Tax Liens

Help a Community and Earn a High Return at the Same Time

Government agencies depend on tax revenue to fund services. Unfortunately, individual taxpayers can fall behind in tax payments. When that happens, the agency may have the option to file a tax lien against any assets the taxpayer has within its jurisdiction and, rather than wait until an unknown future date to collect the past due funds, sell the lien at public auction. The agency is able to raise immediate revenue, and investors have an opportunity to help the community while earning a good, and potentially great, return on, typically, a small and secured investment.

Usually sold by counties and attached to local real estate, tax liens can be bought by your CamaPlan account, which earns the right to collect interest on the lien, file notice to foreclose on the assets, and obtain title to the asset if the lien is not repaid. Auction prices are at a discount to the lien amount to reflect the current value of those future payments. The average past due tax bill satisfied by the tax lien is not large (usually a few thousand dollars), so the investment is usually small. In the unusual event that title to the property is secured through foreclosure, the return on investment can be huge.

Prohibited Transactions

The IRS does not specify the types of investments that can be made by tax-advantaged savings accounts; it only specifies investments you cannot make. Refer to IRS rules and regulations for complete information on prohibited transactions, including its definition of disqualified persons (ex., spouse, children, parents, a fiduciary et al). The structure and form of your investment can also vary depending on the type of CamaPlan account you open.

Buying a Tax Lien

Many states and counties offer tax liens at auction and will host websites that provide a list of available properties with pictures and information of each property. You are responsible for assessing the value of the tax lien and the underlying asset supporting its value. You must place bids in the auction and make arrangements with the auctioneer to pay with your CamaPlan account.

Some auctions can require buyers to fund transactions faster than CamaPlan, or any self-directed account custodian, can review and approve the transaction. One solution is to escrow account funds in advance of the options. In order to make this possible, CamaPlan clients have two options. They may file for a trust EIN, then open a bank account using the EIN in the IRA’s name, or they may consider forming a self-managed Limited Liability Company (LLC). Both would be funded with a private placement from their accounts for the purpose of buying tax liens on the fly.

Most auctions follow a process that asks bidders to offer a discount on the lien’s interest rate. For example, if the agency assesses a 10% annual penalty on unpaid taxes, a bidder might bid 7%. If that is the winning bid, the investor earns the principal, plus 7% interest while the agency keeps 3%.

As lienholder, you simply wait for the delinquent taxpayer to pay the taxes. In most jurisdictions, the delinquent taxpayer must fall three years behind before the investor can foreclose on the property; stated another way, the lienholder must pay three years of past-due taxes on the property before being able to enforce collection through foreclosure.

CamaPlan Administrative Services Provided

CamaPlan guides you through the process of directing account funds for the purchase of tax liens; however, you are responsible for having the documents drafted and delivered to our administrators for execution, as well as all communications with the tax agency. Our account administrators review and approve purchase documents considering only their form and general content; we do not certify their legality, accuracy, or truthfulness. After the purchase is finalized, we receive and deposit lien payments to your account.

CamaPlan does not provide investment advice, and we do not sell or endorse investment products. We do not service the lien by billing the taxpayer or by acknowledging and tracking payments received, and we don’t pursue delinquent payments or institute legal action to enforce payment. All of these tasks are your responsibility as accountholder and lienholder.

Title and Vesting Instructions

All contracts and documents related to a private placement must adhere to these guidelines:

Owner’s Name

Documents should note the ownership interest is held in the name: “CAMA SDIRA LLC FBO [ YOUR NAME ] IRA”.

Owner’s Address

The owner’s address that should be listed on all documents as:

512 East Township Line Road
5 Valley Square, Suite 200
Blue Bell, PA 19422

Income

Documents should instruct that all distributions of income by the business venture accruing to account are to be issued in the above owner’s name and delivered to the above owner’s address for deposit in your CamaPlan account.

Signature

Because title to the ownership shares is held in CamaPlan’s name (above) for your benefit, only authorized employees of CamaPlan can legally execute the private placement for your account. Documents must be mailed, faxed, or delivered to our offices sufficiently in advance of the desired transaction date for our review and signature before their return to the offerer. Also, CamaPlan will not sign any document until your signature indicates that you have “read and approved” it. Thus, each document must include a statement to that effect and your signature thereto.

There is one exception – because we do not need to review due diligence paperwork, they do not require our signature.

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