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IRS Right of Redemption After Sale (26 U.S.C. § 7425)

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IRS Right of Redemption After Sale (26 U.S.C. § 7425)

Federal-authority reference page. Legal information, not legal advice. Last verified: 2026-06-02.

Overview

When a property carries a federal tax lien that is junior to the interest being foreclosed — i.e., the IRS filed a Notice of Federal Tax Lien (NFTL) after a mortgage, deed of trust, or recorded property-tax claim already attached — and that senior interest is then enforced by sale, two federal questions arise that state foreclosure law cannot answer on its own:

  1. Does the sale wipe out the federal tax lien, or does it survive and ride through to the purchaser? Under 26 U.S.C. § 7425(b), this turns on whether the foreclosing party gave the IRS the statutory 25-day notice of sale before a nonjudicial sale, or (for a judicial sale) whether the United States was joined as a party under 28 U.S.C. § 2410.
  2. Even when the federal lien is validly discharged, the United States retains a separate post-sale right to redeem the property — to buy it from the foreclosure purchaser — for 120 days from the sale (or the local-law redemption period, whichever is longer) under § 7425(d)(1) and 28 U.S.C. § 2410(c).

This is federal law that preempts state law on the narrow questions of how a federal tax lien is divested and what rights the United States keeps after a sale. A federal tax lien is a creature of federal statute (26 U.S.C. §§ 6321–6323), so the manner of its divestiture and the government’s redemption option are federal questions; the implementing regulation states that such a lien “may be discharged or divested under local law only in the manner prescribed in 28 U.S.C. 2410 or section 7425.” (26 C.F.R. § 301.7425-1, retrieved 2026-06-02.) State right-of-redemption law still matters in two ways: it supplies the judicial-vs-nonjudicial character of the foreclosure (which branch of § 7425 applies), and it can lengthen the federal redemption window when the state’s own post-sale redemption period exceeds 120 days.

The practical consequence for any acquirer at a tax treasurer-sale or mortgage sheriff-sale is a cloud on title for the entire redemption window: the IRS can step into the buyer’s shoes and take the property for the purchase price plus modest interest and carrying costs, regardless of whether it ever does so. This is the canonical junior-lien-purchase-risk at foreclosure auctions, and it is detailed operationally in the companion explainer federal-tax-lien-redemption.

Statutory / regulatory framework

The text below is quoted from the official U.S. Code (uscode.house.gov), corroborated by the Cornell LII text of the same sections, and from the official CFR (govinfo.gov / Cornell LII). Each provision carries the source URL actually retrieved.

26 U.S.C. § 7425(a) — Judicial proceedings

Where the United States is not joined as a party, a judgment in a civil action or suit affecting property on which the United States “has or claims a lien” leaves the federal lien undisturbed if the NFTL was filed before the action was commenced. The provision applies to a “judgment in any civil action or suit … with respect to property on which the United States has or claims a lien under the provisions of this title.” (26 U.S.C. § 7425(a); source: https://www.law.cornell.edu/uscode/text/26/7425 , retrieved 2026-06-02.) The proper way to divest a federal lien in a judicial foreclosure is therefore to name the United States as a defendant under 28 U.S.C. § 2410 (below).

26 U.S.C. § 7425(b) — Other (nonjudicial) sales

For a nonjudicial sale (power-of-sale deed of trust, statutory-lien execution, sheriff’s execution sale made under a statutory lien rather than a court judgment, forfeiture of a land-sale contract), the federal lien’s fate turns on a 30-day NFTL-filing test plus notice:

  • § 7425(b)(1) — lien survives. The sale “shall … be made subject to and without disturbing such lien or title, if notice of such lien was filed or such title recorded in the place provided by law for such filing or recording more than 30 days before such sale and the United States is not given notice.” (Source: https://www.law.cornell.edu/uscode/text/26/7425 , retrieved 2026-06-02.)
  • § 7425(b)(2) — local-law effect. Where the NFTL was not filed more than 30 days before the sale, or where the United States was given the § 7425(c) notice, the sale “shall have the same effect with respect to the discharge or divestment of such lien …, as may be provided with respect to such matters by the local law of the place where such property is situated.” (Source: https://www.law.cornell.edu/uscode/text/26/7425 , retrieved 2026-06-02.)

Plain rule of thumb. If the NFTL was on record more than 30 days before a nonjudicial sale, the foreclosing party must give the IRS 25-day notice to extinguish the federal lien. No notice = the federal tax lien rides through to the buyer.

