State tax warrants as senior claims

0:27Filed like a judgment, deemed to be one

Start with the mechanism. Filed like a judgment, deemed to be one.

Tax Law 692 describes it for personal income tax, and it's 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 5 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. No case number exists. And Tax Law 1092 does the same for the corporate franchise taxes, under articles nine and nine-A.

1:23The date on the docket is not always the date of the lien

Now here's the part that catches people. The date on the docket isn't always the date of the lien.

For income tax, the warrant's filing date is the date that matters. The franchise taxes run on an earlier one.

Tax Law 1092, subsection J, paragraph 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. The day the return was due, and nothing about the assessment or the warrant moves it.

Which may be years before anything was docketed. And it isn't written anywhere on the warrant.

So you read the docket, you see a 2024 filing, and you place it behind your own 2022 judgment. The statute may place it in 2019. Two claims that look ordered are not ordered the way the register displays them.

2:16What it does not reach without a second filing

Then there's what it doesn't 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 doesn't 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's information your county search will never show you, because it's a fact about a different office.

2:56What outranks it

So what outranks it.

A tax lien isn't automatically first, and 1092, subsection J, paragraph 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 wasn't given to an officer or stockholder of the corporation owning the property. It's also subject to local taxes and assessments, and that one runs without regard to when the local lien accrued.

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

3:46It expires, and on two different clocks

And it expires. On two different clocks, depending on who's asking.

Subsection J, paragraph 3, sets the outside limit.

Taxes that became a lien under that subsection cease to be a lien 20 years from the date they became due and payable. But as against a person who'd be a good faith purchaser of the real estate but for the tax, and as against the holder of a mortgage who'd be a good faith holder but for the tax, the period is 10 years instead.

So the same warrant can be alive against the taxpayer and dead against the bank. The document doesn't change. The person reading it does.

That limitation doesn't apply to a transfer made with intent to avoid payment, or to a grantee corporation controlled by the grantor.

4:38A release is its own document

And a release is its own document.

Paying a tax warrant doesn't delete it. Same reason paying a mortgage doesn't 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, subsection J, paragraph 2, a release of real property is applied for, costs $50, and may be recorded wherever conveyances are recorded.

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

5:26What this does not cover

Here's what I'm not covering.

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 I just gave you touch them. Sales tax under article 28, and the other taxes the Tax Law imposes, have their own collection sections. They resemble these two without being identical, so read the one that applies.

I'm not a lawyer and none of this 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 I can tell you is narrower. The date in the docket column is a filing date. And for some taxes, the statute picks an earlier one.

So when a warrant turns up in a docket search, treat the filing date as the beginning of the question. The federal liens run on a scheme that reverses this one, and that's the piece to read next.