Bulletin: TX000006

Dear Associates:

Effective July 1, 1989, Section 6334 of the Internal Revenue Code was amended to exempt from levy those properties used as the "principal residence" of the taxpayer.

The section was further amended to disallow this exemption from levy on the principal residence only in the event that:

"(1) a district director or assistant district director of the Internal Revenue Service personally approves (in writing) the levy of such property, or

(2) the Secretary finds that the collection of tax is in jeopardy".

Refinance of Federal Tax Liens:

Any time we must rely on subrogation to the IRS lien on the taxpayer's principal residence (i.e., residential homestead) in order to establish the validity or priority of our insured lien, we must ascertain that such property was not exempt from levy at the time of payoff. To establish the validity of the lien, you should require a written approval of levy signed by a district director or assistant district director of the Internal Revenue Service. If such person declines to execute such written approval, please contact the Houston Legal Department for further direction.

Release of Federal Tax Liens:

Another concern created by this amendment is the certain taxpayer challenge with which you will be faced when requiring payoffs and releases of IRS liens. When being asked to insure conveyances or mortgages of "exempt" property claimed to be the principal residence of the proposed seller/mortgagor, always require a release of the Federal Tax Lien; never rely on the "exempt" status to excuse payoff.