Under South Carolina Revenue Ruling 92-14, who owed deed documentary tax, and how were master-in-equity deeds and transfers to or from governments, GNMA, FNMA, Freddie Mac, and Farm Credit entities treated?

Plain-English summary

South Carolina Revenue Ruling 92-14 explained who bore historical state and county documentary tax on deeds and how tax immunity applied to master-in-equity deeds, government transfers, and several federally created housing and Farm Credit entities.

The controlling idea was the legal incidence of the tax: the purchaser or grantee was primarily liable because the deed was made for that person's benefit. A transfer to an exempt government or entity was therefore exempt, while a transfer from that entity to a private grantee was generally taxable.

Who was liable for deed tax

Sections 12-21-380 and 12-25-10 placed primary liability on the purchaser or grantee. The state tax and additional county tax used the same exemptions.

Citing Loyola Federal Savings and Loan Association v. South Carolina Tax Commission, the ruling treated the grantee as the person for whose benefit or use the deed was made.

The seller or grantor was only a substitute taxpayer. Under Investors Premium Corp. v. South Carolina Tax Commission, the Commission could assess the grantor when collecting from the primary taxpayer was impractical, not merely because it preferred an alternative payer.

Master-in-equity deeds

A deed issued by a master in equity after foreclosure to an individual or business was subject to documentary tax.

The master personally had no liability for the tax. Because the grantee bore the legal incidence, imposing tax on the deed did not impose an illegal tax on the judiciary.

Transfers involving South Carolina

Realty conveyed to the state

The deed was exempt when realty was conveyed to South Carolina or one of its political subdivisions or departments for highway or other public purposes.

Realty conveyed from the state

A deed from the state to an individual or business was taxable. The statute did not provide a comparable exemption for the outgoing transfer.

Transfers involving the federal government

Realty conveyed to the federal government

The deed was exempt because the federal government, as grantee and primary taxpayer, could not constitutionally be taxed by the state.

The grantor could not be substituted merely because the federal grantee was legally immune. The ruling distinguished constitutional prohibition from impractical collection and said taxing the seller would negate entity exemptions.

Realty conveyed from the federal government

A deed from the federal government to an individual or business was taxable because the private purchaser bore the legal incidence. The ruling also treated this as nondiscriminatory because deeds from South Carolina to private buyers were taxed too.

Federal instrumentalities and chartered entities

GNMA and Farm Credit instrumentalities

Deeds to the following entities were exempt because they were federal instrumentalities and grantees:

• Government National Mortgage Association (GNMA);
• Farm Credit Bank;
• Production Credit Association;
• Federal Land Bank Association; and
• Bank for Cooperatives.

Deeds from those entities to an individual or business were taxable because the private grantee owed the tax.

FNMA and Freddie Mac

The ruling said FNMA and Freddie Mac were not federal instrumentalities but had congressional exemptions from state and local taxation, except for real-property taxation described in their statutes.

Deeds to FNMA or Freddie Mac were exempt. Deeds from either entity to an individual or business were taxable because liability fell on the private purchaser.

What this means for you

Buyers and sellers allocating deed tax

The ruling placed primary responsibility on the buyer or grantee. Grantor liability was a collection substitute only when proceeding against the grantee was impractical.

Foreclosure purchasers

A master's deed was not automatically exempt. The private grantee remained subject to documentary tax under the ruling.

Government transaction teams

Direction mattered. A deed to an immune government or exempt entity could be exempt, while a deed from it to a private buyer could be taxable.

Current transactions

Verify current statutes and the entity's present federal status. This page reports the 1992 ruling only.

Common questions

Q: Who was primarily liable for deed documentary tax?
A: The purchaser or grantee.

Q: Could the seller ever be assessed?
A: Yes, when collection from the purchaser or grantee was impractical.

Q: Was a master-in-equity foreclosure deed taxable?
A: Yes when it conveyed property to an individual or business, but the master was not personally liable.

Q: Was a deed to South Carolina always exempt?
A: The ruling required use for highway or another public purpose.

Q: Why was a deed from the federal government taxable?
A: The private grantee, not the federal government, bore the legal incidence.

Q: How were FNMA and Freddie Mac treated?
A: Deeds to them were exempt under their congressional tax exemptions; deeds from them to private buyers were taxable.

