Tax Law Insights

The South Carolina Department of Revenue ("DOR") is the state agency charged with collecting most South Carolina taxes, including income taxes, sales and use taxes, and withholding taxes. If a taxpayer fails to pay an assessed tax liability, DOR may file a tax lien against a taxpayer, with the lien notice being filed in one or more of the county register of deeds offices. The filing of the lien notice makes the delinquent tax liability a matter of public record.

Prior to March 1, 2014, when a taxpayer fully paid the amount secured by a filed tax lien, DOR would file a lien satisfaction with the county register of deeds office to release the lien. The lien satisfaction alerted the public that the lien had been paid in full. The satisfaction and the original tax lien both remained in the records of the register of deeds, however, and both could continue to be viewed by the general public.

S.C. Code § 12-58-165 was added to the South Carolina Code on June 13, 2013, and now permits DOR to take action necessary to "expunge" the recording of a tax lien once the lien is fully paid and satisfied. An expungement, unlike a lien satisfaction, is a direction to the register of deeds office to remove the lien from the public record.

Effective March 1, 2014, DOR will no longer file tax lien satisfactions. Instead, DOR will now file expungements when a lien is fully paid and satisfied.

Taxpayer Impact

The filing of a tax lien has an immediate negative impact on a taxpayer's credit record which continues from the date of filing for up to fifteen years. When a tax lien is paid in full and a satisfaction is filed, a taxpayer's credit record continues to be negatively impacted for seven additional years even after payment.

DOR's decision to file expungements instead of satisfactions effective March 1, 2014 is a taxpayer-friendly policy that will benefit taxpayers who fully pay and satisfy a lien. When an expungement is filed, the tax lien is removed from the public record and the taxpayer's credit record. A taxpayer's credit will no longer be negatively affected for seven years after a lien is paid.

Taxpayers who fully pay a lien on or after March 1, 2014 do not need to take any action in order for DOR to file an expungement (aside from paying the lien amount). Taxpayers who have fully paid a lien prior to March 1, 2014 may request that DOR file an expungement. Absent a request, the lien will remain of record and continue to have a negative credit record impact.