Document Number
Tax Type
Recordation Tax
Recordation Tax, Deed of Trust, Real Property, Valuation, Exemption
Payment and Refund
Date Issued

October 17, 2017

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 “Taxpayer”) for recording a deed of trust.


***** (the “Authority”), a regional facility authority, has a fee simple ownership interest in real property located in the ***** (the “County”).  The Taxpayer possessed a leasehold interest in the real property with the option to purchase for $4 million.

In December 2012, the Authority and Taxpayer jointly filed a deed of trust in the County which secured a line of credit in the amount of $10 million.  The County assessed the recordation tax based on the secured amount.  The  Taxpayer paid the assessment and filed an appeal, contending that a portion of the recordation tax should be attributed to the Authority.  It also asserts that the tax was not based on either the value of the leasehold interest or purchase option.


Virginia Code § 58.1-803 A, as effective at the date of the transaction, imposes the recordation tax on deeds of trust, mortgages, and supplemental indentures “[a]t a rate of 25 cents on every $100 or portion thereof of the amount of bonds or other obligations secured thereby.”  If the amount which is secured under a deed of trust or mortgage is not ascertainable, the tax is based on the fair market value of the property conveyed.  However, under Title 23 of the Virginia Administrative Code (VAC) 10-320-­40, the Department based the recordation tax for deeds of trust at the lesser of the value of the obligations actually secured by the deed of trust or the fair market value of the real property secured.  This regulation was codified in 2012 by the General Assembly effective January 1, 2014.  See Chapter 505, Acts of Assembly.

Leasehold Interests

The Taxpayer contends that because it only has a leasehold interest in the real property at issue, it should only be subject to the recordation tax attributable to its leasehold interest.  The recordation tax on deeds of trust is imposed for recording deeds of trust.  In Va. Att'y Gen. Op. No. 2012-038 (11/1/2012), the Virginia Attorney General determined that Virginia's recordation tax is not a tax upon real property, but is a tax upon the privilege of using Virginia's registration laws. Accordingly, the property interest possessed by the parties to the deed of trust or mortgage is not relevant to the proper payment of the tax imposed for recording deeds of trust.  As such, the tax imposed by Va. Code § 58.1-803 must be paid in full unless exempt under Va. Code § 58.1-811 or Title 23 VAC 10-320-40.


Under Title 23 VAC 10-320-40 B 1, a deed of trust from an Industrial Development Authority is not subject to tax under Va. Code § 58.1-803.  In this case, the deed of trust was issued jointly by both the Taxpayer and the Authority.  The regulation only exempts deeds of trust from Industrial Development Authorities.  It does not exempt deeds of trust that are issued jointly from Industrial Development Authorities and private entities.  As such, Title 23 VAC 10-320-40 B 1 does not exempt this deed of trust from the recordation tax provided by Va. Code § 58.1-803.  No other exemptions under Va. Code § 58.1-811 or Title 23 VAC 10-320-40 apply to the Taxpayer.

Virginia Code § 15.2-6411 provides that regional facility authorities are not “required to pay any taxes or assessments of any kind whatsoever . . . .” Therefore, the Authority is exempt from paying recordation tax.  Because the entire tax for recording deeds of trust was required to be paid, and the Authority was exempt from paying the tax, the Taxpayer was liable for the recordation tax required under Va. Code § 58.1-803.


The Taxpayer contends that tax should have been based on the option price because it represents the fair market value of the real property at issue.

The assessed value of real estate 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 the 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 P.D. 00-97 (5/26/2000), P.D. 06-77 (8/23/2006), P.D. 12-61 (4/27/2012) and P.D. 14-44 (3/24/2014).

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).

In this case, the only evidence the Taxpayer provided to show the fair market value of the real property is the purchase option.  This documentation is insufficient to demonstrate the fair market value of the property at the time the deed of trust was recorded.  The Department, therefore, will send a copy of this letter to the clerk of the County and request that the actual value of the property be determined, taking into consideration all 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, regulation and public document cited are available on-line at in the Laws, Rules & Decisions section of the Department's web site.  If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.



Craig M. Burns
Tax Commissioner



Last Updated 10/27/2017 13:05