Pub. 7 2016 Issue 1

spring 2016 13 West Virginia Banker 2016 SESSION • May 22— June 3, 2016 (225) 766-8595 • gsblsu.org 4273 Highland Road | Baton Rouge, LA 70808 TRUE LEADERS DON’T CREATE FOLLOWERS, THEY CREATE MORE LEADERS Since 1950 the Graduate School of Banking at Louisiana State University has helped build over 15,000 banking leaders in the industry. Contact us to develop your future leaders today. qualifying property acquired by a borrower any time after such a tax lien is filed. Again, a simple example illustrates the harsh results this rule can create. Suppose on April 1, 2015, Lender perfects a security inter- est in Borrower’s after-acquired inventory and equipment and on April 15, 2015, the IRS files a tax lien against Borrower. Let’s assume Borrower acquires both a piece of equipment used for its own purpose as well as some inventory for resale sometime after the tax lien is filed. First, with respect to the equipment, if the equipment is acquired after April 15, 2015, the IRS could likely assert a superior lien on the after-acquired equipment since equipment is non-qualified property. Second, with respect to the inventory, if the inventory is acquired prior to May 30, 2015, Lender likely has priority since that is within the 45 day window and inventory constitutes qualified property. However, the IRS could claim priority on inventory acquired after June 1, 2015 since that would be beyond the 45 day window. Given the superior lien status federal tax liens can garner on after-acquired property, it is critical to monitor the timing of when collat- eral securing a loan is acquired, to be aware of whether federal tax liens have been filed and to act swiftly when a loan secured by after-ac- quired property goes into default. This is especially true with respect to collateral, which is continually being acquired or generated such as accounts receivable and inventory. Conclusion Commercial lenders cannot simply rely on the “first to file” rule when federal tax liens come into play. It is critical lenders stay apprized of whether federal tax liens have been filed and take steps to protect against being trumped by federal tax liens on loans where future advances are being Dave Thomas is Managing Partner of Dinsmore’s Morgantown office, practicing in the Corporate De- partment. Dave focuses on banking law, bankruptcy, commercial transactions and commercial litigation. He assists corporate clients and financial institutions in a variety of commercial matters including loan structuring, workouts, collections, bankruptcy, and regulatory compliance. He has significant experience representing creditors in bankruptcy, including Chapter 7, 11 and 13 cases. He speaks regularly on bankruptcy and banking topics. Dave is a member of the firm’s Professional Development Committee. Paige Vagnetti is an attorney in Dinsmore’s Morgantown office. She is amember of our Corporate Depart- ment where she focuses her practice on Tax Benefits and Wealth Planning. She graduated Order of Coif and served as the student writing specialist while at West Virginia University College of Law. 1 26 U.S.C. § 6323(a). 2 It is worth noting that the Act fails to specifically address whether a purchase money security interest primes a federal tax lien so lenders should proceed with caution and consult with counsel when dealing with purchase money loans when federal tax liens exist. 3 26 U.S.C. § 6323 (d). 4 26 U.S.C. § 6323 (c)(1). 5 26 U.S.C. § 6323 (c)(2)(C).