The Department of Revenue recently launched a new out-of-state lien enforcement program to help the department carry out its duty of collecting the tax revenue that funds essential government services and programs.
The goal of the out-of-state lien enforcement program is to collect delinquent taxes from taxpayers who are located out of state and have no assets within Pennsylvania. Since its launch roughly a year ago, this program has brought in more than $6 million in revenue.
"This is a unique approach that is helping us ensure that all taxpayers are operating on a level playing field," Revenue Secretary Dan Hassell said. "One of the goals in our strategic plan is to enhance our tax compliance initiatives, and this program has helped us in our efforts to reach that goal."
To explain the program, it's first important to define what a lien is and how it works. A lien is defined as a charge on real or personal property for the satisfaction of debt or duty. In many cases, the Department of Revenue files a lien with a county Prothonotary Office when an individual or business has unpaid delinquent taxes. The lien ensures that the Commonwealth of Pennsylvania is listed as a priority creditor that must be paid before other financial transactions involving the property can take place (home sales, business transfer, obtaining a loan, etc.).
But what does the department do in cases when a taxpayer who has failed to pay state taxes has no in-state assets? That's where the new out-of-state lien enforcement program can help. For the taxpayers selected for the program, the department still moves forward with filing a lien in one of Pennsylvania's 67 counties to create a public record of the delinquent taxes that are owed. Meanwhile, a final warning letter is sent to each taxpayer advising the taxpayer that unless the Department of Revenue is contacted within 15 days, the case will be referred to Wong Fleming, the department's outside law firm, for legal enforcement.
Legal enforcement is initiated by exporting and filing the department's liens as a judgment in the taxpayer's home state. Once the judgement has been filed in the taxpayer's home state, the necessary legal steps are implemented to collect the delinquent taxes that are owed. Those steps may include the seizure and selling of property to pay the delinquency.
Pennsylvania's Department of Revenue is one of the first state taxing authorities to successfully implement an out-of-state lien enforcement program that utilizes the judicial process in other states. Staff from the department have presented on this program at recent conferences, including the annual meeting of the Northeastern States Tax Officials Association.