOC).

Attachment I: Example A - NAOC with Correct Refile Period Calculated

Example D - NAOC/NFTL in Timeline Format

I. Release of NAOC or NFTL
Expired CSEDs render the liability and underlying statutory lien legally unenforceable. On May 2, 2008 the Automated Lien System (ALS) released liens with expired CSEDs. ALS will continue to release liens when the final CSED expires on a module. Example D, referenced above, shows a release timeline after ALS receives module satisfaction from master file (MF) or determines that a CSED extension, previously received from MF, has expired even though the NAOC (or NFTL) refile period has not expired.

II. Effectiveness of Statutory and Notice of Lien (NAOC or NFTL)
The effectiveness of the notice provided by a NAOC (or NFTL) against third party creditors is distinguishable from the viability of the underlying statutory lien. The viability of the underlying statutory lien is tied to the assessment but circumstances may make its viability distinguishable from the assessment. Placing a date in column “e” of the NFTL causes the lien to self-release saving the Service resources devoted to releasing liens when CSEDs expire. If a CSED has been extended past the date in column “e” but no refile has occurred, the liability remains viable but the statutory lien and NAOC (or NFTL) have been extinguished. When the statutory lien has been extinguished a revocation of release is needed to reestablish it before a new NAOC (or NFTL) can be filed. If the statutory lien remains viable only a new NAOC (or NFTL) need be filed.

The underlying statutory lien is extinguished if :
a. The liability has been fully satisfied by payment

b. The liability becomes legally unenforceable due to no time remaining on the original statute collection period (or longer period if a suspension or extension)

c. A release occurs due to the self-releasing language on Form 668(Y)(c) even though the CSED has been extended or suspended


The NAOC or NFTL is valid if both :
a. The statutory lien is valid, and

b. The NAOC or NFTL refile period has not expired (whichever refile period applies section 6232(g)(3)(A) or section 6323(g)(3)(B) )


The NAOC or NFTL is not valid if either:
a. The statutory lien is not valid, or

b. The refile period has expired whether or not there is a date in column “e”


When a NAOC or NFTL is not valid, the Service must release that NAOC or NFTL within 30 days of the underlying liability becoming unenforceable or satisfied.

Attachment I: Example B - NAOC with Incorrect “Refile By” Date in Column “e”

Example D - NAOC/NFTL in Timeline Format

III. Repair Procedures for NAOC or NFTL with Expired Refile Period
No date in column “e”
If the CSED has not expired

File a new NAOC or NFTL

Attachment I: Example C - NAOC with NA for “Refile By” Date in Column “e”

Date in column “e”

If the CSED has not expired

File a revocation of release

File a new NAOC or NFTL

Attachment I: Example B - NAOC with Incorrect “Refile By” Date in Column “e”

For questions on the validity of NAOC or NFTL contact Advisory or Counsel.

IV. Table 1: Computing “Refile By” Dates for NFTL and NAOC

Refile Period
“Refile By” Date

IRC § 6323(g)(3)
Last Day for Refiling


From
Until
(a/k/a column “e”)


First 10 year period after assessment * **
The first day of a one year period ending with the date calculated to the right
10 years and 30 days after assessment
10 years and 30 days after assessment


Second period for refile
10 years after the date calculated above
10 years after the date calculated above
10 years after date calculated above


Third period for refile
20 years after date calculated in first row
20 years after date calculated in first row
20 years after date calculated in first row


REMINDER: Use the “refile by” date calculated using the table above even if the CSED precedes the “refile by” date.

* NOTE: If the first refile period begins in January, February, or March of a leap year, use IRM Exhibit 5.12.2-2 to obtain the refile period ending date. For questions on these calculations contact Area Counsel to ensure correct refile period calculation.

** NOTE: When encountering old cases, NFTL, NAOC, or judgments involving a tax liability assessed prior to the Revenue Reconciliation Act , effective November 5, 1990, contact Advisory and Counsel for assistance in determining the correct refile period.


If you have any questions, please call me or a member of your staff may contact Christine Kalcevic.

