Survey of Colorado Tax Liens
| Publication year | 1985 |
| Pages | 1765 |
| Citation | Vol. 14 No. 9 Pg. 1765 |
1985, October, Pg. 1765. Survey of Colorado Tax Liens
J. Scott Needham, a 1985 graduate of the University of Colorado School of Law, is a law clerk for Judge Alan Sternberg of the Colorado Court of Appeals.
Many levels of Colorado government have been given legislatively created, nonconsensual liens to enforce tax, assessment and service obligations. These liens can affect a wide variety of normal commercial transactions and may be omnipresent where a taxpayer is in financial trouble.
Tax liens(fn1) are often secret and claimants usually enjoy priority and enforcement advantages relative to third-party creditors. Therefore, it is important for attorneys and others responsible for planning or untangling a financial history to be well-informed concerning the operation and potential effects of such liens. As a matter of policy favoring commercial and administrative efficiency, it is desirable that tax lien statutes provide this information with as much clarity as possible.
A subcommittee of the Ad Hoc Committee of the Corporation, Banking and Business Law Section of the Colorado Bar Association has concluded a preliminary study of Colorado tax lien statutes. The purpose of the study was to examine the statutes to determine whether a clear and consistent structure could be found and to attempt to describe that structure. This article presents the results of this study.
Research was based on a sample generated by a computer word search isolating the word "lien."(fn2) The following lien characteristics were considered: subject property, type of assessment, imposing authority, time of attachment, method of attachment, duration, priority, excepted classifications, collection procedures, redemption provisions, discharge procedures and possibilities for administrative verification. Examples of statutory language providing any of these characteristics were classified according to their probable common effect. The statutes were then arranged in a table ("Table") designed to display and describe common structural elements.
This article discusses areas of uniformity and unresolved confusion observed in the process of researching the Colorado tax lien structure. It is the product of an impressionistic review of the data and is intended to be illustrative and by no means exhaustive of the points considered. Conclusions are based primarily on a literal reading of the statutes. With certain significant exceptions, glosses imposed by case law or by practice are outside the scope of the article. After a brief description of Title 39 provisions governing general taxes, discussion follows the organization of the Table.
CRS § 39-1-107 provides a lien for general taxes. Subsection (1) states that the lien attaches to all taxable real and personal property at noon on the assessment date, which is January 1 of each year. Taxes, penalty interest and costs are declared to be a perpetual lien prior to all other liens until paid in full.(fn3)
The provisions of Article 3 describe what property interests may be exempt from taxation and therefore not subject to the lien;(fn4) Article 3.5 describes a tax deferral system available to persons over 65 years of age.(fn5)
Article 10 deals with collection procedures available to enforce the general tax lien. Taxes are to be collected by each county treasurer, but no lien can be filed or other collection procedures begun more than six years after the tax becomes due.(fn6) CRS § 39-10-103 provides that each taxpayer shall be mailed a statement of taxes due. Taxes may be paid in installments and the treasurer must issue receipts for payment and keep proper records thereof.(fn7) As soon as practicable after taxes become delinquent,(fn8) taxpayers must receive notice of delinquency by mail.(fn9)
CRS § 39-10-110 provides that names and addresses of delinquent taxpayers must be published in September, accompanied by a statement that taxable personal property shall be subject to distraint, seizure and sale, as described in CRS § 39-10-111. Collection by civil action is possible. Procedures are available by which erroneous levies may be abated and taxes due may be verified by written certification.(fn10)
The provisions of Article 11 describe sale procedures applicable to real property. Notice must be given to delinquent taxpayers, and the notice must be published.(fn11) CRS §§ 39-11-108 through 39-11-116 describe particular aspects of these procedures; for example, the statutes describe when the sale is to be held, who may purchase and what may be
The author wishes to acknowledge the assistance of Associate Dean Clifford Calhoun of the University of Colorado School of Law. His comments and moral support contributed greatly to the preparation of this article.
CRS § 39-11-128 provides notice procedures for occupants of the property and persons in whose name it has been taxed; i.e., possible title or claim holders. Transfers by tax deed are described in great detail.(fn14) Sale proceeds are to be distributed among taxing jurisdictions claiming delinquencies pursuant to CRS § 39-11-145. Liens "upon real property created by a tax certificate or a certificate of purchase" may exist for no longer than fifteen years (with exceptions in favor of liens held by government entities). Expiration of a lien cancels it, apparently without possibility of extension or revival.(fn15)
Article 12 describes procedures by which persons with claims to the property may redeem it. Redemption may be effected at any time prior to execution of a tax deed, and verification of a redemption is available.(fn16) Actions for recovery of land sold for taxes may be initiated within five years of execution of a tax deed,(fn17) but persons under disability at the time the deed was executed are given nine years.(fn18)
Although this structure is generally clear and complete, one significant interpretative problem must be considered. Wolf v. Antonoff(fn19) and City and County of Denver v. Tax Research Bureau(fn20) combine to create doubt as to when the lien of CRS § 39-1-107 attaches. The language construed in both Wolf and Tax Research Bureau was essentially that of CRS § 39-1-107(1): "[T]he lien of general taxes for the current year shall attach... at 12 noon on the assessment date."
The Colorado Supreme Court in Tax Research Bureau held that, because no lien could be effective until the amount of the tax obligation was ascertained and assessed, the general tax lien became effective only at levy, "at which time the theretofore inchoate lien relates back and attaches as of [the assessment date]."(fn21) The Wolf court stated that "the tax lien here in question attached ... on [the assessment date],"(fn22) but then, after stating the Tax Research Bureau result in favorable or (at least) neutral language, held that "as concerns the instant controversy the effective date of the treasurer's tax lien was [the assessment date]."(fn23)
In both opinions, the use of "effective" and "attached" is ambiguous, but Wolf may be read to say that the obligation of the general tax attaches and arises on the assessment date without relation back. Assessment and levy procedures may then be seen as perfection requirements, not preconditions of attachment. In Delaney v. City and County of Denver, the Tenth Circuit Court of Appeals apparently adopted the latter view.(fn24)
Because whenever the CRS § 39-1-107 lien attaches it is declared to be prior to all other liens, resolution of this question may be irrelevant for purposes of state law. However, proceedings under federal law may be affected significantly by the time of attachment issue. Financially troubled entities often initiate federal bankruptcy proceedings. When this occurs, statutory tax liens are almost certainly among the obligations sought to be discharged. In federal bankruptcy cases, pre-petition secured claims will be paid before administrative expenses.
If the CRS § 39-1-107 lien arises on January 1, it may be treated as a pre-petition secured claim with respect to bankruptcy petitions filed throughout the year in question. If the lien is created only after assessment and levy, it may be barred by the automatic stay provisions of the Bankruptcy Code and treated as an administrative expense. In this situation, it is possible that the taxes owed would not be collected at all.
Liens in respect of ad valorem taxes, described in the Table at I, are generally uniform in structure and content. The typical statute describes the collection and assessment duties of county officers regarding a particular tax, creating a perpetual lien for taxes, interest, penalties and costs of collection. The lien affects all taxable property within the jurisdiction of the taxing body and is given parity with the lien for general ad valorem taxes.(fn25) Because the imposing authority in each instance certifies these taxes to appropriate Boards of County Commissioners to be collected by the county treasurer as part of the general tax, presumably there is little chance that the enforcement procedures of one body will conflict with those of another.(fn26)
Certain characteristics are not specified in each statute, such as time of attachment, procedures for redemption and discharge and...
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