When a federal credit union takes title to Virginia real estate, does the clerk of court collect the grantee's recordation tax?

Plain-English summary

The Clerk of the Chesapeake Circuit Court asked the AG a routine but expensive question: when a federal credit union takes a deed (becomes the grantee), does the clerk collect the recordation tax that Virginia normally charges grantees under Va. Code § 58.1-801?

The AG concluded no. The federal credit union charter statute, 12 U.S.C. § 1768, says that federal credit unions and their property, funds, and income "shall be exempt from all taxation now or hereafter imposed by the United States or by any State, Territorial, or local taxing authority." The statute carves out one narrow exception: real and tangible personal property of federal credit unions remains subject to state and local tax "to the same extent as other similar property is taxed."

Virginia's recordation tax sits outside that carve-out. The Virginia Administrative Code (23 VAC § 10-320-10) and a 1912 Supreme Court of Virginia decision (Pocahontas Consolidated Collieries v. Commonwealth) both characterize the recordation tax as a tax on a "civil privilege," meaning the privilege of accessing the state's recording system, not as a tax on the property being conveyed. Because § 1768 only allows states to tax federal credit unions' real and personal property, and the recordation tax is not a property tax, the broader "all taxation" prohibition controls.

The AG had already reached the same answer for grantors under § 58.1-802 in Opinion 13-010. This opinion completed the symmetry: federal credit unions are exempt whether they appear as grantor or grantee, so long as they are a principal to the transaction.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The structural points in this opinion (the text of 12 U.S.C. § 1768, the Virginia recordation tax statutes in Title 58.1 Chapter 8, and the case law characterizing the recordation tax as a civil-privilege tax) have remained stable. Anyone handling a present-day closing involving a federal credit union should verify the current Virginia Department of Taxation guidance, the current text of the relevant Code sections, and any later AG opinions before relying on this exemption.

Common questions

What is the Virginia recordation tax?
A tax that Virginia levies when a deed or other instrument is admitted to record in a Circuit Court clerk's office. Va. Code §§ 58.1-800 to 58.1-817 set out the framework. The grantor and the grantee each pay a portion.

Why does the type of tax matter for credit union exemption?
12 U.S.C. § 1768 exempts federal credit unions from "all taxation" by states and localities, with one carve-out: real or tangible personal property of the credit union remains taxable like other similar property. So if the recordation tax counts as a tax on the property, it falls inside the carve-out and is collectible. If it counts as a tax on the privilege of recording, it falls inside the broader prohibition and is not collectible.

How did the opinion characterize the recordation tax?
As a tax on a civil privilege, not on property. The opinion cites both Virginia regulation (23 VAC § 10-320-10) and the Pocahontas Consolidated Collieries case from 1912, where the Supreme Court of Virginia described the recordation tax as a tax "for the privilege of availing oneself of the benefits and advantages of the registration laws of the State."

Does this also exempt state-chartered credit unions?
No. The exemption in 12 U.S.C. § 1768 applies by its terms to federal credit unions, meaning credit unions chartered under 12 U.S.C. Chapter 14. State-chartered credit unions are creatures of state law and look to state-law tax exemptions (if any).

Does the credit union have to be a principal to the transaction?
Yes. Prior AG opinions concluded the exemption applies when the credit union is the principal to the transaction, as a grantor or grantee. The exemption is for the credit union's own taxation, not for transactions where it is acting as a mere agent.

Does this affect federal credit unions' real-property tax bills?
No. The § 1768 carve-out preserves state and local property tax on real and tangible personal property "to the same extent as other similar property is taxed." So a federal credit union's office building remains on the local tax rolls. The recordation tax is different because, in Virginia, it is not a property tax.

What about state credit unions, national banks, and other federally chartered entities?
The analysis turns on what each entity's federal charter says. National banks (12 U.S.C. § 548) are subject to a narrower federal carve-out that has been read to allow state recordation taxes. Federal land banks have their own exemption analysis. Anyone handling a closing for a federally chartered lender should pull the lender's specific charter section and check the corresponding AG and Virginia Tax Department guidance.

Background and statutory framework

• Va. Code § 58.1-801(A): levies the grantee's portion of the recordation tax on deeds admitted to record.
• Va. Code § 58.1-802(A): levies the grantor's portion.
• Va. Code § 58.1-800 through § 58.1-817: the Virginia Recordation Tax Act.
• 12 U.S.C. § 1768: federal credit union tax exemption. Exempts federal credit unions, their property, franchises, capital, reserves, surpluses, and other funds and income from all federal, state, territorial, and local taxation, except real and tangible personal property which remains taxable.
• 23 Va. Admin. Code § 10-320-10: Virginia Tax Department regulation characterizing the recordation tax as a tax on a civil privilege.
• 2013 Op. Va. Att'y Gen. No. 13-010: companion opinion concluding § 1768 also exempts federal credit unions from the grantor-side recordation tax under § 58.1-802.
• 2012 Op. Va. Att'y Gen. 137: earlier opinion working through the same federal-exemption framework for a different federally chartered lender.

The interpretive moves:

• § 1768 imposes a broad "all taxation" prohibition with a narrow property-tax carve-out.
• The Virginia recordation tax is characterized as a tax on a civil privilege under Virginia regulation and Supreme Court of Virginia case law, so it is not a property tax.
• Therefore the recordation tax falls inside the broad prohibition, not the narrow carve-out.
• The exemption applies whenever the federal credit union is a principal to the transaction (grantor or grantee).

