PART 400—TEMPORARY REGULATIONS UNDER THE FEDERAL TAX LIEN ACT OF 1966 Authority: Sec. 7805, Internal Revenue Code of 1954; 68A Stat. 917; 26 U.S.C. 7805. § 400.1-1 Refiling of notice of tax lien. (a) Scope. (b) Requirement to refile. (c) Place for refiling notice of lien In general. (i) If the notice of lien is refiled in the office in which the prior notice of lien (including a refiled notice) was filed under the provisions of section 6323; and (ii) In any case in which 90 days or more prior to the date the refiling of the notice of lien under subdivision (i) of this subparagraph is completed, the Internal Revenue Service receives written information (in the manner described in subparagraph (2) of this paragraph (b)) concerning a change in the taxpayer's residence, if a notice of such lien is also filed in accordance with section 6323f)(1)(A)(ii) in the State in which such new residence is located (or, if such new residence is located without the United States, in the District of Columbia). If on or before such 90th day more than one written notice is received concerning a change in the taxpayer's residence, a notice of lien is required by this subdivision to be filed only with respect to the residence shown on the written notice received on the most recent date. This subdivision is applicable regardless of whether the taxpayer resides at the new residence on the date the refiling of notice of lien under subdivision (i) of this subparagraph is completed. (2) Notice of change of taxpayer's residence In general. (ii) By return or amended return. (iii) Other rules applicable. (3) Examples. Example 1. A, a delinquent taxpayer, is a resident of M State and owns real property in N State. Notices of lien are properly filed in M and N States. In order to continue the effect of the notice of lien filed in M State, the Internal Revenue Service must refile, during the required refiling period, the notice of lien with the appropriate office in M State but is not required to refile the notice of lien with the appropriate office in N State. Similarly, in order to continue the effect of the notice of lien filed in N State, the Internal Revenue Service must refile, during the required refiling period, the notice of lien with the appropriate office in N State but is not required to refile the notice of lien with the appropriate office in M State. Example 2. B, a delinquent taxpayer, is a resident of M State. Notice of lien is properly filed in that State. One year before the required refiling period, B establishes his residence in N State, and B immediately notifies the Internal Revenue Service of his change in residence in accordance with the provisions of paragraph (c)(2) of this section. In order to continue the effect of the notice of lien filed in M State, the Internal Revenue Service must refile, during the required refiling period, notices of lien with (i) the appropriate office in M State, and (ii) the appropriate office in N State because B properly notified the Internal Revenue Service of his change in residence to N State more than 89 days prior to the date refiling of the notice of lien in M State is completed. If B did not notify the Internal Revenue Service of his change in residence to N State in accordance with the provisions of paragraph (c)(2) of this section, the Internal Revenue Service would not be required to file a notice of lien in N State, even if the Internal Revenue Service had actual notice of B's change in residence to N State. In this latter case, in order to continue the effect of the notice of lien filed in M State, the Internal Revenue Service must refile, during the required refiling period, the notice of lien only with the appropriate office in M State. Example 3. C, a delinquent taxpayer, is a resident of O State. Notice of lien is properly filed in that State. Four years before the required refiling period, C establishes his residence in P State, and C immediately notifies the Internal Revenue Service of his change in residence in accordance with the provisions of paragraph (c)(2) of this section. Three years before the required refiling period, C establishes his residence in R State, and again C immediately notifies the Internal Revenue Service of his change in residence in accordance with the provisions of paragraph (c)(2) of this section. In order to continue the effect of the notice of lien filed in O State, the Internal Revenue Service must refile, during the required refiling period, notices of lien with (i) the appropriate office in O State, and (ii) the appropriate office in R State since the notice received by the Service of C's change in residence to R State was the most recent notice received more than 89 days prior to the date refiling in O State is completed. The notice of lien is not required to be filed in P State, even though C properly notified the Internal Revenue Service of his change in residence to P State, because such notice is not the most