Indiana Law Journal
Publication Title (Abbreviation)
On December 7, 1999, the United States Supreme Court unanimously decided Drye v. United States, a case likely to be a landmark in federal tax lien law. Drye clarified what had been muddied by previous Supreme Court and lower court decisions: the proper relation between state law and federal law in tax lien attachment cases. That clarification will permit-indeed, compel-greater analytical precision as future courts address tax lien cases. This Article discusses one such line of cases.
It has long been the rule that the federal tax lien does not attach to tenancy-by-the entireties interests when (1) only one of the spouses owes tax and (2) applicable state law prohibits separate creditors of only one of the spouses from proceeding against entireties property. Unfortunately, that rule, though long standing, is conceptually bankrupt, indeed is fundamentally inconsistent with the modem understanding of tax liens.
Thus, the tension in this area has been “which shall prevail: history or logic?”. History has had the ascendancy thus far, but only, I believe, because loose language in prior Supreme Court decisions created an environment in which imprecision could survive. The clarification of the applicable standards by Drye eliminates that environment. Accordingly, fidelity to Drye requires reexamination-and abolition-of the outdated rule as to attachment of the tax lien to entireties interests.
This Article has five parts. Parts I, II, and III are foundational. Part I describes Drye, while Parts II and III explore the interaction of the tax lien and tenancies by the entireties before Drye. Specifically, Part II explains the development and nature of the current rule as to attachment of the federal tax lien to entireties interests (called hereafter the "entireties bar"). Part III argues that, for both policy and doctrinal reasons, the entireties bar was a dubious rule of law even before Drye.
Parts IV and V carry the central message of this Article: the effect of Drye on the current rule. Part IV begins with the central curiosity as to the entireties bar: given its shortcomings, why does the rule command widespread acceptance? The Part concludes that the explanation is historical: the rule developed before clear elaboration of modem tax lien doctrine and has survived vestigially, by inertia. Part IV then describes the doctrinal clarification wrought by Drye. In the glaring light of Drye, no comer of shadow remains in whose murk the entireties bar can plausibly be defended. Finally, Part V considers objections, that is, arguments (inadequate in my view) in favor of survival of the current rule despite Drye.
© 2000 Steve R. Johnson
Steve R. Johnson,
After Drye: The Likely Attachment of the Federal Tax Lien to Tenancy-by-the-Entireties, 75
Available at: http://ir.law.fsu.edu/articles/252