27 CFR 70.232 - Protection for commercial transactions financing agreements.
(1) Comes into existence after the tax lien filing.
(2) Is in qualified property covered by the terms of a commercial transactions financing agreement entered into before the tax lien filing, and
(b)Commercial transactions financing agreement. For purposes of this section, the term “commercial transactions financing agreement” means a written agreement entered into by a person in the course of such person's trade or business:
(1) To make loans to the taxpayer (whether or not at the option of the person agreeing to make such loans) to be secured by commercial financing security acquired by the taxpayer in the ordinary course of the taxpayer's trade or business, or
(2) To purchase commercial financing security, other than inventory, acquired by the taxpayer in the ordinary course of the taxpayer's trade or business.
(c)Commercial financing security -
(1)In general. The term “commercial financing security” means:
(i) Paper of a kind ordinarily arising in commercial transactions,
(ii) Accounts receivable (as defined in paragraph (c)(2) of this section),
(iii) Mortgages on real property, and
For purposes of this subparagraph, the term “paper of a kind ordinarily arising in commercial transactions” in general includes any written document customarily used in commercial transactions. For example, such written documents include paper giving contract rights (as defined in paragraph (c)(2) of this section), chattel paper, documents of title to personal property, and negotiable instruments or securities. The term “commercial financing security” does not include general intangibles such as patents or copyrights. A mortgage on real estate (including a deed of trust, contract for sale, and similar instrument) may be commercial financing security if the taxpayer has an interest in the mortgage as a mortgagee or assignee. The term “commercial financing security” does not include a mortgage when the taxpayer is the mortgagor of realty owned by the taxpayer. For purposes of this subparagraph, the term “inventory” includes raw materials and goods in process as well as property held by the taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or business.
(i) A contract right is any right to payment under a contract not yet earned by performance and not evidenced by an instrument or chattel paper, and
(ii) An account receivable is any right to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper.
(d)Qualified property. For purposes of paragraph (a) of this section, qualified property consists solely of commercial financing security acquired by the taxpayer-debtor before the 46th day after the date of tax lien filing. Commercial financing security acquired before such day may be qualified property even though it is acquired by the taxpayer after the lender received actual notice or knowledge of the filing of the tax lien. For example, although the receipt of actual notice or knowledge of the filing of the notice of the tax lien has the effect of ending the period within which protected disbursements may be made to the taxpayer, property which is acquired by the taxpayer after the lender receives actual notice or knowledge of such filing and before such 46th day, which otherwise qualifies as commercial financing security, becomes commercial financing security to which the priority of the lender extends for loans made before the lender received the actual notice or knowledge. An account receivable (as defined in paragraph (c)(2)(ii) of this section) is acquired by a taxpayer at the time, and to the extent, a right to payment is earned by performance. Chattel paper, documents of title, negotiable instruments, securities, and mortgages on real estate are acquired by a taxpayer when the taxpayer obtains rights in the paper or mortgage. Inventory is acquired by the taxpayer when title passes to the taxpayer. A contract right (as defined in paragraph (c)(2)(i) of this section) is acquired by a taxpayer when the contract is made. Indentifiable proceeds, which arise from the collection or disposition of qualified property by the taxpayer, are considered to be acquired at the time such qualified property is acquired if the secured party has a continuously perfected security interest in the proceeds under local law. The term “proceeds” includes whatever is received when collateral is sold, exchanged, or collected. For purposes of this paragraph, the term “identifiable proceeds” does not include money, checks and the like which have been commingled with other cash proceeds. Property acquired by the taxpayer after the 45th day following tax lien filing, by the expenditure of proceeds, is not qualified property.
(e)Purchaser treated as acquiring security interest. A person who purchases commercial financing security, other than inventory, pursuant to a commercial transactions financing agreement is treated, for purposes of this section, as having acquired a security interest in the commercial financing security. In the case of a bona fide purchase at a discount, a purchaser of commercial financing security who satisfies the requirements of this section has priority over the tax lien to the full extent of the security.