Virginia Law

Chapter 320. Recordation Tax Regulations

23VAC10-320-10. Preface.

The recordation tax is not a tax on property but on a civil privilege, i.e., the privilege of utilizing the registration laws of Virginia. The tax is generally measured by the consideration or actual (fair market) value of the property transferred, whichever is greater, and the amount of bonds or other obligations secured by deeds of trust or mortgages.

Statutory Authority

§§ 58.1-203 and 58.1-800 of the Code of Virginia.

Historical Notes

Derived from VR630-14-800, eff. January 1, 1985.

23VAC10-320-20. Deeds generally.

A. Examples of deeds taxable under § 58.1-801 of the Code of Virginia:

1. Where real estate is conveyed to a "strawman" or nominee for the purchaser who paid the entire consideration and the title is taken in this form for the purchaser's convenience pursuant to an agreement. When the "strawman" or nominee conveys the property to the purchaser for no consideration, this second conveyance is also a taxable transfer based on the actual (fair market) value of the property at the time of the conveyance.

2. A conveyance of real estate by the personal representative of an estate and/or by a surviving beneficiary of a decedent as the result of an election by such beneficiary established under the terms of the decedent's will. The doctrine of election rests upon the equitable principle that he who accepts a benefit under a deed or will must adopt the whole contents of the instrument, conforming to all its provisions, and renouncing every right inconsistent with it. If by one clause of a will a legacy is given A, and by another clause an estate of which A is the owner is given B, unless A surrenders to B the estate, A cannot have the legacy. In order to raise a case of election, there must appear in the will itself a clear intention on the part of the testator to dispose of that which is not his own.

3. Where a deed of bargain and sale conveys real estate and the deed recites that for and in consideration of $100,000, of which $10,000 is cash in hand paid, and a promissory, negotiable bond of even date for $90,000 which includes interest. The deed further provides that of the consideration of $100,000, $65,000 is principal and the balance is interest. The consideration is stated to be $100,000. The tax would be based on that amount including interest.

4. A deed of exchange of realty.

5. If a grantor conveys real estate and keeps the deed in his possession and makes no delivery of the deed to the grantee until a later date, the date of delivery of the deed to the grantee is the date of the conveyance, and the actual (fair market) value of the property as of the date of delivery controls in the matter of computing the tax when offered for recordation.

6. When a deed conveys property to a life tenant with remainder in fee simple to X and Y. The life tenant dies. The tenants in common, X and Y, transfer their interests by deed to themselves as joint tenants with the right to survivorship. There being no consideration, the tax is based on the actual (fair market) value of the property. (No tax is imposed, however, if X and Y are husband and wife and the tax has been paid on the original deed. See § 58.1-810 of the Code of Virginia.)

7. A deed conveying real estate from a trustee of a trust to a beneficiary of the trust, unless provided otherwise in § 58.1-811(A)(13).

8. A deed reconveying real estate to the seller upon the buyer's default.

9. A deed reconveying property to the former owner pursuant to court order after a finding of fraud in the original transaction which court order rendered the conveyance voidable.

10. A conveyance of real estate to a foreign government.

11. A "quitclaim" deed, unless a specific exemption otherwise applies.

12. A conveyance of realty not pursuant to a decree of divorce or incident thereto, unless provided otherwise in § 58.1-810(3) of the Code of Virginia.

Statutory Authority

§§ 58.1-203 and 58.1-801 of the Code of Virginia.

Historical Notes

Derived from VR630-14-801, eff. January 1, 1985.

23VAC10-320-30. Additional tax paid by grantor.

A. A tax is imposed, in addition to any other recordation tax, upon deeds, instruments, or other writings whereby realty sold is granted, assigned, transferred, or otherwise conveyed to or vested in the purchaser or, at his direction any other person, when the consideration for, 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 $100.

The term "sold" imports a transfer of an interest for a valuable consideration, which may be money or anything of value.

B. The tax is based upon the net consideration. In determining the amount of the net consideration, only the amount of the liens and encumbrances on the property existing before the sale and not removed thereby may be deducted. The value of the lien or encumbrance remaining on the property sold, regardless of whether such lien is assumed or sold subject to such lien or encumbrance, is deductible.

C. The legal incidence of the tax imposed by § 58.1-802 of the Code of Virginia is on the grantor and not the grantee. This is a matter between the grantor and the grantee, and the clerk cannot be expected to ascertain who is bearing the economic burden of the tax. The clerk should not admit the deed to record until the tax is paid, whether it is paid by the grantor, the grantee, or some other person.

D. Examples of deeds taxable under § 58.1-802 of the Code of Virginia:

1. A conveyance of realty in exchange for other property.

2. A conveyance of realty in consideration of life maintenance. The consideration or value of the interest is the net value of the realty conveyed.

