December 22, 2015
Re: § 58.1-1821 Application: Recordation Tax
Dear *****:
This will reply to your letter in which you request a refund of state and local recordation taxes paid by the ***** (the "Taxpayer") for recording a deed.
FACTS
In November 2013, the Taxpayer presented a deed for recordation to the ***** (the "County") resulting from a sale at auction. The County assessed recordation-tax based on the assessed value of the property, which was greater than the consideration for the conveyance of the real property interest. Subsequently, the County Board of Equalization reduced the assessed value of the property.
The Taxpayer appeals the recordation tax assessment, contending that the state and local recordation taxes should have been based on the consideration paid, which was less than the reduced assessed value of the property. In support of its position, the Taxpayer has presented an appraisal that values the subject property at less than the consideration paid for the conveyance.
DETERMINATION
Virginia Code § 58.1-800 et seq., imposes the state tax on the recordation of documents relating to real estate transactions. A recordation tax is imposed on any instrument admitted to record unless otherwise exempt by statute. Under Va. Code § 58.1-801, a state recordation tax is imposed on deeds of 25¢ on every $100 or fraction thereof of the consideration or the actual value of the property conveyed, whichever is greater. Any city or county may impose a recordation tax equal to 1/3 of the amount of state recordation tax. See Va. Code § 58.1-814. Virginia Code § 58.1802 imposes an additional grantor's tax of 50¢ on every $500 or fraction thereof, exclusive of any lien or encumbrance remaining thereon at the time of the sale, on the greater of actual value of the property conveyed or the consideration of the sale. The grantor's tax is divided equally between the state and the locality.
Virginia Code § 58.1-812 B provides that:
The tax on every deed, deed of trust, contract or other instrument shall be determined and collected by the clerk in whose office the instrument is first offered for recordation. The clerk may ascertain the consideration of the deed or of the instrument, the actual value of the property conveyed, and the qualification of the deed or instrument for any exemption claimed by inquiry, affidavit, declaration or other extrinsic evidence acceptable to the clerk.
In this case, the Taxpayer contends that the consideration paid for the transfer of the property interest represents the best indication of the fair market value for purposes of the recordation tax. The assessed value is accorded a very strong presumption of accuracy in determining fair market value. See Shoosmith Bros., Inc. v. County of Chesterfield, 268 Va. 241, 601 S. E.2d 641 (2004) and Tidewater Psychiatric Institute, Inc. v. Virginia Beach, 256 Va. 136, 501 S.E.2d 761 (1998). A clerk of a circuit court is not required to use the assessed value to the exclusion of other reliable information as to the current fair market value. If it can be shown by clear and cogent evidence why the assessed value does not reflect fair market value as of the date of the transaction, the clerk has the authority to rely on such evidence to determine the proper amount of the recordation tax. See Public Document (P.D.) 00-97 (5/26/2000), P.D. 06-77 (8/23/2006), P.D. 11-41 (3/14/2011), P.D. 11-191 (11/30/2011) and P.D. 12-61 (4/27/2012).
Placing a value on real estate is entirely a factual determination that is best made by one who is thoroughly familiar with the property itself and local market conditions. This responsibility lies with the clerk when the value must be determined for recordation tax purposes. See P.D. 91-146 (8/2/1991).
Because Va. Code § 58.1-3201 requires all assessments of real estate for purposes of local property taxation to be made at 100% of fair market value, it is reasonable for a clerk to presume that a recent assessment reflects the actual value of the property. See P.D. 88-317 (11/10/1988). Where the clerk has reason to believe that the assessed value does not reflect the actual value (e.g., the assessment is not recent), the clerk should seek other evidence of the actual value.
The Department will send a copy of this letter to the Clerk of the County and request a review of the determination of the actual value of the property, taking into consideration the Taxpayer's appraisal and all other relevant and reliable information available. When the County informs the Department of the correct fair market value, the Department will refund the appropriate amount of state recordation tax. A refund of the local recordation tax would be issued by the County.
The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this response, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-6108741654.B