Yes, we believe your mortgage lien and assignment of rent trumps the IRS tax lien. The Internal Revenue Code provides that a tax lien is inferior to a perfected security interest of a secured party if the secured party does not have “actual notice or knowledge” of the tax lien at the time the security interest is created.

The Internal Revenue Code defines a “security interest” as a security interest that has been perfected under local law. Illinois law provides that an assignment of rent becomes a perfected security interest against third parties when the mortgage or the instrument that assigns the rent is recorded. Assuming that you have met the requirements for perfecting your security interests in the assignment of rent and the property, and your bank did not have actual notice or knowledge of the tax lien at the time the security interest was created, we believe your mortgage lien and assignment of rent would trump the IRS tax lien.

For resources related to our guidance, please see:

• Internal Revenue Code, 26 USC 6323(b)(1) (A filed tax lien “shall not be valid . . . as against a holder of a security interest in such security who, at the time such interest came into existence, did not have actual notice or knowledge of the existence of such lien.”)

• Internal Revenue Code, 26 USC 6323(h)(1) (“Security interest” means “any interest in property acquired by contract for the purpose of securing payment or performance of an obligation or indemnifying against loss or liability. A security interest exists at any time (A) if, at such time, the property is in existence and the interest has become protected under local law against a subsequent judgment lien arising out of an unsecured obligation. . . .”)

• Internal Revenue Manual, 5.17.2.6.4. (“If a Notice of Federal Tax Lien has not been filed prior to a creditor perfecting a security interest, the security interest has a priority over the federal tax lien.”)

• Kahn v. Deerpark Inv. Co., 115 Ill.App.2d 121, 124 (1st Dist. 1969) (An assignment [of rent] creates a security interest in rents that is perfected as to third parties upon recording of the mortgage in the real estate records.)

• Conveyances Act, 765 ILCS 5/31.5(b) (An assignment of rents is perfected if the instrument assigning the interest in rent is recorded in the county where the real property is located.)