Sam Brotman, JD, LLM, MBA August 24, 2014 5 min read

Franchise Tax Board Liens – Part Three


Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

Government Code Section 7171 authorizes both the recording of a Notice of State Tax Lien (NSTL) in the office of a county recorder and the filing of a NSTL with the Secretary of State (SOS) at any time after the state tax lien is created and before it is extinguished. Any recording with county recorder becomes a public record and is used mostly for real property. A Secretary of State lien will be filed to attach consumer goods, fixtures, and bulk sales, as well as when personal property like accounts receivable, chattel paper, equipment, farm product or equipment, inventory, negotiable documents of time or interest in a partnership or LLP. The state tax lien attaches personal property and, consequently, a taxpayer or entity's interest in a partnership may not be sold, assigned or otherwise conveyed free of a state tax lien. Notice to Taxpayer and Notice to Partnership are used to notify the taxpayer and partners of the force and effect of the state tax lien. Although the state tax lien attaches to a taxpayer's interest in a partnership, it does not attach to specific partnership distributions of profits and surplus.

Government Code Sections 7171 and 7220 authorize the filing of a NSTL with the SOS. The filing of the notice establishes a public record of the existence of the state tax lien against all personal property belonging to the taxpayer and located in the state. Notice of State Tax Lien is more likely to be filed by FTB with the country recorder’s office if taxpayer is self-employed, has real property, is contemplating filing a bankruptcy, is terminally ill, or is involved in judicial proceedings. The Taxpayers' Bill of Rights (Revenue and Taxation Code Section 21019, effective January 1, 1989) requires notification be sent to the taxpayer or entity at least 30 days prior to the filing of a lien. The notification must include the statutory authority for issuing a NSTL, the earliest date on which the lien may be filed or recorded, and the remedies available to the taxpayer or entity to prevent the filing of the NSTL. Generally, the FTB will file a lien in each case where an accumulated unliened case balance is due. A NSTL should be recorded in the county where the taxpayer resides, or was last known to reside. Additional notices should be recorded in any county where the taxpayer transacts business or owns real property. A NSTL should be recorded in the county where the entity owns property and transacts business. Failure to record NSTL by FTB may result in that FTB looses priority to third persons' interest in property. Government Code Section 7170(c) describes in detail priority of liens involving state department v. liens by third parties.

For individual married taxpayers, If there are balances due for multiple tax years and spouses are jointly liable for only some of the years, two notices of state tax lien should be recorded. One notice should name both spouses and the balances due for the joint tax years. The other notice should name the spouse liable for the remaining tax years and the balances due for those separate years.


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Last updated: April 14, 2024

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law



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