Tax Type
Recordation Tax
Description
Grantor's Tax
Topic
Documents Subject to Tax
Date Issued
03-31-1986
March 31, 1986
Re: §58.1-802 Recordation Tax: Grantor's Tax
Deed in Lieu of Foreclosure to*****************
Dear *****************
This is in response to your letter of August 14, 1985, requesting a ruling on whether recordation of a Deed in Lieu of Foreclosure conveying property to the Secretary of Agriculture is subject to the additional recordation tax imposed by Virginia Code §58.1-802, commonly referred to as the Grantor's Tax.
In previous correspondence the Department has said that the Grantor's Tax was due on recordation because it was imposed on the grantor, not the United States. This position is supported by former Treasury Regulations interpreting the repealed federal stamp tax which the Virginia Grantor's Tax replaced. These regulations provided that the federal stamp tax was due on conveyances to the United States. Although the United States was exempt from tax, the transaction was not exempt. Therefore, as long as there was one non-exempt party to the transaction the federal stamp tax was due. See Treasury Regulations under I.R.C. §4384 prior to its repeal.
You suggest that 42 U.S.C. §1490h(3) prohibits the imposition of the Grantor's Tax on recordation of a Deed in Lieu of Foreclosure conveying property to the Secretary of Agriculture. For the reasons to follow, we do not agree.
Section 1490h(3) provides in pertinent part:
-
- All property subject to a lien by the United States or the title to which is acquired or held by the Secretary under this subchapter other than property used for administrative purposes shall be subject to taxation by a State, Commonwealth, territory, possession, district, and local political subdivisions in the same manner and to the same extent as other property taxed: Provided, that no tax shall be imposed or collected on or with respect to any instrument if the tax is based on*********
(3) the value of any property conveyed or transferred to the Secretary, whether as a tax on the instrument, the privilege of conveying or transferring, or the recordation thereof; nor shall the failure to pay or collect any such tax be a ground for refusal to record or file such instruments, or for failure to impart notice, or prevent the enforcement of its provisions in any State or Federal court. (Emphasis in original)
- All property subject to a lien by the United States or the title to which is acquired or held by the Secretary under this subchapter other than property used for administrative purposes shall be subject to taxation by a State, Commonwealth, territory, possession, district, and local political subdivisions in the same manner and to the same extent as other property taxed: Provided, that no tax shall be imposed or collected on or with respect to any instrument if the tax is based on
The Grantor's Tax is imposed on the grantor in a Deed in Lieu of Foreclosure. The Grantor's Tax is not imposed on the United States. Therefore, there is no issue as to whether the United States has consented to be taxed and the prohibition of §1490h(3) has no application.
Moreover, the prohibition of 42 U.S.C. §1490h(3) is limited to taxes "based on...the value of any property conveyed or transferred to the Secretary..." The tax imposed by §58.1-802 of the Code of Virginia is based on "the consideration or value of the interest...exclusive of the value of any lien or encumbrance remaining thereon at the time of sale..." That is, the tax is computed on the amount of the unpaid mortgage debt plus unpaid accrued interest. It is not based upon the value of the property conveyed. For this additional reason, 42 U.S.C. §1490h is inapplicable. Thus, I conclude that the conveyance is subject to the Grantor's Tax.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner