Could a developer recover recordation tax on a released portion of a deed-of-trust loan when it filed the refund claim more than three years later?

Plain-English summary

Virginia denied the recordation-tax refund because the protective claim was filed too late. The taxpayer recorded a credit-line deed of trust in January 2008 and paid state and local recordation taxes. It later returned an unused portion of the improvement loan to the lender and sought a refund attributable to that released amount.

Payment when the deed was recorded counted as an assessment under Virginia law. A refund claim therefore had to be filed within three years of that January 2008 assessment—by January 2011.

The taxpayer did not file its protective claim until September 2011. Because the limitations period had expired, Virginia denied the refund request without deciding whether the released loan amount otherwise supported a refund.

Common questions

Q: When did the three-year period begin?
A: When the tax was paid as the deed of trust was recorded in January 2008.

Q: Did the ruling decide whether reducing the loan principal entitled the taxpayer to a refund?
A: No. The late filing disposed of the claim.

Citations and references

• Va. Code §§ 58.1-1820 and 58.1-1824.
• Virginia Public Document 09-65 (May 13, 2009).

Subject

Claim was not filed within the statutory limitations period, refund request denied.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 12-135

Original ruling text

August 20, 2012

Re: § 58.1-1824 Application: Recordation Tax

Dear *:

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

FACTS

In January 2008, the Taxpayer recorded a credit line deed of trust in the * (the "County") securing a loan for developing commercial property. Part of the loan was designated for the acquisition of the property and the other part of the loan was designated for property improvement. The Taxpayer was unable to utilize the portion of the loan designated for improvements so it was released back to the lender. The Taxpayer filed a request for refund of the recordation tax attributable to the portion of the loan released to the lender.

DETERMINATION

Pursuant to Va. Code § 58.1-1824, any, person who has paid an assessment of taxes administered by the Department of Taxation may preserve his judicial remedies by filing a claim for refund with the Tax Commissioner within three years of the date such tax was assessed. Virginia Code § 58.1-1820 defines an assessment to include "an assessment made pursuant to notice by the Department of Taxation and self assessments made by a taxpayer upon the filing of a return or otherwise not pursuant to notice." In the Taxpayer's case, payment of the tax at the time the deed of trust was recorded falls within the definition of "assessment" in Va. Code § 58.1-1820.

The Department has previously ruled that tax paid on any instrument recorded more than three years prior to the date that a taxpayer's protective claim is filed is not eligible for a refund. See Public Document (P.D.) 09-65 (5/13/2009). In this case, the credit line deed of trust was filed in January 2008. Pursuant to Va. Code § 58.1-1824, the Taxpayer was required to file its protective claim for refund within three years of the date the tax was assessed, i.e. , by January 2011. The Taxpayer did not file its protective claim with the Department until September 2011, well beyond the expiration of the filing deadline. Accordingly, the protective claim was not filed within the statutory limitations period, and the refund request must be denied.

The Code of Virginia sections and public document cited, along with other reference documents, 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 concerning this determination, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings Division, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4893198304.B