Did a lower deed price and private appraisal require Virginia to override the county clerk's assessed-value calculation of recordation tax?

Subject

The clerk of the county is thoroughly familiar with the property and local market conditions. Placing a value on real estate is entirely his responsibility when the value must be determined for recordation tax purposes.

Plain-English summary

A county calculated recordation tax using the property's assessed value because it exceeded the consideration stated for the transfer. The taxpayer argued that the lower consideration represented fair market value and asked the Department to evaluate a private appraisal instead of the county.

Virginia explained that the deed and grantor taxes use the greater of consideration or actual property value. The circuit-court clerk determines that value and may use inquiries, affidavits, declarations, or other acceptable evidence. A recent local assessment carries a strong presumption because Virginia requires real-estate assessments at 100% of fair market value, although clear and cogent contrary evidence may justify another value.

Property valuation is a factual judgment best made by someone familiar with the property and local market. The Department therefore deferred to the clerk unless the valuation was unreasonable; disagreement and an appraisal alone did not establish unreasonableness.

Virginia nevertheless sent the matter back for the clerk to review the appraisal and all other reliable information. After the county reported the correct fair market value, the Department would issue any state refund due, while the county would handle any local recordation-tax refund.

Common questions

Is recordation tax always based on the deed's purchase price? No. Virginia uses the greater of consideration or actual value of the property conveyed.

Does a private appraisal automatically replace the assessed value? No. It is relevant evidence, but a recent assessment is strongly presumed accurate and an appraisal alone does not prove the clerk unreasonable.

Who issues a refund after the value is corrected? The Department handles the state-tax refund, and the county handles the local-tax refund.

Citations and references

• Va. Code §§ 58.1-800 et seq., 58.1-801, 58.1-802, 58.1-812 B, 58.1-814, and 58.1-3201.
• 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. 88-317, P.D. 91-146, P.D. 00-97, P.D. 06-77, P.D. 11-41, P.D. 11-191, and P.D. 15-205.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 16-32

Original ruling text

March 18, 2016

Re: § 58.1-1821 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.

FACTS

In August 2015, 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 and has requested that the Department evaluate the appraisal in lieu of the County.

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. 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. 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. The grantor's tax is divided equally between the state and the locality.

Virginia Code § 58.1-812 B provides that:

The tax on every deed, deed of trust, contract or other instrument shall be determined and collected by the clerk in whose office the instrument is first offered for recordation. The clerk may ascertain the consideration of the deed or of the instrument, the actual value of the property conveyed, and the qualification of the deed or instrument for any exemption claimed by inquiry, affidavit, declaration or other extrinsic evidence acceptable to the clerk.

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. 11-191 (11/30/2011) and P.D. 15-205 (10/20/2015).

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). While the Department does engage licensed appraisers to assist with the administration of the Land Preservation Tax Credit under Va. Code § 58.1-512 et seq. , the Department will defer to a clerk's determination of a property's value unless the clerk's valuation is unreasonable. The mere fact that a taxpayer disagrees with a clerk's valuation and has an appraisal done is not sufficient to show it is unreasonable.

Because Va. Code § 58.1-3201 requires all assessments of real estate for purposes of local property taxation to be made at 100% of fair market value, it is reasonable for a clerk to presume that a recent assessment reflects the actual value of the property. See P.D. 88-317 (11/10/1988). Where the clerk has reason to believe that the assessed value does not reflect the actual value ( e.g. , the assessment is not recent), the clerk should seek other evidence of the actual value.

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 in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/1-6169724969.B