Federal Tax Liens & the Receiver Part II
By Rosen, Charles*
(In Part 1 in the last issue of Receivership News Mr. Rosen
discussed the creation of the federal tax lien, and tips for investigating
and resolving attendant issues. In his conclusion, Mr. Rosen addresses
dealing with a recalcitrant IRS, and the basis for potential personal
liability for a receiver who doesn’t honor a proper government lien.)
How Does Potential Personal Liability of
the Receiver Arise?
Payments by a person in control of a corporation – including a receiver – or in control of and administering assets of an individual are encompassed by this statute. See, Lakeshore Apartments, Inc. v. U.S., 351 F2d 349 (9th Circuit, 1965); U.S. v. Spitzer, 261 F.Supp. 754 (S.D.N.Y. 1966).
A divestiture of the insolvent taxpayer’s property in a legal proceeding is required to create this priority. U.S. v. Oklahoma, 361 US 253 (1923). However, A Federal tax lien may be subordinate to a perfected judgment lien creditor on certain (real) property. U.S. v. Estate of Romani, 523 US 517 (1998). This case resolved an apparent conflict between 31 USC sec. 3713(a) and IRC sec. 6323(a) and the case would appear to protect a receiver from personal liability where the receiver has paid senior perfected lien creditors.
The statute is keyed to the insolvency of the debtor. A debtor usually falls into insolvency when its liabilities exceed its assets. See Lakeshore Apartments, Inc., v. U.S., 351 F2d 349, 353 (9th Cir 1965). The government may exercise this statutorily created priority even though taxes have not yet been assessed . . . let alone a tax lien created. The claim for taxes constitutes the “debt.” U.S. v. Moore, 423 US 77, 96 SCt 310 (1975); Viles v. Commissioner, 233 F2d 376 (6th Cir 1956).
There is personal liability to those in control of a corporation’s affairs at a time when preferential payments are made and the corporation is insolvent. See Lakeshore Apartments, Inc. v. U.S., 351 F2d 349 (9th Cir 1965). (This can include officers, directors, or shareholders [or a receiver or cases involving individuals rather than a corporation].) In U.S. v. Spitzer, 261 F.Supp 754 (DC SD NY 1966), the court held liable officers, directors and stockholders who either directed or controlled wrongful payments, or know of the payments from the corporation and failed to stop them. The court also stated that no statute of limitations applied to a claim under § 3713. This could just as likely be applied to a receiver who made such payments absent a court order and absent notice, including adequate and complete notice and information - to the United States and the I.R.S.
*CHARLES F. ROSEN, ESQ. of the Law Offices of A. Lavar Taylor has substantial tax expertise involving receiverships and bankruptcy. For more than twenty years Mr. Rosen served as a bankruptcy advisor for the Special Procedures branch of the Internal Revenue Service.