26 U.S.C. § 7425(c)(1) — Notice of sale (the 25-day requirement)

“Notice of a sale to which subsection (b) applies shall be given (in accordance with regulations prescribed by the Secretary) in writing, by registered or certified mail or by personal service, not less than 25 days prior to such sale, to the Secretary.”

(26 U.S.C. § 7425(c)(1); source — official U.S. Code: https://uscode.house.gov/view.xhtml?req=(title:26+section:7425+edition:prelim)+OR+(granuleid:USC-prelim-title26-section7425)&f=treesort&edition=prelim&num=0&jumpTo=true , retrieved 2026-06-02; corroborated at https://www.law.cornell.edu/uscode/text/26/7425 , retrieved 2026-06-02.)

A related provision, § 7425(c)(2) (consent), allows a sale to “discharge or divest such property of the lien or title of the United States if the United States consents to the sale of such property free of such lien or title.” (Source — official U.S. Code, same URL, retrieved 2026-06-02.)

26 U.S.C. § 7425(d)(1) — The United States’ 120-day right of redemption

“In the case of a sale of real property to which subsection (b) applies to satisfy a lien prior to that of the United States, the Secretary may redeem such property within the period of 120 days from the date of such sale or the period allowable for redemption under local law, whichever is longer.”

(26 U.S.C. § 7425(d)(1); source — official U.S. Code, same URL, retrieved 2026-06-02; corroborated at https://www.law.cornell.edu/uscode/text/26/7425 , retrieved 2026-06-02.)

28 U.S.C. § 2410 — Joinder of the United States; judicial-sale redemption

§ 2410(a) — joinder. “[T]he United States may be named a party in any civil action or suit in any district court, or in any State court having jurisdiction of the subject matter — (1) to quiet title to, (2) to foreclose a mortgage or other lien upon, (3) to partition, (4) to condemn, or (5) of interpleader or in the nature of interpleader with respect to, real or personal property on which the United States has or claims a mortgage or other lien.” (Source: https://www.law.cornell.edu/uscode/text/28/2410 , retrieved 2026-06-02.) This is the waiver of sovereign immunity that lets a foreclosing plaintiff join the IRS so a judicial sale can clear the federal lien (and the vehicle for a quiet title action against a surviving federal lien — see quiet-title-after-tax-sale).

§ 2410(c) — redemption after a judicial sale. “Where a sale of real estate is made to satisfy a lien prior to that of the United States, the United States shall have one year from the date of sale within which to redeem, except that with respect to a lien arising under the internal revenue laws the period shall be 120 days or the period allowable for redemption under State law, whichever is longer ….” (Source: https://www.law.cornell.edu/uscode/text/28/2410 , retrieved 2026-06-02.) Thus the redemption window is 120 days for a federal tax lien under both the § 7425 (nonjudicial) and the § 2410 (judicial) branches, even though § 2410’s default for other federal liens is one year.

26 C.F.R. § 301.7425-1 — Scope: federal mechanism is exclusive

A federal tax lien “may be discharged or divested under local law only in the manner prescribed in 28 U.S.C. 2410 or section 7425,” with paragraph (a) governing judicial proceedings and paragraph (b) governing nonjudicial sales. (Source — official CFR, govinfo: https://www.govinfo.gov/content/pkg/CFR-2016-title26-vol20/pdf/CFR-2016-title26-vol20-sec301-7425-1.pdf , retrieved 2026-06-02; corroborated at https://www.law.cornell.edu/cfr/text/26/301.7425-1 , retrieved 2026-06-02.)

26 C.F.R. § 301.7425-3 — Notice of nonjudicial sale (mechanics of the 25-day notice)

The notice “shall be given, in writing by registered or certified mail or by personal service, not less than 25 days prior to the date of sale,” and “a notice of sale is not effective if it is given to an office other than the office listed in the relevant publication” — i.e., the specific IRS official, office, and address in IRS Publication 786. The notice must contain the submitter’s name and address; a copy of Federal Tax Lien Form 668 or the equivalent NFTL details; a detailed property description; the sale date, time, place, and terms; and the principal of the obligation secured by the foreclosing lien, with interest and expenses. (Source: https://www.law.cornell.edu/cfr/text/26/301.7425-3 , retrieved 2026-06-02.)

26 C.F.R. § 301.7425-4 — Redemption by the United States (the price formula)

The redemption period is the 120 days after the sale or “the period for redemption … allowable with respect to other secured creditors, under the local law … whichever expires later.” The amount the IRS must pay to redeem comprises four components: (1) the actual amount paid by the purchaser at the sale (including the obligation satisfied by the sale); (2) interest at 6 percent per annum on that amount from the date of sale to the date of redemption; (3) the excess of necessary maintenance expenses over income from the property; and (4) amounts the purchaser paid to satisfy senior liens after the sale. (Source: https://www.law.cornell.edu/cfr/text/26/301.7425-4 , retrieved 2026-06-02.)

