The U.S. Supreme Court has ruled that taxes do not give rise to a maritime lien against a vessel, even if the tax is related to the ownership or use of the vessel. This means that a tax claim is an obligation of the owner of the vessel but not an obligation of the vessel itself. The tax agency may go after the boat while it is owned by the taxpayer, but after the boat is sold the agency must satisfy itself with the remaining assets of the taxpayer.
So, on the surface it looks like our reader can buy the boat without worrying about a tax claim surfacing sometime in the future. But there are always a few exceptions to these things.
Our reader did not say whether the boat he is considering is Coast Guard documented or state-registered through the DMV, but he may be facing a problem if it is a DMV registered boat in California.
Section 9880 of the California Vehicle Code authorizes the DMV to withhold the annual renewal of a boat’s registration and prevent a future title transfer if the DMV has received notice of delinquent taxes from a county tax collector. This tricky little provision does not give the tax collector a right to seize the boat, but it encourages prompt payment of the delinquent taxes by freezing the title.
Our reader may also face a problem from the Coast Guard’s policies for the recording of claims against the title of a documented vessel. The Coast Guard’s National Vessel Documentation Center (NVDC) maintains the title records for all documented vessels, and lien claimants may record a Notice of Claim of Lien (NCL) with the NVDC. Federal law prohibits the recording of a NCL unless the claimant has a good faith belief that their claim will give rise to a legitimate maritime lien. But this is a self-policing system since the Coast Guard does not evaluate or render an opinion on the validity of any NCL that is submitted for recording. The recording of an NCL does not give the claimant a property right in the vessel, but it has the practical effect of interfering with a future sale of the boat. No one wants to buy a boat with a claim recorded against it, regardless of whether the claim is theoretically valid.
So how does this relate to a tax claim? The California Board of Equalization regularly records NCL’s with the Coast Guard for unpaid sales and use tax claims relating to vessel purchases. These claims are not valid maritime liens but the BOE records the claim and the Coast Guard accepts it nonetheless. We are not aware of any examples of county tax collectors following this sketchy procedure, but it could happen. The good news is that the claim can only be recorded while the taxpayer owns the vessel, so a careful review of the vessel’s abstract of title before a purchase will reveal the claim against the title.
So the bottom line is that a documented vessel can be purchased without fear of a future tax claim surfacing as long as the title history is reviewed carefully before the purchase. But a boat registered through the California DMV may be problematic. Talk to an experienced maritime attorney for more information.