recent one received. Example 4. Assume the same facts as in example 3, except that C does not notify the Internal Revenue Service of his change in residence to R State in accordance with the provisions of paragraph (c)(2) of this section. In order to continue the effect of the notice of lien filed in O State, the Internal Revenue Service must refile, during the required refiling period, the notice of lien with (i) the appropriate office in O State, and (ii) the appropriate office in P State because C properly notified the Internal Revenue Service of his change in residence to P State, even though C is not a resident of P State on the date refiling of the notice of lien in O State is completed. The Internal Revenue Service is not required to file a notice of lien in R State because C did not properly notify the Service of his change in residence to R State. Example 5. D, a delinquent taxpayer, is a resident of M State and owns real property in N and O States. The Internal Revenue Service properly files notices of lien in M, N, and O States. Five years and 6 months after the date of the assessment shown on the notice of lien, D establishes his residence in P State, and at that time the Internal Revenue Service received from D a notification of his change in residence in accordance with the provisions of paragraph (c)(2) of this section. On a date which is 5 years and 7 months after the date of the assessment shown on the notice of lien, the Internal Revenue Service properly refiles notices of lien in M, N, and O States which refilings continue the effect of each of the notices of lien. The Internal Revenue Service is not required to file a notice of lien in P State because D did not notify the Internal Revenue Service of his change of residence to P State more than 89 days prior to the date each of the refilings in M, N, and O States was completed. Example 6. Assume the same facts as in example 5 except that the refiling of the notice of lien in O State occurs 100 days after D notifies the Internal Revenue Service of his change in residence to P State in accordance with the provisions of paragraph (c)(2) of this section. In order to continue the effect of the notice of lien filed in O State, in addition to refiling the notice of lien in O State, the Internal Revenue Service must also file, during the required refiling period, a notice of lien in P State because D properly notified the Internal Revenue Service of his change of residence to P State more than 89 days prior to the date the refiling in O State was completed. However, in order to maintain the effect of the refilings in M and N States, the Internal Revenue Service is not required to file, during the required refiling period, the notice of lien in P State since D did not notify the Internal Revenue Service of his change in residence to P State more than 89 days prior to the date the refilings in M and N States were completed. Example 7. E, a delinquent taxpayer, is a resident of T State. Because T State has not designated one office in the case of personal property for filing notices of lien in accordance with the provisions of section 6323(f)(1)(A)(ii), the Internal Revenue Service properly files a notice of lien with the clerk of the appropriate United States district court. However, solely as a matter of convenience for those who may have occasion to search for notices of lien, and not as a matter of legal effectiveness, the Internal Revenue Service also files notice of lien with the recorder of deeds of the county in T State where E resides. In addition, the Internal Revenue Service sent a copy of the notice of lien to the X Life Insurance Company to give the Company actual notice of the notice of lien. In order to continue the effect of the notice of lien, the Internal Revenue Service must refile, during the required refiling period, the notice of lien with the clerk of the appropriate U.S. district court. It is not necessary in order to continue the effect of the notice of the lien to refile the notice of lien with the recorder of deeds of the county where E resides because the refiling of the notice of lien with the recorder of deeds does not constitute a proper filing for the purposes of section 6323(f). In addition, it is not necessary to continue the effect of the notice of lien under this section to send a copy of the notice of lien to the X Life Insurance Company because the sending of a notice of lien to an insurance company does not constitute a filing for the purposes of section 6323 and, thus, a refiling with an insurance company is not required under this section. (d) Required refiling period In general. (i) The 1-year period ending 30 days after the expiration of 6 years after the date of the assessment of the tax, and (ii) The 1-year period ending with the expiration of 6 years after the close of the preceding required refiling period for such notice of lien. (2) Tax assessments made before January 1, 