Should deed and grantor taxes use the sale consideration when the property's assessed value was higher?

Plain-English summary

Virginia did not accept the sale consideration automatically; it asked the county clerk to reconsider the property's actual fair market value. State deed tax applies to the greater of consideration or actual value, and grantor's tax likewise uses the greater value specified by statute. A locality may also impose recordation tax equal to one-third of the state amount.

The property's assessed value exceeded the consideration. Virginia said assessed value carries a strong presumption of accuracy, but it is not exclusive. If clear and cogent evidence shows that the assessment did not reflect fair market value on the transaction date, the circuit-court clerk may rely on other relevant and reliable information.

The Department sent the matter to the county clerk for that factual review. After the county reported the correct value, Virginia would adjust the state recordation tax; any local refund would come from the county.

Common questions

Q: Is deed consideration always the recordation-tax base?
A: No. The statutes cited in the ruling use the greater of consideration or actual property value.

Q: Can assessed value be challenged?
A: Yes, but the ruling required clear and cogent evidence showing why it did not reflect current fair market value.

Citations and references

• Va. Code §§ 58.1-800 et seq., 58.1-801, 58.1-802, 58.1-814, 58.1-1821, and 58.1-1824.
• 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; Grantor's tax; Refunds

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 12-61

Original ruling text

April 27, 2012

Re: § 58.1-1824 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 "Taxpayers") for recording a deed.

FACTS

In July 2010, the Taxpayers 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 Taxpayers paid the tax and the deed has been recorded. The Taxpayers now appeal the assessment, contending the state and local recordation taxes should have been based on the consideration paid. They request a refund for the amount of tax that was overpaid.

DETERMINATION

Pursuant to the authority granted the Tax Commissioner under Va. Code § 58.1­1824, a protective claim for refund can be held pending the outcome of another case before the courts or the claim may be decided based upon its merits pursuant to Va. Code § 58.1-1821. As permitted by statute, the Taxpayers' request has been treated as an appeal under Va. Code § 58.1-1821.

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 Taxpayers contend 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/1-4881071390.B