|This information is taken from the FTB web site and provided here as a convenience.|
|4340 RELEASE OF LIEN|
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1. Once a Notice of State Tax Lien has been recorded or filed to create a public record of the existence of the state tax lien, a release of lien Form FTB 2730, must be recorded or filed to establish a public record that the state tax lien has been satisfied and no longer encumbers the taxpayer’s property.
2. A release of lien will be automatically issued by the PIT Accounts Receivable Collection System (ARCS) for recordation when tax years included on the Notice of State Tax Lien are paid in full and:
3. If a Notice of State Tax Lien was issued outside of ARCS and was not converted to ARCS, a release of lien must be manually issued using ((ARCS Initiate Correspondence)). Refer to ARCS PIT Lien Processing Manual for instruction on how to release a lien not in ARCS.
1. If the department has recorded a Notice of State Tax Lien in a county recorder’s office and the liability secured by the lien is satisfied in full, Section 7174(c) of the Government Code requires the department to record a release of lien not later than 40 days after the liability is satisfied.
2. If the department has filed a Notice of State Tax Lien with the Secretary of State and the liability secured by the lien is satisfied in full, Section 7174(e) requires the department do one of the following not later than 40 days after the liability is satisfied:
1. Section 7174(a) of the Government Code permits the release of all or any portion of the property subject to a state tax lien if the department determines the amount due is sufficiently secured by a state tax lien on other property or the release of lien will not jeopardize collection.
2. Section 7174(b) of the Government Code permits the release of a state tax lien if the department finds the liability underlying the state tax lien is legally unenforceable. A liability may become legally unenforceable as a result of a discharge in bankruptcy proceedings under federal law.
1. A Notice of State Tax Lien is considered to have been recorded in error in any of the following circumstances:
2. Upon finding a Notice of State Tax Lien recorded in error, a release of lien will be issued and mailed to the entity recording the lien as soon as possible, but not later than seven working days, after this determination or the receipt of the lien recording information, whichever is later (RT & C 21019c).. The release of lien should bear the statement “Release without fee. Recorded in error (G.C.27361.3)”. The section of the Government Code noted provides that no fee shall be charged the state for recording a release of lien if the Notice of State Tax Lien was recorded in error.
1. In those instances when a lien is issued in error, Section 21019 of the Revenue and Taxation Code provides that upon request from the taxpayer, the department must send a copy of the lien release to the three major credit reporting companies in the county where the lien was filed.
2. Upon receiving a request from the taxpayer to notify a credit reporting company that a lien was issued in error, the collector will do the following:
1. The department issues numerous assessments based upon adjustments made by the Internal Revenue Service to the taxpayer’s federal tax return. These adjustments are reported to the department on Revenue Agent’s Reports (RAR’s). Occasionally, after the department has issued an assessment based on an RAR and the assessment has become final (no timely protested filed), it is discovered that the IRS adjustments have been protested and are not yet final. If a Notice of State Tax Lien has been recorded or filed, it should be released.
2. If a Notice of State Tax Lien was recorded in a county, the release of lien should indicate the notice was recorded in error (CPM Section 4340.04).
A Notice of State Tax Lien may be recorded or filed showing both spouses names based upon a joint tax liability. If one spouse is granted relief from liability, the state tax lien may be released with respect to that one spouse only. Refer to the ARCS PIT Lien Processing Manual for instructions on How to Perform a Single Party Lien Release.
1. Title to real property is normally passed under a title insurance policy that requires a title search. This search will uncover liens recorded against the seller and buyer in the county where the property is located. Liens discovered during title searches must be resolved before clear title can be conveyed.
2. The term “Demand and Release” pertains to situations where a preliminary title search discloses a lien and the escrow company, title company, financial institution, or attorney wishes to obtain clear title.
3. When a Demand request is received, the user (on associated cases) or the Lien Group (on unassociated cases) will prepare the Demand for Payment, Form FTB 2600, instructing the escrow holder to pay the tax liability including collection and lien release fees, in order to obtain a lien release. This payment is usually made at the close of escrow. The lien will automatically release after payment in full has posted to the case. Refer to the ARCS PIT Lien Processing Manual for instruction on How to Issue a Demand.
A release of lien may be requested on an immediate basis based on the following scenarios:
1. Liens recorded in error (CPM Section 4340.04) – upon taxpayer demand.
2. Protested assessments (CPM Section 4340.05) – upon taxpayer demand.
3. Liens recorded to secure a state tax liability (CPM Section 4340.02) – upon taxpayer demand after payment in full, in cash or certified funds.
Should these or similar circumstances occur, the collector should:
a. Investigate to insure that an immediate release is warranted.
b. If warranted, release the lien through the Accounts Receivable Collection System (ARCS) ((**Proprietary Information**)). If the lien is not in ARCS, prepare a lien release using ARCS ((**Proprietary Information**)). Refer to the ARCS PIT Lien Processing Manual for instructions on How to Release a Lien.
c. Provide the taxpayer a copy of the lien release or the taxpayer copy of a filed in error release.
d. Mail the original lien release (if required – a billing transmittal) to the appropriate county recorders’ office for recording.
1. A partial release of lien fully removes a state tax lien from a specific piece of property as described in the partial release. Other property owned by the taxpayer, or subsequently acquired by the taxpayer, remains subject to the state tax lien.
2. The determination to issue a partial release must be made by a collection supervisor or designee. The partial release must bear the signature of the collection division chief.
3. Section 7174 of the Government Code authorizes the department to issue a partial lien release when it is determined that the liability is sufficiently secured by a lien on other property or that the partial release will not jeopardize the collection of the liability.
4. Requests for partial releases are common in cases when the taxpayer no longer owns property which is somehow encumbered by the state tax lien. This can occur as a result of a transfer of title by way of foreclosure or, in some cases, a Grant Deed in Lieu of Foreclosure. A partial release may also be appropriate when the taxpayer is selling property for an amount insufficient to satisfy the liability and it is in the best interest of the department to permit the sale and accept less that the full amount due from the taxpayer. HOWEVER, in many cases a partial lien release is unnecessary and inappropriate since the lien does not attach that specific property and/or the individual involved in the sale of the property. The department is not required to, and should not, issue a partial release when the lien in question does not attach the property. The requester should be referred to Government Code Sections 7170-7191, which explains the state tax lien and attachment thereof.
5. Consideration will be given to a request for a partial release, after the taxpayer or requesting party submits the following information:
6. If the decision is made to issue a partial release, the taxpayer or requestor will be advised of the conditions under which the release may be recorded. If the partial release is issued subject to certain conditions such as payment of the amount of the taxpayer’s equity to the department, the partial release, with a letter of instructions (Form FTB 2931), will be furnished only to an impartial agent, such as an escrow agent. The impartial agent will be responsible for recording the partial release with the appropriate county recorders. Refer to ARCS PIT Lien Processing Manual for instructions on how to issue a Partial Lien Release.