For a discussion of the types of actions against the United States authorized under 28 U.S.C. § 2410, see CCDM 34.1.1.8, Interpleader/Quiet Title/Foreclosure or Other Actions Involving Property in Which IRS May Claim an Interest.

Title 28 U.S.C. § 2410(b) sets forth the matters required to be alleged in a complaint, the procedures for the service of process on the United States, and the time available to file an answer or other pleading.

Except in interpleader suits, or those quiet title suits involving special condition Notices of Federal Tax Lien (nominee, alter ego, transferee, or successor in interest), the U.S. Attorney should forward a copy of the complaint to, and contact the Territory Manager, Technical Services and request information concerning the assessment, the property involved, and the claims of all lien holders.

The statute permits the United States to be joined as a party defendant in state or federal courts having jurisdiction of the subject matter. Most section 2410 cases are handled by Assistant U.S. Attorneys, but the Tax Division handles all interpleader suits and those quiet title suits that involve nominee, alter ego, transferee, or successor in interest issues. Field Counsel will open a case only for cases referred to the Tax Division, or in other cases where:

The U.S. Attorney may, depending on local procedures, send copies of the summons and complaint to Field Counsel and request assistance. The Tax Division may also request assistance in some cases.

The complaint should be examined to determine whether the case is a proper 2410 action. If the action does not come within section 2410, the Tax Division or U.S. Attorney should be notified together with an explanation as to the appropriate action that should be taken.

The U.S. Attorney’s office should be advised as to the position of the Service. If additional information is necessary, the Area Director should furnish it directly to the U.S. Attorney with copies to Field Counsel.

Expedited consideration of whether to authorize counterclaims is required to enable the Department of Justice to remove the case from state to federal court within the 30-day removal period. There is no requirement that Collection provide a Form 4477, Civil Suit Recommendation, or other authorization for counterclaims, although such authorization may be sought in individual cases. SeeIRM 25.3.1.4(5).

If a debt owing the United States is due, and a federal tax lien is involved, the United States may ask by way of affirmative relief for a foreclosure of its own lien. If it is a first lien, the Government may bid at the sale in an amount equal to its claim plus the expense of sale. For delegation of authority to bid on property in IRC § 7403 sales, see CCDM 34.6.1.2.3, Appointment of Agent to Bid at Execution Sale.

During the pendency of a proceeding to which the United States has been joined as a party, any application for administrative discharge of property from the federal tax lien must be submitted to Field Counsel who will determine whether it will be necessary to obtain the views of DOJ concerning the application.

While the sale of property under 28 U.S.C. § 2410 has the effect of discharging the property from the federal tax lien, the Government’s rights do not end. In many cases the property will be sold for an amount more than sufficient to satisfy the mortgage or other liens that are prior to those of the United States. In such cases, action is taken to obtain the surplus proceeds for application to the taxpayer’s account.

This still does not terminate the Government’s rights. Section 2410(c) provides that the United States shall have one year from the date of sale within which to redeem, except that with respect to a lien arising under the internal revenue laws, the redemption period shall be 120 days, or the period allowable for redemption under state law, whichever is longer. This gives the Service time to investigate and determine whether it would be to the advantage of the United States to redeem the property so that it might be resold for more than the cost of redemption with the resulting benefit to the Government. A principal determination in such an investigation is whether the value of the property sold in the foreclosure proceeding is substantially in excess of the amount required to effect the redemption.

Section 2410(d) provides a uniform method for determining the amount to be paid by the United States when it redeems real property, whether the redemption is made under the authority of section 2410(c) or IRC § 7425(d)(1) (relating to real property sold at nonjudicial sales).

IRC § 7810 establishes a revolving fund of $10,000,000 under the control of the Treasury Department that is available without fiscal year limitation for all expenses necessary for the redemption of real property as provided in IRC § 7425(d) and 28 U.S.C. § 2410.

Many of the 28 U.S.C. § 2410 cases and other cases in which the United States is named a party are brought in state courts. In general Field Counsel should recommend to DOJ to have the case removed to a federal district court. Consult 28 U.S.C. §§ 1441-1446 for the rules governing removal of a case to federal district court.

See CCDM 34.5.1.1, General Procedures for Defense Letters, for requirements of defense letters. The letter to DOJ in these cases is a defense letter signed for Chief Counsel by the Field Counsel.

Field Counsel must consider whether there has been proper service, and whether the particularity requirements of 28 U.S.C. § 2410 have been met.

The question of removal should always be discussed when the case is in a state court. The case should be immediately referred to DOJ to allow sufficient time to consider and, when appropriate, effectuate removal. This referral should be made at least 10 days prior to the 30-day deadline to remove provided in 28 U.S.C § 1446.

If the interpleader suit is brought in response to an administrative levy, see the additional instructions in CCDM 34.5.6.7.1.1, Interpleader Suits in Response to Administrative Levies.

When the taxpayer has no interest in the property — that is, the taxpayer never had any title, claims, etc., to the property — a disclaimer will be filed. This does not cover the situation in which the taxpayer has an interest in the property but there are claimants with a superior right to that of the United States. DOJ will file an answer and put the priority claimant to his/her proof. Examples of when DOJ will disclaim are:

In addition to situations in which the taxpayer never had any title, claims, etc., to the property, when the taxpayer has conveyed property before assessment — divesting the taxpayer of all interest in the property — and the conveyance was not recorded until after assessment, a disclaimer will be filed, despite applicable State law that provides specified creditors and other parties recourse against the property because the conveyance was unrecorded.

A disclaimer will also be filed:

A disclaimer will not be filed if the taxpayer has an interest in, lien on, or claim to the property involved in the proceeding. The fact that there may be senior encumbrances exceeding the value of the property is not a basis for disclaimer. The senior lienor will be put to proof.