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• Tax Liens in General
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• Corporate Tax Liens
• Federal Tax Liens
• State Tax Liens
• Private Tax Liens
• Real Estate Tax Liens
• Personal Property Tax Liens
• Non-Profit Organization Tax Liens
• Tax Liens Sales Procedures
• Tax Liens Trends
• Risk Analysis - Tax Liens
• Tax Liens and Competing Claims
• Tax Liens and Statute of Limitations
• Discharging a Tax Lien
• Tax Liens - From the Tax Lien Purchaser's Perspective
• Tax Liens - From the Government's Perspective
• Tax Liens - From the Tax Payer's Perspective
• Negative Effect of Tax Liens on 3rd Parties
• Pitfalls of Investing in Tax Liens
• Pitfalls of Tax Lien Sales for Taxation Authorities and Local Government

State Government Tax Liens

The tangled web of State government tax liens has at its heart the autonomy of the various States, being exercised in their individual treatment of tax administration. Unfortunately, this creates a maze of litigious procedures and conflicting data from State to State. The astute investor will notice that an attractive return to be had in the investment of tax liens is equally able to stem from the fact that a complex statutory procedure often allows the observant and learned investor to benefit from due diligence and preparation.

Different Horses for Different Courses
The challenge for investors in State government tax liens is the enormous variety in deadlines and procedural practices that need to be followed in a particular State. These procedures vary so considerably from State to State that caution needs to be exercised.

Particular State legislation may allow for that government’s tax liens to take priority over Federal tax liens, if the tax owed on the property is derived from the value of the property itself. This may occur even though the State procedural rules may not in fact require filing of the lien. Even if State liens do indeed require filing, they may take priority, even though the Federal lien was filed before that of the State.

Each State has different laws governing the administration of taxation, and so research of a particular State’s tax administration law is highly recommended.

The purchasing procedures for government issued tax liens also vary, and many may for example be a premium bidding process, where the highest bid for the premium of the lien wins the tax lien, or it may be a process of bidding down the interest rate return on the lien, in which the lowest rate that the investor will accept wins the lien. The owner of the property enjoys a redemption period in which to repay the lien to its holder and secure a release however, an interest rate of 16%-18% is also payable with the principle tax debt on the lien. Of course, once the redemption period expires, the holder of the lien is vested with the same rights as the original tax authority and is able to foreclose on the property.

State lien returns vary considerably, and range from approximately 5% in Oregon to a surprising 36% in Illinois. Redemption periods can also be inconsistent and can range from 4 months for vacant land in Nevada, to 6 months in Massachusetts, to 4 years in South Dakota.

Again, the period during the year that States hold their annual lien sales vary. Usually these sales are held for 2 months duration somewhere within the year, and these are predetermined in each State as a matter of course.

On an even more detailed basis, the conditions of lien sales differ from county to county, so it is imperative that the astute investor acquaints themselves with all the idiosyncrasies of that particular State or county, at least as far as their administration of taxation liens is concerned.

Sell Your Sanity for a Higher Return
From gathering this information, an objective analysis is able to be had in order to determine a possible yield for an investment. Certainly more evaluation of the underlying property over which the lien is held is warranted, but in consideration of the varying terms of sale between States, and also the vast difference in indicative yields and redemption periods, it is possible that an investor will be willing to accept a lower return on their investment in exchange for the relative simplicity and convenience of some State or county procedures.

Of course, the converse is also true. In return for intricate and detailed procedures being observed, with tenuous periods of redemption and risk for the investor of a tax lien, and also considering the possibility that if statutory procedures are not followed with precision, a lien may be set aside, a line purchaser may well demand a far higher return on their investment.

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