Tax Lien Subordination (Certificate of Subordination) — Definition Glossary

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

Full Definition

Tax lien subordination is a process where the IRS allows a new lender to take a priority position over an existing federal tax lien on specific property. The IRS issues a Certificate of Subordination of Federal Tax Lien under IRC Section 6325(d), which states that the lender’s security interest takes priority over the existing tax lien for the specific property being financed. This allows specialized lenders to fund business loans even when an active IRS lien would otherwise prevent traditional bank financing. Tax lien subordination financing is the primary mechanism used to resolve IRS tax debt when a business cannot pay from operating cash flow.

Why This Matters for Businesses With Tax Debt

Understanding Tax Lien Subordination (Certificate of Subordination) 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, Certificate of Discharge

Need Help With Tax Debt?

Tax Funds connects businesses facing IRS enforcement with specialized financing solutions. If you are dealing with any of the situations described above, apply below — no obligation, no upfront fees.

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Full Name *

Business Name *

Email Address *

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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

Approximate Tax Debt Amount *-- Select Amount --$10,000 - $25,000$25,000 - $50,000$50,000 - $100,000$100,000 - $250,000$250,000 - $500,000$500,000+

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What enforcement actions are active? How long has the debt been owed? Any upcoming deadlines?

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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.