There is no such thing as an IRS nominee Lien or an IRS alter ego lien. The only tax lien provided for under the Internal Revenue Code is the statutory lien against all property and rights to property of the taxpayer which arises as a result of an assessment, along with notice and demand. Nevertheless, the IRS sometimes files a document which it calls a “notice of nominee lien”or “notice of alter ego lien.” The document should really be titled as a “nominee notice of lien”because it’s function is to give notice that the IRS contends that the statutory lien against the taxpayer attaches to the property, even though the property is titled in the name of someone or some entity other than the name of the taxpayer against whom there is a notice of lien on file.
Despite the fact that the documents are misnamed they are usually effective to tie up the property. Where the IRS can have problems is if a Revenue Officer actually acts on the notion that a separate lien has been created. If, upon being paid the value of the property or concluding that the property is worthless, or that the taxpayer had no interest in the property, the Revenue Officer releases the lien or if the notice has a self-release legend and the notice is not refilled, the consequence is that the statutory lien is released, not just the so-called nominee or alter-ego lien. This can be especially problematic where the affected property is in a jurisdiction other than the jurisdiction of the taxpayer’s residence. The property must be discharged from the statutory lien or the notice must be withdrawn in order to preserve the statutory lien. Also, since the only notice that actually relates to the statutory loan is the notice against the taxpayer, that notice must be filed and refilled in the jurisdiction where the property is located as well as in the jurisdiction of the taxpayer’s residence.
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