Revoking the Release of the Federal Tax Lien and Appointing a Receiver

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In United States v. Evseroff the Eastern District of New York rendered an opinion which seems to have brought a case with procedural history spanning almost 15 years and six prior decisions to conclusion. After appointing a receiver to sell Mr. Evseroff’s residence, the property at the heart of this case, the court gave him 35 days to vacate and declined his invitation to exercise equitable powers to stay the appointment of the receiver and the sale of the property.

Since both the revocation of the release of federal tax lien and the appointment of a receiver are unusual procedural actions, with the appointment of a receiver the much more unusual of the two, a discussion of the Evseroff case provides an opportunity to examine two little used procedures and to look at another situation in which the Court declines to exercise its equitable powers to stop a sale.


Mr. Evseroff, a retired attorney, owns a valuable house in Brooklyn. After, or in conjunction with, incurring substantial tax liabilities, he transferred the house to a trust. In an earlier proceeding the Second Circuit, overturning the district court, determined that the transfer of the house to the trust was fraudulent.

Because the property at issue in this case serves as the taxpayer’s personal residence, the IRS has two primary choices as it seeks to get the unpaid taxes out of the taxpayer’s equity in the property. Ignoring for a moment the appointment of a receiver in this case which represents a very rarely used third choice, the normal choices available to the IRS involve seeking to administratively sell the house after an ex parte hearing before a District Court judge or Federal Magistrate as provided in IRC 6334(e)(1) or bringing a suit in federal district court to foreclose the federal tax lien pursuant to IRC 7403. On April 18, 2014, the IRS issued guidance on how to proceed in these cases. The guidance makes clear that the IRS prefers the administrative course and seeks to use foreclosure proceedings (or the appointment of a receiver) only in the more difficult cases.

While this case journeyed through the courts for many years, the IRS improvidently released the notice of federal tax lien filed against Mr. Evseroff. Section 6325(a) provides for lien release where the tax is satisfied or no longer enforceable. Occasionally, the IRS will issue a release when it should not. The opinion contains a suggestion that Mr. Evseroff’s representative may have played an inappropriate role in the release; however, that issue went unresolved and did not impact the outcome of the case.

When the IRS releases a lien improvidently, it has the ability to reverse the release. It must follow the procedures of IRC 6325(f)(2) which involves filing a release revocation form in the same place(s) where it recorded the release. Revoking the release requires little effort; however, the process of releasing the federal tax lien and then revoking the release can have very negative consequences on the priority of the federal tax lien vis a vis other competing creditors.

During the period between the release and its revocation, other creditors, or a purchaser, can intervene to defeat the federal tax lien. Here, that did not appear to happen. The IRS discovered its mistake relatively quickly. No one purchased the property during the period after the release or recorded a mortgage or judgment. So, the improvident release did not harm the IRS. A taxpayer who thinks the federal tax lien has been improvidently released may want to act quickly if they want to get the value of the property without the burden of the lien. Considering the earlier transfer to a trust in this case in an apparent attempt to defeat the federal tax lien, Mr. Evseroff’s failure to sell or encumber the property during the period when the federal tax lien did not attach to the property suggests his earlier action did not evince an effort to defeat the federal tax lien or, if it did, he no longer sought to do so or did not appreciate the window of opportunity.

The federal tax lien release can occur either with the filing of a release with the court(s) where the notice was recorded or it can occur with the passage of time. The more frequent cause of inadvertent releases, which themselves are rare, results from a combination of the failure of the IRS to refile the notice within the appropriate period coupled with the self releasing feature of the notice of federal tax lien. The IRS incorporated the self releasing feature into the notice in the early 1980s because it could not keep up with all of the releases it needed to file in order to meet its statutory obligation to release a lien once the liability was satisfied or became unenforceable. The IRS monitors its liens to determine when they will self release and refiles them when appropriate – usually when something has extended the statute of limitations on collection. It occasionally fails to properly monitor a lien resulting in an unintended release. As mentioned above, fixing the improvident release requires little effort but the release itself can have dire consequences for the priority of the federal tax lien in its competition with other creditors or purchasers of any encumbered property.

