The Internal Revenue Code (IRC) provides the IRS a powerful tool allowing the government to protect the taxpaying public's interest in collecting the proper amount of tax revenues. This tool is the federal estate tax lien.

The federal estate tax lien provided under IRC 6324(a), which is sometimes called the “silent lien,” is the basis for the Government’s claim against the property of a taxpayer’s estate and enables collection of the tax from a taxpayer’s estate.

Throughout the life of the federal estate tax lien, situations may arise involving the lien. The resolution to these situations can vary and is guided by the IRC, Treasury Regulations (Regs), IRS policy, and IRM procedures.

The authority for estate tax liens, related lien certificates, and collateral on special elections is found in the following IRC sections:

The Director Collection Policy is responsible for overseeing policy and procedures regarding securing, processing and filing of notice of estate tax liens and related documents.

Employees that process estate tax liens are responsible for providing accurate information and accuracy of lien documents.

Employees authorized to make determinations regarding specific lien actions are responsible for ensuring procedures are properly followed.

Managers are responsible for ensuring that lien actions taken by employees are in accordance with policy and procedures.

Any employee who manually prepares or approves estate tax liens and lien related documents is responsible for ensuring the request or document is accurate and complete. The requestor/preparer is ultimately responsible to see that the estate tax lien document is filed appropriately.

The Centralized Lien Operation (CLO) has primary responsibility for filing estate tax lien documents.

The Integrated Collection System (ICS) is used to control lien-related processes worked by Advisory and document case work.

The ENTITY Case Management System can also generate certain, unique reports related to lien processes to assist in managing assigned inventory.

Notice of estate tax liens are not maintained on ALS because these liens do not self release in ten years and may be in effect longer than 10 years. Advisory is primarily responsible for creating, monitoring and maintaining lien case files in accordance with retention guidance in IRM 5.5.8.19. Centralized Lien Operation is primarily responsible for sending notices of estate tax lien to recording offices with payment for associated lien fees.

Controls to monitor estate tax liens are established on ICS.

Authority to issue federal estate tax lien certificates is restricted to the following delegation orders:

The following table includes common acronyms used in estate tax cases:

Related resources include the following:

Referrals are made to Advisory when the executor elects the special use valuation election under IRC 2032A. By signing Schedule A-1 to take the election, the heirs that received the special use property and other individuals with an interest in the property agree to the filing of an IRC 6324B estate tax lien on the property that qualified the estate for the special use valuation. Advisory is responsible for filing the IRC 6324B lien. The heirs that received the property also agree to be held personally liable for any additional estate tax that is triggered during the ten-year period following the decedent’s death when they take the special use valuation election.

The referring office will provide Form 6111, IRC 2032A Referral to Advisory, to include the amount of the additional estate tax (also known as recapture tax). The amount of the additional estate tax is the tax savings the estate received by taking the special use valuation election. The tax is only owed if an event occurs to trigger the tax. The origin of the referral depends on which operating unit approved the election:

When a case is referred to Advisory, the referring office will provide the following documents which are also shown on the checklist included on Form 6111:

See IRM 4.25.11.2, IRC 2032A Special Use Valuation, for E&G Examination procedures to refer cases to Advisory. See IRM 4.25.2.8.7, Lien Packages to Advisory, for Campus E&G procedures to refer cases to Advisory.

Advisory will open a Non-Field Other Investigation (NFOI) 194, 668-H Lien (IRC 2032A), on Integrated Collection System (ICS), and they will verify that all information on Form 6111 is provided with the attachments. Advisory can either contact the estate or return the case back to the referring IRS office to obtain any missing information or to resolve any inconsistencies. The referring IRS office is ultimately responsible to ensure that Schedule A-1 information is complete and that all required documents have been provided by the estate for a valid election. The IRS office that refers the case to Advisory must confirm that the estate is eligible for the special use valuation election before they grant the election.

A lien arises under IRC 6324B, Special Lien for Additional Estate Tax Attributable to Farm, etc. Valuation, on the specific property specially valued under IRC 2032A. Advisory will file Form 668-H, Notice of Federal Estate Tax Lien Under Internal Revenue Code Section 6324B, to provide an asset for collection if an event occurs to trigger the additional estate tax.

The lien on the property that qualifies the estate for the special use valuation is consensual because the heirs, executor and interest holders agree to the filing of the lien when they take the special use valuation election. Therefore, Advisory will review the documents in the referral to confirm that the estate has a valid election to ensure that the filing of Form 668-H is appropriate. Since the lien is consensual, there are no Collection Due Process (CDP) or Collection Appeals Program (CAP) rights related to this lien.

The IRC 6324B estate tax lien is property specific. The lien attaches to the property that qualified the estate for the special use valuation election as shown on Schedule A-1 of Form 706. Schedule K of Form 706 should also be reviewed to determine if there were any encumbrances on the property at the date of the decedent’s death. Advisory will ensure that there is a complete legal description with the referral, and they will include the complete legal description on Form 668-H or as an attachment to Form 668-H.

Advisory must confirm that all the signatures of the heirs are included on Schedule A-1 since the heirs are personally liable for the additional estate tax if it is triggered. The heirs must consent to the filing of the lien and agree to their personal liability for the additional estate tax by signing Schedule A-1.

