[Congressional Record Volume 153, Number 61 (Tuesday, April 17, 2007)]
[Senate]
[Pages S4604-S4606]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LEVIN (for himself and Mr. Coleman):
  S. 1124. A bill to amend the Internal Revenue Code of 1986 to 
simplify, modernize, and improve public notice of and access to tax 
lien information by providing for a national, Internet accessible, 
filing system for Federal tax liens, and for other purposes; to the 
Committee on Finance.
  Mr. LEVIN. Mr. President, today is the day that millions of Americans 
across this country perform an important civic duty by paying their 
taxes. It is also a day when many Members of Congress take the time to 
reflect on the state of the Federal tax system and consider how we can 
strengthen it, simplify it, make it more fair, and, in a responsible 
way, ease the tax burden on our citizens.
  Earlier this year, I introduced the Stop Tax Haven Abuse Act, S. 681, 
to strengthen our tax system. That bipartisan bill, which I introduced 
with my colleagues, Senators Norm Coleman and Barack Obama, targets 
outrageous, offshore tax abuses that drain $100 billion each year from 
the U.S. Treasury at the expense of honest, hardworking American 
families who pay their fair share. Offshore tax abuses eat away at the 
foundations of our tax system, draining billions in tax revenue, 
diverting substantial IRS enforcement resources, and demoralizing 
honest taxpayers who play by the rules. S. 681 offers a host of 
provisions to stop offshore abuses, and I urge my colleagues to take a 
serious look at that legislation on this tax day. If enacted, it would 
make our tax system more effective, more fair, and more productive. It 
deserves to be enacted into law this year.
  Stopping offshore tax abuse, however, is far from the only tax 
problem that needs to be addressed if we are to achieve a fair and cost 
effective tax system. So today, I am introducing with Senator Coleman 
legislation offering a cure to a completely different tax problem. The 
target of this legislation is better administration of Federal tax 
liens.
  It has been 40 years since Congress made any significant changes to 
the laws regulating how the Internal Revenue Service (IRS) files 
Federal tax liens and makes them public. Right now, outdated laws are 
forcing the IRS to waste taxpayer dollars on an old-fashioned, 
inefficient, and burdensome paper tax lien filing system that should be 
replaced by a modernized electronic filing system capable of operating 
at a fraction of the cost. It is time to bring the Federal tax lien 
system into the 21st century. That's why I am introducing today, along 
with Senator Coleman, the Tax Lien Simplification

[[Page S4605]]

