Does a private seller owe Virginia grantor's tax when conveying property to VDOT for a highway project?

Plain-English summary

The Frederick County Clerk asked whether grantor's tax should be assessed on a deed from a private bank to the Commonwealth, where VDOT had purchased the property for a highway improvement project.

The AG answered no, based on § 58.1-811(C)(5), which exempts a "conveyance of real estate to the Commonwealth or any county, city, town, district, or other political subdivision thereof, if such political unit is required by law to reimburse the parties taxable [as grantors]." Two conditions had to be satisfied: the conveyance had to be to a covered government entity, and that entity had to be required by law to reimburse the grantor. Both were satisfied.

On the first condition, although the statute refers to "political subdivisions" in the list of covered entities, it switches to "political unit" when imposing the reimbursement condition. Under the canon of meaningful variation (Indus. Dev. Auth. v. Bd. of Supvrs., 263 Va. 349, 353 (2002); Shelor Motor Co. v. Miller, 261 Va. 473, 480 (2001)), different terms in the same statute should be presumed to mean different things. The "political unit" in the reimbursement clause therefore included the Commonwealth itself, not just political subdivisions.

On the second, §§ 25.1-401(C) and 25.1-418, together with VDOT's interpretation as set out in its Right of Way Manual of Instructions, require VDOT to reimburse the seller for recording fees and transfer taxes paid by the owner. The federal companion at 49 C.F.R. § 24.106(b) conditions federal funding on the same kind of reimbursement. The AG accepted VDOT's interpretation as persuasive and entitled to deference (Jackson v. W., 14 Va. App. 391, 399 n.6 (1992)). Because both conditions of the exemption were met, the grantor's tax should not be assessed at all.

Currency note

This opinion was issued in 2017. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The Recordation Tax Act and the eminent-domain reimbursement statutes have been amended since 2017. Anyone applying the analysis today should verify the current text of § 58.1-811(C)(5), § 25.1-418, and the current VDOT Right of Way Manual.

Background and statutory framework

Section 58.1-802 imposes a grantor's tax of 50 cents for each $500 (or fraction thereof) of consideration or value over $100, exclusive of any lien or encumbrance remaining at the time of sale. The Act, however, sets out a number of exemptions. The opinion focused on § 58.1-811(C)(5), exempting conveyances to the Commonwealth or covered political subdivisions where "such political unit is required by law to reimburse the parties taxable" as grantors.

The drafting question was whether the exemption applied to any conveyance to the Commonwealth or only to conveyances where the Commonwealth had a reimbursement duty. The AG read the statute through the canon of meaningful variation: because the General Assembly chose the term "political unit" (rather than repeating "political subdivision") in the reimbursement clause, the term had to be construed as referring to something different, and the natural reading was that the Commonwealth itself was included. The exemption therefore had bite for state-level conveyances when (but only when) the Commonwealth was required by law to reimburse the grantor.

Sections 25.1-401(C) and 25.1-418 require VDOT to reimburse sellers for recording fees and transfer taxes incident to a public-purpose acquisition. The federal Uniform Relocation Assistance regulation at 49 C.F.R. § 24.106(b) requires the same as a condition of federal funding. The AG accepted VDOT's published interpretation in the Right of Way Manual and concluded that the conditions of the exemption were satisfied. The conclusion comported with the apparent purpose of the exemption: reducing the state's administrative accounting burden by avoiding pointless circular collection and reimbursement (Commonwealth v. Zamani, 256 Va. 391, 395 (1998)).

Common questions

Q: Does this mean every state agency acquisition is exempt?
A: Not necessarily. The exemption turns on whether the acquiring state entity is required by law to reimburse the grantor. The AG's reasoning was specific to VDOT's acquisition under §§ 25.1-401 and 25.1-418. For other state acquisitions, the reimbursement requirement must be checked separately.

