Under 26 U.S.C. Section 7425(b), if a federal tax lien is filed more than 30 days before the date of a foreclosure sale, the United States must be given notice of the sale in writing by registered mail, certified mail or personal service at least 25 days before the date of the sale. If the United States is not given notice, the foreclosure will be subject to the federal tax lien, which would have been inferior otherwise. Therefore, when there is a subordinate tax lien that affects property which is the subject of a foreclosure, notice of the foreclosure must be given to the IRS. For the notice to be adequate, it must be given at least 25 days before the date of the foreclosure sale and must contain the following information:
iii) With respect to the property to be sold, the following information --
If the above information is not included in the notice, it will be considered inadequate by a district director. If the notice is inadequate, under Federal Tax Regulations Section 301.7425-3(d)(2), the district director is to give written notice to the person who submitted the notice of what information is inadequate. However, when the name and address of the person submitting the notice is not included, the notice is inadequate for all purposes, and the district director is not required to notify anyone of the inadequacy.
If the district director gives notice of the inadequacy, a notice complying with the above requirements must be submitted at least 25 days before the date of the scheduled foreclosure sale.
If notice is given on time and contains the name and address of the person who submitted it, the district director must give written notice of the inadequacy to the person who submitted it at least 5 days before the date of the sale. If the district director does not do so, the notice will be considered adequate.
The district director also has discretion to consent to the sale of the property free of the lien or the title of the United States even if notice is given less than 25 days before the scheduled sale.
When a title examiner discovers a federal tax lien in connection with a foreclosure, it should be brought to our underwriters attention to assess the adequacy of any notice given and possible risks which might result from an inadequacy in the notice or failure to file a timely notice.