Advisory employees must review deeds or available on-line public records to determine how the property pledged is titled to ensure all interested parties (whether or not in possession) signed the Schedule A-1 lien agreement and to correctly style the notice of lien. If the property is in the name of a business entity, Advisory will review documents to confirm that the individual that signed the lien consent on behalf of that entity had authority do so. For example, if the property is in the name of a corporation, Advisory will review corporate documents to confirm the name of the individual that can pledge property for the corporation. If the property is in the name of a trust, Advisory will review trust documents to confirm the name of the trustee. In a partnership or LLC scenario, Advisory should determine who has authority to act on behalf of the entity. General guidance on ownership of LLCs, operating agreements, documents that outline ownership, or authorities of LLC members is in IRM 5.1.21, Collecting from Limited Liability Companies.

As an additional requirement for a special use valuation election, there must be a designated agent listed on Schedule A-1. This individual is responsible for notifying the IRS if there is a disposition of the special use valuation property or if the property has been converted to a different use. Advisory employees will confirm that this information is provided on Schedule A-1.

Once Advisory confirms that all required items are provided for a valid special use valuation election, Advisory will prepare Form 668-H, Notice of Federal Estate Lien Under Internal Revenue Code Section 6324B, listing the name of the estate and the names of all qualified heirs as shown on Form 706, Schedule A-1. The names of the qualified heirs are included on Form 668-H because they are personally liable for any additional estate tax that is triggered. If the real property is in the name of an entity, Advisory will include the entity’s name on Form 668-H to ensure that the lien is properly indexed in the public records under the owner’s name. Filing a copy of the Schedule A-1 lien agreement with the recorded estate tax lien is not necessary.

When preparing Form 668-H, the social security number (SSN) of the decedent and qualified heirs whose names are shown on the notice of lien will be redacted using the format XXX-XX-1234. If the property is in the name of a business entity, do not include the taxpayer identification number for the entity that owns the property.

The amount of additional estate tax shown on Form 668-H is based on the tax difference of the estate tax calculation using the fair market value of the property and the estate tax calculation using the special use value. The tax is calculated by the referring office and is shown on Form 6111 on Line 9, Item C. The referring office will also provide copies of any examination documents that show valuation information and the additional estate tax calculation.

Since Form 668-H is property specific, it must be prepared manually using the PDF version of the form that is available on the intranet at http://publish.no.irs.gov/catlg.html. The form can be digitally signed.

See IRM Exhibit 5.12.7-2, State and Territory Filing Locations, for guidance on filing locations.

Advisory will e-mail the completed Form 668-H to the Centralized Lien Operation (CLO) Field Office Resource Team (FORT) at e-mail address *SBSE CLO FORT so that they can forward the lien for recording. Advisory will also provide Form 3210, Document Transmittal, indicating the estate’s name, decedent’s complete social security number, lien type, and a notation if a TC 582 lien indicator and TC 360 lien fee should be input on Integrated Data Retrieval System (IDRS).

Advisory will send a copy of Form 668-H to the executor of the estate, designated agent listed on Schedule A-1, and to any other individuals that have authority to receive a copy due to the filing of Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authorization.

CLO FORT will return Form 3210 to confirm receipt of Form 668-H for recording, and they will log in receipt of the case. Within seven business days of receipt, CLO FORT will mail Form 668-H to the recording office for filing with payment of recording fees. See IRM 5.19.12.8.2, Filing Estate Tax Lien Documents, for CLO FORT processing procedures. CLO FORT will input the lien indicator and lien fee (if applicable), and they will monitor the case to ensure that the lien is properly recorded.

Advisory will input a 120-day follow-up on ICS to ensure receipt of the recorded estate tax lien from CLO FORT and to confirm that the lien indicator and lien fee have been input, if applicable.

In exigent circumstances, advisors may issue an Other Investigation (OI) on ICS to request for a Field Collection revenue officer to deliver Form 668-H to a recording agency for filing and for paying the recording fee.

Form 668-H, Notice of Federal Estate Tax Lien Under Internal Revenue Code Section 6324B, does not include an expiration date or "last day for refiling" because this lien can only be released if one of the conditions listed in IRM 5.5.8.4.2, Monitoring and Release of Lien - Form 668-H, have been met. In some situations, such as when the additional estate tax is triggered, the collection statute may remain open for several years past the ten-year period following the decedent’s date of death. Therefore, when Form 668-H is recorded in the public records, the public records index should not reflect an expiration date.

Once CLO FORT receives the recording information back from the recording department, they will forward the recorded Notice of Federal Estate Tax Lien to Advisory who will maintain a case on ICS until the lien is released. Advisory will input a follow-up on ICS for six years and for ten years from date of death to ensure timely follow-up actions are taken to conduct research to determine if a cessation of qualified use or disposition of the property has occurred. Advisory will also maintain a file of retained lien copies with Form 6111 and associated documentation while the lien is in effect.

The additional estate tax (also known as recapture tax) is triggered when one of the following events occurs:

Advisory may become aware that the additional estate tax was triggered due to contact from a designated agent or from internal research. In addition, Advisory may be contacted by an estate representative or heir with a request to release the estate tax lien because the 10-year special use period has elapsed. The following research may be conducted to determine if the additional estate tax has been triggered:

When property is transferred to a qualifying family member, the tax might not be triggered. The heir that is transferring the property must file Form 706-A, United States Additional Estate Tax Return, to report the transfer. The family member that receives the property must agree to the filing of the estate tax lien and agree to be held personally liable for the additional estate tax if the tax is triggered. The family member can agree to the lien and personal liability by completing Schedule A-1 of Form 706 or by providing a signed document with similar verbiage. A family member for special use valuation purposes includes the following:

The transfer of property due to a like-kind exchange might not trigger the tax liability. Advisory can obtain assistance from Estate and Gift Examination through the Specialist Referral System (SRS) to make this determination. If the estate qualifies for a like-kind exchange, the heirs and others with an interest in the property must provide a new lien agreement by completing Schedule A-1 of Form 706 or by providing a written document with similar verbiage. A new Form 668-H should be filed on the like-kind replacement property, and a Form 792, U.S. Certificate Discharging Property Subject to Estate Tax Lien, can then be provided on the property that has been replaced.

