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Franchise Tax Board Lien Release

Here is a quick summary of some of the procedure surrounding Franchise Tax Board lien release:

An FTB lien can be released without being satisfied under the following situations:

• Franchise Tax Board (FTB) staff determines the amount due is sufficiently secured by a state tax lien on other property or the release of lien will not jeopardize collection

 

• FTB staff finds the liability underlying the state tax lien is legally unenforceable. For instance, in certain circumstances a liability may become legally unenforceable as a result of a discharge in bankruptcy proceedings under federal law

 

• FTB has determined that the state tax lien has been recorded in error. In those instances FTB must send a copy of the lien release to the three major credit reporting companies

 

• A partial Franchise Tax Board lien release fully removes a state tax lien from a specific piece of property as described in the partial release. Other property owned by the entity, or subsequently acquired by the entity, remains subject to the state tax lien

 

A Franchise Tax Board lien release establishes a public record showing the state tax lien was satisfied and no longer encumbers the taxpayer or entity’s property. If the FTB has recorded a NSTL in a county recorder's office and the liability secured by the lien is satisfied in full, Government Code Section 7174(c) requires the department to issue a release of lien not later than 40 days after the liability is satisfied. If the department has filed a NSTL with the Secretary of State (SOS) and the liability secured by the lien is satisfied in full, Government Code Section 7174(e) requires the FTB do one of the following not later than 40 days after the liability is satisfied:

• File a Franchise Tax Board lien releasewith the SOS

• Deposit in the mail, or otherwise deliver, a Franchise Tax Board lien release to the taxpayer

 

If FTB finds that lien is insufficiently secure or is unenforceable (as a result of bankruptcy discharge, for example), FTB in its own discretion may or may not release the lien. Liens recorded in error must be released. A NSTL is considered recorded in error if any of the following circumstances exist:

• Notice was recorded after the effective date of payment of the liability

• Notice was recorded using an incorrect name or Social Security Number (SSN) (a typographical error or an SSN used by the taxpayer does not invalidate the lien)

• Liability underlying the state tax lien was established in error

• Notice was recorded using an incorrect entity name, Federal Employer Identification Number (FEIN), or corporation number.

 

In those instances when a lien is issued in error, Revenue and Taxation Code Section 21019 states, 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. For married taxpayers, if one spouse is granted relief from liability, the state tax lien should be released with respect to that one spouse only. Please note that there is a difference between a Franchise Tax Board lien release and a withdrawal.

 

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