Q: What's the practical workflow for a clerk?
A: If the deed conveys to the Commonwealth in connection with a covered VDOT acquisition, the clerk should not assess the grantor's tax. The clerk may want to require some indication on the deed or in the recording cover sheet that the acquisition fits the exemption.

Q: Why does the canon of meaningful variation matter here?
A: Because the exemption clause says "such political unit is required by law to reimburse." If "political unit" meant exactly the same as "political subdivision," the Commonwealth would be excluded, and the exemption wouldn't reach a deed to VDOT. The variation in terminology, the AG concluded, signals that the Commonwealth itself is covered.

Q: What if the seller declines to ask for reimbursement?
A: The exemption is triggered by the legal requirement to reimburse, not by an actual reimbursement claim. The exemption applies regardless of whether the seller actually claims reimbursement, so the tax should not be assessed in the first place.

Citations and references

Statutes and regulations:

• Va. Code Ann. § 58.1-800 to § 58.1-817 (Virginia Recordation Tax Act)
• Va. Code Ann. § 58.1-802 (grantor's tax)
• Va. Code Ann. § 58.1-811(C)(5) (exemption for government conveyances with reimbursement)
• Va. Code Ann. § 25.1-401(C); § 25.1-418 (VDOT reimbursement for recording fees and transfer taxes)
• 49 C.F.R. § 24.106(b) (Uniform Relocation Assistance regulation)
• Va. Code Ann. § 2.2-505 (AG advisory opinion authority)

Cases and references:

• Small v. Fannie Mae, 286 Va. 119 (2013)
• Indus. Dev. Auth. v. Bd. of Supvrs., 263 Va. 349 (2002)
• Shelor Motor Co. v. Miller, 261 Va. 473 (2001)
• Jackson v. W., 14 Va. App. 391 (1992)
• Commonwealth v. Zamani, 256 Va. 391 (1998)
• VDOT Right of Way Manual of Instructions (3rd ed., last rev. Aug. 25, 2011)
• Linda D. Jellum, Mastering Statutory Interpretation 130-31 (2d ed. 2013)

Attorney General opinions:

• 1980-1981 Op. Va. Att'y Gen. 292
• 1979-80 Op. Va. Att'y Gen. 349

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2017/16-010-Hogan---grantors-tax-on-deed-to-VDOT---issued.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Mark R. Herring
Attorney General

March 9, 2017

The Honorable Rebecca P. Hogan
Clerk of the Frederick County Circuit Court
5 North Kent Street
Winchester, Virginia 22601

Dear Ms. Hogan:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issue Presented

You ask whether grantor's tax should be assessed on a deed conveying real property from a private bank to the Commonwealth in connection with a highway project carried out by the Virginia Department of Transportation ("VDOT"). In the scenario you present, VDOT purchased the real property from the bank for public use on the highway improvement project.

Applicable Law and Discussion

In Virginia, deeds recorded in circuit court are subject to the recordation taxes established in the Virginia Recordation Tax Act (the "Act").[1] Among other things, the Act provides generally that the grantor in a conveyance of real estate must pay a grantor's tax, which is sometimes described as a "transfer tax."[2] Pursuant to the Act, "[t]he rate of the tax, when the consideration or value of the interest . . . exceeds $100, [is] 50 cents for each $500 or fraction thereof, exclusive of the value of any lien or encumbrance remaining thereon at the time of the sale . . . ."[3]

The Act, however, establishes several exemptions to the grantor's tax. Relevant here is the exemption in § 58.1-811(C)(5), which provides that no grantor's tax shall be assessed on a "conveyance of real estate to the Commonwealth or any county, city, town, district, or other political subdivision thereof, if such political unit is required by law to reimburse the parties taxable [as grantors]."[4] Applying the language of the exemption to your inquiry, I conclude that no grantor's tax shall be assessed if the conveyance 1) is to the Commonwealth, and 2) the Commonwealth is required by law to reimburse the grantor for the tax.[5]

In the circumstances you describe, the conveyance is clearly to the Commonwealth, as the Commonwealth is grantee in connection with a highway project carried out by VDOT, a state agency. With respect to reimbursement, §§ 25.1-401 and 25.1-418, together with VDOT's interpretation of those statutes, provide that when VDOT purchases real property for a transportation project, it is required to reimburse the seller for recording fees and transfer taxes, if paid by the owner.[6] Thus, in the scenario you present, VDOT, an agency of the Commonwealth, would be required by law to reimburse the grantor for the tax, if assessed. Because it is required by law to reimburse the grantor for the tax, § 58.1-811(C)(5) provides that the tax should not be assessed.[7]

Conclusion

For the foregoing reasons, it is my opinion that the grantor's tax may not be assessed on a deed conveying real property from a private bank to the Commonwealth, following VDOT's purchase of the property for public use on a highway improvement project.

With kindest regards, I am

Very truly yours,

Mark R. Herring
Attorney General

[1] VA. CODE ANN. §§ 58.1-800 to 58.1-817 (2013 & Supp. 2016).

[2] See § 58.1-802 (Supp. 2016); Small v. Fannie Mae, 286 Va. 119, 124 n.3 (2013).

[3] Section 58.1-802 ("The rate of the tax, when the consideration or value of the interest, whichever is greater, exceeds $100, shall be 50 cents for each $500 or fraction thereof, exclusive of the value of any lien or encumbrance remaining thereon at the time of the sale, whether such lien is assumed or the realty is sold subject to such lien or encumbrance.").

[4] Section 58.1-811(C)(5) (Supp. 2016).

[5] Although it is not immediately clear whether the exemption applies to any conveyance of real estate to the Commonwealth, or only a conveyance in which the Commonwealth is required by law to reimburse the grantor for the tax, a well-established canon of statutory construction favors the latter interpretation. According to the canon of meaningful variation, if the legislature "uses two different terms in the same act, those terms are presumed to have distinct and different meanings." Indus. Dev. Auth. v. Bd. of Supvrs., 263 Va. 349, 353 (2002) (citing Shelor Motor Co. v. Miller, 261 Va. 473, 480 (2001)); see generally LINDA D. JELLUM, MASTERING STATUTORY INTERPRETATION 130-31 (2d ed. 2013). Here, the General Assembly chose the term "political unit" rather than repeating the term "political subdivision." Thus, according to the canon of meaningful variation, the two terms should be construed as referring to different things. The only entity in the statute that may (in context) be construed as a "political unit" but not a "political subdivision" is the Commonwealth. Accordingly, the term "political unit" should be read to include the Commonwealth, making the exemption applicable to conveyances to the Commonwealth in which it is required by law to reimburse the grantor for the tax. See 1980-1981 Op. Va. Att'y Gen. 292, 293.

[6] See § 25.1-401(C) (2016); § 25.1-418 (2016); VIRGINIA DEPARTMENT OF TRANSPORTATION, RIGHT OF WAY MANUAL OF INSTRUCTIONS, at 3-9 to 3-10 (3rd ed., last rev. Aug. 25, 2011) (digesting § 25.1-418 to require payment of grantor's tax, consistent with agency practice). See generally 49 C.F.R. § 24.106(b) (requiring that a state governmental agency that acquires real property for a transportation project shall reimburse the grantor for recording fees and transfer taxes, as a condition of federal funding); 1979-80 Op. Va. Att'y Gen. 349, 349. Considering the overall statutory and regulatory context, and in particular the federal regulation cited above, I consider VDOT's interpretation persuasive and entitled to deference. See Jackson v. W., 14 Va. App. 391, 399 n.6 (1992).

[7] This conclusion comports with the evident purpose of the exemption to reduce the state's administrative accounting burden. See Commonwealth v. Zamani, 256 Va. 391, 395 (1998) ("The primary objective of statutory construction is to ascertain and give effect to legislative intent.").