Certificate of Discharge of Property from Federal Tax Lien — Definition Glossary

Defined by Sarah Mitchell, CPA | Reviewed by: James Okafor, EA

Full Definition

A Certificate of Discharge releases a specific piece of property from a federal tax lien, even when the overall tax debt is not paid in full. The IRS issues a Certificate of Discharge under IRC Section 6325(b) when: the property is sold and the IRS receives the lesser of the value of its lien interest or the proceeds; the value of the remaining encumbered property exceeds the tax debt by 2x; or the government’s interest in the property has no value. Certificates of Discharge are commonly used in real estate transactions where a business needs to sell a specific property that has an IRS lien, without paying the full tax debt.

Why This Matters for Businesses With Tax Debt

Understanding Certificate of Discharge of Property from Federal Tax Lien is essential for any business owner navigating IRS enforcement. This term directly affects the options available for resolving business tax debt — including whether tax debt financing is available, how lien subordination works, and what enforcement the IRS can take.

Related Terms

Federal Tax Lien, Certificate of Release, Tax Lien Subordination

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Type of Tax Debt *-- Select Tax Debt Type --IRS 941 Payroll Tax DebtFederal Tax LienIRS Bank Levy (Active Now)Trust Fund Recovery Penalty (TFRP)State Tax DebtOIC Bridge FinancingMultiple Types

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Sources: IRS.gov; Internal Revenue Code (IRC); IRS Publication 594 (The IRS Collection Process); IRS Publication 1 (Your Rights as a Taxpayer). Tax Funds is a financing marketplace — not a lender, CPA firm, or law firm. This content is for informational purposes only.