[Federal Register Volume 73, Number 75 (Thursday, April 17, 2008)]
[Proposed Rules]
[Pages 20877-20882]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-8082]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[REG-141998-06]
RIN 1545-BG13


Withdrawal of Regulations Under Old Section 6323(b)(10)

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations related to the 
validity and priority of the Federal tax lien against certain persons 
under section 6323 of the Internal Revenue Code (the Code). The 
proposed regulations update the corresponding Treasury Regulations in 
various respects. The proposed regulations reflect the adjustment 
within section 6323(b) of certain dollar amounts as well as the 
amendment of section 6323(b)(10) by the IRS Restructuring and Reform 
Act of 1998 (RRA 1998). In addition, the proposed regulations amend the 
existing regulations under section 6323(c), (g), and (h) to reflect 
that a notice of Federal tax lien (NFTL) is not treated as meeting the 
filing requirements until it is both filed and indexed in the office 
designated by the state (in the case of real property located in a 
state where a deed is not valid against a purchaser until the filing of 
such deed has been entered and recorded in the public index); the lien 
will be extinguished if an NFTL contains a certificate of release and 
the NFTL is not timely refiled; and current law provides the IRS with a 
10-year period to collect an assessed tax. The proposed regulations 
also make changes to the existing regulations under section 6323(f) to 
clarify the IRS's authority to file NFTLs electronically. Finally, the 
proposed regulations make incidental changes throughout the existing 
regulations under section 6323 to make the dates in the examples more 
contemporaneous with the present and to remove language deemed no 
longer necessary.

DATES: Written or electronic comments and requests for a public hearing 
must be received by June 16, 2008.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-141998-06), room 5203, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. Submissions may be hand-delivered Monday through Friday 
between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-141998-06), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, 
NW., Washington, DC 20224, or via the Federal eRulemaking Portal at 
www.regulations.gov (IRS-141998-06).

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Debra A. 
Kohn at (202) 622-7985; concerning submissions of comments and the 
hearing, Regina Johnson at (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed amendments to the Procedure and 
Administration Regulations (26 CFR part 301) under section 6323 of the 
Code. If any person liable for tax neglects or refuses to pay after 
demand, the amount of that tax is a lien in favor of the United States 
against all property and rights to property of such person under 
section 6321. Section 6323 provides that a Federal tax lien is only 
valid against certain persons if an NFTL is filed and addresses 
generally the validity and priority of the Federal tax lien against 
such persons. Section 6323(b) and (c) addresses the protection of 
certain interests even though an NFTL has been filed. Section 6323(f) 
prescribes the place for filing and the form of an NFTL. Section 
6323(g) addresses the refiling of an NFTL. Section 6323(h) contains 
definitions of certain terms used throughout section 6323.
    Since 1976, there have been numerous amendments to section 6323 
that are not reflected in the existing regulations. Section 6323(b)(10) 
has been amended by RRA 1998. In addition, several subsections of 
section 6323(b) have been amended to increase the dollar amounts these 
sections reference. Also, section 6323(f)(4) was amended by the Revenue 
Act of 1978 to provide that an NFTL does not meet the filing 
requirements with respect to real property until the filing is entered 
and recorded in a public index maintained by the state if the laws of 
the state provide that a deed is not valid against a purchaser unless 
it is recorded in a public index. Moreover, section 6502, the statute 
that governs the period the IRS has to take collection action 
(referenced in various places throughout Sec.  301.6323(g)-1(c)), was 
amended by the Revenue Act of 1990 to change the period from six years 
to 10 years.
    There have also been several changes to IRS practice that are not 
reflected in the existing regulations. Section 301.6323(f)-1(d)(2) of 
the existing regulations provides that an NFTL may be filed 
electronically if the state in which it is being filed permits 
electronic filing. Whether a state ``permits'' electronic filing of 
NFTLs has been subject to varying interpretations, thus casting doubt 
on the validity of NFTLs filed electronically in jurisdictions that do 
not specifically provide for electronic filing. However, the 
requirements for proper filing of liens are a matter of Federal, not 
state, law. United States v. Union Cent. Life Ins. Co., 368 U.S. 291, 
82 S. Ct. 349, 7 L. Ed. 2d 294 (1961). Thus, the IRS already possesses 
the authority to dictate the form and content of its NFTLs. The 
proposed regulations remove the ``permits'' language so that they 
correctly reflect the IRS's authority to file NFTLs electronically.
    Section 301.6323(g)-1(a)(3) and (4) of the existing regulations 
states that the IRS may refile an NFTL once the filing period has 
elapsed and that failure to refile within the specified period does not 
affect the existence of the lien. The existing regulations also provide 
that failure to refile during the specified period does not affect the 
NFTL with respect to property that is the subject matter of a suit or 
that was levied upon prior to the expiration of the required refiling 
period. These provisions concerning the effect of a failure to refile 
are, to some extent, inconsistent with current IRS practice. Most filed 
NFTLs now contain a certificate of release that automatically releases 
the lien as of the date the NFTL prescribes, which is the date at the 
end of the required refiling period. Therefore, if the IRS does not 
refile an NFTL within the specified period, the certificate of release 
contained in the NFTL extinguishes the lien. The proposed regulations 
update the regulations under section 6323 to reflect these changes in 
IRS practice.
    The Code currently provides a 10-year period for instituting a 
proceeding in court or serving a levy to collect an assessed tax 
liability, while Sec.  301.6323(g)-1(c) of the existing regulations 
references the 6-year period that existed until 1990. The proposed 
regulations update Sec.  301.6323(g)-1(c) to reflect this change in the 
law.
    The proposed regulations also update the regulations under section 
6323(h) to reflect changes made by the Uniform

