Chapter 5 - § 5.3 • STATE OF COLORADO TAX LIENS

• Jurisdiction: Colorado

§ 5.3 • STATE OF COLORADO TAX LIENS

§ 5.3.1—Generally

Prior to 2008, C.R.S. § 39-20-103(1) provided that the remedy of someone with a prior lien against property also encumbered by a lien for taxes owed to the State of Colorado was to request the Department of Revenue to commence a civil action to enforce its lien and, if no such action was filed within two months, to commence a civil action to determine the rights of the State of Colorado in the property. Although there was no judicial authority, some believed this was the exclusive remedy available to divest a tax lien owing to the State of Colorado. C.R.S. § 39-20-103(2) clarifies that most tax liens of the State of Colorado may be divested in a public trustee foreclosure. This section also allows the State of Colorado the same redemption rights as other lienors. This provision allows more certainty in the public trustee foreclosure process.

§ 5.3.2—Tax Liens Affected

The only State of Colorado tax lien excepted from the provision allowing divestiture in a public trustee foreclosure is the lien for withholding taxes under C.R.S. § 39-22-604, which is granted priority. This seems to be unnecessary, because a public trustee foreclosure cannot divest liens that have priority over the lien being foreclosed. Perhaps the reference to priority was included because, although the tax lien may be recorded after the lien being foreclosed, it has an earlier priority than its recording date. That leaves open the question of the ability to divest the priority lien against a distributor owing excise tax upon gasoline and other special fuels under C.R.S. § 39-27-105.5. Alternatively, perhaps the reference is to allow divestiture of the lien for withholding taxes if the mortgagee has exempted the property from that lien under C.R.S. § 39-22-604(7)(b), an option apparently not available to a mortgagee of a distributor of gasoline or special fuels. The problem with this interpretation is that C.R.S. § 39-22-604(7)(b) says the exemption means the lien does not attach to the assets of the employer.

The provisions of C.R.S. § 39-20-103(2) allow the State of Colorado to assert tax liens for sales taxes (C.R.S. § 39-26-118(3)), use taxes (C.R.S. § 39-26-205), estate taxes (C.R.S. § 39-23.5-108(5)), and general liens asserted by the Department of Revenue under C.R.S. § 39-21-114(4), to be divested in the public trustee process without going through a judicial foreclosure. Further, judgment liens of the State of Colorado for...