26 U.S.C. § 7425 — Discharge of liens
submitted 60 years ago by Pub. L. 89-719 to r/title-26-INTERNAL-REVENUE-CODE · 1,104 words · no verdicts yet
This section states how judicial and nonjudicial sales affect federal tax liens and titles when the United States is not a party or is not properly notified. It also gives the United States notice, claim, and redemption rights and explains how redemption is recorded.
(a) Judicial proceedings. If the United States is not joined, a judgment or judicial sale described in section 2410(a) of title 28 involving property subject to a federal tax lien: (1) remains subject to and does not disturb the lien if notice was properly filed when the case began; or (2) affects discharge or removal of the lien according to local law if notice was not filed then, or local law provides no filing method. If a sale discharges the lien, the United States may claim the sale proceeds, excluding costs, with the lien’s priority any time before distribution is ordered.
(b) Other sales. Despite subsection (a), a sale under a lien-creating instrument, a confession of judgment secured by that instrument, or a statutory nonjudicial lien sale remains subject to the federal lien or title if notice was filed or title recorded more than 30 days before sale and the United States did not receive subsection (c)(1) notice. Otherwise, the sale has the effect local law provides if (A) notice was not filed or recorded more than 30 days before sale, (B) law provides no filing method, or (C) the United States received subsection (c)(1) notice.
(c) Special rules. (1) Notice of sale. Written notice, by registered or certified mail or personal service, must be given to the Secretary* at least 25 days before a subsection (b) sale, in the manner set by regulations. (2) Consent. A sale discharges or removes the federal lien or title if the United States consents to a sale free of it. (3) Perishable goods. A sale of property that may perish, sharply lose value, or cost greatly to keep discharges or removes the lien or title if the Secretary receives written notice, in the regulatory manner, before sale. The proceeds, excluding costs, must be held for at least 30 days after sale for United States liens and claims, with the same priority they had against the property. (4) A land-sales-contract forfeiture counts as a sale.
(d) Redemption by United States. (1) For a real-property sale under subsection (b) satisfying a lien senior to the United States lien, the Secretary may redeem within 120 days after sale or the longer local-law period. (2) The payment is the amount specified in section 2410(d) of title 28. (3)(A) The Secretary must seek locally designated redemption documents and documents putting title in the United States’ name. If none is designated or the officer fails to issue them, the Secretary must execute a certificate of redemption. (B) The Secretary must promptly record the documents or certificate in the proper deed registry. If the State has no designated office, the certificate must be filed with the clerk of the United States district court for the district where the property is located. (C) The Secretary’s recorded certificate is initial evidence that redemption was regular and transfers to the United States all rights and title acquired by the person from whom the United States redeemed the property.
If the United States is not joined as a party, a judgment in any civil action or suit described in subsection (a) of section 2410 of title 28 of the United States Code, or a judicial sale pursuant to such a judgment, with respect to property on which the United States has or claims a lien under the provisions of this title—
shall be made subject to and without disturbing the lien of the United States, if notice of such lien has been filed in the place provided by law for such filing at the time such action or suit is commenced, or
shall have the same effect with respect to the discharge or divestment of such lien of the United States as may be provided with respect to such matters by the local law of the place where such property is situated, if no notice of such lien has been filed in the place provided by law for such filing at the time such action or suit is commenced or if the law makes no provision for such filing.
If a judicial sale of property pursuant to a judgment in any civil action or suit to which the United States is not a party discharges a lien of the United States arising under the provisions of this title, the United States may claim, with the same priority as its lien had against the property sold, the proceeds (exclusive of costs) of such sale at any time before the distribution of such proceeds is ordered.
Notwithstanding subsection (a) a sale of property on which the United States has or claims a lien, or a title derived from enforcement of a lien, under the provisions of this title, made pursuant to an instrument creating a lien on such property, pursuant to a confession of judgment on the obligation secured by such an instrument, or pursuant to a nonjudicial sale under a statutory lien on such property—
shall, except as otherwise provided, be made subject to and without disturbing such lien or title, if notice of such lien was filed or such title recorded in the place provided by law for such filing or recording more than 30 days before such sale and the United States is not given notice of such sale in the manner prescribed in subsection (c)(1); or
shall have the same effect with respect to the discharge or divestment of such lien or such title of the United States, as may be provided with respect to such matters by the local law of the place where such property is situated, if—
notice of such lien or such title was not filed or recorded in the place provided by law for such filing more than 30 days before such sale,
the law makes no provision for such filing, or
notice of such sale is given in the manner prescribed in subsection (c)(1).
Notice of a sale to which subsection (b) applies shall be given (in accordance with regulations prescribed by the Secretary*) in writing, by registered or certified mail or by personal service, not less than 25 days prior to such sale, to the Secretary.
Notwithstanding the notice requirement of subsection (b)(2)(C), a sale described in subsection (b) of property shall discharge or divest such property of the lien or title of the United States if the United States consents to the sale of such property free of such lien or title.
Notwithstanding the notice requirement of subsection (b)(2)(C), a sale described in subsection (b) of property liable to perish or become greatly reduced in price or value by keeping, or which cannot be kept without great expense, shall discharge or divest such property of the lien or title of the United States if notice of such sale is given (in accordance with regulations prescribed by the Secretary) in writing, by registered or certified mail or by personal service, to the Secretary before such sale. The proceeds (exclusive of costs) of such sale shall be held as a fund* subject to the liens and claims of the United States, in the same manner and with the same priority as such liens and claims had with respect to the property sold, for not less than 30 days after the date of such sale.
For purposes of subsection (b), a sale of property includes any forfeiture of a land sales contract.
In the case of a sale of real property* to which subsection (b) applies to satisfy a lien prior to that of the United States, the Secretary may redeem such property within the period of 120 days from the date of such sale or the period allowable for redemption under local law, whichever is longer.
In any case in which the United States redeems real property pursuant to paragraph (1), the amount to be paid for such property shall be the amount prescribed by subsection (d) of section 2410 of title 28 of the United States Code.
In any case in which real property is redeemed by the United States pursuant to this subsection, the Secretary shall apply to the officer designated by local law, if any, for the documents necessary to evidence the fact of redemption and to record title to such property in the name of the United States. If no such officer is designated by local law or if such officer fails to issue such documents, the Secretary shall execute a certificate of redemption therefor.
The Secretary shall, without delay, cause such documents or certificate to be duly recorded in the proper registry of deeds. If the State in which the real property redeemed by the United States is situated has not by law designated an office in which such certificate may be recorded, the Secretary shall file such certificate in the office of the clerk of the United States district court for the judicial district in which such property is situated.
A certificate of redemption executed by the Secretary shall constitute prima facie evidence of the regularity of such redemption and shall, when recorded, transfer to the United States all the rights, title, and interest in and to such property acquired by the person from whom the United States redeems such property by virtue of the sale of such property.
Source credit: (Added Pub. L. 89–719, title I, § 109, Nov. 2, 1966, 80 Stat. 1141; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 99–514, title XV, § 1572(a), Oct. 22, 1986, 100 Stat. 2765.)
- 1966Enacted · Pub. L. 89-719 · 80 Stat. 1141
- 1976Amended · Pub. L. 94-455 · 90 Stat. 1834
- 1986Amended · Pub. L. 99-514 · 100 Stat. 2765
A history note hasn’t been published yet. The record shows enactment by Pub. L. 89-719 on 1966-11-02.
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