CCA 1138037: NFTL caption may identify a person as transferee, alter ego, and nominee

Plain-English summary

Chief Counsel Advice considered whether a Texas Notice of Federal Tax Lien could identify an entity or person as the nominee, alter ego, and/or transferee of another entity or person when the facts supported a nominee-lien theory rather than transferee liability. The advice stated that using “transferee” in this context was permissible because it was being used in its ordinary meaning and as a synonym for “nominee,” with “alter ego” added as an alternative. It concluded that the wording was not legally prohibited and did not affect lien enforceability, although including “transferee” might be unnecessary. The advice also noted that some Internal Revenue Manual provisions appear to treat transferee and alter-ego or nominee theories as mutually exclusive.

Ruling snapshot

• Question: May a Notice of Federal Tax Lien use “transferee” alongside “alter ego” and “nominee” in the entity identification or caption?
• Outcome: advice given
• Key authorities: IRC § 6323; IRM §§ 5.12.2.6.4, 5.12.2.6.4.1(7), 5.12.2.6.6(2), and 5.17.14.3(2)

Full text (IRS public release)

ID: CCA_2011072017581619 Number: 201138037
Release Date: 9/23/2011
Office: -----------
UILC: 6323.01-00

From: ----------------------
Sent: Wednesday, July 20, 2011 5:58:17 PM
To: ----------------
Cc: --------------------------------------------
Subject: Your Request for Assistance

You requested an opinion on whether the practice in Texas of captioning Notices of
Federal Tax Lien (NFTL) in the following manner, “Entity/Person X, as nominee, alter
ego, and/or transferee of Entity/Person Y”, is legally permissible. You specifically
questioned the legality of including “transferee” in the entity identifications when the the
facts of the cases do not support “transferee” liability but rather a nominee lien theory.
In sum, we have no problem with captioning of the NFTL in this manner. The word
"transferee" in this context is being used as a synonym for "nominee" (and “alter ego” is
being added in the alternative). The Service is using the term "transferee" in its ordinary,
everyday meaning -- a person to whom a transfer of property is made. In other words,
not all cases involving transferees will involve transferee liability. Support for using the
every day meaning of the term "transferee" is contained in the Internal Revenue
Manual (IRM). For example, the term “transferee” is used in the discussion specific to
nominee liens. See IRM 5.12.2.6.6(2). Additionally, IRM 5.12.2.6.4 provides that not all
transferee cases are transferee liability cases. However, we note that there are IRM
provisions that suggest that “transferee” and “alter ego/nominee” are mutually exclusive
-- meaning you can have one but not the other. See IRM 5.17.14.3(2) and IRM
5.12.2.6.4.1(7). We believe these provisions may be the reason you questioned the
captioning.

In sum, while the inclusion of “transferee” in the entity identification section or caption
may not be necessary, it is not legally prohibited in the context in which it is used. The
use of “transferee” in this manner does not affect the enforceability of the liens,
regardless of whether its use is appropriate. In the entity identification section of the
NFTLs, “transferee,” “alter ego” and “nominee” is used both disjunctively and
conjunctively. Therefore, the unnecessary use of one term is of little consequence.

We coordinated this response with the ----------------------------------------------------of Chief
Counsel. If you have any questions, feel free to contact me.