Tax Type
Local Taxes
Recordation Tax
Description
Local recordation tax
Topic
Local Taxes Discussion
Date Issued
02-19-1987
February 19, 1987
Re: Request for Ruling:
§§ 58.1-3800 and 58.1-3801 Local Recordation Tax
Dear *********************
This is in response to your letters of January 19, 1987, and January 29, 1987, requesting a ruling on the proper allocation of recordation tax to the various localities.
On or about February 23, 1987, you expect to record a Supplemental Indenture to the mortgage on the property of ************** covering the issuance of $ ************ in bonds. The obligation will be secured by utility property located in numerous Virginia localities as well as property located in two other states.
You have submitted a computation of the state tax under the second paragraph of § 58.1-803 B. For the value of all of the properties in all of the states you used the book value as of November 30, 1986. Since the fair market value of the properties in all of the states is not easily ascertainable, the valuation is consistent for all properties and the amount of state tax is not materially affected, use of the book value is reasonable and approved for this transaction.
The portion of the obligation secured by property in Virginia is large enough to take advantage of the reduced rates on amounts over $10,000,000 set forth in § 58.1-803 E. Accordingly, your Exhibit A (copy attached) showing that a state recordation tax of $ ******* will be due appears to be correct.
You have also submitted a computation of the amount of tax collectible by each locality which imposes a local recordation tax. This computation allocates $ ******* (one-third of the total state recordation tax, computed above) among the localities.
Your Exhibit B (copy attached) is misleading in that it is my understanding that each locality's share of the $ ******** available was computed as follows:
1. Obtaining the assessments in each locality as of January 1, 1986, as reported by the State Corporation Commission (amounts shown in Exhibit B);
2. Totaling the assessed value of only those localities imposing a local recordation tax (Exhibit B shows the total for all localities):
3. Computing the ratio that the assessed value in each locality which imposes a local recordation tax bears to all localities imposing a local recordation tax (Exhibit B shows the ratios for all localities, including those not imposing a local recordation tax);
4. Multiplying these ratios by one-third of the state tax, $ ******* to compute each locality's share of the local tax authorized by § 58.1-3800 (Exhibit B shows these amounts).
The amounts shown as the local recordation tax due to each locality appear to be correct as authorized by § 58.1-3800. However, it should be noted that when the 1958 General Assembly authorized all localities to impose this local tax, it included the proviso, now codified at § 58.1-3802, that any existing city charter authorizing a recordation tax at a different rate was not repealed. Therefore a city imposing a recordation tax pursuant to its charter, instead of pursuant to § 58.1-3800, may impose a tax which is different from the amount shown in Exhibit B.
Sincerely,
W.H. Forst
Tax Commissioner
Rulings of the Tax Commissioner