[Federal Register Volume 64, Number 125 (Wednesday, June 30, 1999)]
[Proposed Rules]
[Pages 35102-35105]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16164]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[REG-101519-97]
RIN 1545-AV00
Withdrawal of Notice of Federal Tax Lien in Certain Circumstances
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document contains proposed regulations relating to the
withdrawal of notices of federal tax liens in certain circumstances.
The proposed regulations reflect changes made to section 6323 of the
Internal Revenue Code of 1986 by the Taxpayer Bill of Rights 2. The
proposed regulations affect all taxpayers seeking withdrawals of
notices of federal tax liens.
DATES: Written comments and requests for a public hearing must be
received by September 28, 1999.
ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-101519-97), room
5228, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand delivered to:
CC:DOM:CORP:R (REG-101519-97), room 5228, Internal Revenue Service,
1111 Constitution Avenue NW., Washington, DC. Alternatively, taxpayers
may submit comments electronically via the Internet by selecting the
``Tax Regs'' option on the IRS Home Page, or by submitting comments
directly to the IRS Internet site at http://www.irs.ustreas.gov/prod/
tax__regslist.html.
FOR FURTHER INFORMATION CONTACT: Kevin B. Connelly, (202) 622-3640 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed amendments to the Procedure and
Administration Regulations (26 CFR part 301) relating to the withdrawal
of notices of federal tax liens under section 6323 of the Internal
Revenue Code (Code). Section 501(a) of the Taxpayer Bill of Rights 2
(TBOR2), Public Law 104-168, 110 Stat. 1452 (1996), amended section
6323 to authorize the Secretary to withdraw a notice of federal tax
lien in certain limited circumstances. Section 501(a) also requires the
Secretary to notify credit reporting agencies, financial institutions
and creditors of the withdrawal upon the written request of the
taxpayer. These proposed regulations reflect the amendments made by
Section 501(a) of TBOR2.
Explanation of Provisions
Section 501(a) of TBOR2 amended section 6323 of the Code by
authorizing the Secretary to withdraw a notice of federal tax lien
under certain conditions and providing that upon written request of the
taxpayer the Secretary will notify any credit reporting agency and any
financial institution or creditor identified by the taxpayer. These
proposed regulations implement section 501(a).
The proposed regulations provide that a district director, the
director of a service center or the Assistant Commissioner
(International) (the relevant person being referred to as ``the
director'') may withdraw a notice of federal tax lien if the director
determines that one of the conditions enumerated in paragraph (b) of
the regulations exists. The notice of federal tax lien is withdrawn by
filing a notice of withdrawal in the office in which the notice of
federal tax lien is filed and providing the taxpayer with a copy of the
notice. Following the withdrawal of a notice of federal tax lien,
chapter 64 of subtitle F, relating to collection, is applied as if the
IRS had never filed a notice of federal tax lien. The withdrawal of a
notice of federal tax lien does not affect the underlying tax lien. The
withdrawal simply relinquishes any lien priority the IRS had obtained
under section 6323 of the Code when the IRS filed the notice being
withdrawn.
The proposed regulations provide that the director has the
authority to
[[Page 35103]]
withdraw a notice of federal tax lien if one of the following
conditions exists: (1) The filing of the notice of federal tax lien was
premature or otherwise not in accordance with the administrative
procedures of the Secretary; (2) the taxpayer has entered into an
agreement under section 6159 to satisfy the liability for which the
lien was imposed by means of installment payments, unless the agreement
by its terms provides that the notice will not be withdrawn; (3) the
withdrawal of notice will facilitate collection of the tax liability
for which the lien was imposed; or (4) the withdrawal of notice would
be in the best interest of the taxpayer, as determined by the National
Taxpayer Advocate, and in the best interest of the United States, as
determined by the director.
