What Property Does an IRS Tax Lien Attach To?

What property does an IRS tax lien attach to?  As a tax attorney, I am asked many questions regarding tax liens, and one such question is, what property does the tax lien attach to?  The article below has been prepared to provide additional information regarding the above question.  As always, you should discuss your particular tax matter with a tax attorney.  If you would like to speak with a tax attorney in Denver, Colorado, please feel free to contact The McGuire Law Firm to schedule a free consultation.

 

In many respects, the answer to the above question is easy because a tax lien issued by the Internal Revenue Service attaches to all property and rights to the property of the taxpayer.  Thus, this is a very broad and far reaching lien because it not only includes tangible property, but a tax lien also attaches to intangible property and rights to intangible property.  One exception exists as a tax lien does not attach an interest of an Indian in restricted land that is held by the United States.  Please see treasury regulation 301.6321-1 for information regarding this exception.

 

One important question or issue to consider is, how have courts interpreted the broad reach of a federal tax lien?  In general, courts have interpreted the broad language relating to tax liens to include many different types of property that vary greatly when compared against one another, and this includes contingent interests, future interests and contracts, which are all discussed below.

 

–          Future Interests: A future interest in property does not prevent a federal tax lien from attaching to such property.  Thus, if a taxpayer’s enjoyment to property is in the future, the tax lien can still attach to the property.  For example, if a taxpayer has a right under a contract or trust to receive payments or distributions of property, the tax lien will attach to the taxpayer’s entire right regardless of when the payments or distributions will be made.  See Rev. Rule 55-210 for more information regarding this issues.

–          Contingent Interests: A contingent interest would be an interest that a party will receive only if certain conditions occur.  For example, an individual may be a contingent beneficiary of a trust if the receipt of property requires them to perform certain tasks, live longer than another individual etc.  Courts have found that an IRS tax lien can attach to a contingent interest.

–          Executory Contracts: Courts have held that a tax lien can attach before performance within a contract agreement.  In Seaboard Surety Co. v. United States, 306 F.2d 855, 859 (9th Cir. 1962) the tax lien attached to taxpayer’s contract rights that taxpayer had assigned.  When the contract was performed, the government had a lien on the contract proceeds.  Other courts have held that contract rights under a partially executed contract had a realizable value and therefore, were a right to property that a tax lien could attach to.

In addition to the above issues, it is important to note that a tax lien attaches to property acquired by the taxpayer during the existence (or after the filing) of the tax lien.  Thus, a federal tax lien issued by the Internal Revenue Service attaches to after acquired property, meaning property the taxpayer acquires after the tax lien has actually been filed.  This is likely different from other liens such as a mortgage.

If the IRS has filed a tax lien against you or your business, it is recommend you speak with a tax attorney or other tax professional.  You can schedule a free consultation with a Denver tax attorney by contacting The McGuire Law Firm.

Denver IRS Tax Lien