Federal tax collecting procedure is well known, but collection procedure in New York is shrouded in mystery. Lawyers delving into the field will find that the legal materials consist of short, often incoherent judicial opinions scattered across 100 years of changing laws. Typically, if a court opinion is unsatisfactory, the legislature reacts promptly by amending the New York tax law, so that one can never be confident that any given precedent is still valid.
As a result, New York tax law itself is highly confusing, repetitive, and contradictory. Much of the problem can be traced to a legislative decision, made many years ago, that tax collection procedure should reflect the law governing collection of ordinary money judgments. The choice has been a disaster in terms of coherence. New York's law of money judgments is itself rife with confusion, (1) and its interaction with tax law is almost completely mystifying.
This article is a first attempt at systematizing New York tax collection in a rational way. There has never been a study of New York tax collection procedure, although the State (and City of New York) is a potent force in debtor-creditor relations both here and abroad. At the moment, New York tax law is full of potholes. We can do little more than identify some of these and speculate how they might be filled, consistent with common sense, to the extent that the statutory materials allow.
The current study is limited to the New York tax warrant. This document issues from various taxing authorities in New York, most notably the State Department of Taxation and Finance ("DTF") and New York City's Department of Finance ("NYCDOF"). (2) Twenty-nine different liens arise from tax warrants issuable on behalf of the State or the City of New York. (3) Other taxes exist that do not involve warrants. (4) Taxes for which warrants are not issued are excluded from the present study. (5)
The tax warrant is many things. First, it is a judgment, or so the state and City of New York hope when they seek full faith and credit recognition in other states. Second, when docketed with the county clerk and with the Department of State, (6) the tax warrant creates a lien on real and personal property. (7) Third, it is a writ of execution to the county sheriffs; (8) alternatively, it authorizes a designated tax compliance officer (an employee of the DTF or other issuer of the warrant) to pursue collection as a sheriff might. (9)
The current study examines all of these features of the tax warrant. Part I describes the procedural minima necessary for a tax warrant to issue. Part II discusses the status of the tax warrant as a judgment worthy of full faith and credit in other courts. Part III examines the tax lien that arises by virtue of the tax warrant. Part IV considers liens that arise even prior to the issuance of the tax warrant. In particular, New York City has pre-warrant rights with respect to its corporate tax. In addition, the DTF has a lien against the property of purchasers of "any part or the whole [of a taxpayer's] business assets, otherwise than in the ordinary course of business." (10) These transactions are commonly referred to as "bulk sales." (11) Part V considers the priority to which a New York tax lien is entitled, as against various other liens that might arise from security agreements, money judgments, and federal taxes. Throughout our discussion, we attempt to alert readers when New York State procedures differ from those applicable to the Internal Revenue Service ("IRS").
I. THE PROCEDURAL ASPECTS OF A TAX WARRANT
The chief tax collector for the state of New York is the DTF. (12) This would be far from apparent to anyone who is tempted to learn New York tax law by reading the New York Tax Law. (13) The Tax Law usually refers to the Tax Commission, or to the Tax Commissioner. (14) In fact, the Tax Commission was abolished in 1986, to be replaced by the DTF. …