State tax warrants as senior claims

Listen instead

The same material, read aloud and told more loosely than it is written. Nothing is said in it that this page does not also say.

That same recording, with the writing lit line by line as it plays and the sections listed beside it, is on its own page.

Filed like a judgment, deemed to be one

Tax Law 692¹ describes the mechanism for personal income tax and it is short enough to follow end to end.

The commissioner issues a warrant to a sheriff. Subsection (d) requires a copy to be filed with the county clerk within five days, and the clerk enters the taxpayer in the judgment docket, in the column for judgment debtors, with the amount and the date the copy was filed. That amount becomes a lien on the title to and interest in the taxpayer's property.

Subsection (e) finishes the job. Once the warrant is filed, the state is deemed to have obtained judgment against the taxpayer. No court entered it and no case number exists. Tax Law 1092² does the same, under articles nine and nine-A, for the corporate franchise taxes.

The date on the docket is not always the date of the lien

For income tax the warrant's filing date is the date that matters. For the franchise taxes it is not, and this is the part that catches people.

Tax Law 1092(j)(1) makes each tax imposed by articles nine, nine-A, nine-B and nine-C a lien on the date the return was required to be filed, without regard to any extension. Not the assessment date. Not the warrant date. The day the return was due, which may be years before anything was docketed and is not written anywhere on the warrant.

A creditor reading the docket sees a 2024 filing and places it behind their own 2022 judgment. The statute may place it in 2019. Two claims that look ordered are not ordered the way the register displays them.

What it does not reach without a second filing

The lien created by filing with the county clerk is narrower than it reads.

Both sections say the same thing in the same place: the lien does not apply to personal property unless the warrant is also filed in the Department of State. So a warrant on file in one county and nowhere else binds real property there and leaves the bank account, the vehicle and the equipment alone.

Which means the absence of a Department of State filing is information, and it is information a county search will never show you, because it is a fact about a different office.

What outranks it

A tax lien is not automatically first, and 1092(j)(1) says so at length.

The lien of each such tax is subject to the lien of any mortgage indebtedness existing against the real property before the tax became a lien, where that mortgage was incurred in good faith and was not given to an officer or stockholder of the corporation owning the property. It is also subject to local taxes and assessments, and that one runs without regard to when the local lien accrued.

There is a further carve-out worth knowing. Where title passed from an individual, or from a corporation owing no franchise tax, to a corporation that is in default, the lien is enforceable only against the equity remaining after the prior mortgage.

It expires, and on two different clocks

Subsection (j)(3) sets the outside limit, and the answer depends on who is asking.

Taxes that became a lien under that subsection cease to be a lien twenty years from the date they became due and payable. As against a person who would be a good faith purchaser of the real estate but for the tax, and as against the holder of a mortgage who would be a good faith holder but for the tax, the period is ten years instead.

So the same warrant can be alive against the taxpayer and dead against the bank. The document does not change. The person reading it does. The limitation does not apply to a transfer made with intent to avoid payment, or to a grantee corporation controlled by the grantor.

A release is its own document

Paying a tax warrant does not delete it, for the same reason paying a mortgage does not delete the mortgage.

Both statutes provide that the tax commission may release property from the lien and that the release may be recorded in the office where the warrant was filed. Under 1092(j)(2) a release of real property is applied for, costs fifty dollars, and may be recorded wherever conveyances are recorded.

So the warrant and its release are two entries, and a search that returns the first without the second returns a claim that has already been satisfied. Counting it is the same error as counting a retired mortgage, in the same direction, for the same reason.

What this does not cover

Two articles of one state's tax law, and nothing federal.

Federal tax liens run on their own scheme with their own filing offices and their own notice rules, and none of the sections above touch them. Sales tax under article twenty-eight, and the other taxes the Tax Law imposes, have their own collection sections that resemble these two without being identical. Read the one that applies.

Nobody writing this is a lawyer and none of it is advice. Whether a particular warrant attaches to a particular parcel, and from what date, is a question for counsel with the assessment history in front of them. What a page can do is narrower. It can tell you that the date in the docket column is a filing date, and that for some taxes the statute picks an earlier one.