Release number 200939023 of 2009-09-25

• Date: 25 September 2009
• Year: 2009
• Record Number: 200939023
• UILC Number: 6323.07-00

ID:

Office:

UILC:

CCA_2009072714351825

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6323.07-00

Number: 200939023

Release Date: 9/25/2009

From: ----------------

Sent: Monday, July 27, 2009 2:35:23 PM

To: --------------------------

Cc: -------------------------------------

Subject: Wyoming Usage Fees

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The Service needs to nail down the subsidiary lien priority question. The levy issue is easy. There are

only two defenses to a levy action. Unless it is not the taxpayer's property, or unless the proceeds are

subject to judicial attachment, --------------must remit the withheld funds (including the 4% to the Service).

See U.S. v. National Bank of Commerce, 472 U.S. 713 (1985). A claim of lien priority is not a defense to

levy. However, it would not be efficient for the Service to receive the property only to have the state of

Wyoming sue on the lien. Accord Rev. Rul. 2006-42.

For all creditors not listed in section 6323 (e.g., a state taxing authority), priority is determined under the

judicial doctrine of choateness, under which first in time is first in right. See U.S. v. City of New Britain,

347 U.S. 81 (1954). A state-created lien arises when the state takes administrative steps to fix the

taxpayer's liability. If there was no state tax assessment, which your stated facts seem to suggest, then

the state's interest would not prime the government's interest under section 6323. The date of demand

letter would be immaterial. See Minnesota v. U.S., 184 F.3d 725 (8th Cir. 1999); City of New Britain, 347

U.S. 81. You likely can work this out via a conference call that would include a representative of ------------

------and the contact representative for the state.

A good starting point would be the GL-1 lessons. Here is the blurb from lesson 4, Priority of Federal Tax

Lien (1/2009), regarding competing state tax liens.

D. State Tax Liens

1. Basic Rule: A state or local tax lien is entitled to priority over a

federal tax lien only if it is a choate lien prior to the time the federal

tax lien arises. United States v. City of New Britain, 347 U.S. 81

(1954). But see In re WPG, Inc., 282 BR 66 (D.D.C. 2002) (District

of Columbia sales tax lien had superpriority over prior choate

federal tax lien in Chapter 11 bankruptcy case, where D.C.

superpriority statute constituted federal law).

a. A state's characterization of its tax liens as choate is not

conclusive for federal tax lien purposes. Illinois ex. rel.

Gordon v. Campbell, 329 U.S. 362 (1946). See also In Re

Priest, 712 F.2d 1326 (9th Cir. 1983), mod. 725 F.2d 477

(1984), holding a state law ineffective which stated that a tax

lien arose when the tax return was "due and payable" on the