A tax lien is a lien imposed on property by law to secure payment of taxes. Tax liens may be imposed for delinquent taxes owed on real property or personal property), or as a result of failure to pay income taxes or other taxes.

Tax liens in connection with property taxes

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Unlike personal debts, tax liens on real estate "run with the land"; that is, a property owner becomes responsible for payment even if the tax obligation was incurred by a prior owner. Depending on the law of the State or jurisdiction, the owner of the property may also be personally liable for payment of the taxes.

Payment of a tax lien may occur through various methods:

• Payment may be made directly by the property owner or, in many cases, indirectly by the mortgage holder using an escrow account. Notice is given both to the property owner and mortgage holder when a property tax is delinquent; thus, even if the property owner does not have an escrow account on the mortgage, the mortgage company will receive notice of the delinquency and may pay the tax. The mortgage company will then demand repayment from the owner/borrower and/or create an escrow account to recoup the proceeds, since the mortgage company might lose some of the value of its mortgage lien if the property were sold by the taxing agency to satisfy unpaid taxes foreclosure.
• If a property is sold by the owner prior to tax foreclosure by the government body, the tax lien (which is generally discovered as part of a title search) is usually paid as part of closing costs from the sale proceeds.
• Procedures vary from State to State. Generally, in the event a tax lien on personal property is not paid within a specified time (and after several notices are generally given), the property may be seized and sold at foreclosure sale. On real property, one of two methods may be used: either the property may be seized and sold (a tax deed sale), or in some States the tax lien may be offered to investors (in the form of a tax lien certificate) with an accompanying right for the investor, after a specified period of time, to institute foreclosure proceedings (a tax lien sale).

Federal tax lien in the United States

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In the United States, the Federal tax lien may arise in connection with any kind of Federal tax, including but not limited to income tax, gift tax, or estate tax.

Internal Revenue Code section 6321 provides:

Sec. 6321. LIEN FOR TAXES.

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belong to such person.

See .

Under the doctrine of Glass City Bank v. United States, 326 U.S. 265 (1945), the tax lien applies not only to property and rights to property owned by the taxpayer at the time of the assessment, but also to after-acquired property (i.e., to any property owned by the taxpayer during the life of the lien).

The term "assessment" refers to the statutory assessment made by the Internal Revenue Service under .

Internal Revenue Code section 6322 provides:

Sec. 6322. PERIOD OF LIEN.

Unless another date is specifically fixed by law, the lien imposed by section 6321 shall arise at the time the assessment is made and shall continue until the liability for the amount so assessed (or a judgment against the taxpayer arising out of such liability) is satisfied or becomes unenforceable by reason of lapse of time.

See .

The statute of limitations under which a Federal tax lien may become "unenforceable by reason of lapse of time" is found at . For taxes assessed on or after November 6, 1990, the lien generally becomes unenforceable ten years after the date of assessment (for taxes assessed on or before November 5, 1990, six years after the date of assessment).

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