1962. (3) Examples. Example 1. On March 1, 1963, an assessment of tax is made against B, a delinquent taxpayer, and a lien for the amount of the assessment arises on that date. On July 1, 1963, a notice of lien is properly filed. The notice of lien filed on July 1, 1963, is effective up to and including March 31, 1969. The first required refiling period for the notice of lien begins on April 1, 1968, and ends on March 31, 1969. A refiling of the notice of lien during that period will extend the effectiveness of the notice of lien filed on July 1, 1963, up to and including March 31, 1975. The second required refiling period for the notice of lien begins on April 1, 1974, and ends on March 31, 1975. Example 2. Assume the same facts as in example 1, except that the Internal Revenue Service fails to refile a notice of lien during the first required refiling period (Apr. 1, 1968, through Mar. 31, 1969). However, a notice of lien which meets the requirements of section 6323(f) is filed on June 2, 1971. Because of this filing, the notice of lien filed on June 2, 1971, is effective as of June 2, 1971. That notice must itself be refiled during the 1-year period ending on March 31, 1975, if it is to continue in effect after March 31, 1975. As in example 1, the second required refiling period for the notice of lien begins on April 1, 1974, and ends on March 31, 1975. Example 3. On April 1, 1960, an assessment of tax is made against B, a delinquent taxpayer, and a tax lien for the amount of the assessment arises on that date. On June 1, 1962, a notice of lien is properly filed. Because the assessment of tax was made before January 1, 1962, the notice of lien filed on June 1, 1962, is effective up to and including December 31, 1967. The first required refiling period for the notice of lien is the calendar year 1967. A refiling of the notice of lien during 1967 will extend the effectiveness of the notice of lien filed on June 1, 1962, up to and including December 31, 1973. The second required refiling period for the notice of lien is the calendar year 1973. [T.D. 6932, 32 FR 14835, Oct. 18, 1967] § 400.2-1 Discharge of property by substitution of proceeds of sale; subordination of lien. (a) Scope. (b) Discharge of property by substitution of proceeds of sale. (c) Subordination of lien By payment of the amount of subordination. (2) To facilitate tax collection In general. (ii) Example. Example. A, a farmer, needs money in order to harvest his crop. However, a Federal tax lien, notice of which has been filed, is outstanding with respect to A's property. B, a lending institution is willing to make the necessary loan if the loan is secured by a first mortgage on the farm which is prior to the Federal tax lien. Upon examination, the district director believes that ultimately the amount realizable from A's property will be increased and the collection of the tax liability will be facilitated by the availability of cash when the crop is harvested and sold. In this case, the district director may, in his discretion, subordinate the tax lien on the farm to the mortgage securing the crop harvesting loan. (3) Application for certificate of subordination. [T.D. 6944, 33 FR 732, Jan. 20, 1968] § 400.4-1 Notice required with respect to a nonjudicial sale. (a) Scope and application of this section In general. (2) Effective date of this section. (i) Any notice of sale given to an office of the Internal Revenue Service or the Treasury Department during the period November 3, 1966, through December 21, 1966, shall be considered as adequate; (ii) Any notice of sale given during the period December 22, 1966, through January 31, 1968, which complies with provisions of either ( a ( b shall be considered as adequate; and (iii) Any notice of sale given after January 31, 1968, which complies with the provisions of this section shall be considered as adequate. (b) Nonjudicial sale In general. (i) An instrument creating a lien on the property sold, (ii) A confession of judgment on the obligation secured by an instrument creating a lien on the property sold, or (iii) A statutory lien on the property sold. For purposes of this section, such a sale is referred to as a “nonjudicial sale.” The term “nonjudicial sale” includes, but is not limited to, the divestment of the taxpayer's title to property which occurs by operation of law, as well as those which result from a public or private sale. Under section 7425(b)(1), if a notice of lien is filed in accordance with section 6323(f) or (g), or the title derived from the enforcement of a lien is recorded as provided by local law, more than 30 days before the date of sale, and the appropriate district director is not given notice of the sale (in the manner prescribed in paragraph (c) of this section), the sale shall be made subject to and without disturbing the lien or title of the United States. Under section 7425(b)(2)(C), in any case in which notice of the sale is given to the district