5.12.9  Withdrawal of Notice of Federal Tax Lien

Manual Transmittal

October 14, 2013

Purpose

(1) This transmits the new IRM 5.12.9, Federal Tax Lien, Withdrawal of Notice of Federal Tax Lien.

Background

A revision of the IRM 5.12 chapter has been done to consolidate and coordinate like topics, reduce duplication of content, and provide an overview, cross-references, and contacts.

Material Changes

(1) Introduces new IRM section with title "Withdrawal of Notice of Federal Tax Lien," which identifies the content contained herein.

(2) The content of the section was taken primarily from former IRM 5.12.3 and 5.12.6 and Interim Guidance (IG) memos that have been issued. Some former sections were broken into multiple sections so guidance could be expanded.

(3) From the wording of the previous IRM sections, editorial changes made throughout and verbiage updated for form and systemic changes.

(4) The following table provides a cross walk of sections moving to IRM 5.12.9 and the nature of the changes involved.

New IRM Number Old IRM Number(s) Material Change
5.12.9.2 5.12.3.27 Added statement about special condition NFTLs.
5.12.9.3 5.12.3.27 New heading for section on conditions
5.12.9.3.1 5.12.3.28 Clarified the negative examples.
5.12.9.3.1.1 5.12.2.6.3 New subsection on Limited Liability Companies
5.12.9.3.1.2 n/a New subsection on NFTLs filed in disaster areas
5.12.9.3.2 5.12.3.29 Added clarifying statement to beginning of section.
5.12.9.3.2.1 IG SBSE-05-0613-0052 New subsection on DDIA withdrawals
5.12.9.3.3 5.12.3.30 Clarified definition of facilitating collection. Added paragraph about securing payment agreement.
5.12.9.3.4 5.12.3.31 Updated verbiage.
5.12.9.4 5.12.3.32 Expanded section to clarify information necessary for withdrawal application.
5.12.9.4.1 n/a New section on processing requests.
5.12.9.5 5.12.3.34; 5.12.6.5.3; IG SBSE-05-0613-0052 Revised to update procedures
5.12.9.6 5.12.3.34; 5.12.6.5.3; IG SBSE-05-0613-0052 Revised to update procedures
5.12.9.6.1 5.12.3.34; 5.12.6.5 New subsection on manual preparation of certificates
5.12.9.6.2 IG SBSE-05-0513-0039 New subsection on electronic signatures
5.12.9.6.3 5.12.3.34 New subsection on distribution of forms
5.12.9.6.4 5.12.3.34(7) New subsection
5.12.9.6.5 5.12.6.5.3(8) New subsection on abatement of filing fees
5.12.9.6.6 n/a New section on rescission of CDP rights.
5.12.9.7 5.12.3.36; 5.12.6.5.3.1 Revised section to provide more instruction on partial withdrawals.
5.12.9.8 5.12.3.35 Expanded section to better define denial process.
5.12.9.8.1 n/a Clarified processing of Appeals decisions.
5.12.9.9 5.12.3.37; IG SBSE-05-0613-0051 Revised instructions on withdrawal after release
5.12.9.9.1 IG SBSE-05-0613-0051 New section on processing withdrawals after release.
5.12.9.9.2 5.12.6.5.1.8 New section on handling requests for liens no longer on ALS.
5.12.9.10 5.12.3.40 No material changes.
5.12.9.11 IG SBSE-05-0113–013 New section on documentation
Exhibit 5.12.9-1 n/a New sample letter on third party notification

Effect on Other Documents

This material supersedes IRM 5.12.1, dated January 9, 2009; IRM 5.12.2 dated March 8, 2012; IRM 5.12.3 dated June 1, 2010; IRM 5.12.6 dated July 16, 2010; and Interim Guidance memos SBSE-05-0613–0051, Withdrawal of Notice of Federal Tax Lien after Release, dated June 28, 2013; SBSE-05-0613–0052, Withdrawal of Notice of Federal Tax Lien in DDIA Situations, dated June 28, 2013; SBSE-05- 0513–0039, Electronic Signatures on Lien Certificates and Associated Correspondence, dated May 16, 2013; and SBSE-05-0113–0013, Advisory Internal Revenue Manual Changes, dated January 31, 2013.

Audience

SBSE and W&I Collection, Centralized Lien Operation, and Appeals

Effective Date

(10-14-2013)

Michelle C. Alvarado
Acting Director, Collection Policy
Small Business/Self Employed Division

5.12.9.1  (10-14-2013)
Purpose

  1. The purpose of this Internal Revenue Manual (IRM) is to provide instructions on the identification, analysis, recommendations, denial, and granting of Notice of Federal Tax Lien (NFTL) withdrawals.

  2. See IRM Exhibit 5.12.1-2 for common acronyms used in this section.

  3. This IRM is for procedural use and does not provide instruction on the use of any system. Please consult User Guides as necessary.

    • Automated Lien System (ALS) User Guide: http://mysbse.web.irs.gov/Collection/collsystems/als/userguide/default.aspx

    • Integrated Collection System (ICS) User Guide: http://icsweb.web.irs.gov/Docs/HTML/user_guide.htm

5.12.9.2  (10-14-2013)
Withdrawal of the Filed Notice of Federal Tax Lien (Overview)

  1. Internal Revenue Code (IRC) § 6323(j) gives the Service the authority to withdraw a Notice of Federal Tax Lien (NFTL) under certain circumstances, and to provide notice of the withdrawal to credit agencies.

  2. Form 10916(c), Withdrawal of Filed Notice of Federal Tax Lien, is the document issued to withdraw an active NFTL.

  3. A Withdrawal of the Notice of Federal Tax Lien differs from a Certificate of Release of Federal Tax Lien and the two cannot be used for one another. A Withdrawal only removes the effect of the NFTL whereas the Certificate of Release releases both the NFTL (paper document) and extinguishes the statutory tax lien.

  4. Requests for withdrawals will be considered regardless of the date the notice of lien was filed.

  5. Withdrawal of the NFTL is not mandatory except when the NFTL was filed in violation of the automatic stay in bankruptcy. Factors that put collection at risk, such as the taxpayer disposing of assets, should be considered prior to approving any withdrawal request.

  6. Special condition NFTLs (e.g., nominee NFTLs) may be withdrawn if they meet the criteria provided in this section. Seek Area Counsel's advice as needed in cases.

  7. Positions authorized to approve withdrawals are found in Delegation Order 5-4 in IRM 1.2.44.5.

5.12.9.3  (10-14-2013)
Conditions for NFTL Withdrawal

  1. IRC § 6323(j) gives the Service the authority to withdraw a Notice of Federal Tax Lien (NFTL) under the following conditions:

    • the filing of the notice was premature or otherwise not in accordance with the Service's administrative procedures ( IRC § 6323(j)(1)(A));

    • the taxpayer entered into an agreement under IRC § 6159 to satisfy the tax liability for which the lien was imposed by means of installment payments, unless such agreement provides otherwise (IRC § 6323(j)(1)(B));

    • withdrawal of such notice will facilitate the collection of the tax liability (IRC § 6323(j)(1)(C)); or

    • with the consent of the taxpayer or the National Taxpayer Advocate, the withdrawal of such notice would be in the best interest of the taxpayer (as determined by the National Taxpayer Advocate) and the United States (IRC § 6323(j)(1)(D)).

  2. This section provides details of each of those conditions.

5.12.9.3.1  (10-14-2013)
Withdrawal for Premature or Inadvertent Filings

  1. A NFTL may be withdrawn if the filing was premature or otherwise not in accordance with administrative procedures (IRC § 6323(j)(1)(A)).

    Example:

    The person responsible for the filing of the NFTL has knowledge that the taxpayer has an undisputed credit available as the result of a filed return that will satisfy the liabilities on the lien, such as a carryback, overpayment, adjustment, etc. Filing of the NFTL is premature.

    Example:

    The taxpayer has filed bankruptcy and the NFTL is filed while the automatic stay is in effect. Filing of the NFTL is not in accordance with the Service’s administrative procedures and must be withdrawn.

