CUNA Comment Letter
Proposed Rule Withdrawal of Federal Tax Lien Notice
September 28, 1999
Internal Revenue Service
POB 7604, Room 5228
Ben Franklin Station
Washington, D.C. 20044
RE: Proposed Rule Withdrawal of Federal Tax Lien Notice
Dear Sir or Madam:
The Credit Union National Association (CUNA) appreciates the opportunity to comment on the Internal Revenue Service (IRS) proposed rule that would allow for the withdrawal of federal tax lien notices in certain circumstances, which was published in the Federal Register on June 30, 1999. CUNA represents more than 90 percent of our nation's 11,000 state and federal credit unions.
The proposed rule will authorize the IRS district director or the director of a service center to withdraw notices of federal tax liens under certain circumstances. The rule would allow taxpayers to request in writing that IRS notify any credit reporting agency, financial institution, or creditor of the withdrawal. The withdrawal would not affect the underlying tax lien, but would relinquish any lien priority the IRS obtained under Section 6323 of the Internal Revenue Code (Code) at the time the IRS filed the notice.
Under the rules, an IRS director would have the authority to withdraw federal tax lien notices if one of the following conditions exists:
- the filing of the notice was premature or otherwise not in accordance with the administrative procedures;
- the taxpayer has entered into an agreement under Section 6159 of the Code to satisfy the liability for which the lien was imposed through installment payments, unless the agreement by its terms provides that the notice will not be withdrawn;
- the withdrawal of the notice will facilitate collection of the tax liability for which the lien was imposed; or
- the withdrawal of the notice would be in the best interests of the taxpayer, as determined by the National Taxpayer Advocate, and in the best interests of the United States, as determined by the director.
Because only the notice of the federal tax lien would be removed, and not the lien itself, we are concerned that the credit reports for these individuals will be inaccurate. For example, if a credit union member has entered into an agreement to pay installments to the IRS and then applies for a loan, the credit report will not provide the credit union with an accurate credit description if the tax lien notice is withdrawn. Credit unions will be better protected in such situations if either notices are filed for all federal tax liens or if there is some other indication on the credit report that the debt in question is being paid under an installment plan.
Two of the conditions for withdrawal of the federal tax lien notice are if the withdrawal would facilitate collection of the tax liability or if the withdrawal would be in the best interests of the taxpayer and the United States. We are concerned that situations may arise where withdrawal of the notice may satisfy one or both of these conditions, but under a situation where a credit union would make a loan that otherwise would not be made if the notice was not withdrawn.
Although withdrawal of the federal tax lien notice will benefit the credit union members who are subject to liens, the processing of the withdrawal will impose additional costs on credit unions. Because the withdrawal of the notices is related to the IRS collection process, we believe that the IRS should absorb this additional expense.
Thank you for the opportunity to comment on the proposed rule that would allow for the withdrawal of federal tax lien notices in certain circumstances. If IRS staff have questions about our comments, please give me a call at 202-218-7795.
Assistant General Counsel