Aside from the lien release issue, Mr. Evseroff’s case contains another interesting issue because of the appointment of a receiver. The appointment of a receiver got scant attention in the opinion yet this action by the IRS rarely occurs. Usually, the IRS simply forecloses its lien on the property subject to a lien and sells the property itself. It does not see the appointment of a receiver because of the expense of paying the receiver and, quite often, the difficulty in finding a receiver willing to accept the task and acceptable to the IRS. Getting a receiver appointed also requires a demonstration to the court of the necessity of a receiver. The opinion contained little or no information guiding a reader to an understanding of why it chose to appoint a receiver here. The motion seeking the appointment of a receiver makes it clear that the receiver here is a real estate agent experienced in the Brooklyn. The motion also includes information that the IRS expects to recover more for the property by selling it through a local real estate agent than a typical IRS sale. This approach makes a great deal of sense but is not one I routinely encountered when I worked at Chief Counsel’s office.

I can offer some speculation based on other situations in which I have seen a receiver appointed. Usually, the property needs to have characteristics that will make sale of the property by the IRS difficult or one in which the IRS will obtain a depressed price. About 15 years ago the IRS split the function for sale of property off from an occasional duty of a revenue officer handling the account into a special unit, the Property Appraisal and Liquidation Specialists (PALS) unit. The individuals assigned to the PALS unit do nothing but sell property. As a consequence, they know the complicated rules under the Internal Revenue Code for selling property and the market for such sales better than revenue officers did. Because of the low number of seizures and sales of property following the Revenue Reform Act of 1998, a typical revenue officer might sell property only a handful of times through a career. This specialization brings many benefits while losing very little except for the local market contacts some of the senior revenue officers had developed.

Some types of property exceeds even the capacity of the PALS unit to property market and sometimes even the clear title following a judgment and foreclosure of the lien will still not make it beneficial for the government to conduct a sale. In those circumstances, the IRS should consider the appointment of a receiver by the court because a knowledgeable receiver will better market the property. If done correctly the increased price will benefit the IRS (and the taxpayer) because it will more than pay for the extra expense of the receiver. Typical IRS sales bring in a depressed sales price because of the nature of the sale. A receiver has the opportunity to market the property in a manner much more likely to achieve a fair market value for the property.

Aside from the legal issues presented here involving lien release and the appointment of a receiver, the case also presents another view at the factors a court considers when asked to exercise its equitable powers to postpone foreclosure, or in this case the appointment of a receiver. Mr. Evseroff made the request and the Court relatively easily said no. He argued that his “age, physical condition, history as an attorney, veteran and law-abiding taxpayer, as well as the age of this case” should factor into the Court’s decision to grant a stay. The Court found that unlike the Rodgers case Mr. Evseroff’s wife did not have an interest in the property. It also found that appointing a receiver rather than simply allowing the IRS to foreclose was itself an equitable result. His tax liabilities were over 10 years old (not an unusual age in these types of cases) and they were so old because of his actions to hinder and delay the IRS from collecting. When someone has been found to have made a fraudulent transfer of property, they need to have significant equity on their side in order to persuade a court to exercise its discretion using the Rodgers factors. Mr. Evseroff did not have enough equity to overcome his earlier actions.



  1. George Griffith says

    Any precedent for a Divorce Court-appointed Receiver selling the divorced couple’s residence in such a manner that will extinguish / release / vacate an IRS lien against that property? How can this be achieved?

    • The short answer is paying the tax will remove the lien. The longer answer requires knowing whether the lien reaches any equity in the property. The receiver sells the property subject to applicable liens just as the taxpayers’ would. The receiver could obtain a discharge and have the lien attach to the proceeds. If there is no equity in the property to which the federal tax lien attaches, the receiver could apply for a discharge on that basis and the discharge would extinguish the lien with respect to this property.

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