    Example:

    A revenue officer is assigned a bal due for collection. A CP 501 (Balance Due - Reminder) was sent to the taxpayer. NFTLs have been previously filed for other liabilities owed by the taxpayer. The CP 501 constitutes a reasonable effort to contact the taxpayer and filing of the NFTL for the additional balance due would not be premature. Unless it can be shown that one of the other provisions for withdrawal has been met, the NFTL should not be withdrawn.

    Example:

    A taxpayer has submitted an offer in compromise. During the course of the investigation a NFTL is filed because it becomes known that the taxpayer is dissipating assets and rejection of the OIC appears likely. If the taxpayer previously received notices warning that a NFTL could be filed at any time, the recording of the NFTL was not premature. Unless it can be shown that one of the other provisions for withdrawal has been met, it should not be withdrawn.

  2. Withdrawal of the NFTL is mandatory when the NFTL is filed in violation of the automatic stay in bankruptcy.

  3. If the NFTL is filed when then taxpayer is in a Combat Zone, is in the active military outside the United States away from his or her permanent duty station participating in a contingency operation, or hospitalized for an injury received while serving in the combat zone or contingency operation, the Notice of Federal Tax Lien should be withdrawn. (See IRM 5.1.7.9 for further details on Combat Zone restrictions.)

  4. When the person filing a NFTL knows or should have known about available credits as in example 1 above, the NFTL should be withdrawn.

  5. Even though filing of the NFTL may have been premature or otherwise not in accordance with the Service’s administrative procedures, a withdrawal may not always be appropriate. Generally, the NFTL should not be withdrawn if a new NFTL will be immediately filed after withdrawing the NFTL.

  6. In situations where a NFTL was inadvertently filed in duplicate, issue Letter 2440. (See IRM 5.12.7.10.4). A withdrawal of the duplicate filing may be considered if requested by the taxpayer, but caution should be taken so that only the duplicate filing is withdrawn.

    Note:

    If the duplicate filing was the result of the same NFTL serial number being filed twice, the withdrawal document must be manually prepared so as to leave the NFTL active on ALS.

  7. Requests stating the NFTL was erroneous, as defined by IRC § 6326, should first be considered for release following procedures in IRM 5.12.3.9.

5.12.9.3.1.1  (10-14-2013)
Errors on Limited Liability Company NFTLs

  1. Assessments in the name of a Limited Liability Company (LLC) may include the name of the LLC and the name of an owner; however, only the name of the liable taxpayer should appear on an NFTL. See IRM 5.1.21, Collecting from Limited Liability Companies, to determine whether the LLC or the single member owner is liable.

  2. When an NFTL has been inadvertently filed using the name of any entity that is not the taxpayer, it must be amended or withdrawn. Use the following table to determine the proper action to take:

    If the NFTL shows... Then request . .
    only the name of the entity that is not the liable taxpayer a withdrawal of the NFTL
    the name of the liable taxpayer and the name of an entity that is not the liable taxpayer an amended NFTL, deleting the name of the entity that was not liable.

  3. Because the Service will lose its priority by withdrawing the NFTL, consult Area Counsel in cases where the name of the LLC is very close to the name of the single member owner.

  4. See IRM 5.12.7.5.3 for additional information on filing NFTLs on LLCs.

5.12.9.3.1.2  (10-14-2013)
NFTLs Filed in Designated Disaster Areas

  1. If an area is designated as a "disaster area" NFTLs requested prior to "disaster area" notification, but that were filed within the "disaster area" relief time-frame may be withdrawn. If a disaster is declared, employees who requested NFTLs prior to the disaster should:

    • review ICS histories to determine if the NFTL requested was withdrawn when the disaster was declared; and

    • determine if an -O Freeze was input to the taxpayer account;

  2. If the NFTL is withdrawn, a new NFTL may be filed, if appropriate, when the disaster condition is reversed.

  3. See IRM 25.16.1 for further information on disaster freezes.

5.12.9.3.2  (10-14-2013)
Withdrawals in Installment Agreements Situations

  1. A NFTL may be withdrawn if the taxpayer has entered an installment agreement to satisfy the liability for which the lien was imposed, unless such agreement provides otherwise(IRC § 6323(j)(1)(B)).

  2. Consider the following in determining whether the filing should be maintained.

    If... Then...
    the installment agreement provided for the NFTL, a request for withdrawal may not be granted.

    Note:

    Withdrawal may be appropriate under one of the other provisions.

    the NFTL was not addressed in the installment agreement or as an additional condition of the agreement, withdrawal may be considered, but is not mandatory.
    the installment agreement (or an additional condition of the agreement) provided that a NFTL would be filed a request for withdrawal may not be granted.

    Note:

    Withdrawal may be appropriate under one of the other provisions.

    the installment agreement (or an additional condition to the agreement) provided that a NFTL may be filed withdrawal may be considered, but is not mandatory

    Note:

    There is a separate box on the agreement which may be used for additional conditions.

    Example:

    A taxpayer enters into an installment agreement that provides for the filing of a NFTL if the taxpayer defaults. The taxpayer pays the installments each month and has not defaulted. Ten months after entering into the agreement a NFTL is filed. Because the taxpayer is under an installment agreement and has not defaulted, the NFTL should be withdrawn because the taxpayer is in compliance with the terms of the agreement.

5.12.9.3.2.1  (10-14-2013)
Special Provisions for Direct Debit Installment Agreements

  1. On April 7, 2011, the policy regarding withdrawals under IRC § 6323(j)(1)(B) was expanded to address situations in which a taxpayer enters a direct debit installment agreement (DDIA) to satisfy the liability.

  2. The types of taxpayers that qualify for withdrawal of the NFTL under this DDIA provision is limited to:

    • Individual Master File (IMF);

    • Business Master File (BMF) (income tax only); or

    • BMF out of business (any type of tax).

  3. Generally, a NFTL should be withdrawn if the taxpayer has entered a DDIA and has met the conditions specified in (4) through (10) below.

  4. The aggregate unpaid balance of assessments on the DDIA is $25,000 or less at the time of the request.

    1. The unpaid balance of assessments includes tax, assessed penalty and interest, and all other assessments on the tax modules. It does not include accrued (i.e., unassessed) penalty and interest.

    2. If pre-assessed taxes are included, the pre-assessed liability (including tax, penalty, and interest up to the date of expected assessment) plus unpaid balance of other assessments must be $25,000 or less.

  5. The total tax liability will be fully paid in 60 months or the agreement will be fully paid prior to the Collection Statute Expiration Date (CSED), whichever comes first.

    Note:

    For liabilities consisting of multiple assessments with different CSEDs, the agreement must fully pay each assessment before its respective CSED or within 60 months, whichever comes first.

    Note:

    Use Integrated Data Retrieval System (IDRS) Command Code (CC) ICOMP) to determine the pay off time frame. See IRM 5.14

    .

  6. The taxpayer requests the withdrawal in writing. Form 12277, Application for Withdrawal of Filed Notice of Federal Tax Lien, is the preferred format for the taxpayer’s request; however, any written request that provides sufficient information may by used for processing (see IRM 5.12.9.4).

  7. The taxpayer is in compliance with other filing and payment requirements.

  8. The DDIA is active and at least three consecutive electronic payments (generally received on a monthly basis) have been processed under the DDIA. Also, there have been no defaults in payment under this, or any previous, DDIA or any such default was not caused by the taxpayer.

  9. The taxpayer did not previously have a withdrawal of NFTL for any of the modules included in the DDIA (e.g., TC 583 dc 03 on module). This excludes previous withdrawals for improper filing under IRC § 6323(j)(1)(A) (e.g., TC 583 dc 02 on module).

  10. Taxpayers making payments under any other type of installment agreement are not eligible for consideration for withdrawal under the conditions specified in this section unless they convert to a DDIA and otherwise meet the conditions. Taxpayers are not precluded, however, from requesting a withdrawal under any other provision of the IRC § 6323(j).

    1. A DDIA is normally indicated by a 03 in the Agreement Locator Number (ALN). A regular IA that is converted to a DDIA will have the ALN updated.

    2. If a taxpayer states they have a DDIA but the ALN does not show 03, request the taxpayer provide documentation of the DDIA (e.g., an acknowledgement letter from the IRS, copies of bank statements showing the withdrawals, etc.).

