Was a bail bondsman's deed of trust securing the Commonwealth exempt from Virginia recordation tax?

Plain-English summary

Virginia held that the bail bondsman's deed of trust was subject to recordation tax. The document secured real estate the bondsman already owned as a licensing requirement; it did not convey the property to the Commonwealth.

That distinction controlled which exemption provisions applied. Va. Code § 58.1-811(A)(3) exempted certain deeds conveying property to Virginia or another government, but the ruling said the subsection applied to property conveyances, not this security instrument.

The deed of trust was taxed under Va. Code § 58.1-803. The ruling found no exemption in § 58.1-811(B) for a bail bondsman's deed of trust securing the Commonwealth.

What this means for you

• Naming the Commonwealth in a deed of trust did not itself create an exemption.
• A deed conveying property was treated differently from a deed of trust securing existing property.
• The applicable exemption had to appear in the provisions governing deeds of trust and mortgages.
• Verify current law and recording-office requirements for present transactions.

Common questions

Was the real estate transferred to Virginia?

No. The ruling says the taxpayer merely secured real estate already owned.

Why did the government-conveyance exemption not apply?

Because the deed of trust was a security instrument, not a deed conveying the real estate.

Was there another exemption for bail bondsmen?

The ruling found none in the deed-of-trust exemption provisions.

Citations and references

• Va. Code §§ 9.1-185.5(C)(4), 58.1-801, 58.1-803, and 58.1-811(A)(3), (B).

Subject

There is no exemption on deeds of trust recorded by bail bondsmen

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 07-23

Original ruling text

March 27, 2007

Re: Request for Ruling: Recordation Tax

Dear *:

This will reply to your letter in which you (the "Taxpayer") seek a ruling as to whether a deed of trust issued to the Commonwealth, as a requirement for bail bondsmen, is subject to the recordation tax.

FACTS

Virginia Code § 9.1-185.5 C 4 states that prior to the issuance of a bail bondsman license, the Department of Criminal Justice Services may require that a bail bondsman "place a deed of trust on the real estate that he is using for the limit of his expected bonded indebtedness to secure the Commonwealth and shall name the attorney for the Commonwealth of the affected locality as trustee under the deed of trust . . . ." The Taxpayer requests a ruling based on the question, "When properties are conveyed to the Commonwealth of Virginia by a deed of trust, or a deed modification to increase the amount of a current deed of trust," is the exemption from recordation tax in Va. Code § 58.1-811 A 3 applicable?

RULING

Virginia Code § 58.1-811 A 3 provides an exemption from the taxes imposed by Va. Code § 58.1-801 for any deed conveying real estate "[t]o the United States, the Commonwealth, or to any county, city, town, district or other political subdivision of the Commonwealth." The exemptions listed under Va. Code § 58.1-811 A apply to deeds conveying property. The Taxpayer in this case is not transferring real property. As such, the exemptions under Va. Code § 58.1-811 A do not apply.

In the situation presented, the Taxpayer is merely securing real estate already owned, as required by the Taxpayer's profession. The tax on such recordings is imposed under Va. Code § 58.1-803. The exemptions listed under Va. Code § 58.1-811 B apply to the recording of deeds of trust and mortgages under Va. Code § 58.1-803. There is no exemption on deeds of trust recorded by bail bondsmen to secure the Commonwealth. As such, the Taxpayer is liable for the recordation tax on the recording the deed of trust.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this ruling, please contact * in the Office of Policy and Administration, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-901956680B