If additional information is needed to determine if an event has occurred to trigger the additional estate tax, Advisory will contact the designated agent listed on Schedule A-1 of Form 706 for the additional information. The designated agent is the individual designated by the heirs and others with an interest in the property to notify the IRS of changes to the special use valuation property and to receive confidential information. If the designated agent had provided the IRS with a Form 2848, Power of Attorney and Declaration of Representative, contact should be made through the individual named on the Form 2848.

If the investigation reveals, or the IRS is notified, that the heir did not continue to use the property for the special use purpose or disposed of the property during the ten-year period following the decedent’s death, additional estate tax may be due. If the heir had leased the property to a third-party, this may be considered a discontinuance of use of the property for the qualifying special use valuation purpose. If tax is due, the heir must file Form 706-A, United States Additional Estate Tax Return:

Advisory employees must verify that the return and any payments have properly posted to the Non-Master File account. This information can be confirmed on the ANMF system. Procedures for using the ANMF system are provided in IRM 3.17.46.14.1, Entering and Exiting the System, and IRM 3.17.46.14.2, Non-Master Account Transcript Requests. Advisory employees can also request an account transcript from the Non-Master File team by sending an e-mail to *W&I KCSPS Non-Master File Team.

The statute of limitations for assessment of the additional estate tax is three years from the date the IRS was notified of the disposition or cessation of use. See IRC 2032A(f), Statute of limitations.

Form 668-H should not be released until any liability due on Form 706-A is full paid or becomes unenforceable due to expiration of the collection statute, or if the IRS is satisfied that no event has occurred to trigger the additional estate tax.

The 10-year period provides a measure of time during which the additional estate tax triggering event must occur. The liability for the tax may continue beyond that period. Accordingly, if an event has occurred to trigger the tax during the 10-year period following the decedent’s death, and the additional estate tax liability has not been fully satisfied, Form 668-H should not be released while the tax liability is still enforceable.

The assessment of the additional estate tax has its own collection statute expiration date, which is ten years from the date of the assessment.

Advisory can make a referral to Estate and Gift Examination through the Specialist Referral System (SRS) for assistance with the following:

Once ten years from the decedent’s date of death has passed, if the investigation reveals that the heir continued to use the property for the qualifying purpose that the election is based upon, and they continued to own the property for the ten-year period following the decedents death, the additional estate tax is not owed.

The special use valuation lien is in effect until one of the following occurs. Advisory can then release the recorded Notice of Federal Estate Tax Lien:

To release the recorded estate tax lien, Advisory will prepare Form 668-I, Certificate of Release of Estate Tax Lien Under Internal Revenue Code Section 6324B. Advisory will e-mail the completed form to the Centralized Lien Operation (CLO) Field Office Resource Team (FORT) at e-mail address *SBSE CLO FORT so that CLO FORT can forward the lien release for recording. Advisory will also provide Form 3210, Document Transmittal, indicating the estate’s name, complete social security number, lien release type, and a notation if a TC 583, Reverse Lien Indicator, should be input on Integrated Data Retrieval System (IDRS). The TC 583 would only need to be input if a TC 582 was previously input on the module.

CLO FORT will acknowledge receipt of Form 3210, and they will log in receipt of the case. Within seven business days of receipt, CLO FORT will mail the estate tax lien release to the recording office for filing with payment of recording fees. See IRM 5.19.12.8.2, Filing Estate Tax Lien Documents, for CLO FORT processing procedures. CLO FORT will input the reverse lien indicator, if applicable, and they will monitor the case to ensure that the lien release is properly recorded.

Advisory will input a 120-day follow-up on ICS to ensure receipt of the recorded lien release from CLO FORT. Once CLO FORT receives the recording information back from the recording department, they will forward the recorded release information to Advisory.

Advisory will send a copy of Form 668-I to the executor of the estate, designated agent listed on Schedule A-1, and to any other individuals that have authority to receive a copy due to the filing of Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authorization.

Whenever contact is made with an estate representative who is requesting a release of an estate tax lien, Advisory should give the representative the option of filing the release themselves, making the representative aware that if they choose to do so, it is their responsibility to pay the recording fees. Advisory will request for the estate representative to provide Advisory with the lien release recording information so that Advisory can document the case history with the release information.

After Advisory confirms that the Form 668-I estate tax lien release has been recorded, they will close the 194 Non-Field Other Investigation (NFOI) on the ICS system.

A discharge of the IRC 6324B lien from property may be necessary if part of the property described on the recorded Form 668-H, Notice of Federal Estate Tax Lien Under Internal Revenue Code Section 6324B, is being sold or removed from special use.

An estate should request a discharge of the IRC 6324B lien from property by submitting Form 4422, Application for Certificate Discharging Property Subject to Estate Tax Lien, to Advisory.

If issuance of a conditional commitment to discharge property from the Notice of Federal Estate Tax Lien is necessary, Advisory should request a draft of Form 706-A, United States Additional Estate Tax Return, from each heir who owns a share of the property being sold or removed from special use. Advisory may request for Estate and Gift Examination to review Form 706-A to confirm the tax liability by submitting a request through the Specialist Referral System (SRS). If there is a disposition of all the special use valuation property, and the tax on the Form 706-A matches the additional estate tax (recapture tax) on the lien, a referral to E&G Examination may not be necessary.