director not less than 25 days prior to the date of sale (in the manner prescribed in section 7425(c)(1)), the sale shall have the same effect with respect to the discharge or divestment of the lien or title as may be provided by local law with respect to other junior liens. A nonjudicial sale pursuant to a lien which is junior to a tax lien does not divest the tax lien, even though notice of the nonjudicial sale is given to the appropriate district director. However, under the provisions of section 6325(b), § 301.6325-1 of this chapter (Regulations on Procedure and Administration), and § 400.2-1, a district director may discharge the property from a tax lien, including a tax lien which is senior to another lien upon the property. In the case of a nonjudicial sale subject to the provisions of section 7425(b), in order to compute any period of time determined with reference to the date of sale, the date of sale shall be determined in accordance with the following rules: (iv) In the case of divestment of junior liens on property resulting directly from a public sale, the date of sale is deemed to be the date the public sale is held, regardless of the date under local law on which junior liens on the property are divested or the title to the property is transferred, (v) In the case of divestment of junior liens on property resulting directly from a private sale, the date of sale is deemed to be the date title to the property is transferred, regardless of the date junior liens on the property are divested under local law, and (vi) In the case of divestment of junior liens on property not resulting directly from a public or private sale, the date of sale is deemed to be the date on which junior liens on the property are divested under local law. For provisions relating to the right of redemption of the United States, see section 7425(d) and § 400.5-1. (2) Examples. Example 1. Under the law of M State upon entry of judgment, the judgment creditor obtains a statutory lien upon the real property of the judgment debtor, and certain procedures are provided by which the judgment creditor may execute by public sale upon such real property. These procedures provide, among other things, for notification by personal service or registered or certified mail to other lien creditors, if any, and publication of a notice of the sale in a local newspaper. After the expiration of a prescribed period of time after such notification and publication, the sheriff of the county where the real property is located may sell the property at public sale. After payment of the amount bid at the public sale, the sheriff issues to the purchaser a deed to the real property, and the interests of junior lienors in the property are divested. For purposes of this section, such an execution sale is a nonjudicial sale described in section 7425(b) since the sale is made pursuant to a statutory lien on the property sold. The date of sale, for purposes of computing a period of time determined with reference to the date of sale, is the date on which the public sale is held, since junior liens on the real property are divested directly as a result of the public sale. This result obtains even though the junior liens are legally divested on a later date when the sheriff issues the deed. Example 2. Under the law of N State, mortgages on real property may contain a power of sale which authorizes the mortgagee, upon breach by the mortgagor of one of the conditions of the mortgage, to have the mortgaged property sold at public sale. This public sale must be preceded by notice by advertisement in a local newspaper, and the time, place, description of the property, and other terms of the sale must be specified. The purchaser at such a public sale obtains a title to the real property which is not subject to a right of redemption by the mortgagor and which divests the interests of the junior lienors in the property. For purposes of this section, a sale pursuant to such a power of sale is a nonjudicial sale described in section 7425(b) since the sale is made pursuant to the mortgage instrument which created a lien on the property sold. The date of the sale, for purposes of computing a period of time determined with reference to the date of sale, is the date of the public sale since junior liens on the property are divested directly as a result of the public sale. Example 3. Under the law of O State, upon breach by a mortgagor of real property of one of the conditions of the mortgage, the mortgagee may foreclose the mortgage by securing possession of the property by one of several procedures provided by statute. These procedures are generally referred to as “strict foreclosure.” In order for a foreclosure to be effective under these procedures, a certificate attesting the fact of entry must be recorded with the proper registrar of deeds within 30 days after the mortgagee enters the property. During the 1-year period following the date on which the