[[Page 20878]]

Commercial Code (UCC). Section 9-312(a) of the UCC, as adopted by most 
states in 2001, now provides that a security interest in chattel paper, 
negotiable documents, instruments, or investment property may be 
perfected by filing.
    The proposed regulations also make various incidental changes 
throughout the Sec.  301.6323 regulations.

Explanation of Provisions

I. Adjustment of Dollar Amounts

    Under section 6323(b) of the Code, a Federal tax lien is not valid 
against certain interests even though an NFTL has been filed.
    Section 6323(b)(4) includes, as one such interest, certain tangible 
personal property purchased in a casual sale. In 1976, the purchase 
price of such property was required to be less than $250. The limit of 
$250 is reflected in Sec.  301.6323(b)-1(d)(1) and in examples 1 and 3 
contained in Sec.  301.6323(b)-1(d)(3). This limit has been raised in 
the most recent amendment to section 6323(b)(4) to $1,000. The 
statutory limit is indexed annually for inflation. After indexing, the 
amount for 2008 is $1,320.
    Section 6323(b)(7) protects a mechanic's lienor with respect to 
residential property subject to the mechanic's lien. In 1976, the 
protection extended to such property was limited to an amount not more 
than $1,000. The limit of $1,000 is reflected in Sec.  301.6323(b)-
1(g)(1) and in the examples contained in Sec.  301.6323(b)-1(g)(2). 
This amount was raised to $5,000 in the most recent amendment to 
section 6323(b)(7). The statutory limit is indexed annually for 
inflation. After indexing, the amount for 2008 is $6,600. The proposed 
regulations update Sec.  301.6323(b)-1(d) and (g) to make the dollar 
limits consistent with those applicable under the current version of 
section 6323(b)(4) and (7).
    Section 301.6323(b)-1(d)(3), Example 3, references a $500 limit on 
household goods exempt from levy, citing Treas. Reg. Sec.  301.6334-
1(a)(2). Section 301.6334-1(a)(2) is the regulation under I.R.C. Sec.  
6334(a)(2). The amount reflected in section 6334(a)(2) as set forth in 
the most recent version of the Code is $6,250. The amounts in both 
section 6334(a)(2) and the corresponding regulation are indexed 
annually for inflation. After indexing, the applicable amount for 2008 
is $7,900. Accordingly, Sec.  301.6323(b)-1(d)(3), Example 3, is 
amended to make the reference to the limit on household goods exempt 
from levy consistent with the amounts applicable in section 6334(a)(2) 
and Sec.  301.6334-1(a)(2).

II. Removal of Protection for Passbook Loans

    Section 6323(b)(10) currently protects from a Federal tax lien 
certain institutions holding deposit-secured loans, to the extent of 
any loan made without actual notice or knowledge of the Federal tax 
lien. Prior to the enactment of RRA 1998, section 6323(b)(10) was 
entitled ``passbook loans'' and protected from a Federal tax lien an 
institution granting a loan without actual notice or knowledge of the 
Federal tax lien, if the loan was secured by an account evidenced by a 
passbook and if the lending institution was continuously in possession 
of the passbook from the time the loan was made. Section 301.6323(b)-
1(j) reflects this language and, in addition, includes both a 
definition of ``passbook'' and an example of the provision's operation.
    The amendment of section 6323(b)(10) renders the language in the 
regulations pertaining to passbook accounts obsolete. Because leaving 
Sec.  301.6323(b)-1(j) in place is misleading and unnecessary in light 
of the amendment of section 6323(b)(10), the proposed regulations 
remove Sec.  301.6323(b)-1(j).

