Successor entity may be liable for a taxpayer's unpaid taxes and liens

Plain-English summary

Chief Counsel addressed collection due process notice rights for an entity deemed to be a mere continuation of another taxpayer. The successor is liable for the taxpayer's unpaid taxes, and assessments and liens remain effective against the successor and its property. If the IRS already issued notices under IRC §§ 6320 or 6330 to the taxpayer for a period, it need not issue the same notices to the successor. The IRS should, however, file a notice of federal tax lien identifying the entity as the taxpayer's successor so third parties receive notice of the lien.

Ruling snapshot

• Question: Must the IRS issue a new section 6320 notice to a successor entity that is a mere continuation of the taxpayer?
• Outcome: Advice given. Existing notices to the taxpayer are effective against the successor, but the lien notice should identify the successor relationship.
• Key authorities: IRC §§ 6320, 6330; Today’s Child Learning Ctr., 40 F. Supp. 2d 268; United States v. Galletti, 541 U.S. 114; Ballard v. United States, 17 F.3d 116; Underwood v. United States, 118 F.2d 760; Young v. U.S. I.R.S., Dep't. of Treasury, 387 F. Supp. 2d 143

Full text (IRS public release)

ID: CCA_2013082910472260 [Third Party Communication:

UILC: 6320.00-00 Date of Communication: Month DD, YYYY]

Number: 201343022
Release Date: 10/25/2013
From: ---------------------------
Sent: Thursday, August 29, 2013 10:47:22 AM
To: -----------------------
Cc:
Bcc:
Subject: CDP Rights for Successor Entity

When an entity is deemed to be a mere continuation of a taxpayer, the successor entity
is liable for the unpaid taxes of the taxpayer. See, e.g., Today’s Child Learning Ctr., 40
F. Supp. 2d 268, 273 (E.D. Pa. 1998). The assessment against the taxpayer and the
tax liens based on those assessments are valid against the successor entity. Cf. United
States v. Galletti, 541 U.S. 114, 123 (2004) (holding that the assessments attach to
the tax debt without reference to the special circumstances of the secondarily liable
parties). The assessment lien attaches to the successor’s property and the Service may levy on
such property to collect the taxpayer’s liability. Cf. Ballard v. United States, 17 F.3d 116
(5th Cir. 1994); Underwood v. United States, 118 F.2d 760, 761 (5th Cir. 1941). If the
Service has previously issued notices under IRC §§ 6320 and 6330 to the taxpayer for a
particular tax period, the Service is not required to issue these notices to the successor
entity. Notice to the taxpayer under section 6320 or 6330 is effective as to the
taxpayer’s successor when the successor is a mere continuation. Cf. Young v. U.S.
I.R.S., Dep’t. of Treasury, 387 F. Supp. 2d 143, 145 (E.D. N.Y. 2005).

In order to put third parties on notice of the assessment lien attached to the property of
the successor entity, we agree with your recommendation that the Service should file a
notice of federal tax lien that specifically identifies the entity as a successor of the
taxpayer. A section 6320 notice, however, does not need to be given to the successor
entity for the tax periods listed on the notice of federal tax lien if a section 6320 notice
has already been given to the taxpayer for the same periods.

If you have additional questions or concerns, feel free to contact me.

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