B-154909, SEP. 11, 1964

B-154909: Sep 11, 1964

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WHICH IS DUE AND PAYABLE TO THE WORCHESTER COUNTY NATIONAL BANK. THE CONTRACT WAS ENTERED INTO ON AUGUST 12. THIS ASSIGNMENT WAS ACCEPTED BY THE NATIONAL PARK SERVICE ON SEPTEMBER 6. BEFORE THE CONTRACT WAS ENTERED INTO AND BEFORE THE DATE OF THE ASSIGNMENT. ANOTHER NOTICE OF FEDERAL TAX LIEN WAS FILED IN THE SAME CLERK'S OFFICE. WAS SERVED ON THE CERTIFYING OFFICER BY A REVENUE OFFICER FROM THE RICHMOND. THIS LEVY STATED THAT INCOME TAX FOR THE YEARS 1959 AND 1962 ARE NOW DUE AND PAYABLE. OCTOBER 1961) SPECIFICALLY PROVIDES IN PERTINENT PART: "/THE PRECEDING SENTENCE (PROVIDING FOR NO REDUCTION OR SETOFF) APPLIES ONLY IF THIS CONTRACT * * * IS WITH THE DEPARTMENT OF DEFENSE. THE ABOVE-QUOTED LANGUAGE WAS INCLUDED IN CLAUSE 8 OF THE GENERAL PROVISIONS OF CONTRACT 14-10-0131-1155.

B-154909, SEP. 11, 1964

TO MR. T. J. BAER, CERTIFYING OFFICER:

BY LETTER DATED AUGUST 5, 1964, YOU REQUESTED OUR DECISION AS TO THE ACTION TO BE TAKEN ON A BILL, IN THE AMOUNT OF $12,229, WHICH IS DUE AND PAYABLE TO THE WORCHESTER COUNTY NATIONAL BANK, FITCHBURG, MASSACHUSETTS, UNDER CONTRACT 14-10-0131-1155, BETWEEN G. N. RIDEOUT AND CO., AND THE NATIONAL PARK SERVICE.

THE CONTRACT WAS ENTERED INTO ON AUGUST 12, 1963, AND ON AUGUST 29, 1963, THE CONTRACTOR ASSIGNED ALL MONIES DUE OR TO BECOME DUE UNDER THIS CONTRACT TO THE WORCHESTER COUNTY NATIONAL BANK. THIS ASSIGNMENT WAS ACCEPTED BY THE NATIONAL PARK SERVICE ON SEPTEMBER 6, 1963. ON AUGUST 5, 1963, BEFORE THE CONTRACT WAS ENTERED INTO AND BEFORE THE DATE OF THE ASSIGNMENT, A NOTICE OF FEDERAL TAX LIEN AGAINST THE CONTRACTOR HAD BEEN FILED IN THE TOWN CLERK'S OFFICE, ASHBURNHAM, MASSACHUSETTS, IN THE AMOUNT OF $6,061.94. THIS LIEN COVERED THE TAX YEARS 1959 AND 1960. ON DECEMBER 3, 1963, AFTER THE ASSIGNMENT, ANOTHER NOTICE OF FEDERAL TAX LIEN WAS FILED IN THE SAME CLERK'S OFFICE, IN THE AMOUNT OF $2,464.63. THIS LIEN COVERED THE TAX YEAR 1962. A NOTICE OF LEVY, IN THE AMOUNT OF $7,759.44, WAS SERVED ON THE CERTIFYING OFFICER BY A REVENUE OFFICER FROM THE RICHMOND, VIRGINIA DISTRICT OFFICE OF INTERNAL REVENUE, ACTING ON BEHALF OF THE MASSACHUSETTS DISTRICT OFFICE. THIS LEVY STATED THAT INCOME TAX FOR THE YEARS 1959 AND 1962 ARE NOW DUE AND PAYABLE.

CLAUSE 8 (ASSIGNMENT OF CLAIMS) OF THE GENERAL PROVISIONS OF THE SUBJECT CONTRACT CONTAINED LANGUAGE PROVIDING FOR THE ASSIGNMENT OF AMOUNTS DUE UNDER THE CONTRACT. THIS CLAUSE ALSO DETAILED THE CONDITIONS UNDER WHICH SUCH ASSIGNMENTS WOULD NOT BE SUBJECT TO REDUCTION OR SETOFF.

