Also known as: back tax · back-tax · back taxes owed · tax arrears · delinquent taxes · unpaid taxes
Written by attorneys · grounded in primary & secondary sources — see below
Taxes assessed for a prior year or years that remain due and unpaid. The unpaid amounts create statutory liens that attach to real property and affect marketability and priority in title disputes.
Bernard Bass agreed to sell his warehouse to Beacon Bank. After the deed was recorded the city asserted a lien for several years of unpaid assessments on the property. Beacon Bank refused to proceed with financing until the lien was cleared because the back taxes impaired marketability of title.
Bobby Brady failed to pay property taxes on his farm for five years. The United States initiated civil forfeiture proceedings against the land. Brady challenged the seizure on due-process grounds but the court upheld the action because the back taxes created a valid lien enforceable by statute.
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Blake Butler moved from California to Nevada while owing several years of state income taxes. The Franchise Tax Board sued in Nevada to collect the back taxes. The Supreme Court addressed whether full faith and credit required Nevada to honor the California judgment.
Barbara Bennett sued a union trust fund in state court over distribution of assets subject to a federal tax lien. The defendant removed the case arguing that the back taxes raised a substantial federal issue. The court examined whether the lien priority question belonged in federal court.
Brandon Black inherited real property from his father who had accumulated back taxes. The United States asserted a lien against the inherited land. Black argued the lien could not attach because he had disclaimed the inheritance but the Court held the back taxes followed the property interest.
Bei Bai sued her former attorney for malpractice after losing a patent case that turned on an on-sale bar defense. The attorney argued the federal tax lien question embedded in the underlying dispute was not substantial enough to create federal jurisdiction. The Supreme Court examined whether the embedded federal issue warranted removal.
Back taxes create statutory liens that attach to the property and remain enforceable until paid. These liens impair marketability because subsequent purchasers take subject to the government's priority claim. Title examiners therefore require clearance of the liens before insuring or financing a transfer.
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The lien for unpaid taxes survives the closing and may be enforced against the property regardless of the deed's silence on the issue. The buyer or lender must either pay the taxes or negotiate an indemnity from the seller. Failure to address the lien can lead to foreclosure by the taxing authority.
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Payment of the delinquent taxes at a tax sale extinguishes the lien and conveys clear title to the purchaser. The sale proceeds first satisfy the back taxes before any surplus is distributed to other claimants. Once the taxes are paid the lien is released.
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A partner may face personal liability if she signed a separate written undertaking to pay the taxes or if she consented to an improper distribution that left the taxes unpaid. General partnership law otherwise requires creditors to exhaust partnership assets first. Independent contractual promises bypass that limitation.
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…Court’s most recent decision in this area is Mennonite, supra , which involved the sale of real property for delinquent taxes. State law provided for tax sales in certain circumstances and for a 2-year period following any such sale during which the owner or any lienholder could redeem the property. After…