  11. If a taxpayer defaults on making payment under the DDIA after the NFTL is withdrawn, a new notice of lien may be filed, if appropriate.

  12. If the taxpayer discontinues the DDIA and/or requests it be converted to a regular IA after the NFTL is withdrawn, a new NFTL may be filed.

  13. The criteria in this section apply only to a taxpayer’s eligibility for withdrawal consideration. They do not impact the criteria for a taxpayer’s eligibility for a DDIA. See IRM 5.14.10 for DDIA requirements.

5.12.9.3.3  (10-14-2013)
Withdrawal Will Facilitate Collection

  1. A withdrawal facilitates collection if withdrawing the NFTL will result, either immediately or in the future, in a greater amount being collected by the IRS than had the NFTL been maintained. (IRC § 6323(j)(1)(C))

  2. To determine if withdrawal of the NFTL will facilitate collection of the tax liability, consider all relevant case factors, including, but not limited to, the following:

    1. Will the amount realizable by the U.S. or the chances of collecting the tax liability be increased?

    2. If the NFTL was not already filed, do the conditions exist that would have allowed for NFTL forbearance? (See IRM 5.12.2.3)

    3. Will the Service receive a payment against the liability? If so, would withdrawal of the NFTL to obtain a partial payment hamper the collection of the remaining balance due?

    4. Will withdrawal enhance the taxpayer’s ability to obtain additional credit; and how will additional credit affect the taxpayer's ability to pay the liability?

    5. Is the NFTL the result of a defaulted installment agreement? Was a condition of the installment agreement that a NFTL would be filed in case of default?.

    6. Is there any possibility that a bankruptcy may be filed if the withdrawal is not obtained? If so, consider how the taxes would be treated in a bankruptcy proceeding. Are they dischargeable? Does the taxpayer own assets so that the filing of the NFTL would enhance the government’s position as a secured creditor? Would the taxes be more or less collectible if the taxpayer filed bankruptcy?

    7. Is the taxpayer pyramiding liabilities? Are all required returns filed? A NFTL should not be withdrawn if the taxpayer is not in compliance with filing and deposit requirements.

    8. Will a lien subordination or discharge of certain property from the lien achieve the same result as a withdrawal? If so, a NFTL withdrawal is not appropriate.

    9. Can the taxpayer furnish a bond or other acceptable security in the amount of the government's interest in assets if the NFTL is withdrawn? Note: If the taxpayer can furnish a bond for the full amount of the liability, the NFTL can be released (see IRM 5.12.3.3.3).

    Example:

    A NFTL has been filed in the name of a taxpayer who has no assets, is unlikely to ever acquire assets of any real value, and has no other secured creditors. The taxpayer agrees to pay the balance of tax due through payroll deductions at a rate higher than the Service could obtain through a wage levy in order to get the NFTL withdrawn. The NFTL may be withdrawn because doing so will facilitate collection of the tax liability.

    Example:

    A NFTL has been filed in the name of a taxpayer owning minimal distrainable assets who is currently unemployed. The taxpayer is offered employment provided she is bondable. However, the bonding company refuses to issue a bond because the NFTL reduces the taxpayer’s credit score to an unacceptable level. The taxpayer agrees to pay the balance of tax due through payroll deductions if the NFTL is withdrawn and she is able to begin working. The NFTL may be withdrawn, with the provision that it would be filed again in case of default, because doing so will facilitate collection of the tax liability.

    Example:

    A taxpayer requests withdrawal of a NFTL so that she can improve her credit score and purchase a new vehicle. The new vehicle is not necessary for her to perform her job duties or generate income which would assist in satisfying the liability. Withdrawal of the NFTL is not appropriate because doing so would not facilitate collection of the tax liability.

    Example:

    A taxpayer has been making installment payments for the past year and has two years of payments remaining. The taxpayer is a salesman and needs to purchase a new automobile in order to continue to generate the income that is being used to make the installment payments. The taxpayer verifies that he cannot obtain a new car loan or a lease because the existence of the NFTL causes his credit score to fall below an acceptable level. The NFTL may be withdrawn, with the provision that it would be filed again in case of default, because doing so will facilitate collection of the tax liability.

  3. A determination that withdrawal will facilitate collection may originate with a Revenue Officer in the course of making a collection determination. Although a written request by the taxpayer for the withdrawal would not be needed in such a circumstance, the taxpayer must concur that the withdrawal is in his/her best interest.

  4. When the taxpayer's account is not assigned to another IRS work unit and it is determined that withdrawal of the NFTL will facilitate collection, the Advisory employee should secure the taxpayer's proposal to pay the balance of the tax liability (or evidence of such a proposal to another function) and make a determination on the proposal's collection impact along with the recommendation for acceptance/denial of the request.

5.12.9.3.4  (10-14-2013)
Best Interest Withdrawal Provisions

  1. To be considered for a withdrawal under the best interest provisions (IRC § 6323(j)(1)(D)), two determinations are required:

    • one by the taxpayer or by the National Taxpayer Advocate (NTA) (or designee) with respect to the taxpayer; and

    • one by the Secretary (or designee).

  2. A determination that withdrawal is in the best interest of the United States may be made by collection employees.

  3. A taxpayer may request the withdrawal on the basis that it is in his or her best interest and the best interest of the United States without specifically requesting that the NTA make the determination on his or her behalf. A collection employee may also make a best interest determination independent of a taxpayer request provided the taxpayer or the NTA acting on behalf of the taxpayer consents to the withdrawal.

  4. This IRM cannot address every scenario you may encounter. Apply your knowledge and experience to the case and use your judgment in making a determination. In making "best interest" determinations consider the following:

    1. What will be the effect of withdrawing the notice of lien? Are there claims currently subordinate to the federal tax lien which will become superior?

    2. What is the likelihood that the taxpayer will dispose of the property if the notice is withdrawn? Is there sufficient equity for this to be a concern?

    3. Will tax collection be undermined if the notice is withdrawn and the taxpayer files for bankruptcy protection?

    4. Are there other tools available, such as discharge or subordination, that will alleviate the taxpayer’s problem without eliminating the protection offered by the filed notice of lien.

  5. When making the best interest determination the expectation is that the government and the taxpayer will benefit from withdrawal of the notice.

    If Then
    withdrawal is in the government’s and taxpayer’s best interest, (subject to approval at the managerial level), the employee should follow the withdrawal procedures outlined.
    it is determined that withdrawal would not be in the best interest of the government, notify the taxpayer of the determination and explain his/her appeal rights.
    Collection and Taxpayer Advocate disagree on best interests conditions being met the National Taxpayer Advocate may issue a Taxpayer Assistance Order (TAO), when (s)he determines that it is in the best interest of the taxpayer.

    Example:

    A taxpayer contacts the Taxpayer Advocate Service (TAS) and requests that the NFTL filed in their name be withdrawn because it is in their best interest as well as in the best interest of the government. TAS determines that it is in the best interest of the taxpayer that the NFTL be withdrawn. TAS contacts Collection, requests that the NFTL be withdrawn, and, upon review, Collection determines that it is in the best interest of the government that the NFTL be withdrawn. Because TAS, representing the taxpayer, and the Service agree that it is in the best interests of both, the NFTL may be withdrawn.

    Example:

    A taxpayer requests that the NFTL be withdrawn so that he can refinance his home mortgage. In addition to refinancing the existing first mortgage, the taxpayer offers to borrow an additional amount to be applied as a partial payment of the liabilities listed on the NFTL. The taxpayer’s lender will not make the loan unless the NFTL is withdrawn. Although withdrawal of the NFTL would be in the best interest of the taxpayer, and withdrawal of the NFTL would result in partial payment, it is not in the best interest of the government to withdraw the NFTL. A subordination certificate will better protect the government’s interest by allowing for partial payment of the liability while continuing to secure the government’s interest for the remaining taxes due.