Once Advisory determines the correct amount of tax on Form 706-A, they will issue Letter 5751, Estate Tax Lien Conditional Commitment for Discharge, to conditionally commit to the discharge of the lien from the property. The conditional commitment letter may require the final signed Form 706-A, full payment of the tax liability, closing statements, documents to show title to the property was conveyed to the new owner, and any other necessary items as determined by Advisory.

Advisory may issue Form 792, U.S. Certificate Discharging Property Subject to Estate Tax Lien, when Form 706-A has been filed, all tax and additions to tax have been full paid, any other required documents were provided, and conditions were met. See IRM 5.12.3.3.1.1, Liability Satisfied by Payment, for time frames to provide a lien discharge based on the type of payment received.

Requests for subordination of property described on Form 668-H will be processed by Advisory. An NFOI will be established under time code 142.

Although it is possible that the qualified heir(s) may apply for a certificate of subordination under IRC 6325(d)(2), almost all requests for subordination will be made under IRC 6325(d)(3) which directly addresses IRC 6324B, and provides for the issuance of a certificate of subordination if it is determined that the lien interest of the United States will continue to be adequately secured.

Instructions for applying for a subordination under IRC 6325(d)(3), are contained in Publication 1153, How to Apply for a Certificate of Subordination of Federal Estate Tax Lien Under Section 6325(d) of the Internal Revenue Code.

Review the status of all qualified property and consider factors such as:

If it is determined that the lien interest of the United States will continue to be adequately secured, issue Form 669-F, Certificate of Subordination of Federal Estate Tax Lien .

If the estate declines to provide a bond or consent to a Notice of Federal Estate Tax Lien, or the estate does not respond to Advisory’s request for collateral, Advisory will conduct a risk analysis to determine if the IRS should require collateral. Advisory will document the Integrated Collection System (ICS) history regarding the estate’s refusal. If possible, Advisory will secure a written statement from the estate as to their reasons for refusing to provide collateral.

When an IRC 6166 extension of time to pay estate tax that is attributable to an interest in a closely held business election is granted, the IRS can require an estate to provide a bond if the government is at risk during the deferral period. However, the estate can choose to provide a consent to the filing of an estate tax lien, in lieu of the bond, by completing Form 13925 and providing the required information as described in IRM 5.5.8.5, Collateral from Estates with IRC 6166 Elections. Advisory will determine whether a bond should be required by an estate based on a review and analysis of applicable factors listed below and any other relevant facts and circumstances. This is not an exclusive list:

The following internal sources may provide sufficient information for Advisory to make a risk determination. If additional information is needed, Advisory can request the estate to provide further information. The Advisor will document the ICS case history to address all items that were reviewed and the findings from the review:

If additional information is necessary, Advisory will send a request to the estate for any additional items needed to determine whether the government is at risk during the deferral period to make a risk determination. Information requested from the estate may include copies of tax returns, financial statements, list of assets and encumbrances, status of litigation, and any other information Advisory determines is needed to conduct a risk review. The estate may also submit any additional documentation they believe will support their position that collateral should not be required.

Advisory will document the case file history with their findings to include the following:

After Advisory has made their risk determination, Advisory will send Letter 4283, Notification Regarding Internal Revenue Code Section 6166 Security Requirement. The Advisory manager must sign Letter 4283. When preparing the letter, Advisory will select one of the optional paragraphs:

If optional paragraph (1) is selected, Advisory will close the non-field other investigation (NFOI) 195, 668J Lien (IRC 6166), on ICS, and they will open a NFOI 196 Special No Lien case. Advisory will input an initial follow-up date for six years from the return due date to make an updated risk analysis. See IRM 5.5.8.5.3, Monitoring Accounts During the Deferral Period, for actions required to conduct periodic review of these cases.

If optional paragraph (2) or (3) is selected, Advisory will include Form 13925, Notice of Election and Agreement to Internal Revenue Code (IRC) 6324A Lien, with Letter 4283. The estate has 30 days to respond when the IRS requires a bond. The estate can also provide a consent to an IRC 6324A lien in lieu of providing a bond. Advisory will input a follow-up date on ICS to monitor the case for a response to Letter 4283 and will maintain a copy of the letter in the case file.

After the 30-day period on Letter 4283 expires, if the estate still refuses to provide a bond or lien consent, Advisory will prepare Letter 950-I, Preliminary Internal Revenue Code Section 6166 Determination Letter, which must be signed by the group manager. Letter 950-I notifies the estate of its right to appeal the determination that a bond is required. The letter will be sent by certified mail and a copy will be maintained in the case file along with a notation in the case history of the date the letter is sent. Advisory will schedule a follow-up date on ICS to monitor the case for a response to Letter 950-I. An appeal of the determination must be postmarked by the deadline on Letter 950-I for the appeal to be timely. If the deadline is on a Saturday, Sunday, or federal holiday, the deadline is the next following business day.

If the estate does not appeal the preliminary determination within the 30-day appeal period, or if the estate sends an untimely post-marked protest, Advisory will provide a memorandum to Campus Estate and Gift (E&G), with a copy of Letter 950-I, requesting termination of the IRC 6166 election. Advisory will request that Campus E&G also send Letter 6335-F, Notice of IRC 6166 Denial or Termination, to the estate via certified mail, with return receipt requested, as a demand letter for payment. Letter 6335-F will include the current balance due as calculated by Campus E&G. Advisory will monitor the account for the termination of the IRC 6166 election. Once Advisory confirms the election has been terminated, they can close their NFOI 195, 668J Lien (IRC 6166), on ICS. The Advisory manager may notify a Field Collection revenue officer manager of the tax due to request revenue officer case assignment. While there is a balance due, Advisory will maintain a case file since the file may contain documents to assist the revenue officer with collection of the tax.

