Massachusetts Agencies

Massachusetts Tax Liens: After-Acquired Property

Taxes—Income and Withholding

It is now settled that a Massachusetts tax lien will attach to after-acquired property. See Luchini v. Commissioner of Revenue, —Mass.App.Ct.—, —N.E.2d— (2002). It's likely, however, 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 in Clark 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.