Massachusetts Agencies

Foreclosure: Notice to the IRS

Federal Tax and Tax Liens

Section 7425 of Title 26 provides, in part, as follows:

[A] sale of property on which the United States has or claims a lien . . . made . . . pursuant to a nonjudicial [foreclosure] sale . . . shall, except as otherwise provided, be made subject to and without disturbing such lien . . . if notice of such lien was filed . . . more than thirty days before such sale and the United States is not given notice of such sale in the manner prescribed in subsection (c)(1). (Emphasis added).

Subsection (c)(1) referred to above provides:

Notice of a sale to which [the above provision applies] shall be given (in accordance with regulations prescribed by the Secretary) in writing, by registered or certified mail or by personal service, not less that 25 days prior to such sale, to the Secretary. (Emphasis added).

The regulations require certain information be included in the notice to the government, but from my reading thereof I note that although they set out the familiar requirements as to what the required notice must include, they also provide:

[W]here the person who submitted a timely notice which indicates his name and address does not receive, more than five days prior to the date of the sale, written notification from the district director that the notice is inadequate, the notice shall be considered adequate for purposes of this section. (Emphasis added).

Assuming that (1) notice was timely,[1] (2) the notice contained at least the name and address of the party submitting the same and (3) said party did not receive written notification from the district director as to the inadequacy of the notice at least five days before the sale, I believe that the notice to the Internal Revenue Service would be sufficient under the statute and regulations, and that the lien was effectively wiped out by the foreclosure. An affidavit could be used to attest to these facts.

1 Although the District Office has indicated in writing that notice must be received by the Internal Revenue Service at least twenty-five days proper to sale, the regulation do not support this view. CFR §301.7425—3T(a)(1) addresses generally the requirements for giving notices of sale pursuant to IRC §7425. With specific reference to Gary’s question, the regulation states as follows: “The provisions of [IRC] section[] 7502 (relating to timely mailing treated as timely filing) … appl[ies] in the case of notices required to be made under this paragraph.” IRC §7502, in turn, says that “If any return, claim, statement, or other document required to be filed…within a prescribed period or on or before a prescribed date under authority of any provision of the internal revenue laws is, after such period or such date, delivered by United States mail to the agency, officer, or office with which such return, claim, statement, or other document is required to be filed, or to which such payment is required to be made, the date of the United States postmark stamped on the cover in which such return, claim, statement, or other document, or payment, is mailed shall be deemed to be the date of delivery or the date of payment, as the case may be.”

To paraphrase that last section: if you mail a document that implicates an IRS deadline, as long as the postmark is dated before the deadline, you’re okay even if the letter is delivered after the deadline.