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entity. A lien against personal property
is filed in the Connecticut Secretary of
State's office.
The matter of personal property is
somewhat complicated in the case of a
business entity. First, one must deter-
mine whether Connecticut is the enti-
ty's "principal executive office." The
"principal executive office" is the place
where the major management deci-
sions are made. This may be different
from the "principal place of business,"
which is a term that applies in other
areas of the law. If the principal execu-
tive office is in Connecticut, then the
lien will be filed in the Secretary of
State's office. If the principal executive
office is in another state, then the rules
of that particular state will determine
where the lien is filed.
After the lien is filed, the IRS has five
business days to send a notice to the
taxpayer of the filing of the lien. This
notice is important because it begins
the clock running for the taxpayer's
right to challenge the lien. Taxpayers
challenge the lien by requesting a
"Collection Due Process (CDP)
Hearing." Taxpayers must request the
CDP hearing within 30 days of the date
on the notice of the filing. Taxpayers
will be expected to provide all relevant
information requested before the CDP
hearing, including financial statements,
to help in the consideration of the facts
and issues involved in the hearing.
At the hearing, taxpayers may present
their arguments to an independent
appeals officer often referred to as the
Settlement Officer. The hearing may be
conducted in person or over the phone.
Taxpayers may "raise any relevant
issue relating to the unpaid tax at the
hearing, including appropriate spousal
defenses, challenges to the appropri-
ateness of the Notice of Federal Tax
Lien (NFTL) filing, and offers of collec-
tion alternatives." In practice, taxpayers
seeking a collection alternative will gen-
erally have to show why collection
would be improved by the removal of
the lien. Otherwise, a request to remove
a lien will generally be denied. In addi-
tion, if taxpayers did not receive a statu-
tory notice of deficiency for a tax liability
or did not otherwise have an opportuni-
ty to dispute the tax liability, then they
may also raise challenges to the exis-
tence or amount of the underlying liabil-
ity itself. Taxpayer may not raise an
issue that was already raised and con-
sidered at a previous CDP hearing,
administrative, or judicial proceeding.
The Settlement Officer will make a
decision and communicate it to taxpay-
ers via a Letter of Determination. Like
the notice of the filing, this letter is
important in part because it starts the
clock running on the taxpayers' final
opportunity to challenge the IRS. If tax-
payers disagree with the determina-
tion, then they have 30 days from the
Letter of Determination to file a petition
in the Tax Court. It is the rare case
indeed where taxpayers will be suc-
cessful in appealing to the court.
Conclusion
The IRS lien process has a broad-
reaching effect on taxpayers' property
rights. Consequently, it is very impor-
tant for taxpayers and practitioners to
be aware of the rules and rights listed
in the code and regulations. This article
provided an introductory overview of
the lien process. The next article will
detail who has priority in the proceeds
of the property when a lien has
attached. The final article will discuss
removal, discharge, and subordination
of the federal tax lien.
Laura E. Pisarello,
Esq. is an attorney
with Convicer, Percy
&
Green
in
Glastonbury.
She
concentrates in tax
controversy, includ-
ing representation before the IRS and
the
Connecticut
Department
of
Revenue Services. In addition, she
handles probate matters, estate plan-
ning,
and
business
succession
planning. She can be reached at
lpisarello@convicerpercy.com. Special
thanks to Attorney Eric L. Green for
use of his materials and Attorney
Richard G. Convicer for his review and
helpful comments.
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