    Example:

    The taxpayer in the above example requests that the NFTL be withdrawn so that he can refinance his home mortgage. In addition to refinancing the existing mortgage, the taxpayer offers to borrow an additional amount and full pay the liabilities listed on the NFTL. The taxpayer states that his lender will not make the loan unless the NFTL is withdrawn, even though a payoff statement is provided, the lender is aware that the NFTL will be paid off from the loan proceeds, and a revenue officer offers to attend the loan closing and provide an immediate lien release upon receipt of full payment. Further questioning of the taxpayer reveals that the NFTL is preventing the taxpayer’s mortgage broker from placing the taxpayer’s loan with a lender because the NFTL is lowering his credit score to an unacceptable level. Although other secured creditors have refused to give up their secured status in exchange for a promise of full payment, the taxpayer is hopeful that the government will agree to do so. Although withdrawal of the NFTL is in the best interest of the taxpayer, it is not a good business practice nor is it in the best interest of the government to relinquish its secured creditor status in exchange for a promise to pay.

    Example:

    A taxpayer enters into a 2-year installment agreement conditioned upon the recording of a NFTL. One year later she requests withdrawal of the NFTL. All payments have been made timely and the taxpayer is requesting the withdrawal because it is harming her credit worthiness. Although withdrawal of the NFTL is in the best interest of the taxpayer, it is not a good business practice nor is it in the best interest of the government to relinquish its secured creditor status.

5.12.9.3.4.1  (10-14-2013)
Withdrawal of Special Condition NFTLs

  1. The taxpayer or the person subject to a special condition NFTL may request withdrawal of the special condition NFTL under any of the conditions of IRC 6323(j)(1). The determination to withdraw the NFTL will be based on whether the criteria has been met.

  2. When the situation giving rise to the special condition NFTL has been resolved by addressing the interest of the IRS (e.g., property specified on nominee NFTL was sold and IRS received an amount equal to its interest), but a balance remains for the assessments shown on the NFTL, withdrawal of the special condition NFTL will generally be granted under IRC 6323(j)(1)(D). In such situations, the withdrawal may be issued without receiving a formal application, if the resolution is known to the approving office. Consult Counsel, as needed, if there are questions regarding the matter.

5.12.9.4  (10-14-2013)
Taxpayer Requests for Withdrawal

  1. All requests for withdrawal of the Notice of Federal Tax Lien must be in writing. Preferably, taxpayers should use Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien; however, any written request that contains the necessary information may be used.

    Note:

    A request may be accepted by fax if contact has been made with the taxpayer by phone and the taxpayer history file is documented with the date of the contact and notation is made that the taxpayer wishes to send the request by fax.

  2. Requests for withdrawal must contain the following information:

    • taxpayer’s name;

    • current address;

    • taxpayer’s identification number;

    • a copy of the NFTL affecting the property, if available, or details about the NFTL;

    • a statement explaining the basis for the withdrawal request; and

    • authorization for disclosure of information to creditors, credit reporting agencies and financial institutions.

  3. Requests must be signed by the taxpayer or a valid Power of Attorney (POA). In the event of a business taxpayer, the request must be signed by an appropriate officer or a POA.

    1. If a request involving a NFTL on a joint liability is not signed by all co-obligors, initially consider it as a full withdrawal request (unless the taxpayer expresses otherwise). If during the review issues are found with the non-applying co-obligor(s) that may prohibit the issuance of the withdrawal, consider the request as if for a partial withdrawal and/or seek to secure the signature of the other co-obligor(s).

  4. Attempts should be made to resolve any incomplete applications by contacting the taxpayer and advising of the additional information needed. Document the case history of the situation.

  5. Subsequent requests for copies of approved withdrawal notices to be sent to creditors or financial institutions will contain the same information outlined in above.

5.12.9.4.1  (10-14-2013)
Number of Requests to Submit

  1. Generally, withdrawal requests should be considered on a NFTL by NFTL basis; however, there may be situations in which multiple NFTLs may be covered by the same request. For instance, a taxpayer applying for withdrawal under premature filing would be applying for a specific NFTL whereas someone applying under best interest provisions may be wanting to look at all NFTLs together.

  2. Consider taxpayer burden when providing guidance for completing Form 12277. Generally, if the conditions and reasons for withdrawal are the same for all the NFTLs, one Form 12277 referencing all the NFTLs is acceptable.

  3. The same NFTL filed in separate locations for real and personal property may be considered under one request.

5.12.9.5  (10-14-2013)
Processing Withdrawal Requests

  1. Requests will be reviewed by the Collection field employee assigned the taxpayer's case.

    1. If there is no current assignment of the taxpayer's case, forward the request to Advisory in the area where the taxpayer lives or has its principal place of business.

    2. If the taxpayer claims the NFTL was filed in violation of a bankruptcy stay, contact the Centralized Insolvency Operation (CIO) to determine where the withdrawal request should be sent..

  2. Control the receipt of the request and document any actions relative to the review on the control system applicable to your function (e.g., Integrated Collection System (ICS), Automated Insolvency System (AIS)).

  3. Review the case history as well as the documentation provided by the taxpayer.

  4. Withdrawal may be granted under any of the four provisions provided by the Internal Revenue Code as outlined above.

    1. If during the investigation it is clear the taxpayer cited the wrong provision for withdrawal and they would qualify for withdrawal had the correct provision been cited, contact the taxpayer to confirm their intent. If they request consideration under the correct provision, notate the history and resume processing.

      Note:

      This step is to correct an obvious error made by a taxpayer unfamiliar with the withdrawal process. It does not mean the employee is required to search for additional reasons to grant a withdrawal.

  5. Determine if sufficient documentation is provided to substantiate the withdrawal recommendation.

  6. After completing the review, field employees will prepare a memorandum outlining the facts of the case and their recommendation on the withdrawal.

    Exception:

    Requests for withdrawal based on premature or inadvertent filing (IRC 6323(j)(1)(A)) can be worked by the revenue officer assigned the taxpayer's case without referring it to Advisory. If the request involves any other provisions, the revenue officer must refer the matter to Advisory.

  7. Forward the memorandum with the application and appropriate documents through the group manager to Advisory.

  8. Upon receipt of the memorandum or withdrawal request (if no collection assignment), Advisory will open a Non-Field Other Investigation (NFOI) control on ICS under code 143, Withdrawals, within 7 calendar days of receipt in the group.

5.12.9.6  (10-14-2013)
Approving the Withdrawal Request

  1. The positions authorized to approve/deny withdrawals are found in Delegation Order 5.4.

    1. In most situations, the Advisory Group Manager will be the approving official.

    2. Insolvency Group Managers are responsible for approving requests related to open bankruptcy cases.

    3. Field Group Managers are only delegated approval authority for cases assigned to field revenue officers and that are submitted under IRC 6323(j)(1)(A).

    Note:

    The procedures in this section and following subsections are geared primarily to Advisory being the approving office; however, the procedures should be interpreted to apply to any office with delegated authority, unless expressly stated otherwise.

  2. The approving office reviews the withdrawal package or request to ensure conditions for withdrawal have been met. The extent of the review will depend on the function/person submitting the package.

    1. If the request is directly from the taxpayer, the approving office will complete a full review in accordance with the steps in IRM 5.12.9.5 and make the withdrawal determination.

    2. If Advisory/Insolvency is the approving office and the package is received from the Collection Field function and was concurred with by a Group Manager, Advisory/Insolvency only needs to conduct a cursory review.

    3. If the withdrawal request is received from Appeals as the result of a timely Collection Due Process, Equivalent Hearing, or a Collection Appeal Program case, it will be processed in accordance with IRM 5.1.9. The approving office only needs to confirm the accuracy of the Form 13794-W, Request for Withdrawal of Notice of Federal Tax Lien, while keeping in mind limitations on ex parte communications with Appeals as addressed in IRM 5.1.9.5.

      Note:

      If the approving office fails to process Appeals' request within five days of receipt, Appeals may then utilize their authority under IRM 1.2.44.5 and forward the Form 13794-W directly to Centralized Lien Processing Operation (CLO).

    4. If the package is received from any other function, the approving office will complete a full review of the package and application to confirm the withdrawal determination.

  3. If the approving office disagrees with the request for withdrawal, it will advise the originator of the reasons for disapproval.

    Note:

    Disagreements with Appeals' determinations must follow IRM 5.1.9.5.1. Regardless of the disagreement, withdrawals resulting from a CDP determination must not be delayed.

