Hilton, Lyle F.

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Penn State Dickinson Law: IDEAS

Volume 54 Issue 4 Dickinson Law Review - Volume 54, 1949-1950 6-1-1950 The Federal Tax Lien Index in Pennsylvania Lyle F. Hilton Follow this and additional works at: https://ideas.dickinsonlaw.psu.edu/dlra Recommended Citation Lyle F. Hilton, The Federal Tax Lien Index in Pennsylvania, 54 DICK. L. REV. 475 (1950). Available at: https://ideas.dickinsonlaw.psu.edu/dlra/vol54/iss4/9 This Article is brought to you for free and open access by the Law Reviews at Dickinson Law IDEAS. It has been accepted for inclusion in Dickinson Law Review by an authorized editor of Dickinson Law IDEAS. For more information, please contact lja10@psu.edu. NOTESTHE FEDERAL TAX LIEN INDEX IN PENNSYLVANIAMost attorneys are requested at some time or another to certify the title ofreal estate and, as part of the assignment, to search the records themselves or tosupervise the search conducted by subordinates. Probably the most esoteric phaseof such searching is that concerning the general lien which the Federal Govern-ment exerts to enforce the payment of federal taxes. This discussion is directedto the requirement and effect of filing notice of such liens, called federal taxliLns. It is important to remember that the lien here discussed does not exhaust thesubject of federal liens imposed to enforce taxation but is limited to the generallien.1The Internal Revenue Code of 1939, 53 Stat. 448, 26 U. S. C. § 3670 pro-vides as follows:"If any person liabl'e to pay any tax neglects or refuses to pay thesame after demand, the amount (including any interest, penalty, addi-tional amount, or addition to such tax, together with any costs that mayaccrue in addition thereto) shall be a lien in favor of the United Statesupon all property and rights to property, whether real or personal, belonging to such person."What are the requirements and effects of filing notice of this lien upon realestate situate in Pennsylvania?The rule from earliest times has been that the federal tax lien attaches to allreal and personal property without notice of any kind. However, certain excep-tions have become recognized and were enacted into the Internal Revenue Codeof 1939, 53 Stat. 449, as amended June 29, 1939, 53 Stat. 882, 26 U. S. C. § 3672,the pertinent portion of which provides:"Validity against mortgagees, pledgees, purchasers, and judgmentcreditors.(a) Invalidity of lien without notice. Such lien shall not be valid asagainst any mortgagee, pledgee, purchaser, or judgment creditor untilnotice thereof has been filed by the collector-(1 ) Under State or Territorial laws. In accordance with the State orTerritory in which the property subject to the lien is situated, when-ever the State or Territory as y law provided for the filing of suchnotice; ...In Maryland Casualty Co. v. Charleston Lead Works et al.,2. the court heldthat the statutory lien arising under 26 U. S. C. § 3670 attaches spontaneously."No action is required by the collector to effect the lien. No action by the collectoris referred to except such as relates to giving such notice as will be effectiveagainst mortgagees, purchasers and judgment creditors."I Board of Supervisors of La. State University et al. v, Hart, et al. 210 La. 78, 26 So.2d 361,174 A. L. R. 1366 (1946).2 24 F.2d 836 (1928).DICKINSON LAW REVIEWInasmuch as the bulk of searches are in reference to the rights of mortgagees,pledgees, purchasers, or judgment creditors, section 3672 is a very importantand helpful piece of legislation. Notice that a conditional immunity is given, butotherwise the original rule remains in full force and effect. The condition of theimmunity being that notice of lien is not filed in accord with the laws of the statein which the property is located if such state has enacted pertinent legislation,the Pennsylvania statutes must be consulted.The Act of May 1, 1929, P. L. 1215, 74 P. S. 141 et seq. entitled, "UniformFederal Tax Lien Registration Act" was passed by the Pennsylvania Legislaturefor the express purpose of providing a method of registration of federal tax liennotices in pursuance of the provisions of 26 U. S. C. § 3672.Section one of the act provides:"Notices of liens for taxes payable to the United States of America,and certificates discharging such liens, shall be filed by the collector ofinternal revenue in the office of the prothonotary of the county or coun-ties in this State within which the property subject to such lien is situ-ated."This section fulfills the requirement of authorized procedure necessary tomake operative the first provision of 26 U. S. C. § 3672. Before a federal taxlien becomes operative against a purchaser, mortgagee, pledgee, or judgmentcreditor, notice of such lien must be filed in the office of the prothonotary of thecounty or counties in which the land to which the lien attaches is located.How does the prothonotary file such notices of lien, and where will thesearcher discover such notices?The second section of the act provides:"When a notice of such tax lien is filed, the prothonotary shallforthwith enter the same in an alphabetical Federal Tax Lien Index,showing on one line the name and the residence of the taxpayer namedin such notice, the collector's serial number of such notice, the date andhour of filing, and the amount of tax, with the interest, penalties andcosts. He shall file and keep all original notices so filed, in numericalorder, in a file or files, and designated Federal tax lien notices."The writer recognizes that it is customary in some counties to index noticesof federal tax liens in the judgment index; however, there seems to be no expressauthority for so doing to the exclusion of the procedure prescribed in the Act of1929, Supra.Section three of the act provides that when a certificate of discharge of lienissued by a competent official is filed in the office of the prothonotary wherenotice of such lien is on record, the prothonotary shall so note in the index andNOTESattach such certificate to the original notice of such lien. In view of the law con-cerning the duration of federal liens,' notice of a federal lien can be safelyignored only in case such certificate of discharge is entered with such notice.In all other cases the searcher should examine the details of the lien beforeconcluding that it is inoperative as to his subject matter.The requirement of filing has been tested in Pennsylvania only as betweenmortgagee and the Federal Government. Where both claimed proceeds from thesale of property in bankruptcy proceedings, the Circuit Court of Appeals heldthat because notice of the federal tax lien had not been filed in the office of theprothonotary for the county in which the property sold was located, the federaltax lien was not enforceable against the mortgagee; and hence, the claim fortaxes was secondary to the interest of the mortgagee without notice.4 In UnitedStates v. Beaver Run Coal Co.5 the Circuit Court of Appeals held in favor of themortgagee against the Federal Government's claim where the mortgage hadbeen executed and recorded two and one-half years prior to the filing of noticeof the federal tax lien pursuant to the Act of 1929, supra.Thus it is seen that the law provides only a conditional immunity from thegeneral lien for federal taxes to the interests of mortgagees, pledgees, purchasers,and judgment creditors of land in Pennsylvania, which condition is satisfied andimmunity nullified by the filing of notice of federal tax lien in the office of theprothonotary for the county or counties in which such real estate is situated prior tothe recordation of such mortgage or notice of other transaction within the class towhich immunity extends.Lyle F. Hilton8 53 Stat. 449, 26 U. S. C. § 3671.4 Miners Say. Bank of Pittston, Pa. v. Joyce, et al., 97 F.2d 973 (C. C. A. 3rd 1938).6 99 F.2d 610 (C. C. A. 3rd 1938).

The Federal Tax Lien Index in Pennsylvania

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The Federal Tax Lien Index in Pennsylvania

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Penn State Dickinson Law: IDEAS

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