The fourth ground for withdrawal (i.e., withdrawal based on the
best interests of the parties) requires that the withdrawal be in the
best interests of both the United States and the taxpayer. Therefore,
two distinct determinations must be made before a director may withdraw
a notice of federal tax lien based on the best interests of the
parties. Under the proposed regulations the director alone will
determine whether the withdrawal of a notice of federal tax lien is in
the United States' best interest. The National Taxpayer Advocate
generally will determine whether the withdrawal of a notice is in the
taxpayer's best interest; however, if a taxpayer requests the director
to withdraw a notice and has not requested the National Taxpayer
Advocate to determine the taxpayer's best interest, a finding by the
director that the withdrawal is in the taxpayer's, as well as the
United States', best interest will be sufficient to support the
withdrawal of notice. The director is not authorized to determine that
the withdrawal of a notice is not in the taxpayer's best interest. Only
the National Taxpayer Advocate is authorized to make that
determination.
The proposed regulations provide that a person may request the
withdrawal of a notice of federal tax lien by writing to the director
(marked for the attention of the Chief, Special Procedures Function) of
the district in which the notice is filed. A written request for
withdrawal must include: (1) The name, current address, and taxpayer
identification number of the person requesting withdrawal of the notice
of federal tax lien; (2) a copy of the notice of federal tax lien
affecting the property, if available; (3) the grounds upon which the
withdrawal of notice of federal tax lien is being requested; (4) a list
of the names and addresses of any credit reporting agency and any
financial institution or creditor that the taxpayer wishes the director
to notify of the withdrawal of notice of federal tax lien; and (5) a
request to disclose information relating to the withdrawal to the
persons or entities listed.
The director must consider each taxpayer's request for withdrawal
of notice of federal tax lien and determine whether any of the
conditions authorizing withdrawal exists and whether to issue a
withdrawal. The director also may issue a notice of withdrawal based on
information received from a source other than the taxpayer.
If the director grants a withdrawal of notice of federal tax lien,
the taxpayer may supplement the list of credit reporting agencies and
financial institutions or creditors provided with the request for
withdrawal. If no list was submitted with the request to withdraw, a
list may be submitted after the notice is withdrawn. A request to
supplement the list must be sent in writing to the director (marked for
the attention of the Chief, Special Procedures Function) of the
district in which the notice of federal tax lien is filed. The request
must contain: (1) The name, current address, and taxpayer
identification number of the person requesting the notification; (2) a
copy of the notice of withdrawal; (3) the names and addresses of the
persons or entities the taxpayer wishes the IRS to contact; and (4) a
request to disclose the withdrawal to the persons or entities listed.
The regulations will be effective when the final regulations are
published in the Federal Register with respect to withdrawals of any
notice of federal tax lien occurring after such date regardless of when
the notice was filed.
Special Analyses
It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in EO 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 the
collection of information in the regulation is exempt pursuant to 5
U.S.C. 601(7)(B), the Regulatory Flexibility Act (5 U.S.C. chapter 6)
does not apply. Pursuant to section 7805(f) of the Internal Revenue
Code, this notice of proposed rulemaking will be submitted to the Chief
Counsel for Advocacy of the Small Business Administration for comment
on its impact on small businesses.
Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written comments that are submitted
timely (preferably a signed original and eight (8) copies) to the IRS.
Alternatively, taxpayers may submit comments electronically via the
Internet by selecting the ``Tax Regs'' option on the IRS Home Page, or
by submitting comments directly to the IRS Internet site at http://
www.irs.ustreas.gov/prod/tax__ regslist.html. All comments will be
available for public inspection and copying. The IRS and Treasury
Department specifically request comments on the clarity of the proposed
rule and how it may be made easier to understand. A public hearing may
be scheduled if requested in writing by a person that timely submits
written comments. If a public hearing is scheduled, notice of the date,
time, and place for the hearing will be published in the Federal
Register.
Drafting Information
The principal author of these regulations is Kevin B. Connelly,
Office of Assistant Chief Counsel (General Litigation) CC:EL:GL, IRS.
However, other personnel from the IRS and Treasury Department
participated in their development.
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, the IRS proposes to amend 26 CFR part 301 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(j)-1 is added to read as follows:
Sec. 301.6323(j)-1 Withdrawal of notice of federal tax lien in certain
circumstances.