III. Clarification of Language Authorizing IRS To File NFTLs 
Electronically

    Section 301.6323(f)-1(d)(2) sets forth a definition of a Form 668, 
the form that, when filed, serves as an NFTL. This section includes 
NFTLs filed by electronic or magnetic media ``if a state in which [an 
NFTL] is filed permits a notice of Federal tax lien to be filed by the 
use of an electronic or magnetic medium.''
    Most local recording offices now have the technological capability 
to accept electronically-filed NFTLs. The proposed regulations amend 
Sec.  301.6323(f)-1(d)(2) to provide that a Form 668 may be filed 
either in paper form or electronically. In addition, the proposed 
regulations specifically define transmission by fax and e-mail as 
electronic, as opposed to paper, filings. The regulations as amended 
reflect the IRS's authority to file NFTLs electronically in all 
situations and allow the IRS to work with local jurisdictions to 
receive electronically-filed NFTLs if they have the capacity to do so 
without obtaining permission from the state.

IV. Revision of Language on Late Refiling of NFTLs

    Section 301.6323(g)-1(a) sets forth general principles pertaining 
to refiling NFTLs. Section 301.6323(g)-1(a)(1) provides in part that if 
two or more NFTLs are filed with respect to a particular tax 
assessment, the failure to refile during the specified period in 
respect to one of the notices does not affect the effectiveness of the 
refiling of any other NFTL. Section 301.6323(g)-1(a)(3) states in part 
that the failure to refile an NFTL during the required filing period 
does not affect the effectiveness of the notice with respect to 
property that is the subject matter of a suit or that has been levied 
upon prior to the expiration of the filing period. Section 301.6323(g)-
1(a)(4), as well as several of the examples in Sec.  301.6323(g)-
1(b)(3) and (c)(3), suggest that a lien may continue to exist when an 
NFTL is not refiled. These provisions are, to some extent, inconsistent 
with current IRS practice. Most NFTLs now contain a certificate of 
release that automatically becomes effective on the date prescribed in 
the NFTL, which is the date the required refiling period ends. 
Therefore, if an NFTL that contains a certificate of release is not 
timely refiled in each jurisdiction where it was originally filed, the 
lien self-releases and is extinguished in all jurisdictions. See I.R.C. 
Sec.  6325(f)(1)(A). The extinguishment of the lien invalidates NFTLs 
filed in other jurisdictions and requires the IRS to file certificates 
of revocation, as well as new NFTLs, in each jurisdiction where NFTLs 
were previously filed.
    The proposed regulations amend these provisions to provide that, 
with respect to an NFTL that includes a certificate of release, failure 
to timely refile the NFTL in any jurisdiction where it was originally 
filed extinguishes the lien, and that when an NFTL is filed in more 
than one jurisdiction, certificates of revocation as well as new NFTLs 
must be filed in all the jurisdictions for the lien to be reinstated.

V. Revision of References to 6-Year Collection Period

    Section 6502 generally affords a 10-year period for instituting a 
proceeding in court or serving a levy to collect a properly assessed 
tax. The period section 6502 allowed for taking these collection 
actions was, until 1990, six years. The existing regulations under 
section 6323(g) do not reflect this change. Instead, subsections (b) 
and (c) of Sec.  301.6323(g)-1, which addresses refiling of NFTLs, 
imply that the applicable period for collection is six years. Example 5 
of Sec.  301.6323(g)-1(b)(3) references the 6-year period. In addition, 
several references to a 6-year collection period occur in Sec.  
301.6323(g)-1(c)(1), and additional references to the 6-year period 
occur in

[[Page 20879]]

Example 1 in Sec.  301.6323(g)-1(c)(3). The proposed regulations update 
Sec.  301.6323(g)-1(c) to reflect this change in the law.