Attachment

cc: Director, Advisory, Insolvency, and Quality www.irs.gov

ATTACHMENT I
Example A NAOC with Correct Refile Period Calculated

1. Assessment date: 07-10-1998

2. Normal CSED: 07-10-2008

3. Prior to 07-10-2008 the Taxpayer submits an offer-in-compromise. The Service accepts the offer for processing by signing the completed Form 656 on 05-10-2008. Beginning on this date, the offer in compromise is pending. The Service accepts the offer in compromise on 11-10-2009.

4. During the time the offer-in-compromise was pending, the running of collection limitation period was suspended. In this case the collection limitation period was suspended for 18 months.

5. New CSED: 01-10-2010

6. NFTL (now known as “NAOC”) filed (for first time): 05-10-2009

7. Refiling Period: 08/10/2017 through 08/09/2018




Assessment
CSED
Original
Refile By
New
CSED
NAOC
Filed
ALS
Release
NAOC
Refile By



A
07-10-1998
07-10-2008
08-09-2008
01-10-2010
05-10-2009
01-10-2010
08-09-2018



Example B NAOC with Incorrect “Refile By” Date in Column “e”
Items 1- 6 are the same as Example A:

Assessment date: 07-10-1998

Normal CSED: 07-10-2008

Prior to 07-10-2008 the Taxpayer submits an offer-in-compromise. The Service accepts the offer for processing by signing the completed Form 656 on 05-10-2008. Beginning on this date, the offer in compromise is pending. The Service accepts the offer in compromise on 11-10-2009.

During the time the offer-in-compromise was pending, the running of collection limitation period was suspended. In this case the collection limitation period was suspended for 18 months.

New CSED: 01-10-2010

NFTL (now known as “NAOC”) filed for first time: 05-10-2009

“Refile by” date entered in column “e” is 08-09-2009 (incorrectly calculated by adding twelve months and thirty days to the original 10-year collection limitation period, thinking that was the end of the refile period)

Statutory lien is extinguished as a consequence of the self-release language contained on the NAOC. The lien is released as of 08-09-2009 even though the collection limitation period remains open until 01-10-2010.

Revocation of release filed (and mailed to taxpayer) 10-01-2009 to reinstate the statutory lien

New NAOC filed 10-02-2009 to reestablish the “notice” of lien against the four classes of creditors enumerated in section 6323(a) . See General Background. Thus, the new NAOC is effective as of 10-02-2009 in competing against these four interests. The effectiveness of the notice does not revert back to 05-10-2009, the date the NAOC was filed.

Correct Refiling Period is 08/10/2017 through 08/09/2018




Assessment
CSED
Original
Refile By
New
CSED
NAOC
Filed
ALS
Release
NAOC Refile By








05-10-2009
* 08-09-2009

B
07-10-1998
07-10-2008
08-09-2008
01-10-2010






* 10-02-2009
01-10-2010
08-09-2018


* Revocation required and filed 10-01-2009


Example C NAOC with NA for “Refile By” Date in Column “e”
1. Original Assessment: 04-23-1992

2. Normal CSED: 04-23-2002

3. 2 bankruptcies and the taxpayer's innocent spouse claim and appeal resulted in an 11-year CSED suspension to: 04-23-2013

4. Lien (NAOC) filed (for first time): 02-15-2004

5. Refile period: 05-24-2011 through 05-23-2012 (using the second ten year period after assessment)

6. NAOC shows “NA” in column “e” and the notice contains the standard self-release language used in NFTLs since 1982

7. NAOC not refiled during refiling period. The lien did not self-release because “NA” or nothing in column “e” makes the self-release language inoperable.

8. On 06-01-2012 a new NAOC filed and this includes 05-23-2022 as the refile by date in column “e”. The new NAOC protects the Service's priority position in relation to other creditors enumerated in section 6323(a) as of 06-01-2012, not 02-15-2004 (NOTE: Revocation of release was not filed because the underlying statutory lien remained viable)




Assessment
CSED
Original
Refile By
New
CSED
NAOC
Filed
ALS
Release
NAOC
Refile By








02-15-2004
*
*

C
04-23-1992
04-23-2002
05-23-2002
04-23-2013






○ 06-01-2012
04-23-2013
05-23-2022


○Second refile period ended 05-23-2012


PDF Version of Example DPDF Version of Example D