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The Rules and Regulations Governing Tax Liens

08th December 2009
By Paul Smith in Taxes
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To better collect taxes in their various jurisdictions, every state has come up with its own rules and regulations, but a federal provision insists that the various states must comply with the Fourteenth Amendment of the Constitution. This constitutional provision provides that every citizen must take advantage of the due process of law prior to a refusal by this right buy the courts in relation to the property of the taxpayer.

Separate Jurisdictions Have Separate Legal Rules and Regulations

Ad valorem tax as of right has priority over all other liens on the property of a debtor all over the United States. Still yet, there is no unified legal provision regulating the administration of tax liens on property and it is known that not less than 150 systems exist, all aimed at recovering property tax. This therefore means that every state has a duty to come up with its own procedure or laws for collecting tax debts. This will also mean that the various laws by these states may conflict with what the constitution provides. This matter was put to rest in 1983 by the Supreme Court in Mennonite Board of Missions v Adams. As per the laws of Indiana State, it was mandatory on the tax authorities that any imminent foreclosure would be notified to the general public for three weeks and this notification will be made for at least once a week. A buyer of a tax sale from Elkhart County could not get title insurance because the tax sale was the subject matter of the deal. He brought an action to quiet title. In a proceeding that followed, a certified mortgagee brought an action contesting the authority of the notice issued by Elkhart County.

The 14th Amendment -Due Process of the Law Must Be Adhered To

The legal authorities in their assertion that justice must be equally provided to all, have found out that the Fourteenth Amendment is a constitutional object which protects that right of every citizen that the due process of law must be followed in every proceeding. Therefore, enough and reasonable notification must be made to all sides of the case. Failure to implement this will mean a breach of the constitutional rights of the citizen. This constitutional provision has been misunderstood and misinterpreted by some states especially on the issue of notification. There are conflicting views as to what enough notification is.

It should be recalled that in the 1983 case cited above, the courts in relations to tax liens and insolvency, the mortgagee has a clear right as to notification, but other creditors have not been accorded this right because the law was unclear and indecisive on this issue. It was not until five years later when a way out of this was gotten in Tulsa Professional Collection Services. Inc v Pope, in which it was held that at the same time as the various states are coming up with their own procedure for recovering tax debts, and while they confer these rights to third parties through some agreement to recover these tax debts, and for the purpose of maintaining that the provisions of the Fourteenth Amendment of the constitution should not be breached, any other creditor or third party will be given the same notification like the mortgagee in the case of Mennonite Board.

Things are still not clear today because the ‘Model Real Property Tax Collection Law' assumed by the National Municipal League in 1935 makes it possible for a double process where property is first put up for sale out of any court action and this will be preceded by a constitutional right to a period of redemption and the taxpayer is given a chance over this period to redeem his debts. The period of grace for this redemption is a year, after which the second phase of foreclosure is certain. Both processes will call for due observance of the law especially on the issue of notification, without which any tax sales will be invalid.

Find out more about private tax liens as well as procedures for tax liens sales when you visit, the top resource portal on IRS tax liens
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