If the estate submits an Appeal, Advisory will date stamp the protest and document in the case file history that the protest was received. If the protest contains new issues to consider in the risk analysis, Advisory will determine the validity of the new issues. If Advisory disagrees with the estate on the new issues, they will prepare a response to the protest to include the determination reached on the new issues. Advisory will send the response to the protest to the estate and will include it in the package to be transmitted to IRS Independent Office of Appeals (Appeals). Advisory will forward the following items to Appeals within 30 days from the postmark date of the protest letter:

Advisory will send the appeal package with Form 3210, Document Transmittal, to Appeals. The location to route the package is located on the IRS Independent Office of Appeals Website. Advisory will notify E&G Campus by secure e-mail that a protest has been forwarded to Appeals so that Letter 6335-F is not sent prematurely.

Advisory will input a 90-day follow-up. If no response is received, Advisory will check the status of the appeal on the Appeals Centralized Database System (ACDS). If there is no record on the system, Advisory may contact *AP Inquiries for information.

IRS Independent Office of Appeals will send the case file with the Appeals Case Memorandum (ACM) to Advisory once a decision is final. If they allow the election to continue because they have determined the government is not at risk during the deferral period, Advisory will notify Campus E&G that Appeals has determined the estate is entitled to the election. Advisory will then close the NFOI 195, 668J Lien (IRC 6166), on ICS, and they will open a NFOI 196, Special No Lien Case.

If Appeals determines that the election should be terminated because the government is at risk during the deferral period, and collateral wasn't provided, Advisory will notify Campus E&G to terminate the IRC 6166 election as described in (10) in this IRM section.

Advisory will receive documentation from E&G Campus concerning IRC 6166 payments or installment payments that have not been paid. E&G Campus is sending this information to be associated with the case file. E&G Campus will forward for informational purposes copies of billings and/or protest letters that are sent to Appeals. OIs will be maintained in ICS on accounts where informational documents are sent to Advisory from the E&G Campus.

This information should be used in considering creditworthiness of estate, necessity for a bond or lien, and/or necessary enforcement action.

Advisory may receive a courtesy investigation from the E&G Campus to collect non-deferred tax, penalties and interest. The following actions should be taken:

Advisory will also receive documentation (copies of Letter 6335 or 6335(T)) from the E&G Campus when estates are delinquent in paying installments timely, Advisory should review the account to determine if a lien or bond has been secured. If a lien or bond has not been secured a re-evaluation of collection risk is appropriate action to ensure the Government is adequately protected. This information and advisor actions must be documented in the ICS history because a pattern of delinquency is a factor in determining credit risk.

Advisory will receive from the E&G Campus documentation (copies of Letter 6335(F)) indicating installment payments have not been made and the acceleration of the tax due is in process. Advisory must upon receipt review the account and determine if a lien or bond has been secured. Advisory shall review, recommend and document the ICS history regarding the most appropriate collection action based on information in their lien file. This information will be used when the account is assigned to Field Collection for their initial analysis of collection avenues. Considerations to be addressed:

Advisory will maintain lien case files according to retention guidance in IRM 5.5.8.19 and shall provide lien case files to Field Collection when requested to facilitate collection of the account. Lien case files should not be destroyed on accounts that reflect a balance due.

Advisory will receive from the E&G Campus documentation indicating the case is in litigation contesting the termination of the election.

If the election is terminated and the taxpayer files a section 7479 declaratory judgment case after the IRS proposes termination of a section 6166 election, the election would not be terminated until the declaratory judgment is final. Therefore, the CSED would be suspended until that time.

When E&G Campus closes their IRC 6166 case file documents will be associated with the Form 706.

When Appeals makes a determination that an estate may continue to elect an IRC 6166 installment election, the entire case file, including the original return shall be sent to Advisory to copy information necessary for bond or lien determination. This file should be copied within 30 days, and the return should be sent to E&G Campus to complete the installment account set-up.

Advisory will be responsible to set follow-ups through ICS to check status of cases that were sent to Appeals for resolution either by utilizing the Appeals Account Specialist or contacting the E&G Campus to determine if they have received the Appeals Case Memorandum (ACM) from Appeals.

Informational documents received from the E&G Campus should be reviewed within 30 days of receipt. The advisor’s evaluation of impact or harm to the Government’s interest should be documented in the ICS history. This documentation may dictate frequency of monitoring an account.

Notice of late installment payments, preliminary IRC 6166 election terminations or extensions to pay on IRC 6166 installment payments (see IRM 5.5.5.5) should be considered as a factor in lien determination and monitoring. Accounts should be re-evaluated if any of the above actions occur.

Encumbrances must be checked to determine adequacy of collateral. The advisor may use sources such as Accurint, Secretary of State, UCC filings, etc. to verify encumbrances.

All IRC 6166 accounts will be re-evaluated six years into the deferral period. Schedule a follow up through the ICS system. Advisors will consider the factors described in IRM 5.5.8.5.1 and should also look at subsequent actions below to determine if additional action should be taken to protect the Government’s interest:

Annual monitoring, considering the above factors should be conducted as the Service nears expiration of the IRC 6324(a) lien. Each year that Advisory conducts a review, the Advisor must document their analysis and recommendations to adequately protect the Government’s interest. As the Service gets closer to expiration of the IRC 6324(a) lien, the advisor must consider securing a "replacement lien" (IRC 6324A lien or bond) to cover the additional deferral period and the amount of deferred tax due in order to protect the Government’s interest.