How it interacts with tax sales and foreclosure

The operational reality flows directly from which branch of § 7425 governs and whether the foreclosing party performed the federal procedure.

  • Nonjudicial sales (deed-of-trust / power-of-sale states; statutory-lien execution sales; many county property-tax sales). If a recorded NFTL predates the sale by more than 30 days and no § 7425(c) notice is sent, the federal lien survives the sale and binds the buyer (§ 7425(b)(1)). A purchaser who skipped the lien search inherits a live IRS lien with no recovery against the foreclosing party. If the 25-day notice was properly sent to the correct Publication-786 office, the lien is discharged — but the 120-day redemption right still attaches (§ 7425(d)(1)).

  • Judicial foreclosures. The sale discharges the federal lien only if the United States was joined as a defendant under 28 U.S.C. § 2410(a); if the IRS was not joined and the NFTL was on file before the suit, the lien survives (§ 7425(a)). When the IRS is joined, the sale clears the lien but the government keeps the 120-day redemption right (§ 2410(c)). The judicial-vs-nonjudicial line is litigated: a sheriff’s execution sale under a statutory lien is typically treated as nonjudicial under § 7425(b), while a sale on a court money judgment after plenary proceedings is judicial — the two paths have different divestiture rules and must be distinguished for any given sale.

  • The 120-day title cloud. Whenever a junior federal tax lien is discharged, the buyer takes title subject to the United States’ option to redeem for up to 120 days (longer if local redemption law is longer). During that window the purchaser cannot deliver clear, insurable title; lenders and title insurers will typically except the IRS redemption right until it lapses or the IRS releases it. The IRS exercises the right when its investigation shows the property’s value materially exceeds the redemption cost, so it can redeem and resell for the benefit of the fisc.

  • Release / non-exercise. The IRS can affirmatively release the redemption right before the period runs (a certificate of release / nonredemption); otherwise the right simply expires at the end of the period. A prudent acquirer treats title as clouded until one of those two events is documented.

  • Distinct from owner surplus. The IRS redemption price (purchase price + 6% + carrying costs + senior-lien payments) is not the surplus-funds owed to the former owner. Post-tyler-v-hennepin-county, surplus equity above the tax debt belongs to the former owner; the federal redemption right is the government’s option to buy out the foreclosure purchaser, not a claim against the owner’s surplus. The two buckets are computed and paid independently.

▸ For Investors / Operators. Before bidding, run a federal-lien search for a recorded NFTL. If one predates a nonjudicial sale by more than 30 days, confirm the foreclosing party actually mailed the 25-day Publication-786 notice — if not, you are buying subject to a live federal tax lien (§ 7425(b)(1)) with no clean-title path short of paying or litigating it. In a judicial foreclosure, verify the United States was named as a defendant under 28 U.S.C. § 2410, or the lien survives (§ 7425(a)). Even on a clean discharge, model a 120-day title cloud (longer where local redemption is longer): do not resell, refinance, or make large improvements until the IRS redemption right lapses or is released, because the IRS can redeem for your price + 6% + carrying costs (§ 7425(d); 26 C.F.R. § 301.7425-4). Price the redemption risk and the holding period into the bid.

▸ For Former Owners. The IRS redemption right is the government’s option, not a charge against money owed back to you. If your foreclosed property had a junior IRS lien, the federal redemption math (purchase price + 6% + costs) is separate from any surplus-funds you may be owed as the former owner — surplus equity above the tax debt is yours under tyler-v-hennepin-county. Confirm whether the IRS redeemed, released its right, or let the 120 days lapse before treating any distribution as final, and check your jurisdiction page for the surplus-claim deadline and procedure.

Leading cases

  • Myers v. United States, 647 F.2d 591 (5th Cir. 1981). A Louisiana executory foreclosure sold the property and purported to cancel the federal tax liens; Myers later acquired the property from the foreclosure purchaser. The Fifth Circuit held the executory foreclosure was an “other sale” within 26 U.S.C. § 7425(b), so the foreclosing creditor’s failure to give the United States the required § 7425 notice prevented discharge of the federal tax liens — the liens survived the sale and bound the later purchaser. The case is a clean illustration of the § 7425(b)(1) survival rule: skip the notice, and the federal lien rides through. (Source — CourtListener opinion: https://www.courtlistener.com/opinion/389987/thomas-jerry-myers-v-united-states/ , retrieved 2026-06-02.) Good-law status: holding on the § 7425(b) notice rule reflects the statute as it reads today; see needs_verification re: full citator check.

