Davis v. Miss. State Tax Comm'n
| Docket Number: | 2009-CA-01739-SCT | |
| Supreme Court: | Opinion Link Opinion Date: 10-07-2010 Opinion Author: Chandler, J. Holding: Reversed and remanded. |
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| Additional Case Information: |
Topic: Wills & estates - Priority of tax liens - 31 U.S.C. § 3713 - 26 U.S.C. § 6323(a) - Section 27-7-55 - 26 C.F.R. § 301.6323(h)-1(g) - Judgment lien creditor Judge(s) Concurring: Waller, C.J., Carlson, P.J., Dickinson, Randolph, Lamar, Kitchens and Pierce, JJ. Non Participating Judge(s): Graves, P.J. Procedural History: Bench Trial Nature of the Case: CIVIL - WILLS, TRUSTS, AND ESTATES |
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| Party Name: | Attorney Name: | Brief(s) Available: | ||
| Appellant: | In Re: The Estate of Randall Scott Davis Deceased: Robin E. Davis, Administratrix and United States of America |
KENNETH W. ROSENBERG |
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| Appellee: | Mississippi State Tax Commission | JAMES L. POWELL, STEPHANIE V. ROGERS | ||
Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Wills & estates - Priority of tax liens - 31 U.S.C. § 3713 - 26 U.S.C. § 6323(a) - Section 27-7-55 - 26 C.F.R. § 301.6323(h)-1(g) - Judgment lien creditor |
| Summary of the Facts: | Randall Davis died intestate on December 6, 2004. Davis had not paid federal or state taxes for the years 1997 through 2004. The estate administratrix filed the overdue tax returns but failed to remit the taxes owed on the returns. Between August 8, 2005, and October 3, 2005, the Internal Revenue Service of the United States assessed federal tax liabilities against Davis’s estate. On October 6, 2005, and November 15, 2005, the Mississippi State Tax Commission filed notices of tax lien in the Chancery Court of Lee County for the years 1997 through 2004. On petition of the administratrix of Davis’s estate, the chancery court declared the estate to be insolvent, approved the sale of all assets, and initiated probate proceedings. In the probate proceedings, the IRS and the Commission both filed claims for unpaid taxes. The IRS claimed $209,612.85 for unpaid federal tax liabilities, and the Commission claimed $24,768.01 for unpaid state tax liabilities. Each taxing authority claimed priority. After a hearing, the chancery court determined all claims to be inferior to those asserted by the IRS and the Commission, and continued the hearing on the issue of priority. The estate filed an interpleader petition, which was granted by agreed order. The interpleader fund amounted to $23,900.18, after deductions of $3,000 for administratrix fees and $3,000 for attorney’s fees. The chancellor eventually found that the Commission was entitled to the funds. The chancellor determined that under 31 U.S.C. § 3713(a)(1)(B), commonly known as the federal priority statute, a claim of the United States against a deceased debtor’s insolvent estate is entitled to priority. However, the chancellor determined that the Commission would be entitled to priority if it qualified as a “judgment lien creditor” under 26 U.S.C. § 6323(a). The chancellor found that, because section 27-7-55 gives an enrolled notice of tax lien the status of a judgment, the Commission was a “judgment lien creditor” and entitled to a first priority interest in the interpleader funds. The IRS appeals. |
| Summary of Opinion Analysis: | In the absence of a federal statute, the common-law rule of “first in time, first in right” applies to determine the priority of tax liens and other liens in favor of the federal government. The federal priority statute, 31 U.S.C. § 3713, bestows priority upon certain claims of the federal government. Under the Federal Tax Lien Act, when a person fails to pay a tax after demand, a lien arises in favor of the United States upon all of the real or personal property and rights to property belonging to the debtor. However, under 26 U.S.C. § 6323(a), a federal tax lien is invalid as to a first-in-time judgment lien creditor. The federal priority statute does not give priority to an unrecorded federal tax lien when the competing claimant is a judgment lien creditor under Section 6323(a). Section 27-7-55 of the Mississippi Code gives a notice of tax lien filed by the Commission the status of a judgment. Federal tax liens against Davis’s estate arose under Section 6321 on the dates of the IRS assessments, made between August 8, 2005, and October 3, 2005. The Commission filed its notices of tax lien in chancery court on October 6, 2005, and November 15, 2005. Although no notice of the federal liens was filed in chancery court, the IRS argued that the federal liens had priority under the federal priority statute. However, the Commission argued that it had priority because Section 27-7-55 gave the notices of tax lien the status of judgments, qualifying the Commission as a judgment lien creditor under Section 6323(a). On appeal, the IRS and the Commission agree that the Commission would have had priority if it was a judgment lien creditor within the meaning of Section 6323(a). The parties disagree on whether the Commission met the definition of “judgment lien creditor.” The IRS argues that the Commission did not meet the definition of “judgment lien creditor” provided by 26 C.F.R. § 301.6323(h)-1(g) because the enrolled notice of tax lien was based on an administrative determination rather than a court judgment. The IRS points out that the regulation specifically states that the term ‘judgment’ does not include the determination of a quasi-judicial body or of an individual acting in a quasi-judicial capacity such as the action of State taxing authorities. The definition of “judgment lien creditor” is determinable under federal law. The notices of tax lien filed by the Commission were determinations by an administrative body, not judgments obtained from a court of record. Therefore, the Commission was not a judgment lien creditor under Section 6323, and the IRS was entitled to priority under 31 U.S.C. 3713. |
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