(a) In general. A district director, the Assistant Commissioner
(International), or the director of a service center (collectively the
director) may withdraw a notice of federal tax lien filed under this
section, if the director determines that any of the conditions in
paragraph (b) of this section exist. A notice of federal tax lien is
withdrawn by the
[[Page 35104]]
director filing a notice of withdrawal in the office in which the
notice of federal tax lien is filed. If a notice of withdrawal is
filed, chapter 64 of subtitle F, relating to collection, will be
applied as if the withdrawn notice had never been filed. A copy of the
notice of withdrawal will be provided to the taxpayer. Upon written
request by a taxpayer with respect to whom a notice of federal tax lien
has been or will be withdrawn, the director will promptly make
reasonable efforts to notify any credit reporting agency and any
financial institution or creditor identified by the taxpayer of the
withdrawal of such notice. The withdrawal of a notice of federal tax
lien will not affect the underlying federal tax lien.
(b) Conditions authorizing withdrawal. The director may authorize
the withdrawal of a notice of federal tax lien upon determining that
one of the following conditions exists:
(1) Premature or not in accordance with administrative procedures.
The filing of the notice of federal tax lien was premature or otherwise
not in accordance with the administrative procedures of the Secretary.
(2) Installment agreement. The taxpayer has entered into an
agreement under section 6159 to satisfy the liability for which the
lien was imposed by means of installment payments. If, however, the
agreement specifically provides that a notice of federal tax lien will
not be withdrawn, the director may not grant a request for withdrawal
of that notice of federal tax lien under this paragraph (b)(2).
(3) Facilitate collection. The withdrawal of the notice of federal
tax lien will facilitate the collection of the tax liability for which
the lien was imposed.
(4) Best interests of the United States and the taxpayer--(i) In
general. The taxpayer or the National Taxpayer Advocate has consented
to the withdrawal of the notice of federal tax lien, and withdrawal of
the notice would be in the best interest of the taxpayer, as determined
by the National Taxpayer Advocate, and the United States, as determined
by the director.
(ii) Best interest of the taxpayer. The National Taxpayer Advocate
generally will determine whether the withdrawal of a notice of federal
tax lien is in the best interest of the taxpayer. If, however, a
taxpayer requests the director to withdraw a notice and has not
specifically requested the National Taxpayer Advocate to determine the
taxpayer's best interest, a finding by the director that the withdrawal
of notice is in the best interest of the taxpayer will be sufficient to
support withdrawal.
(5) Examples. The following examples illustrate the provisions of
this paragraph (b):
Example 1. A is an employee of X Corporation. A notice of
federal tax lien has been filed to secure an outstanding tax
liability against A. A, who has no assets and no other secured
creditors, has agreed to pay the balance of tax due through payroll
deductions at a rate higher than the Internal Revenue Service could
obtain through a wage levy in order to get the notice of federal tax
lien withdrawn. X Corporation has agreed to allow A to enter into a
payroll deduction agreement. In this situation, the director may
withdraw the notice of federal tax lien to facilitate collection.
Example 2. A owes $1,000 in federal income taxes. A enters into
an agreement to pay the outstanding federal income tax liability in
installments. The agreement provides that a notice of federal tax
lien may be filed if the taxpayer defaults. A timely pays the
installments each month and has not defaulted in any way. Eleven
months after entering into the installment agreement, the Internal
Revenue Service files a notice of federal tax lien. Noting that
there has been no default, the taxpayer asks the Internal Revenue
Service to withdraw the notice of federal tax lien. In this
situation, the director may withdraw the notice of federal tax lien
because the taxpayer has entered into an installment agreement that
does not prohibit the withdrawal of the notice.
