Must a Virginia circuit-court clerk use assessed value for deed recordation tax when an appraisal and consideration indicate a lower market value?

Subject

Clerk has the authority to rely on other evidence to determine the proper amount of the recordation tax.

Plain-English summary

Virginia sent the valuation question back to the county clerk for review of the taxpayer's appraisal and all other reliable evidence. The county had calculated deed recordation taxes using assessed property value because it exceeded the stated consideration. The taxpayer argued that consideration—and an appraisal below even that amount—better reflected market value.

Virginia deed and grantor's taxes used the greater of consideration or actual property value under the cited provisions. Assessed value had a strong presumption of accuracy, but it was not conclusive.

If clear and cogent evidence showed the assessment did not reflect fair market value on the transaction date, the circuit-court clerk could rely on the appraisal and other evidence. Because local market valuation is factual, the clerk—not the Department—had to determine the correct value.

After the clerk reported that value, the Department would issue any appropriate state-tax refund, while the county would issue any local recordation-tax refund.

What this means for you

• Recordation tax can turn on actual fair market value rather than consideration alone.
• Assessed value is strongly presumed correct but can be rebutted with reliable, transaction-date evidence.
• Provide a credible appraisal and other local market facts to the clerk.
• A remand for valuation review does not guarantee the taxpayer's proposed value or refund amount.

Common questions

Did Virginia accept the appraisal as the final value?

No. It required the clerk to weigh the appraisal with all other relevant and reliable information.

Who issues refunds?

The Department handles the appropriate state recordation-tax refund; the county handles the local refund.

Citations and references

• Va. Code §§ 58.1-800 et seq., 58.1-801, 58.1-802, and 58.1-814.
• 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).
• P.D. 06-77, P.D. 00-97, and P.D. 91-146.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 11-41

Original ruling text

March 14, 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.

FACTS

In May 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 and contends 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 less 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).

The Clerk of the Circuit Court, however, 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.) 06-77 (8/23/2006) and P.D. 00-97 (5/26/2000).

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

Sincerely,

Craig M. Burns

Tax Commissioner

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