II. General explanation-Continued D. Seizure of property for collection of taxes-Continued (7) Redemption of property by taxpayers (sec. 6337(b) (8) Preparation of deed (sec. 6338(c) of the code) – (10) Application of proceeds of levy and sale (sec. 6342 20 (11) Return of property after wrongful levy (sec. 6343 of E. Liability of lenders, etc., for withholding tax (sec. 105 of the (1) Liability where payments are made, or supplied, by 21 (a) Liability where direct payments are made_ (c) Effect of payment by lenders, etc (2) Bonds on public works contracts (sec. 1 of the Miller F. Suspension of running of period of limitation (sec. 106 of the (1) Assets of estate of a decedent or of an incompetent (sec. 6503(b) of the code) ... ... ... (2) Period taxpayers are outside the country (sec. 6503(c) (3) Property of third persons wrongfully held by the G. Proceedings where United States has title to property (sec. 107 (1) Action to quiet title (sec. 7402(e) of the code). II. Intervention by the United States (sec. 108 of the bill and I. Discharge of liens held by United States (sec. 109 of the bill (1) Plenary foreclosure actions (sec. 7425(a) of the code). (3) Special rules (sec. 7425(c) of the code). (4) Redemption by the United States (sec. 7425(d) of J. Civil actions by persons other than taxpayers (sec. 110 of the (1) Actions permitted (see. 7426(a) of the code) K. Sale of property acquired by United States (sec. 111 of the L. Fund for redemption of real property by United States (sec. M. Effect of judgment on tax lien and levy (sec. 113 of the bill N. Consent of United States to be joined in certain proceedings O. Jurisdiction and venue in certain cases against United States Section 1 of the bill, short title, etc. Title I-Priority and effect of tax liens and levies.. Section 102. Special liens for estate and gift taxes_ Section 104. Seizure of property for collection of taxes. Section 105. Liability for withheld taxes. Section 106. Suspension of running of period of limitation _ _ Section 107. Proceedings where United States has title to property. Section 108. Intervention by United States.. Section 109. Discharge of liens held by United States. Section 110. Proceedings by third parties against the United States. Section 111. Sale of property acquired by United States.. Section 112. Fund for redemption of real property by United States. OCTOBER 11, 1966.-Ordered to be printed (Reported, under authority of the order of the Senate of, October 11, 1966) Mr. LONG of Louisiana, from the Committee on Finance, submitted the following REPORT [To accompany H.R. 11256] The Committee on Finance, to which was referred the bill (H.R. 11256) to amend the Internal Revenue Code of 1954 with respect to the priority and effect of Federal tax liens and levies, and for other purposes, having considered the same, reports favorably thereon with amendments and recommends that the bill as amended do pass. I. GENERAL STATEMENT The bill as reported by your Committee makes one amendment to the bill as passed by the House. This amendment is with respect to the place of filing (and of refiling, discussed in A.6 and A.7 below) notice of a tax lien. The Federal Tax Lien bill of 1966 represents the first comprehensive revision and modernization of the provisions of the internal revenue laws concerned with the relationship of Federal tax liens to the interests of other creditors. Since the adoption of the Federal income tax in 1913, the nature of commercial financial transactions has changed appreciably. Business practices have been substantially revised and, as a result, many new types of secured transactions have been developed. In an attempt to take into account these changed commercial transactions, and to secure greater uniformity among the several States, a Uniform Commercial Code was promulgated somewhat over 10 years ago by the American Law Institute and the National Conference of Commissioners on Uniform State Laws. A revised version of this code is already law in over 40 States and could well be adopted by many of the remaining States in the near future. Under the Commercial Code, priority now is afforded new types of commercial secured creditors not previously protected. This bill is in part an attempt to conform the lien provisions of the internal revenue laws to the concepts developed in this Uniform Commercial Code. It represents an effort to adjust the provisions in the internal revenue laws relating to the collection of taxes of delinquent persons to the more recent developments in commercial practice (permitted and protected under State law) and to deal with a multitude of technical problems which have arisen over the past 50 years. The bill represents the culmination of a project initiated approximately 10 years ago by those concerned with the relationship of the tax lien provisions to the interests of other creditors. Since that time, the suggestions and ideas of various groups have been studied and analyzed carefully, both by the groups themselves and by the staffs of the Treasury Department and the congressional committees. Under present law, a lien for Federal taxes arises when a taxpayer's liability is assessed. The lien attaches to all of the property he then holds or subsequently acquires. The assessment is made when the unpaid tax liability is entered on the appropriate records of the Internal Revenue Service-which occurs, in the case of a taxpayer who voluntarily shows the tax liability on his return, shortly after the time the return is filed. Although the lien arises on the date of assessment, present law provides that purchasers and certain categories of secured creditors are given priority over the tax lien up to the time a notice of the tax lien is filed in the appropriate local office as designated by State law. Mortgagees, pledgees, purchasers, and judgment lien creditors are given this priority status. In addition, in the case of securities and motor vehicles, present law provides that even a filed Federal tax lien is not generally to be effective as against a purchaser or a mortgagee or pledgee of securities or a purchaser of motor vehicles. This bill substantially improves the status of private secured creditors. This is accomplished, first, by expanding the categories of creditors protected as against a nonfiled tax lien to include a mechanic's lienor. Second, various types of secured creditor interests already having. or given, priority status over tax liens are specifically defined, and it is provided that where those interests qualify under the definitions they are to be accorded this priority status whether or not they are in all other respects definite and complete at the time notice of the tax lien is filed. Third, the bill adds to the "superpriority" status accorded to certain interests in securities and motor vehicles an additional eight categories of interests in properties which are to be effective as against a tax lien, even though notice of the lien has been filed. Fourth, a priority status is provided for interests arising under three types of financing agreements entered into before the tax lien filingcommercial transactions financing, real property construction or improvement financing, and obligatory disbursements-even though the funds are advanced or the property comes into existence after the tax lien filing. In the case of commercial transactions financing, the protection generally is afforded even though the property underlying the lien is not yet in existence or is turned over within a short time (45 days) after the tax lien filing as long as the loan or purchase is made within this time. In the absence of this grace period, commercial factors and other lenders would have to check on a daily basis to see if a tax lien is filed to protect their interests. Interests arising under |