certificate of entry is recorded, the mortgagor or a junior lienor may redeem the property by paying the mortgagee the amount of the mortgage obligation. If, during such 1-year period the property is not redeemed and the mortgagee's possession is continued, the interests of the mortgagor and the junior lienors in the property are divested. For purposes of this section, such a foreclosure procedure is a nonjudicial sale described in section 7425(b) since it results in the divestment of the mortgagor's interest in the property by operation of law pursuant to the mortgage which created a lien on the property. In addition, since there is no public or private sale which directly results in the divestment of junior liens on the property, the date of sale, for purposes of computing a period of time determined with reference to the date of sale, is the date on which the 1-year period following the recording of the certificate of entry expires. Example 4. The law of P State contains a procedure which permits a county to collect a delinquent tax assessment with respect to real property by the means of a tax sale of the property. First, a notice of a public auction with respect to the tax assessment on the real property is published in a local newspaper. At the public auction, the purchaser, upon payment of the delinquent taxes and interest, obtains from the county tax collector a tax certificate with respect to the real property. Since the obtaining of this tax certificate does not directly result in the divestment of either the owner's title or junior liens with respect to the property, the public auction is not a nonjudicial sale described in section 7425(b). At any time before a tax deed with respect to the property is issued by the clerk of the county court, the owner or any holder of a lien or other interest with respect to the property may obtain the tax certificate by paying the holder of the tax certificate the amount of the taxes, interest, and costs. After a date which is two years after the date on which the tax assessment became delinquent, the holder of the tax certificate may request the clerk of the county court to have the property advertised for sale. After advertisement of the sale, the clerk of the county court conducts a public sale of the real property and the purchaser obtains a tax deed. The interests of all junior lienors in the property are divested and the property is not subject to a right of redemption under the law of P State. For purposes of this section, this public sale is considered to be a nonjudicial sale described in section 7425(b) since the sale is made pursuant to a statutory lien on the property sold. The date of the sale, for purposes of computing a period of time determined with reference to the date of sale, is the date on which the public sale is held at which the purchaser obtains a tax deed as this sale directly results in the divestment of junior liens on the property. (c) Notice of sale requirements In general. (2) Postponement of scheduled sale— Where notice of sale is given. (ii) Where notice of sale is not given. ( a ( b ( c notice of the sale is required to be given to the district director in accordance with the provisions of subparagraph (1) of this paragraph (c). In any case in which notice of sale is required to be given with respect to a scheduled sale, and notice of the sale is not given, any postponement of the scheduled sale does not affect the rights of the United States under section 7425(b). (iii) Examples. Example 1. A nonjudicial sale of Blackacre, belonging to A, a delinquent taxpayer, is scheduled for December 2, 1968. As no notice of lien is filed applicable to Blackacre more than 30 days before December 2, 1968, no notice of sale is given to the district director. On December 2, 1968, the sale of Blackacre is postponed until January 15, 1969. A notice of lien with respect to Blackacre is properly filed on January 2, 1969. The sale of Blackacre is held on January 15, 1969. Even though more than 30 days elapsed between the originally scheduled date of the sale (Dec. 2, 1968) and the date of the sale (Jan. 15, 1969), no notice of sale is required to be given to the district director since the notice of lien was not filed more than 30 days before the date of the sale. Example 2. Assume the same facts as in example 1 except that the notice of lien is properly filed on November 29, 1968. Since more than 30 days elapsed between the originally scheduled date of the sale and the date of the sale, and the notice of lien is filed (on Nov. 29, 1968) more than 30 days before the date of the sale (Jan. 15, 1969), notice of the sale, in accordance with the provisions of subparagraph (1) of this paragraph, is required to be given to the district director. Example 3. A nonjudicial sale of Whiteacre, belonging to B, a delinquent taxpayer, is scheduled for December 2, 1968. A notice of lien applicable to Whiteacre is filed on November 12, 1968. As