Advisory must be aware that if a determination is made that the government is at risk of not collecting the remaining tax due, appropriate action (for example, a bond or lien or enforced collection action) must be taken and completed prior to expiration of the IRC 6324(a) lien. Consideration must be given to allow time for the executor to exhaust any allowable appeals and potential litigation time if the estate petitions the Tax Court under IRC 7479. If the account is accelerated, this process generally requires a minimum of six months to be completed. Timeframes of acceleration, appeals and litigation must be considered in order to complete collection actions prior to expiration of the IRC 6324(a) lien.

If the advisor determines that a lien is required the advisor will send the executor Letter 4283. Follow procedures in IRM 5.5.8.5.1

In consideration of accounts where the estate has been in compliance with timely payment of installments, as the Service gets closer to expiration of the IRC 6324(a) lien, the advisor must consider securing a "replacement lien" (IRC 6324A lien or bond) to cover the additional deferral period and the amount of deferred tax due in order to protect the Government’s interest.

Advisory must ensure annually that the value of the collateral securing the lien is equal to the outstanding IRC 6166 balance on the account. In accordance with the Form 13925, the designated agent is required to send current valuation information annually with respect to the pledged property listed in the agreement. If the executor has provided an IRC 6324A lien, Advisory must review the annual valuation information report from the designated agent to confirm that the value of the collateral securing the lien is equal to the outstanding IRC 6166 balance on the account. If the financial information is not received from the designated agent, the Advisor may contact the designated agent to request that information.

Advisory will use Letter 4345, Collateral Valuation, to request current valuation information with respect to property pledged on the lien agreement.

Advisory will use Letter 4346, Additional Collateral, as notice and demand for additional collateral to secure the special lien.

Follow the procedures found at IRM 5.5.8.4.1 for filing of estate tax liens.

When preparing estate tax liens, the SSN of the decedent and any qualified heirs whose names are shown on the lien will be redacted using the format XXX-XX-1234. For EINs redact all but the last four digits XX-XXX1234.

Actual lien fees will be manually posted by CLO FORT when the lien is received back from the recording office, see IRM 5.19.12.8.2.

Advisors are responsible for ensuring receipt of the recorded lien from CLO and that lien fees have been input, if applicable.

Advisory will maintain an ICS case in the name of the estate for which the Form 668-J was recorded until such time as the lien is released. Advisory will also maintain a file of retained lien copies and associated documentation, see IRM 5.5.8.19 for records retention guidance.

The Campus Estate & Gift Tax Department, will, upon receipt of full payment of the liability secured by Form 668-J, coordinate with the Advisory Estate Tax Group to ensure that the Form 668-J lien is released in a timely manner. Campus will notify the Advisory, Estate Tax Group within 10 working days after receiving notification of payment, through secure e-mail, to release any Form 668-J that may have been recorded.

Advisory will use Form 668-K, Certificate of Release of Federal Estate Tax Lien Under Internal Revenue Section 6324A, to release the Form 668-J lien.

Form 668-J and Form 668-K must be prepared manually. However, a PDF version of the form is available on the intranet at http://publish.no.irs.gov/catlg.html.

If the estate representative chooses to post a bond rather than consent to the filing of a lien, follow the procedures for processing bonds found at IRM 5.6.1.3.1, Bonds and IRM 5.6.1.3.3, Estate Tax Bonds and Other Collateral. Additional information on bonds, such as approved sureties, may be found at Bureau of the Fiscal Service website.

The Service cannot accept a Letter of Credit in lieu of a bond when a decedent’s estate elects to pay the tax in installments under IRC 6166.

In the case of any proposed bond, Advisory will consult with Area Counsel for review of the bond.

If stock certificates are pledged as collateral, the advisor will secure the actual stock certificate. This would prevent the sale of such certificates to third parties.

Prepare Form 2276, Collateral Deposit Record classifying the stock certificates as "safekeeping" and reflecting a zero value for revenue accounting system (RACS) purposes. The certificates must be stored in an approved safe. Follow procedures in IRM 5.6.1.8, Preparing Form 2276, Collateral Deposit Record.

Stock, in most instances, will be considered personal property by most state law. With respect to personal property, a lien must be filed in the office designated by state law in which the property subject to the lien is situated.

Payoff requests for IRC 6166 accounts will still be sent to E&G Campus via SECURE e-mail to:

The penalty and interest computation sheet will be scanned/saved and returned with the response to the advisor. Advisors need to document the ICS case history of the amount, print the calculation sheet and add it to their case file or paste e-mail into ICS history. Should a later payoff be needed or the account is transferred the advisor will be able to forward the calculation sheet so the E&G Campus can update the previous calculation provided.

Requests should be processed within 14 calendar days of receipt to allow adequate time for turnaround. Provide contact information should someone need to call you or reply to inform you of a delay in processing the request.

If there is a need for a quicker response mark the subject line as EXPEDITE, when the payoff is needed and the date of payoff.

For payoff requests on extension to pay accounts that were previously in status 14, please send your payoff requests on IRC 6161 accounts only to CCP FORT. This guidance is in reference only to accounts that were previously in status 14 for manual monitoring, once an account goes into status 14 you can no longer get a payoff through IDRS. If the account did not go into status 14, INTST can be utilized to provide a payoff.

Requests for release of Form 668-J, and discharge and subordination applications will be processed by Advisory.

Releases- The criteria under IRC 6325(a) for issuance of a certificate of lien release - liability satisfied or unenforceable or bond accepted - are applicable to Form 668-J. Follow the procedures found at IRM 5.5.8.4.2 for processing estate tax lien releases.