VI. Incidental Updates

    Various references and dates contained in the regulations under 
section 6323 have been rendered obsolete since 1976. The proposed 
regulations update various provisions throughout the Sec.  301.6323 
regulations to make dates more contemporaneous with the present and 
remove language deemed no longer necessary. In addition, the proposed 
regulations remove all references to Internal Revenue Service district 
directors, as these positions were eliminated by the Internal Revenue 
Service reorganization implemented pursuant to RRA 1998.

Proposed Effective Date

    These regulations are proposed to generally apply with respect to 
any NFTL filed on or after the date that these regulations are 
published as final regulations in the Federal Register.

Special Analyses

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

Comments and Requests for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) or electronic comments that are timely submitted 
to the IRS. The IRS and Treasury Department request comments on the 
clarity of the proposed rules and how they may be made easier to 
understand. All comments will be available for public inspection and 
copying. A public hearing will be scheduled if requested in writing by 
any person that timely submits written comments. If a public hearing is 
scheduled, notice of the date, time, and place for the public hearing 
will be published in the Federal Register.

Drafting Information

    The principal author of these regulations is Debra A. Kohn of the 
Office of the Associate Chief Counsel (Procedure and Administration).

List of Subjects in 26 CFR Part 301

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

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 301 is proposed to be amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

    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(b)-1 is amended as follows:
    1. Paragraph (d)(1) is revised.
    2. Paragraphs (d)(3) Example 1 and Example 3 are revised.
    3. Paragraphs (g)(1), and (g)(2) Example 1 through Example 3 are 
revised.
    4. Paragraphs (i)(1)(iii) and (j) are revised.
    The revisions read as follows:


Sec.  301.6323(b)-1  Protection for certain interests even though 
notice filed.

* * * * *
    (d) Personal property purchased in casual sale--(1) In general. 
Even though a notice of lien imposed by section 6321 is filed in 
accordance with Sec.  301.6323(f)-1, the lien is not valid against a 
purchaser (as defined in Sec.  301.6323(h)-1(f)) of household goods, 
personal effects, or other tangible personal property of a type 
described in Sec.  301.6334-1 (which includes wearing apparel, school 
books, fuel, provisions, furniture, arms for personal use, livestock, 
and poultry (whether or not the seller is the head of a family); and 
books and tools of a trade, business, or profession (whether or not the 
trade, business, or profession of the seller)), purchased, other than 
for resale, in a casual sale for less than $1,320, effective for 2008 
and adjusted each year based on the rate of inflation (excluding 
interest and expenses described in Sec.  301.6323(e)-1).
* * * * *
    (3) * * *

    Example 1. A, an attorney's widow, sells a set of law books for 
$200 to B, for B's own use. Prior to the sale a notice of lien was 
filed with respect to A's delinquent tax liability in accordance 
with Sec.  301.6323(f)-1. B has no actual notice or knowledge of the 
tax lien. In addition, B does not know that the sale is one of a 
series of sales. Because the sale is a casual sale for less than 
$1,320 and involves books of a profession (tangible personal 
property of a type described in Sec.  301.6334-1, irrespective of 
the fact that A has never engaged in the legal profession), the tax 
lien is not valid against B even though a notice of lien was filed 
prior to the time of B's purchase.
* * * * *
    Example 3. In an advertisement appearing in a local newspaper, G 
indicates that he is offering for sale a lawn mower, a used 
television set, a desk, a refrigerator, and certain used dining room 
furniture. In response to the advertisement, H purchases the dining 
room furniture for $200. H does not receive any information which 
would impart notice of a lien, or that the sale is one of a series 
of sales, beyond the information contained in the advertisement. 
Prior to the sale a notice of lien was filed with respect to G's 
delinquent tax liability in accordance with Sec.  301.6323(f)-1. 
Because H had no actual notice or knowledge that substantially all 
of G's household goods were being sold or that the sale is one of a 
series of sales, and because the sale is a casual sale for less than 
$1,320, H does not purchase the dining room furniture subject to the 
lien. The household goods are of a type described in Sec.  301.6334-
1(a)(2) irrespective of whether G is the head of a family or whether 
all such household goods offered for sale exceed $7,900 in value.
* * * * *
    (g) Residential property subject to a mechanic's lien for certain 
repairs and improvements--(1) In general. Even though a notice of a 
lien imposed by section 6321 is filed in accordance with Sec.  
301.6323(f)-1, the lien is not valid against a mechanic's lienor (as 
defined in Sec.  301.6323(h)-1(b)) who holds a lien for the repair or 
improvement of a personal residence if--
    (i) The residence is occupied by the owner and contains no more 
than four dwelling units; and
    (ii) The contract price on the prime contract with the owner for 
the repair or improvement (excluding interest and expenses described in 
Sec.  301.6323(e)-1) is not more than $6,600, effective for 2008 and 
adjusted each year based on the rate of inflation.
    (iii) For purposes of paragraph (g)(1)(ii) of this section, the 
amounts of subcontracts under the prime contract with the owner are not 
to be taken into consideration for purposes of computing the $6,600 
prime contract price. It is immaterial that the notice of tax lien was 
filed before the contractor undertakes his work or that he knew of the 
lien before undertaking his work.
    (2) * * *