Citations and references

• S.C. Code Ann. §§ 12-21-310 and 12-21-380 — historical state documentary tax, liability, and public-purpose exemption
• S.C. Code Ann. § 12-25-10 — historical county documentary tax
• 12 U.S.C. §§ 1452(a), 1452(e), 1717, and 1723a(c)(1)-(2) — Freddie Mac, GNMA, and FNMA
• 12 U.S.C. §§ 2011, 2023, 2071, 2077, 2091, 2098, 2121, and 2134 — Farm Credit entities
• Loyola Federal Savings and Loan Association v. South Carolina Tax Commission, Opinion No. 23646 (S.C. Apr. 27, 1992)
• Investors Premium Corp. v. South Carolina Tax Commission, 260 S.C. 13, 193 S.E.2d 642 (1973)
• Small v. Weed, 293 S.C. 364, 360 S.E.2d 531 (Ct. App. 1987)

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/RR92-14.pdf

Original ruling text

SC REVENUE RULING #92-14

SUBJECT:

Deeds and Other Conveyances of Realty Liability
Master in Equity Deeds
State Government
Federal Government
Certain Federal Instrumentalities and Federally Chartered Institutions
(Documentary Tax)

TAX MANAGER:

John P. McCormack

SUPERSEDES:

SC Revenue Ruling #92-7
SC Technical Advice Memorandum #88-7

EFFECTIVE DATE:

April 27, 1992

REFERENCE:

S.C. Code Ann. Section 12-21-310 (1976)
S.C. Code Ann. Section 12-21-380 (Supp. 1991)
S.C. Code Ann. Section 12-25-10 (1976)

AUTHORITY:

S.C. Code Ann. Section 12-4-320 (Supp. 1991)
SC Revenue Procedure #87-3

SCOPE:

A Revenue Ruling is the Commission's official interpretation of how tax
law is to be applied to a specific set of facts. A Revenue Ruling is
public information and remains a permanent document until superseded
by a Regulation or is rescinded by a subsequent Revenue Ruling.

Questions:
1.

Is the grantor or grantee liable for the documentary taxes imposed under Code Sections 1221-310 and 12-21-380 and 12-25-10?

2.

Are deeds executed by a Master in Equity, which convey property to an individual or
business, subject to documentary taxes?

3.

Are deeds conveying realty to and from the State of South Carolina to documentary taxes?

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4.

Are deeds conveying realty to and from the Federal Government subject to documentary
taxes?

5.

Are deeds conveying realty to and from the Government National Mortgage Association
(GNMA), Federal National Mortgage Association (FHMA), Farm Credit Bank, Production
Credit Association, Bank for Cooperatives, Federal Land Bank Association, and the
Federal Home Loan Mortgage Corporation (Freddie Mac) subject to documentary taxes?

Discussion:
LIABILITY FOR THE TAX ON DEEDS:
Code Section 12-21-310 of the 1976 Code, as amended, imposes the documentary tax upon the
creation of several documents, or instruments, including deeds. This section provides, in part:
There shall be levied collected and paid for and in respect of [documents
described in Section 12-21-380] by any person who makes, signs, issues, sells,
removes, consigns or ships them or for whose benefit or use they are made....the
several taxes specified in said sections. (emphasis added)
Code Section 12-21-380 imposes the documentary tax upon deeds and reads, in part:
A deed, instrument, or writing whereby any lands, tenements, or other realty sold is
granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or
any other person by his direction when the consideration or value of the interest or
property conveyed exclusive of the value of any lien or encumbrance remaining thereon
at the time of sale exceeds one hundred dollars and does not exceed five hundred dollars
must be taxed one dollar and thirty cents and for each additional five hundred dollars, or
fractional part thereof, must be taxed one dollar and thirty cents. ...
Code Section 12-25-10 assesses a county documentary tax on deeds, which is in addition to the
State tax and subject to the same exemptions as the State tax. That section reads:
Whenever a deed, instrument or writing whereby any land, tenement or other realty sold
shall be granted, assigned, transferred or otherwise conveyed to or vested in and recorded
in any county, the purchaser or any other person by his direction when the consideration
or value of the interest or property conveyed exclusive of the value of any lien or
encumbrance remaining thereon at the time of sale exceeds one hundred dollars and does
not exceed five hundred dollars shall be taxed fifty-five cents and for each additional five
hundred dollars, or fractional part thereof, fifty-five cents.
In Loyola Federal Savings and Loan Association v. South Carolina Tax Commission, et al.,
Opinion Number 23646, April 27, 1992, the State Supreme Court held:
In construing statutory language, the statute must be read as a whole, and sections which
are a part of the same general statutory law of the State must be construed together and

