Post-lien bank advance lacks priority without statutory protection

Plain-English summary

Chief Counsel agreed that a bank disbursement made after the filing of a notice of federal tax lien was a future advance. The advance would not take priority over the federal tax lien unless it qualified under the 45-day rule or section 6323(c), and the available facts did not establish either protection. The advice accepted a proposed allocation methodology if the bank also held the stated mortgage interest and a pre-lien security interest securing its line of credit. It cautioned that a wrongful-levy return required satisfaction of section 6343(b), particularly the nine-month request deadline. It also noted that the wrongful-levy claim tolled the collection limitations period under section 6503(f), which might need to be reflected in IRS records.

Ruling snapshot

• Question: What priority and levy-release rules apply to a bank advance made after the federal tax lien notice was filed?
• Outcome: Advice given that the future advance lacked priority absent protection under section 6323, with section 6343(b) procedures and section 6503(f) tolling also relevant.
• Key authorities: IRC §§ 6323(a), 6323(c), 6323(h), 6343(b), and 6503(f).

Full text (IRS public release)

ID: CCA_2015060411105757 Third Party Communication: None

UILC: 6323.02-02, 6343.00-00 Date of Communication: Not Applicable

Number: 201526015
Release Date: 6/26/2015
From:
Sent: Thursday, June 04, 2015 11:10:58 AM
To:
Cc:
Bcc:
Subject: RE: lien priority issue

,

I agree with your conclusion regarding the -------disbursement. As a future advance (an advance made by the bank post-NFTL filing), it would not be entitled to priority unless it primes the FTL by virtue of the 45-day rule (which it does not) or 6323(c). Whether or not the bank can shoehorn into 6323(c) protection would be for them to assert and at this point I take it that you have no reason to think it might qualify.

As long as the bank has a (b)(10) interest securing the mortgage (to the extent of
--------) and also a pre-NFTL security interest (section 6323(a) & (h)) securing the line of credit, then I agree with your methodology, below (though I did not double check the math).

Accordingly, it does make sense to me. You also need to confirm that the procedural requirements of section 6343(b) have been satisfied (primarily that the request was made within 9 months of the initial date of levy).

Finally, one thing to note is that section 6503(f) provides a tolling for the CSED (regarding the taxpayer’s liability) based on this wrongful levy claim. Because there is going to be a large balance due once the wrongfully levied property is returned, you might want to think about having this tolling reflected in IDRS (IMF?). I don’t know if this happens automatically or not, but it is worth mentioning to the RO.

Well done,

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