Must Virginia deed-recordation tax use the property's assessed value when it exceeds the stated consideration?

Plain-English summary

Virginia did not simply order tax based on the lower stated consideration; it asked the local clerk to determine the property's actual fair market value after reviewing all reliable evidence. The county had used the assessed value because it exceeded the consideration shown for the deed transfer.

Virginia's deed and grantor's taxes used the greater of consideration or actual value. Assessed value carried a strong presumption of accuracy, but it was not conclusive. Clear and cogent evidence could show that the assessment did not reflect market value on the transaction date.

Because local property knowledge and market conditions drove that factual determination, the circuit-court clerk had responsibility for the value. After the clerk reported the correct amount, the Department would issue any state-tax refund and the county would issue any local-tax refund.

What this means for you

• A low stated consideration does not cap Virginia recordation tax.
• The assessed value is strong evidence but can be rebutted.
• Provide transaction-date appraisals and other reliable market evidence to the clerk.
• State and local recordation-tax refunds follow separate payment paths.

Common questions

Q: What tax base applied?
A: The greater of the consideration or the property's actual value.

Q: Was the assessed value mandatory?
A: No, but it carried a very strong presumption of accuracy.

Q: Who decided the final value?
A: The local circuit-court clerk, after considering reliable evidence and local market conditions.

Citations and references

• Va. Code §§ 58.1-800 et seq., 58.1-801, 58.1-802, and 58.1-814.
• 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 91-146, 00-97, 06-77, and 11-41.

Subject

Placing fair value on real estate

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 11-173

Original ruling text

October 6, 2011

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 recordation taxes paid by * (the "Taxpayer") for recording a deed. I apologize for the delay in responding to your letter.

FACTS

In November 2010, 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.

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. 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. 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.

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. It cites 1990 Op. Att'y. General 239 and 1991 Op. Att'y. General 290 to support. its argument that the fair market value of the real property at issue is what a "willing buyer" will pay a "willing seller" at the time of the transaction.

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 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), and P. D. 11-41 (3/14/2011).

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 County and request a review of the determination of the actual value of the property, taking into consideration all other 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 County.

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,

Craig M. Burns

Tax Commissioner

AR/1-4634587005.B