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each one given effect, if it can be done by any reasonable construction. Small v. Weed,
293 S.C. 364, 360 S.E. 2d. 531 (Ct. App. 1987). A complete reading of section 12-21-310
indicates that the legislature contemplated that persons "for whose benefit or use [an
instrument] is made" could be liable for payment of documentary stamp taxes. We find
that sections 12-21-380 and 12-25-10 place primary liability for payment of documentary
stamp taxes on the purchaser of real property, who is the person for whose benefit or use
a deed is made....(Emphasis added.)
The South Carolina Supreme Court, in the case of Investors Premium Corp. v. South Carolina
Tax Commission 260 S.C. 13, 193 S.E.2d 642 (1973), with respect to Code Section 12-21-310
stated:
We are of the opinion that in this statute the "or"; while marking an alternative, must also
be construed as introducing a substitute. That is, it does not set up an alternative of
choice available to the Tax Commission but allows an alternative of necessity. We can
find no logic in a purely equal alternative, and yet we must give some significance to the
"or" and the alternative it provides. We find that the legislature meant "or" as introducing
a substitute taxpayer in the event holding the primary taxpayer liable is impractical.
(emphasis added)
Therefore, documentary taxes on deeds are imposed upon the purchaser or grantee. In addition,
if it is impractical to seek payment of the tax from the purchaser or grantee, the Commission may
assess the seller or grantor for the tax.
MASTER IN EQUITY DEEDS:
The next issue concerns the taxability of Master in Equity deeds.
In Loyola Federal Savings and Loan Association v. South Carolina Tax Commission, et al.,
supra, the State Supreme Court, after it determined that the purchaser was primarily liable for the
documentary tax on deeds, held:
Thus, a master-in-equity who issues a master's deed possesses no liability for payment of
documentary stamp taxes. There being no illegal tax imposed upon the judiciary, we
hold that the master-in-equity did not err in finding that documentary stamp taxes may be
imposed on a master's deed issued pursuant to a foreclosure action.
STATE GOVERNMENT:
The next issue concerns deeds that convey realty to and from the State of South Carolina.
Code Section 12-21-380 reads, in part:
Any deed, instrument, or writing whereby any lands, tenements, or other realty is granted,
assigned, transferred, or otherwise conveyed to, or vested in, the State of South Carolina,
or any of its political subdivisions and departments, for highway or other public purposes
is exempted from the documentary tax requirements of this Section, and any clerk of

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court or register of mesne conveyances may record these deeds or other instruments
without revenue stamps affixed and without penalty.
The statute therefore exempts from the tax deeds which convey realty to the State public
purposes. The statute does not provide a similar exemption for deeds which convey realty from
the State to an individual or business.
FEDERAL GOVERNMENT:
The next issue concerns deeds that convey realty to and from the federal government.
With respect to deeds which convey realty to the federal government, the liability for the tax
would fall upon the government, as the purchaser. Such deeds would therefore be exempt from
the tax as the State is constitutionally prohibited from imposing a tax upon the federal
government. In addition, the seller (grantor) cannot be held liable for the tax. Code Section 1221-310 provides for a substitute taxpayer as an alternative of necessity when it is impractical to
hold the primary taxpayer liable. It is not impractical to tax the Federal Government - it is
constitutionally prohibited. To tax the seller when the purchaser is exempt from the tax by law
would also create the absurd result of negating almost all exemptions granted to various entities
by the State and Federal governments.
With respect to deeds which convey realty from the federal government to an individual or
business, the liability for the tax would fall upon the purchaser, and not the federal government.
The following quote from Paul J. Hartman's book, "Federal Limitations on State and Local
Taxation", Section 6:19, provides some guidance in this area:
Under the contemporary view of federal tax immunity, the line drawn between
permissible and non-permissible taxes on the Federal Government or its instrumentalities
is, by and large, formal and mechanical. If the Court concludes that the "legal incidence"
of the challenged tax falls directly on the Government or its instrumentalities, it is an
improper intrusion upon the affairs of the Nation. On the other hand, if the Court
concludes that the "legal incidence" of a tax does not rest upon the government nor its
instrumentalities, the tax is impeccable, for anything that constitutional governmental tax
immunity doctrine has to say, absent discrimination.
Therefore, deeds which convey realty from the Federal Government to an individual or a
business are subject to the documentary tax since the legal incidence for the tax does not fall
upon the
Federal Government. In addition, this tax is not discriminatory since deeds which convey realty
from the State to an individual or a business are also taxable.

