Who decides a property's actual value when Virginia deed recordation tax differs from the stated consideration?

Plain-English summary

Virginia directed the circuit-court clerk to reconsider the property's actual value before any recordation-tax refund was calculated. The deed had been taxed using assessed value because it exceeded the stated consideration. The taxpayer submitted an appraisal slightly above the consideration but below the assessment.

Virginia's deed and grantor taxes used the greater of consideration or actual value under the cited provisions. Assessed value had a strong presumption of accuracy, but the clerk could consider clear and cogent evidence showing it did not reflect current fair market value.

Property valuation was a factual question best handled by the clerk familiar with the property and local market. The Department sent the appraisal and ruling to the clerk for review. If the clerk determined a lower correct value, the Department would refund the appropriate state tax and the county would refund the local tax.

What this means for you

• Recordation tax can be based on actual value when it exceeds consideration.
• Assessed value is strong evidence but not automatically exclusive.
• Appraisals and other reliable transaction-date evidence should be presented to the clerk.
• A remand for valuation does not guarantee a refund.

Common questions

Q: Did the appraisal automatically replace assessed value?
A: No. The clerk had to weigh it with all other relevant and reliable information.

Q: Who would issue refunds after a lower valuation?
A: The Department for state tax and the county for local tax.

Citations and references

• Va. Code §§ 58.1-800, 58.1-801, 58.1-802, and 58.1-814.
• Virginia Public Documents 91-146, 00-97, 06-77, and 11-41.
• Shoosmith Bros., Inc. v. County of Chesterfield, 268 Va. 241, 601 S.E.2d 641 (2004).
• Tidewater Psychiatric Institute, Inc. v. Virginia Beach, 256 Va. 136, 501 S.E.2d 761 (1998).

Subject

Responsibility lies with the clerk to determined recordation tax on real estate

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 11-191

Original ruling text

November 30, 2011

Re: § 58.1-1821 Application: Recordation Tax

Dear *:

This will reply to your letter in which you request a refund of the state and local recordation taxes paid by * (the "Taxpayer") for recording a deed. I apologize for the delay in responding to your request.

FACTS

In December 2010, the Taxpayer presented a deed for recordation to the * (the "County"). 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. The Taxpayer appeals the assessment, contending that the state and local recordation taxes should have been based on the consideration paid. The Taxpayer has presented an appraisal that values the subject property at slightly more than the consideration of the conveyance in support of its position.

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. Virginia Code § 58.1-802 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. 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.

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 grantor's 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), and P.D. 11-41 (3/14/2011).

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).

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. If you have any questions regarding this determination, please contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4696329076.B