  • United States v. Brosnan, 363 U.S. 237 (1960). The Supreme Court held that, under the law then in effect, junior federal tax liens could be divested by state foreclosure proceedings (including nonjudicial proceedings) to which the United States was not, and need not be, a party. Brosnan exposed the gap — federal liens being cut off with no notice to or recovery for the United States — that prompted Congress to enact the present notice-and-redemption scheme in the Federal Tax Lien Act of 1966, adding the § 7425 25-day notice requirement and the 120-day redemption right. The practical lesson: the entire § 7425 regime exists because a state foreclosure can validly cut off a federal lien — so practitioners must run the federal procedure, not assume the lien always survives or always dies. (Citation, year, and holding corroborated across the U.S. Reports PDF index, Justia, and the existing federal-tax-lien-redemption page; verbatim opinion text needs_verification — Library of Congress and Justia PDFs returned 403 on this pass, so no direct quotation is asserted here.)

State interaction notes

The § 7425 framework is uniform federal law; the state-law inputs that change the outcome are (a) whether the foreclosure is judicial or nonjudicial, and (b) whether the state’s own post-sale right-of-redemption period exceeds 120 days, in which case the IRS gets the longer period (§ 7425(d)(1); § 2410(c)). Statements of federal law below carry their own citations above; the state characterizations are synthesized from the linked jurisdiction pages, each of which carries its own primary citation.

State inputEffect on the § 7425 layerFederal authority
Nonjudicial (power-of-sale / deed-of-trust) foreclosureTrustee must mail the IRS 25-day Pub. 786 notice to discharge a >30-day-old NFTL; otherwise the lien rides through§ 7425(b)–(c)
Judicial foreclosureIRS must be joined under § 2410(a) to clear the lien; if not joined, lien survives§ 7425(a); § 2410(a)
Long statutory post-sale redemption period (e.g., alabama, michigan, iowa-type periods)IRS redemption window is extended to match the longer local period (may exceed 120 days) (exact state period per the jurisdiction page; see needs_verification)§ 7425(d)(1) / § 2410(c) (“whichever is longer”)
Prior-in-time property-tax foreclosure (treasurer-sale / sheriff-sale) with a junior NFTLSame notice + 120-day redemption rules; the county/trustee must notice the IRS to clear the federal lien§ 7425(b)–(d)

The number of states whose post-sale redemption period exceeds 120 days (thereby lengthening the federal window) is summarized from jurisdiction pages and is flagged below rather than re-verified state-by-state in this pass.

federal-tax-lien-redemption, junior-lien-purchase-risk, surplus-funds, right-of-redemption, quiet-title-after-tax-sale, treasurer-sale, sheriff-sale, third-party-recovery-rules, due-process-notice, tyler-v-hennepin-county, jones-v-flowers, mennonite-v-adams, mullane-v-central-hanover

needs_verification

  • Verbatim text of United States v. Brosnan, 363 U.S. 237 (1960). The citation, year, holding, and 1966-Act congressional-response history are corroborated across multiple sources, but the official U.S. Reports / Justia PDFs returned HTTP 403 on this pass, so no direct quotation of the opinion is asserted. Build a dedicated united-states-v-brosnan case page from the Library of Congress PDF before quoting.
  • Full citator (good-law) check on Myers v. United States, 647 F.2d 591 (5th Cir. 1981). The § 7425(b) notice holding is consistent with the current statute and was retrieved from the CourtListener opinion, but a Shepard’s/KeyCite-equivalent subsequent-history check was not performed in this pass.
  • State-by-state redemption-period table: precisely which jurisdictions have a post-sale redemption period longer than 120 days (thereby extending the federal redemption window) is summarized from jurisdiction pages, not re-verified here against each state’s primary statute.
  • Currency of the 6% redemption-interest rate and the § 2410(d) “amount to redeem” formula since the CFR snapshot retrieved here; confirm against the current eCFR and current IRS Publication 786 before relying on a specific figure.

Sources

This page provides general legal information, not legal advice. The federal tax lien discharge, notice, and redemption rules under 26 U.S.C. § 7425 and 28 U.S.C. § 2410 interact with highly jurisdiction-specific foreclosure and redemption law and change over time. Verify every deadline, rate, and notice requirement against the current primary sources (and current IRS Publication 786) and consult a licensed attorney in the relevant jurisdiction before acting. Last verified: 2026-06-02.

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