Citations

• Va. Code §§ 58.1-800 through 58.1-817
• Va. Code § 58.1-801(A)
• Va. Code § 58.1-802(A)
• 12 U.S.C. § 1768
• 23 Va. Admin. Code § 10-320-10
• Pocahontas Consol. Collieries Co., Inc. v. Commonwealth, 113 Va. 108, 73 S.E. 446 (1912)
• Fed. Land Bank v. Hubard, 163 Va. 860, 178 S.E. 16 (1935)
• 2013 Op. Va. Att'y Gen. No. 13-010
• 2012 Op. Va. Att'y Gen. 137
• 2003 Op. Va. Att'y Gen. 177
• 2002 Op. Va. Att'y Gen. 328
• 1993 Op. Va. Att'y Gen. 260

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2014/13-105_Mitchell.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II
Attorney General

January 3, 2014

The Honorable Faye W. Mitchell
Clerk of Court, Chesapeake Circuit Court
307 Albemarle Drive, Suite 300A
Chesapeake, Virginia 23322

900 East Main Street
Richmond, Virginia 23219
804-786-2071
FAX 804-786-1991
Virginia Relay Services
800-828-1120
7-1-1

Dear Ms. Mitchell:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issue Presented

You ask whether Federal credit unions are exempted from paying the recordation tax imposed upon grantees by § 58.1-801 of the Code of Virginia pursuant to the exemption provided by 12 U.S.C. § 1768.

Response

It is my opinion that, pursuant to the exemption provided by 12 U.S.C. § 1768, Federal credit unions are exempted from paying the recordation tax imposed on grantees by § 58.1-801 of the Code of Virginia.

Applicable Law and Discussion

The Virginia Recordation Tax Act[1] levies a tax on "every deed admitted to record, except a deed exempt from taxation by law."[2] Previous opinions of this Office have noted, however, that "Congress may create exemptions from taxation for specific entities even if such exceptions are not memorialized in the states' laws. Implicit in [this] opinion is the authority of the federal government to exempt specific real estate transactions from state taxation."[3]

The United States Code provides Federal credit unions with a statutory exemption from taxation. Specifically, the United States Code states:

The Federal credit unions organized [under 12 U.S.C. Chapter 14], their property, their franchises, capital, reserves, surpluses, and other funds, and their income shall be exempt from all taxation now or hereafter imposed by the United States or by any State, Territorial, or local taxing authority; except that any real property and any tangible personal property of such Federal credit unions shall be subject to Federal, State, Territorial, and local taxation to the same extent as other similar property is taxed.[4]

Congress therefore permits the taxation of real or tangible personal property held by Federal credit unions to the extent similar property is taxed, but otherwise exempts the Federal credit unions from "all taxation" by state and local governments.

The Virginia Administrative Code indicates that "[t]he recordation tax is not a tax on property but on civil privilege."[5] The Supreme Court of Virginia also has concluded that the recordation tax is "a tax upon a civil privilege, that is, for the privilege of availing ... of the benefits and advantages of the registration laws of the State."[6] As such, the recordation tax does not fall within the bounds of the exception stated in 12 U.S.C. § 1768 that applies to state and local taxation of Federal credit unions' real and personal property.

Previous opinions of this Office have concluded that "when a federal statute prohibits all state or local taxation on an entity created by the federal government, except for taxation on that entity's real estate, the entity enjoys an exemption from the recordation tax wherever it is a principal to the transaction."[7] When acting as either a grantee or a grantor, Federal credit unions serve as principals to a transaction, and accordingly are exempt from Virginia's recordation tax.[8] Most recently, as noted in your request, an opinion of this Office determined that Federal credit unions are exempt from the recordation tax imposed on grantors by § 58.1-802.[9]

In conformity with this Office's prior opinions, 12 U.S.C. § 1768 must be interpreted as exempting Federal credit unions from the recordation tax imposed by § 58.1-801 when such entity is the grantee in the transaction.

Conclusion

Accordingly, it is my opinion that, pursuant to the exemption provided by 12 U.S.C. § 1768, Federal credit unions are exempted from paying the recordation tax imposed on grantees by § 58.1-801 of the Code of Virginia.

With kindest regards, I am

Very truly yours,

Kenneth T. Cuccinelli, II
Attorney General

[1] Va. Code Ann. §§ 58.1-800 through 58.1-817 (2013).

[2] Section 58.1-801(A). See also § 58.1-802(A) (regarding tax to be paid by grantors).

[3] 2013 Op. Va. Att'y Gen. No. 13-010 at 1 (quoting 2012 Op. Va. Att'y Gen. 137 at 138), available at http://www.oag.state.va.us/Opinions%20and%20Legal%20Resources/Opinions/2013opns/13-010%20Whittle.pdf. See also 2003 Op. Va. Att'y Gen. 177, 179; 2002 Op. Va. Att'y Gen. 328, 329.

[4] 12 U.S.C. § 1768.

[5] 23 Va. Admin. Code § 10-320-10.

[6] See Pocahontas Consol. Collieries Co., Inc. v. Commonwealth, 113 Va. 108, 112, 73 S.E. 446, 448 (1912). See also Fed. Land Bank v. Hubard, 163 Va. 860, 864, 178 S.E. 16, 17 (1935).

[7] 2012 Op. Va. Att'y Gen. 137, 141. See also 1993 Op. Va. Att'y Gen. 260, 262.

[8] 2012 Op. Va. Att'y Gen. at 141.

[9] 2013 Op. Va. Att'y Gen. No. 13-010 at 1.