Filing a federal IRS tax lien against a vessel registered with the United States Coast Guard (USCG) encumbers the vessel and prevents a clear transfer of title unless it is fulfilled, discharged, or show that it is null and void. To ensure the clear transfer, you must deal with paperwork from two federal bureaucratic organizations, but it can be done.

I had a client who found out there was an IRS Link on his boat. The Federal Tax Lien (FTL) was long expired due to the statute of limitations, but the USCG would not allow the title to be transferred on their records without IRS documentation. We got the USCG National Vessel Documentation Center to remove the FTL. It took a lot of back and forth between the IRS, the Coast Guard and my office to resolve the matter.

First, there is the issue of federal tax liability. If the FTL is due or paid, then you get a Federal Tax Liaison (Release) Certificate of Release. But you must have specific data about the launch that is not normally provided. The Release must show the place of filing as “US Coast Guard, National Ship Documentation Center, Falling Waters, WV” and must include vessel specifics such as original registration paperwork.

Just because you have a buyer but the price is less than the FTL amount doesn’t mean you can’t sell the boat. If you are selling the vessel for less than the FTL value, then you must apply for a Certificate of Discharge of Ownership of a Federal Tax Lien. You will be required to obtain independent appraisals and other documentation. In general, if the IRS gets full value after sales expenses, they will likely approve a lien discharge on the boat. This process will allow title to be transferred to the new buyer.

Most Lien Department workers are not familiar with handling vessel releases. They will often send you a standard Communication, but it won’t do you any good. You may need to get help from an enrolled agent, attorney, or certified public accountant with experience in this area, or from the Office of the Taxpayer Advocate. You can contact them directly by phone at: 1-800-913-6050. Be prepared for a long wait time.

Your mailing address is:

Internal Revenue Service
Centralized link operation
PO Box 145595
stop 8420G
Cincinnati, OH 45250-5595

If you have a vessel that has been encumbered by a federal tax liability and you need to sell it or clear the title, don’t give up. With proper documentation, you can resolve the matter as long as the tax liability has expired, discharged from the vessel, or been satisfied.