A tax lien is a legal claim a government places on real estate or other assets when the owner is past due on taxes. It can affect the owner’s credit score and ability to sell or refinance the property. Some municipalities may sell tax liens to investors who pay the tax bill in return for the right to collect the money and interest from property owners. This can be a risky but potentially profitable investment strategy.

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UCC filing where the secured party is the IRS

If the IRS wants to file a statewide tax lien against a taxpayer’s personal property, the document evidencing the lien will be filed with the secretary of state’s office. Most states (if not all) index the IRS liens along with the UCC-1 financing statement liens. Although the tax lien is indexed with the UCC filings, the tax lien is not a UCC filing.

The reasoning for indexing the federal tax liens with the UCC-1 filings has to do with a potential bankruptcy filing by the debtor/taxpayer. In most cases, there will be an issue of which lien takes priority in the bankruptcy case. The date of filing with the secretary of state usually decides the issue of priority.