Example 3. A is the owner of a farm machinery dealership against
whom a notice of federal tax lien has been filed to secure an
outstanding tax liability. A currently is paying the tax liability
by an installment agreement that prohibits the withdrawal of the
notice of federal tax lien. X Corporation has agreed to provide A
with 100 tractors to increase A's inventory if the notice of federal
tax lien is withdrawn. A asks the Internal Revenue Service to
withdraw the notice of federal tax lien. The director determines
that the withdrawal of the notice of federal tax lien is in the best
interest of the United States because it would enable A to generate
additional tractor sales, and increased sales would enable A to
increase the amount of his installment payments as well as reduce
the amount of time needed to satisfy the liability. A, who has no
other assets or secured creditors, has agreed to modify his
installment agreement. If the National Taxpayer Advocate (or the
director in lieu of the National Taxpayer Advocate) determines that
the withdrawal is in the best interests of the taxpayer, the
director may withdraw the notice of federal tax lien because
withdrawal is in the best interest of the taxpayer and the United
States. Alternatively, the director may withdraw the notice of
federal tax lien to facilitate collection.
(c) Determinations by the director. The director must determine
whether any of the conditions authorizing the withdrawal of a notice of
federal tax lien exist if a taxpayer submits a request for withdrawal
in accordance with paragraph (d) of this section. The director also may
make this determination based on information received from a source
other than the taxpayer. If the director determines that conditions
authorizing the withdrawal are not present, the director may not
authorize the withdrawal. If the director determines conditions for
withdrawal are present, the director may (but is not required to)
authorize the withdrawal. If the basis for the withdrawal is the best
interests of the taxpayer and the Internal Revenue Service, the
taxpayer or the National Taxpayer Advocate must consent to the
withdrawal.
(d) Procedures for request for withdrawal--(1) Manner. A request
for the withdrawal of a notice of federal tax lien must be made in
writing to the director (marked for the attention of the Chief, Special
Procedures Function) of the district in which the notice of federal tax
lien is filed.
(2) Form. The written request will include the following
information and documents--
(i) Name, current address, and taxpayer identification number of
the person requesting the withdrawal of notice of federal tax lien;
(ii) A copy of the notice of federal tax lien affecting the
taxpayer's property, if available;
(iii) The grounds upon which the withdrawal of notice of federal
tax lien is being requested;
(iv) A list of the names and addresses of any credit reporting
agency and any financial institution or creditor that the taxpayer
wishes the director to notify of the withdrawal of notice of federal
tax lien; and
(v) A request to disclose the withdrawal of notice of federal tax
lien to the persons listed in paragraph (d)(2)(iv) of this section.
(e) Supplemental list of credit agencies, financial institutions,
and creditors--(1) In general. If the director grants a withdrawal of
notice of federal tax lien, the taxpayer may supplement the list in
paragraph (d)(2)(iv) of this section. If no list was provided in the
request to withdraw the notice of federal tax lien, the list in
paragraph (d)(2)(iv) of this section and the request for notification
in paragraph (d)(2)(v) of this section may be submitted after the
notice is withdrawn
(2) Manner. A request to supplement the list of any credit agencies
and any financial institutions or creditors that the taxpayer wishes
the director to notify of the withdrawal of notice of federal tax lien
must be sent in writing to the director (marked for the attention of
the Chief, Special Procedures
[[Page 35105]]
Function) of the district in which the notice of federal tax lien is
filed.
(3) Form. The request must include the following information and
documents--
(i) Name, current address, and taxpayer identification number of
the taxpayer requesting the notification of any credit agency or any
financial institution or creditor of the withdrawal of notice of
federal tax lien;
(ii) A copy of the notice of withdrawal, if available;
(iii) A supplemental list, identified as such, of the names and
addresses of any credit reporting agency and any financial institution
or creditor that the taxpayer wishes the director to notify of the
withdrawal of notice of federal tax lien; and
(iv) A request to disclose the withdrawal of notice of federal tax
lien to the persons listed in paragraph (e)(3)(iii) of this section.
(f) Effective date. This section is effective on or after the date
final regulations are published in the Federal Register with respect to
a withdrawal of any notice of federal tax lien.
Michael P. Dolan,
Deputy Commissioner of Internal Revenue.
[FR Doc. 99-16164 Filed 6-29-99; 8:45 am]
BILLING CODE 4830-01-U