3. A conveyance by a defaulting mortgagor to the mortgagee in consideration of the cancellation of the mortgage debt. The consideration or value of the interest is the amount of the unpaid mortgage plus unpaid accrued interest.

4. A deed given by a trustee in a deed of trust for realty sold under foreclosure. The tax is computed on the accepted bid for the property plus costs if paid by the purchaser.

5. A conveyance of realty by or pursuant to a judgment or decree in a condemnation proceeding or a conveyance of such property under threat or imminence of such proceeding.

6. If a deed is given by an executor in accordance with the terms of a will and, by reason of a consideration passing between devisees, one of them takes a greater share in the realty than that to which he is entitled under the will, the deed given by the executor to convey such greater share is taxable on the consideration.

7. If in a partition deed some of the parties take shares greater in value than their undivided interest, a tax attaches to each deed conveying such greater share computed upon the consideration.

E. Examples of deeds not taxable under § 58.1-802 of the Code of Virginia:

1. The reconveyance of realty, conveyed to secure a debt, upon payment of such debt.

2. A deed to confirm title already vested in the grantee, such as a deed to correct a flaw in title.

3. A deed from an agent to his principal conveying real estate purchased for and with funds of the principal.

4. A deed executed by a debtor conveying property to a trustee for the benefit of his creditors; however, when the trustee conveys such property to a creditor or sells it to any other person, the deed executed by him is taxable.

5. A conveyance to a receiver of realty included in the receivership assets, and reconveyance of such realty upon termination of the receivership.

6. The conveyance of real estate by a corporation as a dividend.

7. Any deed conveying real estate from the United States, in the absence of Congressional consent, is exempt from the tax imposed by § 58.1-802 of the Code of Virginia on Constitutional grounds. Also, § 7.1-22 C of the Code of Virginia provides that a conveyance to the United States or its agencies is exempt from the tax imposed by § 58.1-802 of the Code of Virginia if the lands acquired are to be used for "public purposes."

Statutory Authority

§§ 58.1-203 and 58.1-802 of the Code of Virginia.

Historical Notes

Derived from VR630-14-802, eff. January 1, 1985.

23VAC10-320-40. Deeds of trust or mortgages.

A. Examples of deeds of trust, mortgages and supplemental indentures taxable under § 58.1-803 of the Code of Virginia:

1. A deed of trust secured by real estate with a lesser value than the note. For example, if real estate valued at $30,000 secures a note of $160,000, the tax is based upon the value of the real estate.

2. A supplemental indenture to a mortgage where the tax upon the initial mortgage has been paid, the tax is imposed only on the amount of the supplemental indenture.

3. A deed of trust given to secure a loan made by the Virginia Housing Development Authority.

4. A deed of trust securing a loan guaranteed by a federal agency.

5. An indemnity deed of trust on Virginia real estate. An indemnity deed of trust or mortgage is "a mortgage which secures a guaranty rather than the primary loan."

B. Examples of deeds of trusts, mortgages and supplemental indentures not taxable under § 58.1-803 of the Code of Virginia:

1. A deed of trust from an Industrial Development Authority.

2. Where a note is secured by personal property and a deed of trust on real estate, and where perfection of the security interest on the personal property will be filed under the Uniform Commercial Code, the tax is computed only upon the real estate under such deed of trust.

Statutory Authority

§§ 58.1-203 and 58.1-803 of the Code of Virginia.

Historical Notes

Derived from VR630-14-803, eff. January 1, 1985.

23VAC10-320-50. Construction loan deeds of trust or mortgages.

When a construction loan deed of trust or mortgage is converted to a permanent loan deed of trust or mortgage, no tax shall be imposed under § 58.1-804 of the Code of Virginia if the persons are the same who made the instrument which the construction loan deed of trust or mortgage secured, if there is no additional amount and the tax was paid on the construction loan deed of trust or mortgage.

Statutory Authority

§§ 58.1-203 and 58.1-804 of the Code of Virginia.

Historical Notes

Derived from VR630-14-804, eff. January 1, 1985.

23VAC10-320-60. Deeds of release.

A deed of release is "[a deed] releasing property from the encumbrance of a mortgage or similar pledge upon payment or performance of the conditions. More specifically, where a deed of trust to one or more trustees has been executed, pledging real property for the payment of a debt or the performance of other conditions, substantially as in the case of a mortgage, a deed of release is the conveyance executed by the trustees, after payment or performance, for the purpose of divesting themselves of the legal title and revesting it in the original owner." [Black's Law Dictionary, Fifth Edition.]

Statutory Authority

§§ 58.1-203 and 58.1-805 of the Code of Virginia.

Historical Notes

Derived from VR630-14-805, eff. January 1, 1985.

23VAC10-320-70. Deeds of partition; transfers pursuant to decree of divorce or separate maintenance, etc..

