Lien Certificates / Corporate Tax Lien Certs
What is a Corporate Tax Lien Certificate?
A lien certificate in PA is a certificate issued by the Department of Revenue providing public notice of the existence or non-existence of Commonwealth liens against assets of a corporation, business trust, limited liability company or any other association subject to PA’s Corporation Taxes for failure to pay taxes due or to file tax reports for given years. Limited Partnership can opt to be taxed as a corporation so it is strongly urged that you obtain a lien certificate for them as well. These certificates are a MUST HAVE* for any situation in which you are trying to determine the status of a company for judgments and liens.
Nonprofits can have estimated taxes applied to their account at Revenue for the Gross Premium Tax however, in over 25 years of obtaining lien certificates we have only seen one with estimates for this tax applied. Nevertheless, most of our clients prefer to order a lien certificate to be sure that the company is exempt from the other corporate taxes. Basically, many title companies like to “paper” their files as a way of covering their bases.
A lien certificate should be ordered for limited partnerships because these entities can opt to be taxed as a corporation. Also, obtaining the lien certificae is a good way to make sure that a company is recognized by Revenue as a limited partnership.
Corporate Tax Liens are often called “silent liens” because the Department of Revenue is not required to file them at the County Prothonotary’s office as notice to the world like almost all other liens established under state law.
When a company fails to file a tax report, the Commonwealth is entitled to apply lien estimates to that company’s account. The “estimates” are just that, estimated amounts that are applied to provide a dollar amount on the lien certificate. The estimates are generally $1,000 per tax (and there are 3 corporate taxes) and $100 penalty for each year. Generally, that works out to $3,300 for a corporation and LLC's even though LLC's are only subject to one of the three corporate taxes.
Estimates, Part 2
If you receive a letter from us telling you that "estimates" are being applied, and if you can obtain original tax reports for the years in question, you can send them to us and we will deliver them to Revenue in person. The Bureau of Compliance will transmit the return to the Bureau of Corporation Taxes. Approximately 3-5 weeks later, the return should be processed and at that time a clear lien certificate can be ordered (assuming that there are no other liens already assessed to the company's account.
Turn Around Time
Lien certificates generally take between 2-6 days to obtain once the order is placed with us. If the subject company failed to file a tax report and the Department needs to apply “estimates” the lien certificate can take weeks to obtain. Note: It can not be assumed that there are no other problems other than the delinquent tax reports. The lien certificate could have other “estimates” or actual amounts due from previous years that were applied to the account in the past.
Payoff amounts can be obtained for actual amounts due but not for “estimates” since they are not actual $ amounts that are due, i.e. they are not settled amounts. Call Esquire Assist, Ltd. at (717) 232-9398 for more information on these matters if you still have questions.
*These liens are called "silent liens" because they do not need to be filed in a county courthouse in PA which is very unusual under PA law. The concept of giving "notice to the world" by filing liens in the courthouse goes way back and there are only a very small number of exceptions...this is one of them. For this reason, closing agents and buyer's attorney's should always request a lien certificate when ordering a judgment/lien/UCC search.