Must Virginia deed and grantor's tax use assessed value when it exceeds the sale consideration?

Plain-English summary

Virginia did not accept either the assessed value or the sale consideration as automatically controlling. State deed tax and the additional grantor's tax are calculated using the greater of the transaction's consideration or the property's actual value. A locality may also impose a recordation tax equal to one-third of the state tax.

The county had used assessed value because it exceeded the consideration. Virginia said assessed value has a very strong presumption of accuracy, but a circuit-court clerk may use other reliable information when clear and cogent evidence shows that the assessment did not reflect fair market value on the transaction date.

Because real-estate value is factual and depends on the property and local market, Virginia sent the matter to the county clerk for review. The Department would adjust state tax after receiving the county's value determination; any local refund would come from the county.

Common questions

Q: Does a lower sale price always set the recordation-tax base?
A: No. The tax uses the greater of consideration or actual value.

Q: Did this ruling grant the requested refund?
A: Not immediately. It required the county clerk to review all relevant, reliable valuation information first.

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).
• Virginia Public Documents 91-146, 00-97, 06-77, 11-41, 11-173, and 11-191.

Subject

Fair market value for purposes of the grantor's tax

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 12-22

Original ruling text

March 9, 2012

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 February 2011, 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.

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 traction 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 60¢ 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), P.D. 11-41 (3/14/2011), P.D. 11-173 (10/6/2011) and P.D. 11-191 (11/30/2011).

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 all relevant and reliable information available. When the County informs the Department of the correct fair market value, the Department will adjust the amount of state recordation tax accordingly. 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/1-4783451276.B