Filing an IRS Federal Tax Lien against a ship registered with the United States Coast Guard (USCG) burdens the ship and prevents the apparent transfer of title unless it is complied, waived or proven null and void. To secure a clear transfer, you will have to deal with paperwork for two federal bureaucratic organizations, but it can be done.
I have a client who discovered there was an IRS lien on his ship. Federal Tax Liens (FTL) have long expired due to statute of limitations but the USCG will not allow titles to transfer their records without documentation from the IRS. We managed to get the USCG National Ship Documentation Center to remove the FTL. It took a lot of back and forth between the IRS, the Coast Guard, and my office to resolve this issue.
First of all there is the issue of Federal Tax liability. If the FTL expires or has been paid for, you obtain a Federal Tax Lien Release Certificate (Release). But you must have specific data about the Release which is usually not provided. Releases must indicate the place of submission as “US Coast Guard, National Vessel Documentation Center, Falling Waters, WV” and must include ship-specific data such as original recording documentation.
Just because you may have a buyer but it costs less than the FTL amount, doesn’t mean you can’t sell the boat. If you sell your boat for less than the FTL value, then you must apply for a Certificate of Discharge of Property from the Federal Tax Lien. You will be asked to obtain an independent assessment and other documentation. Generally, if the IRS gets full value after cost of sale, they will likely approve a Lien Waiver on board. This process will allow the title to be transferred to the new buyer.
Most workers in the Lien Department do not know how to handle discharges for ships. They will often send you the Standard Release, but it won’t do you any good. You may need to seek assistance from a Registered Agent, Attorney or CPA with experience in this field or the Taxpayer’s Advocate Office. You can contact them directly by phone at: 1-800-913-6050. Be prepared for extended holding times.
Their postal address is:
Internal Revenue Service
Centralized Lien Operation
PO Box 145595
Stop 8420G
Cincinnati, OH 45250-5595
If you own a ship that has been encumbered by a Federal Tax Lien and you need to sell it or dispose of title, don’t give up. With the right documentation, you can resolve issues on condition that your tax liability has expired, been removed from the ship, or fulfilled.