Discharge - Requests for discharge will normally be made under IRC 6325(c). Provided property equal to the amount of the remaining deferred balance of tax and interest will remain subject to the lien, a certificate may be issued discharging a portion of the property listed on Form 668-J from the lien. As an alternative, under IRC 6324A(d)(5), the estate representatives may substitute other property in order to obtain a discharge of all or part of the property listed on the lien. If the disposition of property will result in accelerated payment of all or part of the deferred tax, or if the equity in the remaining property will not equal the remaining deferred balance of tax and interest, the application should be made under IRC 6325(b)(2).

Subordination - Requests for subordination will normally be made under IRC 6325(d)(2). Provided it is determined that the amount realizable by the United States from the property will ultimately be increased, or that the ultimate collection of the tax liability will be facilitated by the subordination, a certificate may be issued.

Advisory may receive requests for release of the unrecorded estate tax lien. However, just as there is no provision for filing a notice of the unrecorded estate tax lien, there is no provision for filing a release. Applicants should be instructed to provide documentation to potential purchasers of the decedent's property that either there was no Form 706 filing requirement, or, if Form 706 was filed and a closing letter has been provided to the estate by E&G Exam, a copy of the return, the Estate Tax Closing Letter 627, and verification of payment or transcript, are evidence that the IRC 6324(a) lien has been satisfied.

If an estate requests a release of the statutory IRC 6324(a) estate tax lien Advisory will issue Letter 1352, Request for Discharge of Estate Tax Lien, selecting the applicable paragraph for no estate tax return filing requirement.

If the estate wants all sale proceeds to be applied to the estate’s tax account in exchange for a certificate of discharge, an escrow agreement will not be necessary (see discussion regarding IRC 6325(b)(2)(A)). Funds will be applied to the tax period as a TC 670 with designated payment code 53 for discharges.

Advisory will also request and monitor for input of TC 570 on the payment posting voucher to prevent refund offset prior to posting of a tax return or completion of the audit and any subsequent assessment. The frozen status will release if a TC 150 posts. If a return is not required or audit results in no additional tax due Advisory is responsible for input of the TC 571 to release funds that should not be held.

A control will be opened under code 187 miscellaneous with a "PP" indicator after the name of the estate or SSN. Quarterly follow ups must be input into ICS to see if the return has been filed and if necessary release funds timely to avoid additional interest to be paid after filing of the return or completion of the audit/assessment.

If an estate requests a certificate of discharge yet indicates that no return is needed for the estate because the estate’s gross value is less than the amount for which a return must be filed a discharge will not be issued. Send Letter 1352 to advise the estate under these circumstances a discharge will not be issued or if additional information is required to investigate the request.

If the request is for a 2010 date of death, no certificate of discharge will be issued unless a Form 706 was filed for that year.

If the estate is requesting a discharge certificate early in the administration and does not have sufficient documentation to evaluate assets, consideration should be given to an escrow agreement related to the sale proceeds (see discussion regarding IRC 6325(b)(3)). Some allowance for administrative expenses may be considered if there are no other funds or estate assets available to pay administrative expenses. When considering requests for discharge ensure the Government’s interests are protected and that the discharge will not adversely affect the Government’s ability to collect the tax. Example: The estate is selling the residence of the decedent for $400,000. The executor estimates the tax liability to be $200,000. In addition to the estate tax lien, there are junior third party liens attached to the residence. Other estate assets consist of a trust and Family Limited Partnership. Since it may be harder to determine the value or sell the estate assets that the estate does not have complete control of and the tax liability is not yet determined it may be in the Government’s best interest to use an escrow agreement to secure all proceeds from the sale of the decedent’s residence until the tax return is filed and the tax liability can be established.

Conduct a compliance check to see if the estate has related outstanding periods, for returns such as Form 1040, Form 1041 or Form 709. Look at BMFOLT to see if there are unfiled or balance due returns.

Employees must investigate, evaluate information and consider factors when calculating the interest of the Government in each case that a discharge request is submitted. For example some factors would be:

On accounts that have a portion of the tax deferred by an IRC 6166 election and estate property is sold that is not subject to the IRC 6324A lien, the Service cannot claim the right to payment from the sale proceeds.

Such sale proceeds may be applied:

Termination procedures should be initiated:

Certain expenses may be treated as reasonable and necessary expenses for the financial transaction and should be considered in calculating the amount of the Government's interest. These expenses, which do not have to be present, may include, but are not limited to:

Allowance of the expenses listed in (1) is prohibited if:

Review the proposed itemized closing statement to determine whether any proceeds are used to pay prohibited expenses. See IRM 5.5.2.6, Administrative Expenses, for guidance on reasonable and necessary expenses. In some circumstances property may be sold to pay administrative expenses such as the preparation of the tax return, in such cases documentation should be provided to determine if it is a reasonable and necessary expense that should be allowed to get the estate in compliance with filing and paying requirements. Expenses should not be allowed for administration and/or maintenance of foreign assets.

In addition review the itemized statement for:

Sale proceeds can only be allowed to pay any mortgage or other debt if the debt was recorded before the estate tax lien arose - at date of death. Review the recorded debt instrument and/or title report to determine if it was recorded prior to the date of death.

Escrow agreements are considered collateral agreements per IRM 5.6.1.3.5, Escrow Arrangements, and must be controlled and monitored by Advisory. Collateral inventory is controlled through the Interim Revenue Accounting and Control System (IRACS). The advisor is responsible for sending documentation to ensure a control is established on IRACS.

