Massachusetts Agencies

After-Acquired Property Purchase Money Mortgage

Federal Tax and Tax Liens

Massachusetts tax liens will attach to after-acquired property. See Luchini v. Commissioner of Revenue, 436 Mass. 403,764 N.E.2d 870 (2002), where it was stated:

Although a question of first impression in the Commonwealth, the parallel language of the Federal tax lien statutes . . . . (Citations omitted.) We find the Federal precedent persuasive. * * * The statutory language establishing that a lien "upon all property and rights to property, whether real or personal, belonging to [the taxpayer] . . . shall continue until the liability ... is satisfied," G.L. c. 62C, § 50( a), indicates that "the lien applies to property owned by the delinquent at any time during the life of the lien." Glass City Bank v. United States, 326 U.S. 265, 66 S.Ct. 108, 90 L.Ed. 56 (1945) at 268, 66 S.Ct. 108. Therefore, liens may attach to after‑acquired property.

This analysis would support the view that other liens might be treated the same with respect to after-acquired property. In this regard, it’s likely, however, due to the fact that the decision refers to and tracks federal law that the court would hold that such a lien would not take priority over a purchase money mortgage. Because the court in Luchini came to its conclusion based upon an analogy to federal law as it applied to a federal tax lien it’s just as likely that the court would adopt the reasoning of the federal regulation regarding purchase money mortgages. That is, Revenue Ruling 68-57, Tech. Info.Rel 957, issued Nov. 11, 1968 (cited in Eno and Hovey, Massachusetts Practice - Real Estate Law with Forms, West Publishing Co., (Third Edition, 1995), §11.16) states:

In view of the legislative history of the Federal Tax Lien Act of 1966[1], the Internal Revenue Service will consider that a purchase money security interest or mortgage valid under local law is protected even though it may arise after a notice of federal tax lien has been filed.

The mortgage should (but does not have to) recite that it is a purchase money mortgage. In such a case the Massachusetts tax lien will “catch” the buyer’s title, but will be subordinate to your mortgage.

Moreover, the theory has been applied by the Massachusetts courts in similar circumstances inClark v. Munroe, 14 Mass. 350 (1817) and Libbey v. Tidden, 192 Mass. 175, 184 N.E. 313 (1906).

CAVEAT: It is only a purchase money mortgage which could enjoy the aforementioned priority over a Massachusetts tax lien. Where the mortgage is a refinance mortgage, the tax lien will take priority over it.

1 The federal taxing laws were substantially overhauled by the Internal Revenue Code of 1986, but I can see no reason why the Revenue Ruling 68-57, which was promulgated under the old code, would be inapplicable under the present law.