Act, which will simplify the process of recording tax liens at an 
estimated ten-year cost savings of over half a billion dollars, while 
at the same time improving taxpayer service by speeding up the release 
of liens after taxes are paid.
  Tax liens are a principal way to collect payment from persons who are 
delinquent in paying their taxes. By law, Federal tax liens arise 
automatically ten days after a taxpayer's failure to pay an assessed 
tax. The lien automatically attaches to the taxpayer's real and 
personal property and remains in effect until the tax is paid. However, 
the tax lien is not effective against other creditors owed money by the 
same taxpayer, until a notice of the Federal tax lien is publicly 
recorded. Generally, between competing creditors, the first to file 
notice has priority, so the filing of tax lien notices is very 
important to the government and to the taxpaying public if taxes are to 
be collected from persons who don't pay them.
  Current law requires the IRS to file public notices of Federal tax 
liens in State, county, or city recording offices around the country. 
There are currently more than 4,100 of these local recording offices, 
many of which have developed specific rules regulating how such liens 
must be formatted and filed in their jurisdictions. This patchwork 
system developed more by default than by plan, because those local 
offices were where documents affecting title to real property, 
judgments, and other lien and security interest documents had always 
been filed.
  In 1966, to help the IRS comply with a proliferating set of local 
filing rules for Federal tax liens, Congress passed the Tax Lien Act to 
standardize certain practices. This act provided, for example, that 
liens against real estate had to be filed where the property was 
located, and required each State to designate a single place to file 
Federal tax liens applicable to personal property. Most States 
subsequently adopted a version of the Uniform Tax Lien Filing Act, 
enabling the IRS to file a notice of tax lien in each locality where 
the taxpayer's real estate is located, and a single notice where the 
taxpayer resides to reach any personal property. For corporations, 
States typically require the IRS to file a notice to attach real estate 
in each locality where the real estate is located, and a separate 
notice, usually at the State level, to attach other types of property. 
There are often additional rules for trusts and partnerships. The end 
result of the law was to reduce some but not all of the multiple sets 
of rules regulating the local filing of Federal tax liens.
  In addition, in most cases, the IRS continued to have to physically 
file the tax lien in the appropriate local recording office. In most 
cases, that filing is accomplished by mail. Some jurisdictions also 
allow electronic filings, but those jurisdictions are few and far 
between. The same is true if a lien has to be corrected, or a related 
certificate of discharge, subordination, or nonattachment needs to be 
filed, or when a tax liability has been resolved and the IRS wants to 
release a lien. Each usually requires a paper filing in one or more 
local recording offices. If a paper filing is lost or misplaced, the 
IRS often has to send an employee in person to deal with the problem, 
adding travel costs to other administrative expenses.
  The paper filing system imposes similar burdens on other persons 
dealing with the tax lien system. Any person who is the subject of a 
tax lien, for example, or who is a creditor trying to locate a tax 
lien, is required to make a physical trip to one or more local 
recording offices to search the documents and see if a lien has been 
filed. Currently, there is no central database of locally filed tax 
liens that can be accessed by any member of the public or by any 
taxpayer that is the subject of a federal tax lien. Not even IRS 
personnel have access to such a tax lien database. It does not exist.
  The result is an inefficient, costly, and burdensome paper filing 
system that can and should be completely revamped. Businesses across 
the country learned long ago that electronic filing systems outperform 
paper; they save personnel costs, material costs, time, and client 
frustration. Government agencies have learned the same thing as they 
have moved to electronic databases and recordkeeping, including systems 
made available to the public on the Internet. Among the many examples 
of government-sponsored, Internet-based systems currently in operation 
are the contractor registry operated by the General Services 
Administration to allow persons to register to bid on federal 
contracts, the license registry operated by the Federal Communications 
Commission to allow the public to search radio licenses, and the 
registry operated by the U.S. Patent and Trademark Office to allow the 
public to search currently registered patents and trademarks. Each of 
these systems has saved taxpayer money, while improving service to the 
public.