  4. The approving office prepares Form 13794-W, and, after securing the approving official's concurrence, forwards the form to CLO via secure email.

    1. As an alternative to forwarding Form 13794-W to CLO, Advisory and Insolvency employees with appropriate permissions may input the withdrawal directly into the ALS. Manager's concurrence is still required. An ICS or AIS history entry by the manager meets this requirement.

      Note:

      With managerial approval, the ALS "Bypass Approval" option is available to Advisory and Insolvency employees. This option places documents directly into the ALS print queue. CLO intervention in the ALS approval process is not required.

      Note:

      For security purposes, the employee who recommends the withdrawal should not be the approving official for the recommendation and also input and approve the withdrawal on ALS.

  5. The approving office should send Letter 4711, Withdrawal Decision Letter, to the taxpayer or POA, if applicable, advising of the withdrawal approval.

  6. Actions taken by the approving office, including the manager's concurrence, will be documented on ICS.

  7. Actions taken by CLO relative to the withdrawal can be viewed on ALS. Generally, CLO inputs requests within 5 days of receipt. Once the withdrawal is input on ALS, the approving office prints a facsimile copy of the withdrawal for the case file and closes its NFOI control, if applicable.

    Note:

    Recording information for the NFTL must be on ALS before the withdrawal can be generated. If the recording information is not present, obtain the recording information from the recording office or other reliable source and have it input to ALS.

  8. Whenever an NFTL is released or withdrawn, a TC 583 with a definer code must be input to each module on the certificate. For withdrawals generated through ALS and processed by CLO, the TC 583 is systemically uploaded to Master File with the following designation codes:

    • DC 1 - released

    • DC 2 - withdrawal due to administrative error

    • DC 3 - withdrawal due to collection due process appeal rights

    • DC 4 - reversal

    • DC 5 - self-released (statute expiration).

5.12.9.6.1  (10-14-2013)
Manual Preparation of Withdrawal Certificates

  1. Withdrawal certificates should be prepared through ALS; however, if the taxpayer requests an immediate issuance of the certificate for an imminent circumstance, the certificate may be manually prepared.

  2. Prepare Form 10916, Withdrawal of Filed Notice of Federal Tax Lien, using the ICS template or PDF fillable form from the intranet. Data on the Form 10916 should match the data shown on the NFTL.

    Note:

    Any manually prepared withdrawal form must include references to any refiled, amended, or corrected NFTLs associated with the original filing.

  3. Manually prepared forms must be signed by a delegated approving official.

  4. Provide the manually prepared certificate to the taxpayer or POA, if applicable, for recordation along with Letter 4026. Advise of the filing process and that they will be responsible for paying any filing fee.

    Note:

    Letter 4026 is a cover letter. Preferably it should be signed by the delegated approving official when the Form 10916 is signed. If it cannot be signed by the approving official, the Letter 4026 may be signed by another Service employee as long as the Form 10916 is appropriately approved.

  5. Notify CLO of the issuance of the withdrawal by forwarding a copy of the withdrawal certificate or completing Form 13794-W. Make sure to indicate that the certificate was already issued so that ALS be updated accordingly.

  6. Retain a copy of any manually prepared withdrawal forms in the case file.

  7. Request input though normal channels of a TC 583 with the appropriate definer code to each module on the certificate.

    • DC 02 - withdrawal due to administrative error

    • DC 03 - withdrawal due to collection due process appeal rights

5.12.9.6.2  (10-14-2013)
Use of Electronic Signatures on Withdrawal Documents

  1. Neither the Internal Revenue Code (IRC) nor Treasury regulations address the method in which lien certificates are to be signed; however, they both address the Secretary’s authority to develop procedures associated with the use and acceptability of electronic signatures on forms and other documents.

  2. Approval of documents must always be in accordance with Delegation Order 5-4. See IRM 1.2.44.5.

  3. Manually prepared withdrawal certificates and their related letters and forms may be signed by the approving official via electronic means when a physical signature is not feasible.

    Note:

    Withdrawals should normally be generated through the Automated Lien System (ALS). Documents generated by ALS are digitally signed in accordance with the delegation order. The electronic signature described in this section is only for situations where manually prepared certificates are needed.

  4. To sign a document electronically, the document must be converted to a Portable Data Format (PDF) using Adobe Acrobat and the approving official must create a signature file. The format of the electronic signature should adhere to certain standards.

    1. The signature should not contain the email address, logo, location or other unnecessary information.

    2. The signature should preferably be an actual/graphic signature file of the approving official or at the minimum should show the name of the approving official. It should not be the Standard Employee Identifier (SEID) as that is for internal use only.

    3. The approving official should validate the signature so that the pdf question mark does not appear.

  5. Approval must be granted on a case by case basis. The case history must be documented by the approving official to indicate the electronic or facsimile signing of the lien certificate and associated correspondence.

  6. A printed copy of the electronically signed certificate must be retained as part of the case file for appropriate record keeping.

  7. There may be hesitation from some recording offices to accept electronically signed lien certificates; however, they cannot refuse to record the documents as the IRS dictates the form and content of lien certificates. Recording offices may be referred to Publication 1468, Guidelines for Notices of Federal Tax Lien and Centralized Lien Processing, for more information.

  8. Facsimile signatures must be protected in accordance with established IRS procedures.

    1. Physical signature stamps are designated "High Security." Store signature stamps in accordance with IRM 10.2.15.3(b) with reference to Exhibits 10.2.15-1 and 10.2.15-2. (See also IRM 1.4.6 Managers Security Handbook)

    2. All systems capable of reproducing electronic or PDF generated signatures for lien certificates must be official IRS computer systems and be password protected.

    3. Ensure a record of approval is available for electronically generated, PDF generated, and stamped signatures.

5.12.9.6.3  (10-14-2013)
Distribution of the Withdrawal Certificate

  1. After inputting the withdrawal information into ALS, Form 10916, Withdrawal of Filed Notice of Federal Tax Lien, or Form 10916A(c), Withdrawal of Filed Notice of Federal Tax Lien After Release, as applicable, is generated and distributed.

    1. CLO will print Part 1 of the form and send it to the applicable recording office with the filing fee.

    2. Correspondence Production Services (CPS) will print Part 2 of the form and mail it to the taxpayer with the corresponding cover letter, i.e., Letter 3044 or Letter 4026.

      Note:

      When withdrawal cover letters are printed through ALS, an address sheet is also printed with the most current address of the taxpayer known to ALS.

  2. The Service will usually bear the cost of filing the withdrawal certificate. However, in situations where the taxpayer requests immediate issuance and the document is provided directly to the taxpayer for filing, the taxpayer will bear the cost of filing.

  3. The approving office will request abatement of the filing fee for the original NFTL (TC 360) following standard IDRS adjustment procedures.

  4. A facsimile copy of the withdrawal is available through ALS. Copies of the withdrawal form will not be returned by CLO to the requestor unless specifically requested.

  5. Withdrawal documents, including partial withdrawals, should be generated through ALS. However, in situations where immediate issuance of the withdrawal is needed, the approving office will manually prepare Form 10916(c) and secure the approving official's signature. (See IRM 5.12.9.6.1.)

  6. The withdrawal document should be issued to the recording office (or the taxpayer, if manually prepared) within 15 calendar days after approval.

5.12.9.6.4  (10-14-2013)
Notifying Third Parties of Withdrawal

  1. Pursuant to IRC § 6323(j)(2), taxpayers may request additional copies of the withdrawal form to be sent to specified third parties. These requests may be received with the initial withdrawal request or after the withdrawal is issued. The requests must be in writing from the taxpayer and provide the following information:

    • the taxpayer’s name, current address, and taxpayer identification number with a brief statement authorizing the additional notifications;

    • a list of the names and addresses of any credit reporting agencies, financial institutions, or creditors to notify of the withdrawal;

    • a copy of the notice of withdrawal, if available (for requests subsequent to the issuance of the withdrawal); and

    • a statement authorizing disclosure of the information to the third parties.

      Note:

      Form 12277 contains the necessary disclosure authorization. Requests for third party notifications made in conjunction with the initial Form 12277 need only provide the names and addresses of the third parties.