THE "NO SETOFF" PROVISION OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, APPROVED OCTOBER 9, 1940, CH. 779, 54 STAT. 1029, AS AMENDED BY THE ACT OF MAY 15, 1951, CH. 75, 65 STAT. 41, 31 U.S.C. 203, 41 U.S.C. 15, READS IN PERTINENT PART AS FOLLOWS:

"ANY CONTRACT OF THE DEPARTMENT OF DEFENSE, THE GENERAL SERVICES ADMINISTRATION, THE ATOMIC ENERGY COMMISSION, OR ANY OTHER DEPARTMENT OR AGENCY OF THE UNITED STATES DESIGNATED BY THE PRESIDENT, * * * MAY * * * PROVIDE THAT PAYMENTS TO BE MADE TO THE ASSIGNEE OF ANY MONEYS DUE OR TO BECOME DUE UNDER SUCH CONTRACT SHALL NOT BE SUBJECT TO REDUCTION OR SET- OFF * * *.'

BY EXEC. ORDER NO. 10824, MAY 29, 1959, 24 FED. REG. 4447 AND EXEC. ORDER NO. 10840, SEPTEMBER 30, 1959, 24 FED. REG. 7939, THE PRESIDENT DESIGNATED THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION AND THE FEDERAL AVIATION AGENCY AS AGENCIES TO WHICH THE QUOTED LANGUAGE SHOULD APPLY. THE PRESIDENT HAS MADE NO OTHER SUCH DESIGNATIONS. IN THIS REGARD, SUBSECTION 8 (A) OF STANDARD FORM 32 OF THE FEDERAL PROCUREMENT REGULATIONS (FPR CIRC. 21, OCTOBER 1961) SPECIFICALLY PROVIDES IN PERTINENT PART:

"/THE PRECEDING SENTENCE (PROVIDING FOR NO REDUCTION OR SETOFF) APPLIES ONLY IF THIS CONTRACT * * * IS WITH THE DEPARTMENT OF DEFENSE, THE GENERAL SERVICES ADMINISTRATION, THE ATOMIC ENERGY COMMISSION, THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, THE FEDERAL AVIATION AGENCY, OR ANY OTHER DEPARTMENT OR AGENCY OF THE UNITED STATES DESIGNATED BY THE PRESIDENT PURSUANT TO CLAUSE 4 OF THE PROVISO OF SECTION 1 OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED * * *).'

THE ABOVE-QUOTED LANGUAGE WAS INCLUDED IN CLAUSE 8 OF THE GENERAL PROVISIONS OF CONTRACT 14-10-0131-1155.

THEREFORE, THE RESTRICTION AGAINST SETOFF HAS NO APPLICATION TO NATIONAL PARK SERVICE CONTRACTS AND IT FOLLOWS THAT THE ASSIGNMENT MADE TO THE WORCHESTER COUNTY NATIONAL BANK IS SUBJECT TO SETOFF.

THERE REMAINS FOR DECISION THE AMOUNT THAT MAY PROPERLY BE SETOFF AGAINST THE SUMS DUE THE ASSIGNEE.

SECTION 6321 OF THE INTERNAL REVENUE CODE OF 1954, APPROVED AUGUST 16, 1954, CH. 736, 68A STAT. 779, 26 U.S.C. 6321, PROVIDES:

"IF ANY PERSON LIABLE TO PAY ANY TAX NEGLECTS OR REFUSES TO PAY THE SAME AFTER DEMAND, THE AMOUNT (INCLUDING ANY INTEREST, ADDITIONAL AMOUNT, ADDITION TO TAX, OR ASSESSABLE PENALTY, TOGETHER WITH ANY COSTS THAT MAY ACCRUE IN ADDITION THERETO) SHALL BE A LIEN IN FAVOR OF THE UNITED STATES UPON ALL PROPERTY AND RIGHTS TO PROPERTY, WHETHER REAL OR PERSONAL, BELONGING TO SUCH PERSON.'

SECTION 6323 OF THE INTERNAL REVENUE CODE OF 1954, 26 U.S.C. 6323, PROVIDES IN PART THAT:

"EXCEPT AS OTHERWISE PROVIDED * * * THE LIEN IMPOSED BY SECTION 6321 SHALL NOT BE VALID AS AGAINST ANY MORTGAGEE, PLEDGEE, PURCHASER, OR JUDGMENT CREDITOR UNTIL NOTICE THEREOF HAS BEEN FILED * * *

"IN THE OFFICE DESIGNATED BY THE LAW OF THE STATE OR TERRITORY IN WHICH THE PROPERTY SUBJECT TO THE LIEN IS SITUATED, WHENEVER THE STATE OR TERRITORY HAS BY LAW DESIGNATED AN OFFICE WITHIN THE STATE OR TERRITORY FOR THE FILING OF SUCH NOTICE; OR

"IN THE OFFICE OF THE CLERK OF THE UNITED STATES DISTRICT COURT FOR THE JUDICIAL DISTRICT IN WHICH THE PROPERTY SUBJECT TO THE LIEN IS SITUATED, WHENEVER THE STATE OR TERRITORY HAS NOT BY LAW DESIGNATED AN OFFICE WITHIN THE STATE OR TERRITORY FOR THE FILING OF SUCH NOTICE; * * *"