  Just as government agencies gave up the horse and buggy for the 
automobile, it is time for the IRS to move from a decentralized, paper-
based tax lien filing system to an electronic national tax lien 
registry. But the IRS' hands are tied, until the Congress changes the 
laws holding back modernization of the federal tax lien filing system.
  The bill we are introducing today would make the changes necessary to 
enable the IRS to take immediate steps to simplify and modernize the 
Federal tax lien filing system. The operative provisions would require 
the IRS to create a national registry for the filing of tax lien 
notices as an electronic database that is Internet accessible and 
searchable by the public at no cost. It would mandate the use of this 
system in place of the existing system of local filings. It would 
establish the priority of Federal tax liens according to the date and 
time that the relevant notice was filed in the national registry, in 
the same way that priorities are currently established from the date 
and time of filing in local recording offices. The bill would also 
shorten the time allowed to release a tax lien, after the related tax 
liability has been resolved, from 30 days to 10 days.
  To establish this new electronic filing system, the bill would give 
the Treasury Secretary express authority to issue regulations or other 
guidance governing the establishment and maintenance of the registry. 
Among other obligations, Treasury would be required to ensure that the 
registry was secure and prevent data tampering. In addition, prior to 
the implementation of the national registry, the Treasury Secretary 
would be required to review the information currently included in 
public tax lien filings to determine whether any of that information 
should be excluded or protected from disclosure on the Internet. For 
example, the Treasury Secretary would be expected to prevent the 
disclosure of social security numbers that are currently included in 
many public tax lien filings, but if disclosed on the Internet, could 
facilitate identity theft. While such identifying information could 
continue to be included in a tax lien filing to ensure that the filing 
is directed toward the correct person, the registry could be 
constructed to prevent such information from being disclosed publicly 
and to instead provide such information only upon request from 
appropriate persons involved in the enforcement of the tax lien or 
collection of the tax debt. By requiring this information review prior 
to implementing the national tax lien registry, the bill is expected to 
provide greater protection of some taxpayer information than occurs in 
current tax lien filings.
  The bill would require the Treasury Secretary to establish a 
functioning tax lien registry by January 1, 2009, but would also allow 
the IRS to continue to use the existing paper-based tax lien filing 
system, in parallel with the new system, for an appropriate period to 
ensure a smooth transition. The IRS has indicated that it would be able 
to establish an electronic tax lien filing system within the specified 
time period.
  Moving to a centralized, electronic tax lien filing system, an 
Internet-based National Registry of tax liens, would accomplish at 
least three objectives. It would save taxpayer dollars, speed the 
process for filing and releasing tax liens, and simplify the process 
for researching Federal tax liens for taxpayers and creditors.
  The IRS estimates that moving from a paper-based, locally filed tax 
lien system to an Internet-based, Federal tax lien filing system would 
save about $570 million over 10 years. That's half a billion dollars in 
cost savings. These

[[Page S4606]]

savings would come from the elimination of State filing fees, IRS 
personnel costs, travel costs related to local filing problems, and the 
cost of lost taxes whenever the IRS makes an error or a tax lien filing 
is misplaced or delayed. Filing fees, for example, vary widely from 
state to state, but typically cost at least $10 per filing, and in some 
States cost as much as $150. If a taxpayer has real estate in multiple 
jurisdictions, those costs multiply. Personnel costs include the IRS 
service center staff that is currently charged with filing tax liens 
nationwide and complying with the myriad filing rules in effect in the 
4,100 recording offices across the country. Additional anticipated 
savings would come from reduced mailing and travel costs.
  Electronic filing would not only save money, it would improve 
taxpayer service. Taxpayers who are the subject of a tax lien filing, 
for example, would benefit from a centralized registry in several ways. 
First, taxpayers would be able to review their liens as soon as they 
are filed online, without having to make a physical trip to one or more 
local recording offices. Second, taxpayers would have an easy way to 
look up their liens on multiple occasions, identify any problems, and 
correct any errors. Third, once the underlying tax liability was 
resolved, the IRS would be required to release the tax lien in 10 days, 
instead of the 30 days allowed under current law. The longer 30-day 
period is necessitated by the current complexities associated with 
filing a paper lien in one or more local offices, complexities that 
would be eliminated by the establishment of a centralized, electronic 
registry.
  Creditors who need to research Federal tax liens would also benefit 
from a centralized, electronic registry. Lenders, security holders and 
others, for example, would be able to use a simplified search process 
that could take place online and would not require physical trips to 
multiple locations. Simplifying the search process would also provide 
greater certainty that all tax liens were found. The ability to 
research Federal tax liens remotely and instantaneously should be of 
particular benefit to larger lenders and to creditors of taxpayers with 
widely distributed assets.
  Federal tax liens are not a topic that normally excites the public's 
interest. Sound tax administration, however, requires attention to 
administrative as well as enforcement concerns. Federal law is 
currently impeding development of a more efficient, cost effective tax 
lien filing system. Amending the law as indicated in the Tax Lien 
Simplification Act to streamline the tax lien filing system, moving it 
from a paper-based to an electronic-based system, would not only 
advance the more efficient, cost-effective tax system we all want, it 
would also save half a billion dollars in taxpayer money. At the same 
time, it would make the system work better for individual taxpayers by 
reducing the possibility for mistakes and speeding up the release of 
liens for taxpayers who have paid. Modernizing our tax lien filing 
system makes sense in every way. I urge my colleagues to join Senator 
Coleman and myself in enacting this bill into law this year.
  I ask unanimous consent to print in the Record following these 
remarks a section-by-section analysis of the bill.
  There being no objection, the summary was ordered to be printed in 
the Record, as follows:

       The Tax Lien Simplification Act introduced by Senators 
     Levin and Coleman contains the following provisions.