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CERTAIN FEDERAL INSTRUMENTALITIES AND FEDERALLY CHARTERED
INSTITUTIONS:
The Federal Government has established various associations, banks, and corporations. The
following is a list of federal code sections which established these organizations and established
certain tax exemptions for such organizations.
Organization

Federal Code Sections

Government National Mortgage Assoc. (GNMA)

12 USCA 1717
12 USCA 1723a c)(1)

Federal National Mortgage Assoc. (FNMA)

12 USCA 1717
12 USCA 1723a c)(2)

Production Credit Association

12 USCA 2071
12 USCA 2077

Farm Credit Banks

12 USCA 2011
12 USCA 2023

Federal Home Loan Mortgage Corp (Freddie Mac)

12 USCA 1452(a)
12 USCA 1452(e)

Bank for Cooperatives

12 USCA 2121
12 USCA 2134

Federal Land Bank Association

12 USCA 2091
12 USCA 2098

In all cases, with the exception of the Federal National Mortgage Association (FNMA) and the
Federal Home Loan Mortgage Corporation (Freddie Mac), these organizations are deemed to be,
by statute, instrumentalities of the Federal Government.
Effective September 1, 1968, the Federal National Mortgage Association (FNMA), which
operated within the Department of Housing and Urban Development (HUD), was partitioned
into two separate corporations. One corporation, the Governmental National Mortgage
Association, remained an instrumentality of the Federal Government as part of HUD. The
second corporation, the Federal National Mortgage Association, was federally chartered but is a
private corporation subject to substantial federal regulations. For example, FNMA requires
HUD approval for issuance of debt obligations and stock. HUD also has authority to audit
FNMA's financial transactions.

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Federal statute, 12 USCA 1723a (c)(2), established various tax exemptions for FNMA and reads:
The corporation, including its franchise, capital, reserves, surplus, mortgages or other
security holdings, and income, shall be exempt from all taxation now or hereafter
imposed by any State, territory, possession, Commonwealth, or dependency of the United
States, or by the District of Columbia, or by any county, municipality, or local taxing
authority, except that any real property of the corporation shall be subject to State,
territorial, county, municipal, or local taxation to the same extent as other real property is
taxed.
The Federal Home Loan Mortgage Corporation (Freddie Mac) is not an instrumentality of the
United States and in fact pays federal income taxes. However, it has been granted certain other
tax exemptions under 12 USCA 1452(e) which reads:
The Corporation, including its franchise, activities, capital, reserves, surplus, and income,
shall be exempt from all taxation now or hereafter imposed by any territory, dependency,
or possession of the United States or by any State, county, municipality, or local taxing
authority, except that any real property of the Corporation shall be subject to State,
territorial, county, municipal, or local taxation to the same extent according to its value as
other real property is taxed.
Therefore, deeds which convey realty to an instrumentality of the Federal Government, or to an
entity that has been exempted from state and local taxation by Congress, are not subject to the
documentary tax. Deeds which convey realty from these instrumentalities and entities are
subject to the tax, as the legal incidence for the tax falls upon the purchaser.
Conclusions:
1.

The purchaser or grantee is liable for the documentary taxes imposed under Code Sections
12-21-310, 12-21-380 and 12-25-10. In addition, if it is impractical to seek payment of the
tax from the purchaser or grantee, the Commission may assess the seller or grantor for the
tax.

2.

Deeds executed by a Master in Equity, which convey property to an individual or business,
are subject to documentary taxes.

3.

Deeds which convey realty to the State of South Carolina are not subject to documentary
taxes provided the realty will be used for public purposes. (See the exemption provisions of
Code Section 12-21-380.)
Deeds which convey realty from the State of South Carolina to an individual or business
are subject to documentary taxes.

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4.

Deeds which convey realty to the Federal Government are not subject to documentary
taxes.
Deeds which convey realty from the Federal Government to an individual or business are
subject to documentary taxes.

5.

Deeds which convey realty to the Government National Mortgage Association (GNMA),
Farm Credit Bank, Production Credit Association, Federal Land Bank Association, and the
Bank for Cooperatives are not subject to documentary taxes. These organizations, as
instrumentalities of the Federal Government and as grantees, cannot be held liable for the
tax.

Deeds conveying realty from these instrumentalities of the Federal Government, as described
above (i.e. GNMA), to an individual or business are subject to documentary taxes.
FNMA and Freddie Mac are not instrumentalities of the Federal Government; however, they do
enjoy certain tax exemptions. As such, FNMA and Freddie Mac are exempt from documentary
taxes on deeds which convey realty to them. When realty is conveyed from FNMA or Freddie
Mac to an individual or business, the documentary taxes are due.
Note: References to the State of South Carolina in this ruling also include political subdivisions
of the State. In addition, references to the Federal Government also include instrumentalities of
the Federal Government.

SOUTH CAROLINA TAX COMMISSION

s/A. Crawford Clarkson Jr.
A. Crawford Clarkson, Jr., Chairman

s/T. R. McConnell
T.R. McConnell, Commissioner

s/James M. Waddell Jr
James M. Waddell, Jr., Commissioner

Columbia, South Carolina
September 30
, 1992

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