New Development in West Virginia: Tax Lien Registration Act

Legislators in West Virginia have introduced the Tax Lien Registration Act, which would create one statewide system for filing tax lien notices.

Here’s what the public needs to know.

Wait. Aren’t All Lien Searches Done at County Recorders’ Offices?

Several states have formed central tax lien registries where all recording and lien searches can be done. These states record tax liens with the state registry, not in separate county recorders’ offices. So, if you’re looking up tax liens involving a party and their assets in the state, you can go to one system, and not have to search in multiple counties.

States that have formed tax lien registries in recent years include Illinois, Mississippi, and South Carolina. Now, West Virginia is laying the groundwork to follow suit.

Essentially, What’s a Tax Lien?

A lien is a claim for an unpaid obligation. Tax liens may be recorded by a state or federal government department against the assets that belong to an individual or an organization that has failed to pay taxes. Assets can include home titles, personal belongings, a company’s inventory, equipment, financial or other assets.

In this case, we’re discussing liens imposed at the state level. A state tax lien is the state government’s legal right over a debtor’s property to recover the unpaid taxes.

What Are the Bill Numbers for West Virginia’s Proposed Law to Create a Central Lien Registry?

In the West Virginia House of Representatives, the proposed law is House Bill 5566. It was promptly followed up by the state Senate, in the form of Senate Bill 983.

What’s the Reason for This Move?

Lawmakers in West Virginia are proposing to form a central registry to promote efficient tax collection and better access to public records. Other stated reasons include support for the state’s economic development, and cutting down administrative work.

How Does This Bill Modify West Virginia Law?

The law will add a new section to the Code of West Virginia: §11-10-12a. Now, instead of county filings, there will be one repository, called the State Tax Lien Registry. The state Tax Division will maintain this new public database.

What About Liens Already Filed in West Virginia Counties?

No effect on existing liens. Liens filed with a county recorder of deeds in the past will continue to be valid.

How Will a Lien Be Filed?

Within three years from the nonpayment of tax, the state’s Tax Division may submit a notice of tax lien with the registry. The Tax Division will state the tax (plus existing penalties and interest at the time of filing) and give the record a tax lien number. The filing must contain the debtor’s name and last known address. Date and time of filing must appear on the record. Filings are electronic as well as printed.

What Is the Effect of the Notice of Tax Lien?

It denotes a tax lien that attaches to current and future assets acquired by the debtor in any and all West Virginia counties. These assets include both real estate and personal property.

This mirrors the practice of the Internal Revenue Service, which attaches tax liens to financial accounts, vehicles, and other property. If the homeowner wants to sell anything with a tax lien attached, the government claims a share of the profit.

Do All States Record Liens for Unpaid Taxes?

Every state imposes tax liens and sells homes over unpaid taxes. Unpaid state income taxes or property taxes are major examples of lienable debt. Tax liens are powerful tools. They impose penalties, interest, and administrative costs. Often, government tax liens take precedence over other liens and must be paid off first.  

Most states assign the responsibility to counties. So, a state’s department of revenue will normally file a lien under a debtor’s name in the county where their property exists. A state’s law will provide for tax deed sales, or simply auction off the liens through certificates, as West Virginia does. States that auction off liens (rather than deeds) are commonly referred to as tax lien states. Investors buy these certificates to collect the overdue debts, interest, and penalties.

What Happens to a Delinquent Debtor’s Home If the Lien Certificate Is Not Redeemed?

A quitclaim deed is used, following Chapter 11 of the West Virginia Code. At least 30 days before a sale, anyone with a claim to the deed gets a sheriff’s notice. A tax debtor has until the day before the sale to make good on the debt before the deed is transferred.

How Long Is a Tax Lien Valid?

Ten years. The lien is in force, and interest and penalties build up, for 10 years under both the current and the proposed statute in West Virginia. After the lien period ends, the Tax Commissioner may reinstate the lien, with proper notice.

Will the Recordings Be Publicly Accessible?

Yes. Content of the filings will be available to search for free. Notices will be filed under the debtor’s name or the tax lien number.

The Tax Division “is authorized to sell at bulk the information appearing on the tax lien registry.” That’s not unheard of; see the identical language in the Illinois tax lien registry statute. This practice exists for debt collection rather than marketing.

Are West Virginia Tax Debts Published in Newspapers?

Under current law, “delinquent real estate and personal property taxes” get announced in the Register Herald, to comply with West Virginia Code §11A-2-11. They have also been broadcast over social media by county sheriffs’ offices.

Are the Tax Liens Reported to Credit Reporting Companies?

States cannot do this. In 2017, Equifax, Experian, and TransUnion determined they would no longer list liens in anyone’s credit report.

That said, tax liens are public records. So, businesses can (and do) pull from these records and build databases from them.

A Few Final Notes

All deed holders need to be aware that tax liens can get in the way of selling a home or other assets. It’s important to clear them promptly in order to keep a transferable title. Tax lien rules, procedures, and the terms during which a lien is valid vary by state. The Federation of Tax Administrators has a directory and details.

Much as the IRS does, state governments offer plans so that people and businesses can resolve their overdue bills and get liens released. These plans are designed by each state. In most states, people check with the county where a home exists to search for existing liens against the title.

We provide this overview for Deeds.com readers as general news and commentary. In specific cases, the resolution process must follow applicable laws where the lien exists.