                               Section 1

       The short title of the bill is the ``Tax Lien 
     Simplification Act.''


                               Section 2

       Section 2 contains the findings and purpose of the bill. It 
     finds that the current federal tax lien filing system is 
     inefficient, burdensome, and expensive, and that current 
     technology permits the creation of an electronic system that 
     would be more efficient, more timely, less burdensome, and 
     less expensive. It states that the purpose of the bill is to 
     simplify and modernize the tax lien filing process, to 
     improve public access to tax lien information, and to save 
     taxpayer dollars by replacing the current decentralized 
     system of local tax lien filings with a centralized, 
     nationwide, Internet accessible, and fully searchable tax 
     lien filing system.


                               Section 3

       Section 3 contains the operative provisions of the bill.
       Subsection (a) would amend section 6323(f) of title 26 by 
     eliminating the provisions in current law directing tax liens 
     to be filed in state and local recording offices, and by 
     authorizing the filing of federal tax lien notices in a 
     national tax lien registry to be established under a new 
     subsection 6323(k). It would deem such notices, and any 
     related certificate of release, discharge, subordination, or 
     nonattachment of a lien, to be effective for purpose of 
     determining the relative priority of a federal tax lien. It 
     would direct the Secretary of the Treasury to prescribe the 
     form and content of the tax lien notices to be filed on the 
     registry. Filings of tax lien notices and related documents 
     would become effective from the date and time of recording in 
     the national tax lien registry, just as they are now from the 
     date and time of a local filing.
       Subsection (b) would provide that if an existing tax lien 
     notice must be re-filed, then the re-filing should be made in 
     the national tax lien registry.
       Subsection (c) would require certificates of release, 
     discharge, subordination, and nonattachment of a tax lien to 
     be filed in the national tax lien registry. It would also 
     reduce from 30 days to 10 days the time allotted for the 
     release of a tax lien after the underlying tax liability has 
     been resolved. It would make various conforming amendments in 
     the provisions related to federal tax liens.
       Subsection (d)(1) would amend section 6323 of title 26 by 
     establishing a National Registry of federal tax liens and 
     related documents. It would require this National Registry to 
     be established and maintained by the Secretary of the 
     Treasury, and made accessible to and searchable by the public 
     through the Internet at no cost. It would require the 
     registry to identify the taxpayer to whom the tax lien 
     applies and reflect the date and time the notice of lien was 
     filed. It would require the registry to be searchable by, at 
     a minimum, taxpayer name and address, the type of tax, the 
     tax period, and when Treasury determines it is feasible, by 
     the affected property.
       Subsection (d)(2) would require Treasury to issue 
     regulations or other guidance for the maintenance and use of 
     the registry, and to secure the registry and prevent data 
     tampering. Prior to the implementation of the registry, the 
     Treasury Secretary would be required to review the 
     information currently provided in public tax lien filings to 
     determine whether any of that information should be excluded 
     or protected from public viewing in the National Registry.
       Subsection (e) would establish a transition rule for the 
     move from the existing paper-based tax lien filing system to 
     the National Registry. It would authorize the Treasury 
     Secretary to issue regulations allowing for the continued 
     filing of notices in state and local offices for ``an 
     appropriate period to permit an orderly transition'' to the 
     National Registry.
       Subsection (f) would require Treasury to make the National 
     Registry operational as of January 1, 2009, and make the bill 
     applicable to tax lien notices filed after December 31, 2008.
                                 ______