Effective January 1, 2018, due diligence searchers need to make an addition to their search strategy for state tax liens in Illinois. As of that date, the State Tax Lien Registration Act (“Act”) creates a centralized State Tax Lien Registry to be maintained by the Illinois Department of Revenue (“Department”) for filing notices of tax liens that are in favor of or enforced by the Department. According to the informational bulletin dated October 2017, a link to the Registry will be available on the Department’s website on the effective date.
State tax liens in Illinois attach to both real and personal property and are filed by the Department for unpaid taxes. Once a state tax lien is filed, the lien is perfected and attaches to existing and future property of the debtor until the lien is paid in full and released by the Department. After January 1st, the Act requires that state tax lien filings no longer be made with the county recorders’ offices throughout Illinois. Instead, all state tax liens will be made available in one central location that covers the entire state. This is a significant change.
Are County Recorder Searches Still Necessary for State Tax Liens in Illinois?
As a result of this change, questions have arisen concerning what should be the best practice concerning searching for these tax liens. Since previously filed state tax liens at the county recorders’ offices filed through 12/29/17 remain effective and searchable at these offices, is searching at the county still necessary after the effective date of this Act? Or will searching only be necessary on the new Registry? While the Act is silent on this point, it appears that the Department has, through administrative action, attempted to capture all of the previously filed county-level liens into the registry. In theory, this would mean that searching only the Registry is necessary. However, until it has been confirmed that all effective state tax liens in the county recorders’ offices have been entered into the Registry, searching the Registry alone could be risky. Accordingly, we believe that searches should be conducted at both the county recorders’ offices and on the Registry, and that this practice should continue for the foreseeable future, maybe even for the next twenty years, as Illinois has a twenty-year effective period for state tax liens. Going forward, the state may clarify the completeness of the Registry regarding the pre-Act filings through administrative or legislative action, and we will advise our readers accordingly as additional information becomes available.
So remember, beginning January 1, 2018, creating an effective due diligence search strategy for the state of Illinois has an additional consideration. As a “belt and suspenders” approach, we recommend that searches be conducted on both the newly created Registry and at the county recorders’ offices – at least for the foreseeable future. We will be watching for any developments in this area over the coming months and will be passing along additional recommendations as appropriate.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.