Tax Type
Recordation Tax
Description
Deed of Trust
Topic
Basis of Tax
Computation of Tax
Documents Subject to Tax
Date Issued
06-27-1985
[Opinion - Virginia Attorney General: 1985 at 386]
REQUEST BY: Honorable Warren E. Barry Clerk, Circuit Court of Fairfax County
OPINION BY: Gerald L. Baliles, Attorney General
OPINION:
In your letter, you state that a bank has extended a line of credit to a corporation in the amount of $ 350,000, and the corporation gave its note to the bank in that amount. The corporation is owned by two individuals. In order to secure the bank's interest, the two individuals gave a guaranty to the bank and secured the performance of their obligations under their guaranty by a deed of trust. The deed of trust does not, itself, secure the corporation's note. The deed of trust has been presented for recordation and your question concerns the value upon which the recordation tax may be computed under § 58.1-803 of the Code of Virginia.
The pertinent portion of § 58.1-803 provides:
"A recordation tax on deeds of trust or mortgages is hereby imposed at a rate of 15c. on every $ 100 or portion thereof of the amount of bonds or other obligations secured thereby. In the event of an open or revolving deed of trust, the amount of the obligation for purposes of this section shall be the maximum amount which may be outstanding at any one time. In any case in which the amount which may be secured under a deed of trust or mortgage is not ascertainable, the tax shall be based upon the fair market value of the property conveyed . . . ."
A prior Opinion, found in the 1983-1984 Report of the Attorney General at 408, considered the tax to be placed on the extension of a line of credit, and held that the recordation tax should be calculated upon the maximum amount of credit authorized by the instrument, instead of the actual amount of debt secured at the time the instrument is submitted for admission to record. Although the question presented in that Opinion concerned circumstances in which the same party was both the beneficiary of the line of credit and the grantor on the deed of trust, it is my opinion that the same principle applies to the question here. The proper tax should be based upon the maximum amount for which the owners may be held liable under their guaranty. That maximum is the same maximum amount which is authorized under the line of credit and not the fair market value of the property conveyed. The instrument recites that it is a credit line deed of trust and identifies the note in the amount of $ 350,000. A typed notation on the printed form reads as follows: "The above-described obligations of the Grantors under the Guaranty are hereinafter called the 'Note' and the recipient of the Guaranty is hereinabove and hereinafter called the Noteholder."
Accordingly, it is my opinion that the tax assessable upon the recordation of the instrument is 15c. on every $ 100 of the maximum amount of the obligation which may be outstanding at any one time, which amount is recited in the deed of trust to be $ 350,000.
Attorney General's Opinion