  2. Requests for third party notifications will be worked by the employee assigned the case or the approving office that issued the withdrawal.

  3. Facsimile copies of the withdrawal may be obtained through ALS using the normal facsimile print option. If necessary, a copy of the Form 10916(c) may be requested through CLO. Copies of the withdrawal cover letter are not available through CLO and are not needed.

  4. Letter 5046, NFTL Withdrawal Third Party Cover Letter, should be used to send the copy of the withdrawal to the specified third party. If L5046 is not available, a general cover letter prepared by the employee may be used. The letter should only contain basic information confirming the issuance of the withdrawal. The letter should not elaborate on the reason for the withdrawal nor provide any other information regarding the taxpayer's account, unless specifically requested and authorized by the taxpayer.

  5. Document actions taken on the request. Control the request on ICS or AIS, as appropriate.

    1. If the request for third party notification comes with the taxpayer's withdrawal request, no separate control needs to be opened.

    2. If the request for third party notification comes after the withdrawal has been issued, open an ICS NFOI 148, Lien Priority Other.

5.12.9.6.5  (10-14-2013)
Abating the NFTL Filing Fee

  1. When a NFTL is withdrawn, the filing fee posted to the taxpayer's account for the NFTL (TC 360) is to be abated.

  2. It is the responsibility of the office approving the withdrawal to request abatement of the original NFTL filing fee.

  3. The request for abatement should follow standard procedures for making IDRS adjustments.

5.12.9.6.6  (10-14-2013)
Rescission of CDP Rights for Withdrawals

  1. Under IRC § 6320, a taxpayer is entitled to only one hearing with respect to each tax period identified on a NFTL. Even if the NFTL is withdrawn, the original CDP lien notice conveying the taxpayer appeal rights is valid. If a new NFTL is subsequently filed, the Service may not offer the taxpayer any additional opportunity to request a CDP hearing for the same tax period unless the original CDP lien notice has been rescinded.

  2. The IRC neither expressly prohibits nor provides for rescission of a notice of a right to a hearing under section 6320. In general, the Service has the authority to rescind a section 6320 notice but such authority is limited.

  3. The Service may rescind a CDP notice only if all the following are true:

    • The NFTL is being withdrawn under IRC § 6323(j)(1)(A), the filing of the NFTL was premature or not in accordance with administrative procedures (see IRM 5.12.9.3.1).;

    • Within the time period for requesting a CDP hearing the Service agrees to withdraw the NFTL;

    • The rescission is accomplished by notifying the taxpayer in writing before the expiration of the time period for requesting a hearing; and

    • The taxpayer has not requested a CDP hearing.

  4. The deadline for the time period to request a hearing is generally within 45 days of the TC 582 date shown on IDRS. If the withdrawal is being worked within that time frame, the exact deadline date must be found to make a determination on the rescission. The deadline date will be stated on the Letter 3172 or shown on ALS. If access to ALS or the letter is not available, contact the CLO and request a facsimile copy of the Letter 3172.

    Note:

    The Letter 3172 deadline date for requesting a hearing is extended if the taxpayer is in a combat zone, part of a contingency operation away from the taxpayer's permanent duty station, or recuperating during a qualified hospitalization, plus 180 days. Because the time period for requesting a hearing is extended, the time period for rescinding the section 6320 notice is also extended. Check IDRS for any TC 500 that may impact the deadline date. (See IRM 5.1.7.9).

  5. If the NFTL is being withdrawn because it was filed in violation of the bankruptcy automatic stay, the CDP notice may be rescinded if the limitations described above are met.

  6. If the conditions for rescission are met, contact the employee/function that requested the NFTL or check the case history to confirm that the taxpayer has not requested a CDP hearing. If the taxpayer has requested a hearing, the CDP rights cannot be rescinded. The request must be forwarded and resolved by Appeals.

    Reminder:

    The withdrawal should be processed regardless of whether the CDP rights are rescinded or not.

  7. If rescinding the CDP notice is appropriate, advise the taxpayer by issuing Letter 4711, Withdrawal Decision Letter. Ensure that the box regarding the rescission is checked.

  8. After sending the L4711 hold the case open for sufficient time to see if a "last minute" CDP request was submitted by the taxpayer. In the event a CDP hearing request is received after the L4711 is issued, check the dates to see which was mailed first. If the taxpayer’s request pre-dates the L4711, the CDP rights cannot be rescinded.

  9. After verifying that no CDP request was submitted, or that the hearing request was mailed after the date of the L4711, reverse the TC 971 ac 252 on each module on the withdrawn NFTL.

  10. Document the history regarding the rescission.

  11. The Service is not required to rescind a CDP notice if the NFTL is ineffective (e.g., "lost lien" ).

5.12.9.7  (10-14-2013)
Partial Withdrawal

  1. Neither the Internal Revenue Code nor the Treasury Department's Regulations have provisions for issuing a partial withdrawal. However, circumstances may exist that require a partial withdrawal.

  2. A partial withdrawal is a special worded document that withdraws the NFTL only as it relates to a specific person or period listed on the NFTL.

  3. Consider a partial withdrawal in the following instances if one or more (but fewer than all) of the individuals or entities on the NFTL fit withdrawal criteria.

    Example:

    NFTL is filed on A and B for a joint liability. After they divorce, B requests a withdrawal and meets the criteria.

    Example:

    NFTL is filed on C and D for a joint liability. Prior to the filing of the NFTL, C filed bankruptcy. The NFTL was filed after the bankruptcy petition date in violation of the automatic stay. A partial withdrawal is needed to withdraw the NFTL against C only.

  4. When a taxpayer was never assessed the liability and should not have been included on the NFTL, follow the procedures at IRM 5.12.7.9 to file an amended NFTL removing the non-liable taxpayer's name from the original NFTL. Although unnecessary, a partial withdrawal may be considered if requested.

  5. Partial withdrawals for certain periods listed on the NFTL are permissible, but generally should be issued only in unusual circumstances. The function of the withdrawal is to remove the effects of the NFTL from the taxpayer's assets. A partial withdrawal for certain periods on the NFTL would have little, if any, impact on the effect of the NFTL against the taxpayer's assets.

    Example:

    NFTL is filed on modules 30-200912 and 30-201012. It was subsequently determined that the taxpayer was not properly noticed on 30-201012 prior to the NFTL filing. No other basis for the withdrawal is demonstrated. Even though an argument could be raised to partially withdraw the NFTL with respect to 30-201012, the NFTL would still remain in place for the 30-200912 module. Thus the partial withdrawal would provide no benefit to the taxpayer or the government. The withdrawal request should be denied.

  6. Advisory or Insolvency approval is required for all partial withdrawals. Process partial withdrawal requests in the same manner as full withdrawal requests.

  7. Partial withdrawals should be processed through ALS. The documents generated by ALS will reflect the special wording as approved by Counsel.

  8. Use Form 13794-W to request partial withdrawals. Ensure the name of the person subject to the withdrawal is clearly noted.

  9. In rare situations where the partial withdrawal has to be manually prepared, ensure Form 10916 is properly completed.

    1. Only the name of the non-liable taxpayer should be entered on the form. The NFTL is valid against the still liable taxpayer.

    2. Enter the special wording of the partial withdrawal in the body of the Form 10916.

      *PARTIAL WITHDRAWAL. With respect to tax liabilities for [Taxpayer A and B], [Taxpayer A] has met the provisions for withdrawal of the Notice of Federal Tax Lien for the liabilities identified above. The referenced notice of lien is Withdrawn only insofar as it relates to [Taxpayer A]. The Notice of Federal Tax Lien remains in effect against [Taxpayer B] from the original recordation date.

      *PARTIAL WITHDRAWAL. With respect to the tax liabilities for [Taxpayer A and B], the provisions have been met for withdrawal of the Notice of Federal Tax Lien for the liabilities identified above. The referenced notice of lien is Withdrawn only insofar as it relates to the tax periods specified. The notice of lien remains in effect for all other tax periods as shown on the original Notice of Federal Tax Lien from the original recordation date.

