8.10 State Tax Liens

• Library: Enforcement of Liens and Judgments in Virginia (Virginia CLE) (2019 Ed.)

8.10 STATE TAX LIENS

The liens acquired by state taxing authorities, other than the local real estate lien that is given superpriority in I.R.C. § 6323(b)(6), receive no

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mention in section 6323. Consequently, state tax liens receive no special priority over the federal tax lien. The rule of choateness applies in contests between these two liens. The state cannot achieve priority over the federal tax lien by characterizing itself as a judgment lien creditor, ⁸⁰ nor can the state's lien defeat the federal tax lien based on the state's characterization of choateness. ⁸¹

The issue of states trying to characterize themselves as judgment lien creditors has been addressed by an IRS regulation. Treasury Regulation § 301.6323(h)-1(g) provides that "judgment lien creditor" means:

A person who has obtained a valid judgment, in a court of record and of competent jurisdiction, for the recovery of specifically designated property or for a certain sum of money. . . . The term "judgment" does not include the determination of a quasi-judicial body or of an individual acting in a quasi-judicial capacity such as the action of State taxing authorities." ⁸²

The regulation has been cited by the Supreme Court as having the effect of law. ⁸³

The issue of a state's...