Advisory will open a control on ICS no later than seven (7) calendar days after receipt in the group of the collateral agreement using the action code 184 – Collateral. A control will be opened once the advisor confirms that the net sale proceeds have been deposited with the escrow agent.

The inventory will be maintained in the IRACS database. Refer to IRM 5.6.1.6, CEASO Actions and IRM 5.6.1.8.2, Interim Revenue Accounting and Control System (IRACS), for procedures on establishing and monitoring controls on escrow agreements. Escrow agreements will be maintained as an open NFOI control until the account is resolved.

Agreements will be screened quarterly to determine if a return has been filed and associated with any balance due accounts. Establish quarterly follow up dates in ICS to check IDRS for the status. Escrows should be released as soon as deemed necessary to prevent additional interest from being paid after tax balance is established.

After the tax liability is established, Form 10492 may be provided to the escrow agent to notify the agent how much in certified funds must be paid to the IRS to satisfy the Government’s interest in the escrowed funds. Once the funds are paid to IRS and applied to the account the IRACS controls may be closed. If the funds are released for any reason the IRACS control should also be closed once the collateral is no longer being held. Write "VOID" across all pages of the escrow agreement and forward back to the taxpayer.

Qualified Domestic Trusts (QDOT) must meet certain additional requirements if the assets in the QDOT have a value that exceeds $2,000,000.00, as determined without regard to any encumbrances owed on the assets. In these cases, the trustee must ensure that one of the following additional requirements have been met per 26 CFR 20.2056A-2(d), Additional requirements to ensure collection of the section 2056A estate tax:

The QDOT can alternate between any one of these arrangements provided that at least one of these arrangements are in effect at any given time.

If a QDOT has assets under $2,000,000.00, one of the following requirements must be met:

If there is more than one QDOT in an estate, the value of all the QDOTs in aggregate is used to determine if the $2,000,000.00 threshold has been exceeded.

The executor of the decedent’s estate may elect to exclude up to $600,000.00 in real property value (including furnishings) from the fair market value of the trust assets when determining if the $2,000,000 threshold has been exceeded and to determine the required amount for the bond or letter of credit, if applicable. The exclusion is available if the property is used for the surviving spouse as a personal residence, and the property is owned directly by the QDOT. The election may be made whether the real property is located within or outside the United States.

The U.S. trustee must include a written statement listing the assets that will fund the QDOT, the values of those assets, and whether the personal residence exclusion is being claimed.

Form 706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts, should be filed to report certain taxable and non-taxable events related to the qualified domestic trust (QDOT).

The following events will trigger the tax on Form 706-QDT:

The following events might not trigger a tax liability for a QDOT:

Form 706-QDT assessments are Non-Master File assessments with a master file transaction (MFT) Code of 53. Consult with E&G Examination through the Specialist Referral System if there is a question on the amount of tax that is due.

The failure to pay penalty and failure to file penalty may be assessed on returns that are not paid or filed by the return due date. Interest is also owed if the tax is not paid timely.

The trustee is responsible for filing Form 706-QDT and paying the tax due. If there is more than one trustee for any single trust, each trustee is liable for filing the return and paying the tax. If the surviving spouse is the beneficiary of more than one QDOT from a single decedent, the executor may identify a designated filer to be responsible for filing Form 706-QDT and paying the tax. Each trustee will still be responsible for completing Schedule B of Form 706-QDT and forwarding the information to the designated filer. Notification of a designated filer can be made on either the decedent’s estate tax return or the first Form 706-QDT that is timely filed.

The return due date for Form 706-QDT depends on the event that triggered the requirement to file the return as shown on the chart below:

Form 706-QDT should be filed through Advisory if they are holding collateral. If collateral is not being held by Advisory, the QDOT can file Form 706-QDT with the IRS office listed in the Form 706-QDT Instructions. Advisory will take the following actions when an original Form 706-QDT is received in their office:

If the QDOT qualifies, the trustee may elect an IRC 6166 extension of time to pay estate tax that is attributable to an interest in a closely held business. See IRM 5.5.8.5, Collateral from Estates with IRC 6166 Elections.

The QDOT can also request an IRC 2032A special use valuation election which creates a tax savings for the estate. See IRM 5.5.8.4, IRC 2032A special use Valuation Elections.

The estate can apply for an automatic six-month extension of time to file, and they can apply for an extension of time to pay. Both are requested on Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes. Campus Estate & Gift works Form 706-QDT extension of time to file requests. Advisory works Form 706-QDT extension of time to pay requests. Once Advisory makes a determination on these cases, they should notify both Campus Estate and Gift and the Non-Master File Unit of their determination. See IRM 5.5.5, Processing Estate and Gift Tax Extensions, for extension of time to pay procedures.

If voluntary payment is not made on Form 706-QDT, Advisory will issue an Other Investigation (OI) on Integrated Collection System (ICS) to a Field Collection revenue officer to collect from the collateral. Guidance on collecting on bonds is in IRM 5.5.7.22.2, Estate Tax Collection on Bonds. Also see IRM 5.6.2, Collateral Agreement, Maintenance.

If a taxable event has occurred, Advisory must ensure that Form 706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts, is filed and the liability is paid before releasing the collateral.

Once the liability is paid in full, Advisory will arrange to have the bond or letter of credit released. See IRM 5.6.2, Collateral Agreement Maintenance, for information on releasing collateral.

If the tax has not been triggered and the trust is substituting a suitable bond or letter of credit for different collateral or substituting collateral by having a suitable U.S. bank serve as trustee, the collateral can be released. See IRM 5.5.8.21.1, Qualified Domestic Trust Requirements, for the requirements that must be in effect while the qualified domestic trust is in existence.