[[Page 20880]]


    Example 1. A owns a building containing four apartments, one of 
which he occupies as his personal residence. A notice of lien which 
affects the building is filed in accordance with Sec.  301.6323(f)-
1. Thereafter, A enters into a contract with B in the amount of 
$800, which includes labor and materials, to repair the roof of the 
building. B purchases roofing shingles from C for $300. B completes 
the work and A fails to pay B the agreed amount. In turn, B fails to 
pay C for the shingles. Under local law, B and C acquire mechanic's 
liens on A's building. Because the contract price on the prime 
contract with A is not more than $6,600 and under local law B and C 
acquire mechanic's liens on A's building, the liens of B and C have 
priority over the Federal tax lien.
    Example 2. Assume the same facts as in Example 1, except that 
the amount of the prime contract between A and B is $7,100. Because 
the amount of the prime contract with the owner, A, is in excess of 
$6,600, the tax lien has priority over the entire amount of each of 
the mechanic's liens of B and C, even though the amount of the 
contract between B and C is $300.
    Example 3. Assume the same facts as in Example 1, except that A 
and B do not agree in advance upon the amount due under the prime 
contract but agree that B will perform the work for the cost of 
materials and labor plus 10 percent of such cost. When the work is 
completed, it is determined that the total amount due is $850. 
Because the prime contract price is not more than $6,600 and under 
local law B and C acquire mechanic's liens on A's residence, the 
liens of B and C have priority over the Federal tax lien.
* * * * *
    (i) * * * (1) * * *
    (iii) After the satisfaction of a levy pursuant to section 6332(b), 
unless and until the Internal Revenue Service delivers to the insuring 
organization a notice (for example, another notice of levy, a letter, 
etc.) executed after the date of such satisfaction, that the lien 
exists.
* * * * *
    (j) Effective/applicability date. This section applies to any 
notice of Federal tax lien filed on or after the date these regulations 
are published as final regulations in the Federal Register.
    Par. 3. Section 301.6323(c)-2 is amended as follows:
    1. Paragraph (d), Example 1 through Example 5, is revised.
    2. Paragraph (e) is added.
    The revisions and addition read as follows:


Sec.  301.6323(c)-2  Protection for real property construction or 
improvement financing agreements.

