[Congressional Record Volume 157, Number 109 (Wednesday, July 20, 2011)]
[Senate]
[Pages S4722-S4724]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LEVIN (for himself and Mr. Begich):
  S. 1390. 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

[[Page S4723]]

liens, and for other purposes; to the Committee on Finance.
  Mr. LEVIN. Mr. President, as Congress continues to debate ways to 
reduce our national deficit, some Members of Congress are taking the 
time to reflect on the state of the Federal tax system and consider how 
we can simplify it and make it more efficient and fair. Today, as part 
of that effort, I along with my colleague Senator Begich are 
introducing legislation aimed at simplifying and modernizing the 
existing system for filing Federal tax liens, a key tool used by the 
Treasury to collect unpaid taxes. The bill has been endorsed by 
Citizens for Tax Justice, Tax Justice Network, Public Citizen, US 
Public Interest Research Group, and the FACT Coalition, an organization 
of public interest and business groups concerned with tax fairness.
  It has been 45 years since Congress has made any significant changes 
to the laws regulating how the Internal Revenue Service, IRS, files 
Federal tax liens. Right now, outdated laws are forcing the IRS to 
waste taxpayer dollars on an old-fashioned, inefficient, and burdensome 
paper-based filing system spread out over 4,000 locations 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. The Tax Lien Simplification Act, 
which we are introducing today, will simplify the process of recording 
tax liens at an estimated ten-year cost savings of $150 million, while 
at the same time improving taxpayer service by making it easier to 
verify lien information and speed 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 owing taxes.
  Current law requires the IRS to file public notices of Federal tax 
liens on paper in State, county, or city recording offices around the 
country, to ensure other creditors receive notice of the government's 
claim. There are currently more than 4,100 of these 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, as different offices 
developed procedures for filing a variety of legal documents affecting 
title to real and personal property.
  In 1966, to help the IRS comply with a proliferating set of 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 filing of Federal tax liens.
  The bottom line today is that, in most cases, tax liens have to be 
physically filed in one of over 4,000 recording offices. In most cases, 
that filing is accomplished by mail, using paper documents. 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 action usually 
requires a paper filing in one or more recording offices and requires 
the additional involvement of third parties. 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 recording 
offices, which may not even be in the same State as the taxpayer, to 
search the documents, see if a lien has been filed, and verify or 
examine the information. Currently, there is no single database of tax 
liens that can be accessed by any taxpayer that is the subject of a 
federal tax lien, by any creditor, or by any member of the public. 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 
aggravation. 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 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 establishment of 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 paper 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 a paper filing. 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 20 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. Treasury would also be 
required to work with industry and other potential users of the 
registry to develop accurate search criteria to identify persons who 
are the subject of a tax lien. 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 from 
disclosure on the Internet. For example, the Treasury Secretary would 
end disclosure of social security numbers that are currently included 
in some tax lien filings.

[[Page S4724]]

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 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 would provide greater privacy protections for 
taxpayer information than occurs in current tax lien filings.
  To ensure a successful transition to the new system, the bill would 
require the Treasury Secretary to establish one or more pilot projects 
to be carried out within 2 years of enactment of the bill, and require 
a successful nationwide test of the tax lien registry before it can be 
made operational. The bill 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.
  Moving to an electronic tax lien filing system using an Internet-
based national registry of tax liens, would accomplish at least three 
objectives. It would save taxpayer dollars, streamline the process for 
filing, correcting, and releasing tax liens, and improve taxpayer and 
public access to tax lien information.
  The IRS estimates that moving from a paper-based tax lien system to 
an Internet-based, Federal tax lien registry would save about $150 
million over 10 years. These savings would come from the elimination of 
State filing fees, paper and mailing costs, IRS administrative and 
travel costs related to paper 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. A Federal tax lien system would standardize costs 
for all taxpayers, and require only one filing across all 
jurisdictions.
  In addition, right now, an IRS service center 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. 
Eliminating the paper filing system would free virtually that entire 
service center for other taxpayer services and enforcement work.
  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 an electronic 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 
recording offices. Second, taxpayers would have an easy way to look up 
their liens on multiple occasions, identify problems, and correct any 
errors. A single tax lien registry would be particularly useful for 
taxpayers who move during the ten years that a tax lien can be in 
effect and have to look up liens in jurisdictions where they no longer 
live.
  Third, once the underlying tax liability is resolved, the IRS would 
be required to release the tax lien in 20 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 offices across the country, requiring the action of multiple 
parties in different jurisdictions. These complexities would be 
eliminated by the establishment of an electronic registry. The registry 
would also enable taxpayers, after they pay their taxes, to make sure 
their liens have been lifted.
  Creditors who need to research Federal tax liens would also benefit 
from a single 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 procedures that, 
ultimately, require physical trips to multiple locations. A single tax 
lien registry would make it easier to locate tax liens for persons who 
have moved from the jurisdictions where the liens were first filed. 
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 assets in more than 
one county or State.
  Tax liens are not a topic that normally excites the public's 
interest. But sound tax administration requires attention to efficient, 
effective and low-cost filing systems. Saving taxpayer dollars is more 
important than ever as Congress looks for ways to tackle the deficit.
  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, effective tax system we all 
want, it would also save 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 our colleagues to join us in enacting this 
bill into law this year.
                                 ______