    3. Secure e-mail the document or mail to CLO for processing.

  10. Do not post a TC 583 to master file for a partial withdrawal. Do not abate the TC 360 from the taxpayer's account.

5.12.9.8  (10-14-2013)
Denying the Withdrawal Request

  1. Only those with delegated authority to approve a withdrawal have the authority to deny a withdrawal request. (See Delegation Order 5-4 in IRM 1.22.4.5.) The employee assigned the case recommends acceptance or denial of the withdrawal application and can advise the taxpayer of their recommendation; however, unless delegated otherwise, the delegated official must approve the recommendation prior to formally notifying the taxpayer.

  2. The approving office reviews the withdrawal package or request to ensure conditions for withdrawal have not been met. The extent of the review will depend on the function submitting the package.

    1. If the request is directly from the taxpayer, the approving office will complete a full review in accordance with the steps in 5.12.9.5 and make the withdrawal determination.

    2. If Advisory is the approving office and the package is received from the Collection Field function and was approved by a Group Manager, Advisory only needs to conduct a cursory review.

    3. If the package is received from any other function, the approving office will complete a full review of the package and application to confirm the withdrawal determination.

  3. The approving office prepares and sends Letter 4711, Withdrawal Decision Letter, to the taxpayer or POA, if applicable, advising of the denial. This letter contains information regarding the taxpayer's appeal rights as well as their right to discuss the denial with the immediate manager. Also, provide the taxpayer with:

    • Publication 1660, Collection Appeal Rights for Liens, Levies, Seizures and Installment Agreement Terminations, and

    • Form 9423, Collection Appeal Request.

  4. Note the case history with the reason for denial.

  5. Actions taken by the approving office, including the manager's concurrence, will be documented on ICS or AIS, as applicable.

  6. Advisory closes its NFOI control on ICS 10 calendar days after sending the denial letter, unless an appeal is requested.

  7. Process any appeal requests received from the taxpayer in accordance with standard appeal processing. (See IRM 5.1.9).

5.12.9.8.1  (10-14-2013)
Withdrawal Based on Appeals Decision

  1. Taxpayers have the right to appeal a withdrawal denied by the approving office or ask for a withdrawal during other CAP situations pertaining to the NFTL. The issue of withdrawal may also arise if the taxpayer appeals the filing of the NFTL under CDP.

  2. Appeals has the authority to make determinations regarding NFTL withdrawals using the same criteria as Collection. Procedures for Appeals' determinations on notices of lien can be found in IRM 8.22.7.9.

  3. Once a case is in Appeals, the responsibility for the decision to withdraw rests with Appeals. Contact with Appeals, while the case is open, is strictly limited by Rev. Proc. 2012–18 in order to avoid prohibited ex-parte communication. See IRM 5.1.9.5 for further details on acceptable communications with Appeals.

  4. Upon a decision, Appeals will issue either a decision (for CAP and equivalent hearing requests) or a determination letter (for CDP requests). If a NFTL withdrawal must be issued, Appeals will send a copy of its decision or determination letter and Form 13794-W, along with any other information that supports the decision to withdraw the NFTL, to the approving office, normally which is Advisory.

    Note:

    A copy of the decision or determination letter does not have to be present in the information received from Appeals for the approving office to process the Withdrawal.

  5. The approving office will review and process Appeals determination in accordance with IRM 5.1.9.

    1. If Form 13794-W is received from Appeals on a CDP case, the withdrawal request must be immediately processed. Any dissent takes place only after the withdrawal action has been initiated and Appeals has closed their case. See IRM 8.22.9.17.

    2. If Form 13794-W is received from Appeals on a CAP case, the withdrawal request is binding and should be immediately forwarded for input. Disagreements with the Appeals decision should be rare and limited to situations in which Appeals did not consider all the facts of the case. See IRM 5.1.9.5.1.

  6. The approving office will request the input of the withdrawal within five (5) business days. If the approving office fails to timely process the request, Appeals may use their delegated authority under IRM 1.2.44.5 to bypass the approving office and send the request directly to CLO.

5.12.9.9  (10-14-2013)
Requests for Withdrawal After the NFTL Has Been Released

  1. There is no legal prohibition on withdrawing a NFTL after the underlying lien has been released. A request for the withdrawal of a NFTL after the lien has been released may be considered under IRC § 6323(j)(1)(A), NFTL filed improperly, or 6323(j)(1)(D), best interests of the taxpayer and government.

  2. A request under IRC § 6323(j)(1)(A) for withdrawal of a NFTL that has been released should generally be granted if all the following conditions apply:

    • The taxpayer requests the withdrawal in writing; and

    • The taxpayer demonstrates that the original NFTL filing was improper or otherwise not in accordance with IRS procedures. See IRM 5.12.9.3.1 for further guidance on this provision.

  3. A withdrawal under IRC § 6323(j)(1)(A) may be issued whether a certificate of release was issued or the NFTL self-released.

  4. A request under IRC § 6323(j)(1)(D) for withdrawal of a NFTL where the underlying lien has been released will generally be granted if the following conditions apply:

    • The taxpayer requests the withdrawal in writing;

    • The taxpayer fully satisfied the liabilities on the NFTL;

    • A certificate of release was issued; and

    • The taxpayer is in compliance with filing requirements.

  5. For purposes of withdrawal under this provision, "fully satisfied" includes:

    • Tax liability was fully resolved by payment or credit offset;

    • Most circumstances where the tax assessment was abated because the taxpayer is no longer liable for the tax (e.g., amended return filed, reconsideration of additional assessment, innocent spouse determination, identity theft, or judicial ruling);

    • Abatement of penalty and/or interest due to reasonable cause resulted in zero balance; or

    • The taxpayer completed terms of an offer in compromise, including any related collateral agreements.

      Note:

      The completion of the five-year compliance period after acceptance of the offer is not a condition to determine “fully satisfied.”

  6. For this purpose, "fully satisfied" does not include:

    • Expiration of the statutory period for collection;

    • Discharge of taxes in bankruptcy; or

    • NFTLs that were improvidently or erroneously released and are subject to revocation.

  7. For purposes of this section of the IRM, “in compliance with filing requirements” includes:

    • All required Individual Master File (IMF) and Business Master File (BMF) returns, including information returns, for the prior three years have been filed; and

    • Current Estimated Tax Payments and Federal Tax Deposits (FTDs) have been paid.

  8. If the taxpayer has an unfiled return during any of the past three years, or appears to be delinquent with FTDs or Estimated Tax Payments, further investigation may be necessary as determined on a case-by-case basis. The taxpayer will be considered to be in compliance if the return was, or can be, closed for one of the following reasons:

    • Not liable for the tax period;

    • Income below the filing requirement;

    • Little or no tax due or due a refund; or

    • No longer liable for filing.

  9. The taxpayer may be requested to supply additional information, as necessary, to complete this determination.

  10. Generally, withdrawals will not be granted under IRC section 6323(j)(1)(D) for self-released liens unless extenuating circumstances are present. The determination to grant such request will be made on a case-by-case basis and with Advisory managerial approval. Examples of extenuating circumstances are as follows:

    Example:

    A taxpayer is attempting to secure a license required for their vocation (e.g., realtor, insurance sales), but the record of the self-released NFTL is impeding their ability to obtain the license. A review of the account shows the tax liabilities listed on the NFTL were reported as uncollectible due to economic hardship of the taxpayer for most of the ten-year collection period, and the taxpayer had no assets of value. The statutory period for collection on the liabilities has expired. The taxpayer is in compliance with current and the prior three years’ tax obligations. Withdrawal of the self-released lien may be granted.

    Example:

    The taxpayer has tentatively been offered an employment position if the self-released lien is withdrawn. The lien self-released due to statute expiration, and the taxpayer is in compliance with all current filing requirements. There is no indication the taxpayer had the ability to make payments, had any assets, or paid unsecured creditors instead of the IRS. Withdrawal of the self-released lien may be granted.

    Example:

    The taxpayer owes tax liabilities that were not included on the self-released lien and are not on any open NFTL. The taxpayer is now in a position to restructure a loan to pay the open liabilities but the self-released lien is hindering that process. The taxpayer is in compliance with current filing requirements. A withdrawal of the self-released lien may be granted.

