A bond for the purpose of securing payment of internal revenue taxes, is collateral security offered by the taxpayer, his/her representative or a third party which satisfies the provisions of IRC 7101 and Treasury Reg. Sec. 301–7101–1. IRC 7101

Treasury Reg. Sec. 7101–1(b)(1) and (2) specify the kinds of security acceptable for securing payment of internal revenue taxes as provided in Title 6, Section 15. of the United States Code.

Treasury Department Circular No. 570, Companies Holding Certificates of Authority as Acceptable Securities on Federal Bonds, etc., periodically lists the companies certified by the Secretary of the Treasury as acceptable sureties on Federal bonds. This list also shows the areas in which the companies are licensed to transact business and the underwriting limitations applicable to each company.

A bond executed by surety not holding a certificate of authority approved by the Secretary of the Treasury shall be accompanied by financial statements of the surety or sureties. The Taxpayer's proposal to pay will be submitted with the bond.

Bonds or notes of the United States should be unconditionally guaranteed as to both interest and principal. United States Savings Bonds, Defense Savings Bonds and War Savings Bonds issued under the authority of Section 22 of the Second Liberty Loan Act, as amended, may not be hypothecated, pledged as collateral or used as security for the performance of an obligation, except as provided in Treasury Department Circular No. 530, 31 CFR Part 315. This circular also provides that savings bonds may be registered in co-ownership form only in the names of natural persons.

Treasury Reg. Sec. 301–7101–1(b)(2) allows the Area Director to consider a bond as being executed with satisfactory security, in lieu of execution by an approved surety company or in lieu of being secured by bonds or notes of the United States, if it is:

Security must be submitted with a suitable bond agreement executed by the taxpayer and any third party which may be guaranteeing payment.

Bond executed with surety should be submitted in a format acceptable to the Area Director

Ascertain from Area Counsel whether a time limitation for the validity of the types of checks below are provided by state laws in his/her respective state.

For corporate stocks or bonds, especially unlisted securities:

Persons required to be registered for purposes of the federal excise tax on taxable fuel imposed by IRC § 4081 may be required, as a condition of registration, to furnish a bond and agree to the imposition of a lien. IRC § 4101.

Application for Registration (for certain excise tax activities) is made on Form 637. Refer to IRM 4.24.2 for procedures and circumstances when the agent may recommend to the Area Director that a bond be required as a condition of registration.

Refer to IRC § 4101(b)and Manufacturers and Retailers Excise Tax Regulations 48.4101-1(j) for the form and amount of the bond.

See § 48.4081-3T for rules relating to posting of customs bonds for entries of taxable fuel.

Bonds or other types of collateral accepted by Advisory or Estate & Gift from estates securing extensions of time to pay estate taxes under IRC §§ IRC 6161 IRC 6163 and IRC 6166 will be maintained for safekeeping by Advisory.

Bonds and other types of collateral accepted by Estate & Gift from estates securing contingent estate tax liabilities under IRC 2056A relating to Qualified Domestic Trusts (QDOTs) will also be maintained for safekeeping by Advisory.

When circumstances indicate extension of the period for collection of tax, the Service will normally have the Department of Justice reduce the tax claim to judgment. In rare situations, to extend the time period in which the tax may be paid or to obtain a lien on a piece of property to which the federal tax lien never attached, the Service may obtain a consensual lien (mortgage or deed of trust) from the taxpayer.

The advice and approval of Area Counsel for any anticipated consensual lien are vital. Service personnel must recognize that state law determines if the consensual lien exists and if the lien will be enforceable. Failure to comply with state law may make the consensual lien invalid or unenforceable.

In all situations where Service personnel contemplate obtaining a consensual lien, Area Counsel should be contacted as soon as possible and their approval secured.

These considerations limit the use of the consensual lien to rare circumstances. It may be appropriate when the federal tax lien does not attach to the property in question. For example, an assessment exists against only one spouse and the federal tax lien does not attach to real property held by the non-liable spouse. To avoid collection from property that the lien encumbers, the couple may decide to give the Service a consensual lien on property held by the non-liable spouse.

The Service should never obtain a consensual lien in lieu of filing a notice of federal tax lien and reducing the tax claim to judgment or requiring that the taxpayer post a bond.

The facts and circumstances of a particular case will determine the duration of the consensual lien. Area Counsel must specifically advise the Service concerning the state law issues regarding the duration of the lien and its refiling.

The mortgage or deed of trust must be prepared by the Taxpayer's counsel. The advice of private counsel negates later claims that the taxpayer did not know or understand his rights. The instrument must be executed in favor of the United States, as mortgagee, and should contain a clause expressly providing that it may be released by the Area Director, Compliance, Internal Revenue Service, for the geographic area in which the mortgage is recorded. Do not include the name of the official. All fees in connection with the instrument, including recording and releasing fees, must be paid directly by the mortgagor.

Whenever possible, the instrument should provide that the taxpayer make payments over the life of the mortgage, thereby reducing interest and principal.

Revenue Officers must ascertain whether there are any senior lienholders on the property being offered as collateral. Specific information obtained on any senior liens should include the current status of the lien interest and the potential for default by the taxpayer, which would then force the Service to either redeem the property or lose its interest in the property held as collateral.

The Collection Group Manager receiving the mortgage/deed of trust will immediately contact Area Counsel for their review of the instrument and all related documents. If the Group Manager approves of the mortgage/deed of trust, these documents will be forwarded to the Advisory Group Manager for review.

If the Advisory Group Manager and Area Counsel approve the mortgage/deed of trust, the instrument will be returned to the initiating Collection Group Managers to be filed as provided under local law.

Explore escrow arrangements when prompt action is required to safeguard the Government's interests, to obtain cash security on which the tax lien has not attached, and allow the taxpayer to remain in business during the time required for:

Make certain:

Provide the following information to the Advisory Group Manager where an escrow agreement is to be executed:

Allows the taxpayer to remain in business and protects the Governments interest and is acceptable for:

Cases arising under §§ IRC 6165and IRC 6166

Consult with Area Counsel regarding the terms, conditions and duration of the instrument.

Costs in connection with securing and issuing the instrument and other related expenses must be paid by the taxpayer.

To adequately protect the interest of the United States, the letter of credit must:

When a Letter of Credit is considered submit the following data to Advisory:

Advisory will:

Collateral inventory is controlled through IRACS. The inventory is maintained in the IRACS database. Refer to IRM 3.17.63.24.3 for additional information regarding IRACS collateral.

This information is maintained by the IRACS Unit at the Ogden Campus and is reported to each Advisory Area monthly.