* * * * *
    (d) * * *

    Example 1. A, in order to finance the construction of a dwelling 
on a lot owned by him, mortgages the property to B. The mortgage, 
executed January 4, 2006, includes an agreement that B will make 
cash disbursements to A as the construction progresses. On February 
1, 2006, in accordance with Sec.  301.6323(f)-1, a notice of lien is 
filed and recorded in the public index with respect to A's 
delinquent tax liability. A continues the construction, and B makes 
cash disbursements on June 15, 2006, and December 15, 2006. Under 
local law B's security interest arising by virtue of the 
disbursements is protected against a judgment lien arising February 
1, 2006 (the date of tax lien filing) out of an unsecured 
obligation. Because B is the holder of a security interest coming 
into existence by reason of cash disbursements made pursuant to a 
written agreement, entered into before tax lien filing, to make cash 
disbursements to finance the construction of real property, and 
because B's security interest is protected, under local law, against 
a judgment lien arising as of the time of tax lien filing out of an 
unsecured obligation, B's security interest has priority over the 
tax lien.
    Example 2. (i) C is awarded a contract for the demolition of 
several buildings. On March 3, 2004, C enters into a written 
agreement with D which provides that D will make cash disbursements 
to finance the demolition and also provides that repayment of the 
disbursements is secured by any sums due C under the contract. On 
April 1, 2004, in accordance with Sec.  301.6323(f)-1, a notice of 
lien is filed with respect to C's delinquent tax liability. With 
actual notice of the tax lien, D makes cash disbursements to C on 
August 13, September 13, and October 13, 2004. Under local law D's 
security interest in the proceeds of the contract with respect to 
the disbursements is entitled to priority over a judgment lien 
arising on April 1, 2004 (the date of tax lien filing) out of an 
unsecured obligation.
    (ii) Because D's security interest arose by reason of 
disbursements made pursuant to a written agreement, entered into 
before tax lien filing, to make cash disbursements to finance a 
contract to demolish real property, and because D's security 
interest is valid under local law against a judgment lien arising as 
of the time of tax lien filed out of an unsecured obligation, the 
tax lien is not valid with respect to D's security interest in the 
proceeds of the demolition contract.
    Example 3. Assume the same facts as in Example 2 and, in 
addition, assume that, as further security for the cash 
disbursements, the March 3, 2004, agreement also provides for a 
security interest in all of C's demolition equipment. Because the 
protection of the security interest arising from the disbursements 
made after tax lien filing under the agreement is limited under 
section 6323(c)(3) to the proceeds of the demolition contract and 
because, under the circumstances, the security interest in the 
equipment is not otherwise protected under section 6323, the tax 
lien will have priority over D's security interest in the equipment.
    Example 4. (i) On January 3, 2006, F and G enter into a written 
agreement, whereby F agrees to provide G with cash disbursements, 
seed, fertilizer, and insecticides as needed by G, in order to 
finance the raising and harvesting of a crop on a farm owned by G. 
Under the terms of the agreement F is to have a security interest in 
the crop, the farm, and all other property then owned or thereafter 
acquired by G. In accordance with Sec.  301.6323(f)-1, on January 
10, 2006, a notice of lien is filed and recorded in the public index 
with respect to G's delinquent tax liability. On March 3, 2006, with 
actual notice of the tax lien, F makes a cash disbursement of $5,000 
to G and furnishes him seed, fertilizer, and insecticides having a 
value of $10,000. Under local law F's security interest, coming into 
existence by reason of the cash disbursement and the furnishing of 
goods, has priority over a judgment lien arising January 10, 2006 
(the date of tax lien filing and recording in the public index) out 
of an unsecured obligation.
    (ii) Because F's security interest arose by reason of a 
disbursement (including the furnishing of goods) made under a 
written agreement which was entered into before tax lien filing and 
which constitutes an agreement to finance the raising or harvesting 
of a farm crop, and because F's security interest is valid under 
local law against a judgment lien arising as of the time of tax lien 
filing out of an unsecured obligation, the tax lien is not valid 
with respect to F's security interest in the crop even though a 
notice of lien was filed before the security interest arose. 
Furthermore, because the farm is property subject to the tax lien at 
the time of tax lien filing, F's security interest with respect to 
the farm also has priority over the tax lien.
    Example 5. Assume the same facts as in Example 4 and in addition 
that on October 2, 2006, G acquires several tractors to which F's 
security interest attaches under the terms of the agreement. Because 
the tractors are not property subject to the tax lien at the time of 
tax lien filing, the tax lien has priority over F's security 
interest in the tractors.

    (e) Effective/applicability date. This section applies with respect 
to any notice of Federal tax lien filed on or after the date these 
regulations are published as final regulations in the Federal Register.
    Par. 4. Section 301.6323(f)-1 is amended as follows:
    1. Paragraph (d)(2) is revised.
    2. Paragraph (f) is added.
    The revision and addition read as follows:


Sec.  301.6323(f)-1  Place for filing notice; form.

* * * * *
    (d) * * *
    (2) Form 668 defined. The term Form 668 means either a paper form 
or a form transmitted electronically, including a form transmitted by 
facsimile (fax) or electronic mail (e-mail). A Form 668 must identify 
the taxpayer, the tax liability giving rise to the lien, and the date 
the assessment arose regardless of the method used to file the notice 
of Federal tax lien.
* * * * *
    (f) Effective/applicability date. This section applies with respect 
to any notice of Federal tax lien filed on or