AT THE TIME OF THE TAX LIEN FILED AUGUST 5, 1963, THE APPROPRIATE LAW OF MASSACHUSETTS PROVIDED AS FOLLOWS:

"NOTICE OF A FEDERAL TAX LIEN ON ANY PROPERTY OR RIGHTS THERETO, OR A CERTIFICATE OF DISCHARGE OF SUCH A LIEN, MAY, UPON THE PAYMENT OF A FILING AND RECORDING FEE OF FOUR DOLLARS, BE FILED WITH THE REGISTER OF DEEDS OF THE COUNTY OR THE ASSISTANT RECORDER FOR THE REGISTRY DISTRICT WHERE THE PROPERTY IS SITUATED AND SHALL BE RECORDED. * * *"

SEE SECTION 24 OF CHAPTER 36 OF THE ANNOTATED LAWS OF MASSACHUSETTS, VOLUME 1A, TOGETHER WITH THE 1963 CUMULATIVE SUPPLEMENT TO THAT SECTION.

IN UNITED STATES V. JANE B. CORPORATION, 167 F.SUPP. 352 (D.MASS. 1958) THE COURT HELD THAT A FEDERAL TAX LIEN FILED IN THE OFFICE OF THE CITY CLERK OF THE CITY OF THE PRINCIPAL PLACE OF BUSINESS OF A CORPORATE DEBTOR MET THE FILING REQUIREMENTS UNDER THE MASSACHUSETTS LAW. ACCORDINGLY, SO FAR AS THE NOTICE FILED ON AUGUST 5, 1963, IS CONCERNED, WE FEEL THAT THE FILING OF SUCH NOTICE WITH THE TOWN CLERK'S OFFICE, ASHBURNHAM, MASSACHUSETTS--- THE TOWN WHERE THE TAXPAYERS WERE SITUATED--- MET THE FILING REQUIREMENTS OF THE APPROPRIATE MASSACHUSETTS STATUTE.

THE COURT ALSO HELD IN THE JANE B. CORPORATION CASE THAT THE USE OF THE TERM "ANY PROPERTY," COUPLED WITH THE ABSENCE OF ANY OTHER PROVISION FOR FILING OF NOTICE OF TAX LIENS ON PERSONALTY, INDICATED THAT THE STATUTE WAS INTENDED TO MAKE FULL PROVISION FOR FILING OF TAX LIENS ON BOTH REAL AND PERSONAL PROPERTY. YOU WILL NOTE HOWEVER THAT EFFECTIVE SEPTEMBER 1, 1963, THE MASSACHUSETTS LAW WAS CHANGED TO ONLY PROVIDE FOR THE FILING OF A FEDERAL TAX LIEN ON REAL PROPERTY OR FIXTURES.

THE PURPOSE OF THE FILING REQUIREMENT OF 26 U.S.C. 6323 WAS TO ALLEVIATE THE HARSH CONDITION THAT HAD EXISTED WHEN FEDERAL TAX LIENS WERE HELD VALID AS AGAINST PURCHASERS FOR VALUE WITHOUT NOTICE. SEE UNITED STATES V. BOSTON BERLIN TRANSPORTATION CO., 188 F.SUPP. 304 (D.NEW HAMP. 1960) AND ELLIOTT V. SIOUX OIL CO., 191 F.SUPP. 847 (D.WYOM. 1960). IN THE PRESENT CONSIDERATION, THE ONLY POSSIBLE PRIOR NOTICE AFFORDED THE WORCHESTER COUNTY NATIONAL BANK WAS THE LIEN FILED PRIOR TO THE DATE OF THE ASSIGNMENT. IT FOLLOWS THAT THE AMOUNT INVOLVED IN THE LIEN FILED ON AUGUST 5, 1963, IS AVAILABLE FOR SETOFF. THE TAX LIEN FILED ON DECEMBER 3, 1963, OVER THREE MONTHS AFTER THE ASSIGNMENT OF AUGUST 29, 1963, LACKS PRIORITY AND THE AMOUNT REPRESENTED BY THAT LIEN IS NOT AVAILABLE FOR SETOFF. MOREOVER, IN VIEW OF THE FACT THAT AS OF SEPTEMBER 1, 1963, THE MASSACHUSETTS LAW ONLY PROVIDED FOR THE FILING OF FEDERAL TAX LIENS AGAINST REALTY AND FIXTURES, THE LIEN FILED ON DECEMBER 3, 1963, SHOULD PROPERLY HAVE BEEN FILED WITH THE CLERK OF THE APPROPRIATE UNITED STATES DISTRICT COURT PURSUANT TO 26 U.S.C. 6323 (A) (2).

A COPY OF THIS DECISION IS BEING FURNISHED TO THE CHIEF COUNSEL, INTERNAL REVENUE SERVICE.