Sec. 7-4.2. Lien of tax

Tax Law, § 1092(j)(1) and (3)

(a) The tax (including additions to tax, penalties and interest) imposed by article 9-A becomes a lien from the date on which the report is required to be filed (without regard to any extension of time for filing such report), except that the tax becomes a lien no later than the date the taxpayer ceases to be subject to the tax imposed by article 9-A or the date the taxpayer ceases to exercise its franchise, or do business or employ capital, or own or lease property in this State in a corporate or organized capacity or maintain an office.

(b) Each such tax is a lien and binding on the real and personal property of the taxpayer, or of a transferee liable to pay the tax, until the tax is paid in full, subject to the following exceptions:

(1) The lien of such taxes after the expiration of 10 years from the date they became due and payable is no longer a lien as to the following:

(i) owners of real estate who would be purchasers in good faith but for such taxes, additions to tax, penalties or interest; and

(ii) mortgagees of real estate who would be holders in good faith but for such taxes, additions to tax, penalties or interest.

These limitations do not apply to any transfer from a corporation subject to tax to a person or corporation subject to tax with intent to avoid payment of any taxes, or where with like intent the transfer is made to a grantee corporation subject to tax, or any subsequent grantee corporation subject to tax, controlled by such grantor or which has any community of interest with it, either through stock ownership or otherwise.

(2) The lien of each such tax is subject to the lien of any mortgage indebtedness existing against real property prior to the time when the tax became a lien, where such mortgage indebtedness was incurred in good faith and was not given, directly or indirectly, to any officer or stockholder of the corporation subject to tax owning such real property, whether as a purchase money mortgage or otherwise, and is also subject to the lien of local taxes and assessments, without regard to when the lien for such taxes and assessments has accrued.

(3) If the report is filed and the tax shown on the report to be due is paid on or before the date on which the report is required to be filed, without regard to any extension of time for filing such report, the lien is not enforceable against the interest of any purchaser or mortgagee in property which is thereafter, but prior to the issuance to the taxpayer of a notice of deficiency under section 1081 of the Tax Law, transferred to a bona fide purchaser for value, or mortgaged where the mortgage indebtedness is incurred in good faith and the mortgage is not given directly or indirectly to any officer or stockholder of the corporation subject to tax.

(4) In any action to foreclose any mortgage where the mortgage indebtedness is incurred in good faith, or to foreclose the lien of local taxes or assessments, to which the people of the State of New York are made a party defendant by reason of the existence of a lien for any such tax, or if no such tax was due or a lien at the time of the commencement of such action and the filing of a notice of pendency thereof but such a tax becomes due or becomes a lien subsequent to the time of the commencement of such action and the filing of a notice of pendency thereof, such real property is to be sold and conveyed in such action free from any such tax lien, and any such tax lien becomes a lien on any surplus moneys which may result from such sale, to be determined in the proceedings for the distribution of such surplus moneys.

(5) Where title to mortgaged real property passes from an individual, or from another corporation owing no franchise tax, to a corporation which is in default for such tax, the lien of any such tax is not enforceable except as to the equity, if any, after the prior mortgage or purchase money mortgage encumbrance.

(6) Where an additional tax is assessed in accordance with the provisions of article 27, no lien for such additional tax is enforceable against property which prior to the issuance to the taxpayer of a notice of deficiency under section 1081 of the Tax Law, had been transferred in good faith to a bona fide transferee for value.