Final Regs Clarify Rules for Filing Federal Tax Liens

 [4830-01-u]

 ACTION: Final regulations.

 SUMMARY: This document contains final regulations regarding the place for filing a notice of tax lien against personal property. Sections 1015(s)(1)(A) and (B) of the Technical and Miscellaneous Revenue Act of 1988 (TAMRA), amended section 6323 of the Internal Revenue Code to provide that a state conforming to or reenacting a federal law establishing a national filing system is not considered to have designated a second office for filing a notice of tax lien. TAMRA also amended section 6323 to provide that the filing of a notice of federal tax lien is governed solely by the Internal Revenue Code and is not subject to any other federal law that establishes a national filing system.

 EFFECTIVE DATE: These final regulations are effective April 21, 1993.

 FOR FURTHER INFORMATION CONTACT: Robert A. Walker, 202-622-3209 (not a toll-free call).

 SUPPLEMENTARY INFORMATION:

BACKGROUND

These final regulations amend the Procedure and Administration Regulations (26 CFR part 301) under section 6323 of the Internal Revenue Code (Code). The regulations reflect the amendment of section 6323 by sections 1015(s)(1)(A) and (B) of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, 102 Stat. 3573) (TAMRA).

 The IRS published a notice of proposed rulemaking in the Federal Register on April 22, 1993, (58 FR 21550) providing proposed rules under section 6323 of the Code. No public comments were received and accordingly, the final regulations are substantially identical to the proposed regulations. Certain minor stylistic changes have been made.

EXPLANATION OF PROVISIONS

 Sections 1015(s)(1)(A) and (B) of TAMRA amended section 6323(f) of the Code by clarifying that a state's conformance to or reenactment of a federal law establishing a national filing system for personal property does not constitute a second office for filing in that state. The existing regulations provide that if a state has designated more than one office for filing liens, the IRS must file the notice of tax lien with the clerk of the appropriate United States district court. TAMRA also clarified that the filing of notices of liens by the IRS is to be governed solely by the Code and is not subject to any other federal law establishing a national filing system.

 TAMRA's amendments to the Code were in response to United States v. Air Florida, Inc., 56 B.R. 732 (S.D. Fla. 1985). In that case, the IRS filed its Notice of Federal Tax Lien with the clerk of the county circuit court, but the court held that under section 6323(f)(1) the IRS was instead required to file its Notice of Federal Tax Lien in the office of the clerk of the United States district court. The court found that the State of Florida had designated not one, but two offices for the filing of Federal tax liens against personal property: the office of the clerk of the circuit court of the county in which the personal property was located and, because the state had adopted the U.S. government's national filing system for civil aircraft, the F.A.A.'s offices in Oklahoma City, Oklahoma. The final regulations revise section 301.6323(f)-1 by providing that state law that conforms to or reenacts a federal law establishing a national filing system does not constitute a second office for filing; by providing that the filing of liens is not subject to federal laws (other than the Code) establishing a national filing system for liens; and by adding two examples, one of which resembles the fact pattern of the Air Florida case.

SPECIAL ANALYSES

 It has been determined that this Treasury Decision is not a significant regulatory action as defined in EO 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to these regulations, and, therefore, a Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

DRAFTING INFORMATION

 The principal author of these proposed regulations is Robert A. Walker, Office of the Assistant Chief Counsel (General Litigation), IRS. However, other personnel from the IRS and Treasury Department participated in their development.

LIST OF SUBJECTS IN 26 CFR PART 301

 Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements.

Treasury Decision 8557

ADOPTION OF AMENDMENTS TO THE REGULATIONS

Accordingly, 26 CFR part 301 is amended as follows:

Paragraph 1. The authority citation for part 301 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 301.6323(f)-1 is amended as follows:

1. Two sentences are added at the end of paragraph (a)(2).

2. Paragraphs (c) and (d) are redesignated as paragraphs (d) and (e), respectively.

3. A new paragraph (c) is added.

4. Newly designated paragraph (e) is amended by adding Example 5 and Example 6.

5. The additions and revisions read as follows:

SECTION 301.6323(f)-1 PLACE FOR FILING NOTICE; FORM.

(a) * * *

(2) * * * A state law that conforms to or reenacts a federal law establishing a national filing system does not constitute a designation by state law of an office for filing liens against personal property. Thus, if state law provides that a notice of lien affecting personal property must be filed in the office of the county clerk for the county in which the taxpayer resides and also adopts a federal law that requires a notice of lien to be filed in another location in order to attach to a specific type of property, the state is considered to have designated only one office for the filing of the notice of lien, and to protect its lien the Internal Revenue Service need only file its notice in the office of the county clerk for the county in which the taxpayer resides.

* * * * *

(c) National filing system. The filing of federal tax liens is to be governed solely by the Internal Revenue Code and is not subject to any other federal law that may establish a national system for filing liens and encumbrances against a particular type of personal property. Thus, for example, the Service is not subject to the requirements established by the Federal Aviation Agency for filing liens against civil aircraft in Oklahoma City, Oklahoma.

* * * * *

(e) * * *

EXAMPLE 5. The law of State F provides that notices of lien affecting personal property are to be filed with the clerk of the circuit court in the county in which the personal property is located. State F has conformed state law to federal law to provide that all instruments affecting title to an interest in any civil aircraft of the United States must be recorded in the Office of the Federal Aviation Administrator (FAA) in Oklahoma City, Oklahoma. On July 1, 1990, a tax lien arises against ABC airline, which owns aircraft situated in State F. The Internal Revenue Service files a Notice of Federal Tax Lien with the clerk of the circuit court in the county in which the aircraft is located but does not file the notice with the FAA in Oklahoma City, Oklahoma. Because the FAA system adopted by State F does not constitute a second place of filing pursuant to section 6323(f), the federal tax lien is validly filed.

EXAMPLE 6. Assume the same facts as EXAMPLE 5 except that State F did not reenact or conform state law to the FAA requirements. The result is the same because the filing of federal tax liens is governed solely by the Internal Revenue Code, and is not subject to any other national filing system.