the notice of lien was not filed more than 30 days before December 2, 1968, no notice of sale is given to the district director. On December 2, 1968, the sale of Whiteacre is postponed until December 20, 1968. The sale of Whiteacre is held on December 20, 1968. Even though more than 30 days elapsed between the date notice of lien was filed (Nov. 12, 1968) and the date of the sale (Dec. 20, 1968), no notice of sale is required to be given to the district director since not more than 30 days elapsed between the date of the originally scheduled sale (Dec. 2, 1968) and the date the sale was actually held (Dec. 20, 1968). (d) Consent to sale In general. (2) Application for consent. (e) Sale of perishable goods In general. (2) Definition of perishable goods. (f) Content of notice of sale In general. (i) The name and address of the person submitting the notice of sale. (ii) A copy of each Notice of Federal Tax Lien (Form 668) affecting the property to be sold, or the following information as shown on each such Notice of Federal Tax Lien: ( a ( b ( c (iii) With respect to the property to be sold, the following information: ( a ( b ( c (iv) The approximate amount of the principal obligation, including interest, secured by the lien sought to be enforced and a description of the other expenses (such as legal expenses, selling costs, etc.) which may be charged against the sale proceeds. (2) Inadequate notice. (3) Acknowledgment of notice. (4) Disclosure of adequacy of notice. [T.D. 6944, 33 FR 734, Jan. 20, 1968; 33 FR 916, Jan. 25, 1968] § 400.5-1 Redemption by United States. (a) Scope. (b) Right to redeem In general. (2) Redemption period. (i) The period beginning with the date of the sale (as determined under paragraph (b)(1)(iv), (v), and (vi) of § 400.4-1) and ending with the 120th day after such date, or (ii) The period for redemption of real property allowable, with resepct to other secured creditors, under local law of the place where the real property is located,
whichever is longer. (3) Limitations. (c) Amount to be paid In general. (i) The actual amount paid for the property being redeemed (which, in the case of a purchaser who is the holder of the lien being foreclosed, shall include the amount of the obligation secured by such lien to the extent legally satisfied by reason of the sale); (ii) Interest on the amount paid (described in subdivision (i) of this subparagraph) at the sale by the purchaser of the real property computed at the rate of 6 percent per annum for the period from the date of the sale (as determined under paragraphs (b)(1)(iv), (v), and (vi) of § 400.4-1) to the date of redemption; and (iii) The amount, if any, equal to the excess of ( a b (2) Examples. Example 1. A, a delinquent taxpayer, owns Blackacre located in X State upon which B holds a mortgage. After the mortgage is properly recorded, a notice of tax lien is filed which is applicable to Blackacre. Subsequently, A defaults on the mortgage and B forecloses on the mortgage which has an outstanding obligation in the amount of $100,000. At the foreclosure sale, B bids $50,000 and obtains title to Blackacre as a result of the sale. At the time of the foreclosure sale, Blackacre has a fair market value of $75,000. Under the laws of X State, the mortgage obligation is fully satisfied as a result of the foreclosure sale and the mortgagee cannot obtain a deficiency judgment. Under subparagraph (1)(i) of this paragraph, the district director must pay $100,000 in order to redeem Blackacre. Example 2. Assume the same facts as in example 1, except that under the laws of X State, the fair market value of the property foreclosed is the amount of the obligation legally satisfied as a result of the foreclosure sale, and in a case in which the amount of the obligation exceeds the amount of the fair market value of the property, the mortgagee has the right to a judgment for the deficiency computed as the difference between the obligation and the fair market value of the property. In such a case the district director must, under subparagraph (1)(i) of this paragraph, pay $75,000 in order to redeem Blackacre, whether or not B seeks a judgment for the deficiency. Example 3. Assume the same facts as in example 1, except that under the laws of X State, the amount bid is the amount of the obligation legally satisfied as a result of the foreclosure sale, and in the case in which the amount of the obligation exceeds the amount bid, the mortgagee has the right to a judgment for the deficiency computed as the difference between the amount of the obligation and the amount bid. In such a case, the district director must under subparagraph (1)(i) of this paragraph, pay $50,000 in order to redeem Blackacre, whether or not B seeks a judgment for the deficiency. (d) Certificate of redemption In general. (2) Filing. (3) Effect of certificate of redemption. (4) Application for release of right of redemption. [T.D. 6944, 33 FR 737, Jan. 20, 1968]