Congress should adopt a provision to allow taxpayers to
    administratively appeal a decision of the Collection Division to
    file a Notice of Federal Tax Lien when such filing would hamper
    or jeopardize collection of the tax.

Reasons for Change:

IRM 5426.1:(1) allows revenue officers the discretion to decide not to file a Notice of Federal Tax Lien when "the filing of a notice of lien would hamper collection." The revenue officer is supposed to be free to make his nonfiling decision if the balance due is under $2,000, and he is not even required to record the reasons why in the history sheet. If the case is between $2,000 and $5,000, the revenue officer must record the reasons for the nonfiling in the case history sheets, and no managerial approval is necessary (according to the IRM but some districts give the group manager approval authority anyway). Approval for nonfiling is required only when the case is over $5,000.

It was revealed during the Levin hearings, and I know this to be a fact, that in many districts revenue officers file Notices of Federal Tax Liens without regard for what it may do to the taxpayer's ability to borrow the money to pay the taxes. There are times when it is absolutely necessary that the tax lien not be filed in order not to disturb the ability of a financial institution to advance funds to the taxpayer. The issue of tax lien priorities is a very complex one often requiring litigation to untangle. Lenders are sometimes reluctant to advance funds to delinquent taxpayers unless they can be assured the IRS will not immediately enforce its lien priority, thereby putting the taxpayer out of business and jeopardizing the lender's chances of recovering the loan.

Revenue officers also testified during the Levin hearings that some group managers or branch chiefs would frequently deny their requests for nonfiling of the tax lien for no apparent reason. While this arbitrary enforcement philosophy is used by these managers on the pretext of protecting the government's interest, in fact they are actually jeopardizing the government's potential to collect tax money in the most efficient way. There are times when the government can collect more by helping the taxpayer work through his difficult periods and stay in business than by putting him out of business and selling his assets at nominal value. Sometimes the nonfiling of a tax lien is crucial to preservation of the business.

Taxpayers who can provide evidence that the filing of a Notice of Federal Tax Lien would hamper the collection of the tax ought to be able to administratively appeal the decision to file. Naturally, the appeal should be made outside of the Collection Division to an impartial source like the Ombudsman (more specifically the PRP officer) who could issue a Stop Action Order to temporarily delay filing the lien.