Who had to determine fair market value when assessed real-estate value exceeded deed consideration for Virginia grantor tax?

Subject

Circuit-court clerk had to determine fair market value for grantor tax

Plain-English summary

Virginia directed the local circuit-court clerk to reconsider the real property's fair market value before the grantor-tax refund could be determined. The deed's consideration was lower than the property's assessed value, and the locality had taxed the higher figure.

Since July 2007, § 58.1-802 had imposed grantor tax on the greater of consideration or value. The assessed value carried a strong presumption of accuracy, but the clerk did not have to use it when clear and cogent evidence showed that it did not reflect current fair market value on the transaction date.

Property valuation was a local factual judgment requiring knowledge of the property and market. Virginia sent the ruling to the clerk for review of all reliable information. After the clerk identified the correct value, the Department would refund any excess state recordation tax and the locality would issue any local-tax refund.

What this means for you

• Deed consideration is not always the recordation-tax base.
• Assessed value is strong evidence but can be rebutted with clear and cogent current-value proof.
• The local clerk makes the factual valuation for recordation purposes.
• State and local portions of a refund may be handled by different offices.

Common questions

Was the consideration automatically controlling?

No. The statute used the greater of consideration or value.

Was assessed value automatically controlling?

No. Reliable evidence could rebut it.

Did Virginia set the final refund amount?

No. It first required the clerk's value determination.

Citations and references

• Va. Code § 58.1-802.
• 2007 Va. Acts ch. 748.
• 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 06-77, 00-97, and 91-146.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-33

Original ruling text

April 8, 2010

Re: § 58.1-1821 Application: Recordation Tax

Dear *:

This will reply to your letter in which you request a refund of the state and local grantor taxes paid by * (the "Taxpayer") for recording a deed.

FACTS

In August 2009, the Taxpayer presented a deed for recordation to * (the "Locality"). The Locality assessed the grantor's 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 and contends that the grantor's tax should have been based on the consideration paid.

DETERMINATION

Virginia Code § 58.1-802 provides for a grantor's tax to be imposed on each deed, instrument, or writing by which lands, tenements or other realty sold is granted, assigned, transferred, or otherwise conveyed to, or vested in the purchaser. "The rate of the tax, when the consideration or value of the interest, whichever is greater, exceeds $100, shall be 50 cents or each $500 or fraction thereof . . . ." [Emphasis added.]

Prior to July 2007, the grantor's tax was based only on the consideration of the interest being recorded. In July 2007, the General Assembly amended the grantor's tax to be based on the greater of the consideration or value of the interest being transferred. See Chapter 748, 2007 Acts of Assembly .

In the instant 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).

The Clerk of the Circuit Court, however, 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.) 06-77 (8/23/2006) and P.D. 00-97 (5/26/2000).

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 Locality 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 Clerk 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 Locality.

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,

Janie E. Bowen

Tax Commissioner

AR/1-3873281336.B