  11. To consider self-released liens for withdrawal, the taxpayer must be in compliance with filing requirements, as stated in (7) above, and the statutory period(s) for collection for the liability(ies) on the NFTL must have expired. Liens that self-released in error and are subject to revocation do not qualify for withdrawal under these procedures. NFTLs that are comprised of a mix of fully satisfied and expired liabilities should be evaluated on a case-by-case basis.

  12. NFTLs that contain liabilities that have not been satisfied or expired are not subject to withdrawal under these procedures in this section; however, taxpayers may receive consideration of the withdrawal by following established procedures for requesting a withdrawal of a filed NFTL.

  13. In situations where more than one person is named on the NFTL (e.g., joint liability) and only one person applies for the withdrawal after release, the application should be treated as a request for a full withdrawal. However, if the applying taxpayer meets the requirements stipulated above but the other, non-applying taxpayer listed on the NFTL does not, a partial withdrawal after release may be issued.

5.12.9.9.1  (10-14-2013)
Processing Withdrawals After Release

  1. To process requests for withdrawal after release, follow the procedures in IRM 5.12.9.5 through 5.12.9.11 with the following exceptions noted in this section.

  2. Since the liabilities associated with the released lien have been satisfied, assignment of the request will be based on whether the taxpayer owes other liabilities. If the taxpayer has other balance due modules, the request should be reviewed by the Collection field employee assigned to those modules. If the taxpayer owes no other modules or the case is not assigned, the request will usually be forwarded to Advisory for review.

  3. The authority to approve withdrawals after release is found in IRM 1.2.44.5.

    If the withdrawal request is for a(n)... Then authority to process/approve/deny lies with...
    released NFTL related to an active case assigned to the field the Field Collection Group Manager
    released NFTL not related to any assigned case Advisory, Insolvency, or CLO
    expired, i.e., self-released, NFTL regardless of any related assignment Advisory

  4. Use Form 10916(A), Withdrawal of Notice of Federal Tax Lien After Release, for these post-release withdrawals.

  5. Use Letter 3044, Withdrawal After Release Cover Letter, to send a copy of the withdrawal after release to the taxpayer. For withdrawals generated through ALS, this letter is printed at CPS.

    Note:

    When Form 10916(A) is manually prepared, the Letter 3044 should also be signed by the delegated approving official. If it cannot be signed by the approving official, the Letter 3044 may be signed by another Service employee as long as the Form 10916(A) is appropriately approved.

  6. Since this withdrawal occurs after the original tax liability was satisfied, no adjustments will be made to the taxpayer’s account to abate the Transaction Code (TC) 360 lien fees previously assessed. Also, no additional filing fee will be charged to the taxpayer’s account for the cost of the withdrawal filing.

5.12.9.9.2  (10-14-2013)
Withdrawal Requests for NFTLs No Longer on ALS

  1. ALS retains records of released NFTLs for five years. After that time the records are purged from the system. Occasionally, a request may be received for withdrawal of a NFTL that is no longer on ALS.

    Note:

    Although very rare, it is possible that a NFTL may not be ALS because it was manually filed (i.e., not through CLO) and the information was never loaded onto ALS.

  2. Ask the taxpayer to provide a copy of the NFTL that was filed. Explain that it is not on our computer system and we need to have a copy of the originally filed NFTL in order to work the withdrawal request.

  3. Upon receiving a copy of the document, verify it is a NFTL and not some other type of lien.

    1. If it is not a NFTL, inform the taxpayer that we cannot assist them.

    2. If it is a NFTL, again check ALS both by TIN and by SLID to see if the NFTL is present and can be processed following standard procedures.

      Note:

      If the taxpayer is asking for withdrawal of a recorded judgment, no action can be taken. Withdrawals only apply to NFTLs. Advise DOJ and/or Counsel of the request.

  4. Make a determination if withdrawal of the released lien is appropriate by following IRM 5.12.9.9.

  5. Manually prepare Form 10916(A) and Letter 3044 using the ICS template or the PDF fillable version from the intranet.

    Note:

    Do not recreate the NFTL on ALS for the purpose of generating a withdrawal after release.

  6. Send the manual withdrawal to CLO and ask them to file the withdrawal in the appropriate recording office. In doing this, include a message to CLO advising them that the NFTL is no longer on ALS and therefore the withdrawal does not need to be added to the system. CLO will handle payment of the cost of recordation.

    1. Since the NFTL has fallen off ALS due to age, it may also have been archived at the recording office level and therefore problems may arise when trying to record the withdrawal document. If this unique situation exists, which may only present itself after trying to record the document, mail the original withdrawal to the taxpayer, explain the situation, and let the taxpayer pursue filing with the recording office, if they still desire to do so.

  7. Send a copy of the withdrawal and cover letter to the taxpayer.

  8. Control the case and document actions related to the request on ICS or AIS, as appropriate.

5.12.9.10  (10-14-2013)
Designated Payment Codes (DPC) Related to Liens and Lien Certificates

  1. IRM 5.1.2.8.1 provides detailed instructions on the use of DPCs and who may use them.

  2. Generally, employees should use one of the following DPCs, depending on the basis for the payment:

    • 07 - NFTL payoff

    • 53 - discharges

    • 55 - subordinations

    • 56 - NFTL withdrawals

    • 57 - judicial and non-judicial foreclosures

    • 58 - redemptions and releases of right of redemption

    • 59 - estate tax liens and payments as the result of the filing of a proof of claim in a probate proceeding.

5.12.9.11  (10-14-2013)
Documentation Requirements for Lien-Related Certificates

  1. Use ICS to control and monitor lien certificate cases. For field revenue officers, control will be through the assigned bal due or OI on ICS. For Advisory, a lien certificate case should be loaded into ICS within 7 calendar days of receipt.

  2. Use ICS to record actions taken on all applications for lien-related certificates. Document histories in a clear and complete manner so that actions relative to the case are readily understood. See IRM 5.13.2.7 for further details regarding case histories.

  3. Document the following in ICS histories regarding applications, investigations and issuance of all lien certificates:

    1. Date application or request was received.

    2. Identity of the employee assigned to work the investigation. Enter the name and title of the advisor or other employee reviewing the application/request/investigation. If, on a particular case, the ICS history entry is completed by an employee other than the employee working the case, then ensure that ALL employees working the case are identified in the history entry. When a case is transferred from one employee to another, ensure the name, title and employee number of the employee conducting the investigation is entered in ICS.

    3. Description of type of application.

    4. Code section under which the application/request was submitted.

    5. List of attachments and other documentation received.

    6. If appropriate, an analyses of other lienholders' positions.

    7. When appropriate, an analysis regarding "best interest of the government" considerations including a computation of the government's interest that shows the amount received is the government's interest.

    8. Any Counsel advice received, including the name and phone number of attorney.

    9. All communications with the applicant regarding the application for the certificate.

    10. Date certificate or denial letter was issued.

    11. Name and title of employee issuing the certificate.

    12. The name and title, if applicable (e.g. power of attorney, title agent, etc.), to whom the certificate was issued and their relationship to the taxpayer or applicant.

    13. Once a certificate is issued and if payment is received in exchange for the certificate, the amount received. If there is any difference in the amount expected and the amount received, explain and reconcile.

  4. If delays in case action occur, document the reason in the ICS history.

  5. Retain full information and documentation regarding approvals/denials of taxpayer requests in well organized case files, so that all documents can be easily located by any Service employee with a need to access the information. (See 5.12.9.11.1 regarding necessary documents to be kept in case files after closure.)

5.12.9.11.1  (10-14-2013)
Documents Kept In Case Files

  1. Keep original or copies of all documents that relate to investigations of lien certificate applications. Specifically, keep the following in case-files during investigation of applications, and after investigations are complete:

    • original application and attachments;

    • a copy (or facsimile) of the NFTL to which the application or investigation applies;

    • all documents referenced in the ICS history; and

    • a facsimile copy of the certificate or letter issued as a result of the investigation.

  2. Maintain documentation in an orderly manner so it may be consulted if further actions are necessary on the case.

  3. Retain files as specified in Document 12990, Records and Information Management Records Control Schedules.


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