[[Page 20881]]

after the date these regulations are published as final regulations in 
the Federal Register.
    Par 5. Section 301.6323(g)-1 is amended as follows:
    1. Paragraphs (a)(1), (a)(4), (b)(3) Example 1, (b)(3) Example 5, 
and (c)(1) are revised.
    2. Paragraphs (a)(3), (a)(3)(i), and (a)(3)(ii) are redesignated as 
paragraphs (a)(3)(i), (a)(3)(i)(A), and (a)(3)(i)(B), respectively.
    3. The undesignated text following newly-designated paragraph 
(a)(3)(i)(B) is designated as paragraph (a)(3)(ii).
    4. Newly-designated paragraph (a)(3)(i) introductory text is 
revised.
    5. Newly-designated paragraph (a)(3)(i)(A) is revised.
    6. Newly-designated paragraph (a)(3)(ii) is revised.
    7. Paragraph (c)(2) is removed.
    8. Paragraph (c)(3) is redesignated as paragraph (c)(2) and 
revised.
    9. Paragraph (d) is added.
    The revisions and addition read as follows:


Sec.  301.6323(g)-1  Refiling of notice of tax lien.

    (a) In general--(1) Requirement to refile. In order to continue the 
effect of a notice of lien, the notice must be refiled in the place 
described in paragraph (b) of this section during the required filing 
period (described in paragraph (c) of this section). If two or more 
notices of lien are filed with respect to a particular tax assessment, 
and each notice of lien contains a certificate of release that releases 
the lien when the required refiling period ends, the failure to comply 
with the provisions of paragraphs (b)(1)(i) and (c) of this section in 
respect to one of the notices of lien releases the lien and renders 
ineffective the refiling of any other notice of lien.
* * * * *.
    (3) Effect of failure to refile. (i) If the Internal Revenue 
Service fails to refile a notice of lien in the manner described in 
paragraphs (b) and (c) of this section, the notice of lien is not 
effective, after the expiration of the required filing period, as 
against any person without regard to when the interest of the person in 
the property subject to the lien was acquired. If a notice of lien 
contains a certificate of release that releases the lien at the end of 
the required refiling period and the notice of lien is not refiled 
during this period, the lien is extinguished and the notice of lien is 
ineffective with respect to--
    (A) Property which is the subject matter of a suit, to which the 
United States is a party, commenced prior to the expiration of the 
required filing period; and
* * * * *
    (ii) However, if a notice of lien does not contain a certificate of 
release that releases the lien at the end of the required refiling 
period, the failure to refile during the required refiling period will 
not affect the existence of the lien nor the effectiveness of the 
notice with respect to property which is the subject matter of a suit 
commenced prior to the expiration of the required refiling period, or 
property which has been levied upon prior to the expiration of such 
period.
    (4) Filing of new notice. If a notice of lien is not refiled, and 
the notice of lien contains a certificate of release that automatically 
releases the lien when the required refiling period ends, the lien is 
released as of that date and is no longer in existence. The Internal 
Revenue Service must revoke the release before it can file a new notice 
of lien. This new filing must meet the requirements of section 6323(f) 
and Sec.  301.6323(f)-1 and is effective from the date on which such 
filing is made.
    (b) * * *
    (3) Examples. The following examples illustrate the provisions of 
this section:

    Example 1. A, a delinquent taxpayer, is a resident of State M 
and owns real property in State N. In accordance with Sec.  301-
6323-f(1), notices of lien are filed in States M and N. The notices 
of lien contain certificates of release that release the lien at the 
end of the required refiling period. In order to continue the effect 
of the notice of lien filed in either M or N, the IRS must refile, 
during the required refiling period, the notice of lien with the 
appropriate office in M as well as with the appropriate office in N.
* * * * *
    Example 5. D, a delinquent taxpayer, is a resident of State M 
and owns real property in States N and O. In accordance with Sec.  
301.6323(f)-1, the Internal Revenue Service files notices of lien in 
M, N, and O States. Nine years and 6 months after the date of the 
assessment shown on the notice of lien, D establishes his residence 
in P, and at that time the Internal Revenue Service receives from D 
a notification of his change in residence in accordance with the 
provisions of paragraph (b)(2) of this section. On a date which is 9 
years and 7 months after the date of the assessment shown on the 
notice of lien, the IRS properly refiles notices of lien in M, N, 
and O which refilings are sufficient to 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 because D did not notify the Internal 
Revenue Service of his change of residence to P more than 89 days 
prior to the date each of the refilings in M, N, and O was 
completed.
* * * * *
    (c) Required filing period--(1) In general. For the purpose of this 
section, except as provided in paragraph (c)(2) of this section, the 
term required filing period means--
    (i) The 1-year period ending 30 days after the expiration of 10 
years after the date of the assessment of the tax; and
    (ii) The 1-year period ending with the expiration of 10 years after 
the close of the preceding required refiling period for such notice of 
lien.
    (2) Examples. The following examples illustrate the provisions of 
this paragraph:

    Example 1. On March 10, 1998, 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 10, 1998, in accordance with 
Sec.  301.6323(f)-1, a notice of lien is filed. The notice of lien 
filed on July 10, 1998, is effective through April 9, 2008. The 
first required refiling period for the notice of lien begins on 
April 10, 2007, and ends on April 9, 2008. A refiling of the notice 
of lien during that period will extend the effectiveness of the 
notice of lien filed on July 10, 1998, through April 9, 2018. The 
second required refiling period for the notice of lien begins on 
April 10, 2017, and ends on April 9, 2018.
    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 (April 10, 2007, through April 9, 
2008). A notice of lien is filed on June 9, 2009, in accordance with 
Sec.  301.6323(f)-1. This notice is ineffective if the original 
notice contained a certificate of release, as the certificate of 
release would have had the effect of extinguishing the lien as of 
April 10, 2008. The Internal Revenue Service could revoke the 
release and file a new notice of lien, which would be effective as 
of the date it was filed.

    (d) Effective/applicability date. This section applies with respect 
to any notice of Federal tax lien filed on or after the date these 
regulations are published as final regulations in the Federal Register.
    Par. 6. Section 301.6323(h)-1 is amended as follows:
    1. Paragraphs (a)(2)(ii) and (a)(3) are revised.
    2. A new paragraph (h) is added.
    The revisions and addition read as follows:


Sec.  301.6323(h)-1  Definitions.

    (a) * * *
    (2) * * *
    (ii) The following example illustrates the application of paragraph 
(a)(2):

    Example. (i) Under the law of State X, a security interest in 
certificated securities, negotiable documents, or instruments may be 
perfected, and hence protected against a judgment lien, by filing or 
by the secured party taking possession of the collateral. However, a 
security interest in such intangible personal property is considered 
to be temporarily perfected for a period of 20 days from the time 
the security interest

[[Page 20882]]

attaches, to the extent that it arises for new value given under an 
authenticated security agreement. Under the law of X, a security 
interest attaches to such collateral when there is an agreement 
between the creditor and debtor that the interest attaches, the 
debtor has rights in the property, and consideration is given by the 
creditor. Under the law of X, in the case of temporary perfection, 
the security interest in such property is protected during the 20-
day period against a judgment lien arising, after the security 
interest attaches, out of an unsecured obligation. Upon expiration 
of the 20-day period, the holder of the security interest must 
perfect its security interest under local law.
    (ii) Because the security interest is perfected during the 20-
day period against a subsequent judgment lien arising out of an 
unsecured obligation, and because filing or the taking of possession 
before the conclusion of the period of temporary perfection is not 
considered, for purposes of paragraph (a)(2)(i) of this section, to 
be a requisite action which relates back to the beginning of such 
period, the requirements of this paragraph are satisfied. Because 
filing or taking possession is a condition precedent to continued 
perfection, filing or taking possession of the collateral is a 
requisite action to establish such priority after expiration of the 
period of temporary perfection. If there is a lapse of perfection 
for failure to take possession, the determination of when the 
security interest exists (for purposes of protection against the tax 
lien) is made without regard to the period of temporary perfection.

    (3) Money or money's worth. For purposes of this paragraph, the 
term money or money's worth includes money, a security (as defined in 
paragraph (d) of this section), tangible or intangible property, 
services, and other consideration reducible to a money value. Money or 
money's worth also includes any consideration which otherwise would 
constitute money or money's worth under the preceding sentence which 
was parted with before the security interest would otherwise exist if, 
under local law, past consideration is sufficient to support an 
agreement giving rise to a security interest. A firm commitment to part 
with money, a security, tangible or intangible property, services, or 
other consideration reducible to a money value does not, in itself, 
constitute a consideration in money or money's worth. A relinquishing 
or promised relinquishment of dower, curtesy, or of a statutory estate 
created in lieu of dower or curtesy, or of other marital rights is not 
a consideration in money or money's worth. Nor is love and affection, 
promise of marriage, or any other consideration not reducible to a 
money value a consideration in money or money's worth.
* * * * *
    (h) Effective/applicability date. This section applies as of the 
date these regulations are published as final regulations in the 
Federal Register.

Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
 [FR Doc. E8-8082 Filed 4-16-08; 8:45 am]
BILLING CODE 4830-01-P