When a deed is offered for recordation under § 58.1-806 of the Code of Virginia pursuant to a divorce, since this section does not provide that the deed refer to a divorce or decree of separate maintenance, the clerk must be satisfied that the deed does qualify for the fifty cents taxation. The clerk may require evidence such as an affidavit of the parties, a copy of the decree of divorce, or separate maintenance, and other extrinsic evidence sufficient to satisfy the clerk that the fifty cents taxation is proper.

Statutory Authority

§§ 58.1-203 and 58.1-806 of the Code of Virginia.

Historical Notes

Derived from VR630-14-806, eff. January 1, 1985.

23VAC10-320-80. Contracts generally; leases.

A. Examples of contracts and leases taxable under § 58.1-807 of the Code of Virginia:

1. The assignment of an overriding royalty interest. The term "royalty interest" generally refers to a right to share in the production of oil and gas at severance; it is personal property and relates to the proceeds from oil and gas leases if and when there is production. A "royalty" is not realty but personalty and a contract entirely separate and distinct from the oil and gas lease, which contract requires the owner of the interest in realty to share a portion of the royalty with another. The royalty interest does not run with the land.

2. The recordation tax under § 58.1-807 of the Code of Virginia on options is measured by the consideration given for the option and not by the value of the property involved.

3. An agreement not to encumber or transfer property is a contract relating to real property. The tax would be imposed upon the unpaid principal and interest of the note or notes.

4. An amended lease which increases the original monthly payments. The tax is based on the difference or the increase in the monthly payments.

5. A lease and a contract of sale when both agreements are contained in a single document. This type of document contains more than one type of contract, and the recordation tax is imposed upon each contract; i.e., the lease and the contract of sale.

B. Example of contracts and leases not taxable under § 58.1-807 of the Code of Virginia:

1. An assignment of a lease on which the recordation tax has been previously paid is generally not subject to tax under the provisions of § 58.1-807 of the Code of Virginia if there is no increase in the amount of the principal obligation.

Statutory Authority

§§ 58.1-203 and 58.1-807 of the Code of Virginia.

Historical Notes

Derived from VR630-14-807, eff. January 1, 1985.

23VAC10-320-90. When supplemental writings not taxable.

A. A deed of assumption by which the purchaser assumes the deed of trust or mortgage of the grantor (seller) is not taxable.

Statutory Authority

§§ 58.1-203 and 58.1-809 of the Code of Virginia.

Historical Notes

Derived from VR630-14-809, eff. January 1, 1985.

23VAC10-320-100. What other deeds not taxable; definitions.

A. A "deed of confirmation" is a conveyance which may be utilized in order to accomplish many purposes. It may be utilized in order to remove doubts as to effectiveness or operativeness of a prior deed; to ratify a prior deed executed by an agent or a deed executed by one under disability. A deed of confirmation is one which affirms, corrects, ratifies or adds effectiveness or legality to an earlier deed, which is essential to make the earlier deed effective. As between the parties, a confirming deed relates back to the date of the original instrument.

B. A "deed of correction" corrects defects appearing in the original instruments, such as misnomers, errors in the property description, or omissions of the names of the grantees.

Statutory Authority

§§ 58.1-203 and 58.1-810 of the Code of Virginia.

Historical Notes

Derived from VR630-14-810, eff. January 1, 1985.

23VAC10-320-110. Exemptions.

A. The exemption set forth in § 58.1-811(A)(2) of the Code of Virginia does not apply if the conveyance is made to any corporation, a separate entity of a church or religious body, and not to the trustee or trustees of a church or religious body. This also applies under § 58.1-811(B)(2) of the Code of Virginia where the conveyance is made by any corporation, a separate entity of a church or religious body, rather than trustees of the religious organization conveying to trustees under a deed of trust.

B. A conveyance to a health clinic is not exempt under § 58.1-811(A)(5) of the Code of Virginia unless the clinic is an integral part of a hospital conducted not for profit.

C. To qualify for the exemption under § 58.1-811(A)(6) of the Code of Virginia:

1. The transfer must take place upon organization of the corporation. The transfer must be made within a period of time sufficiently close to the inception of the corporation so that it can be reasonably concluded that the transfer is an integral part of the formation of the corporation;

2. The transferor(s) must be in control of the transferee corporation immediately after the transfer. The transferor(s) must own:

a. at least 80% of the total combined voting power of all classes of stock entitled to vote;

b. at least 80% of the total number of shares of all other classes of stock of the corporation; and

3. The transaction must qualify in all other respects with § 351 of the Internal Revenue Code, as it exists at the time of the transfer.

D. Liquidation of a partnership whereby the partnership is the grantor and in its plan of dissolution it is set out that the partners (grantees) will receive designated units of a condominium. By separate deeds of conveyance each grantee will receive his proportionate interest in the condominium; however, no partner (grantee) received 50% of the profit and surplus of the partnership. A transaction of this nature does not qualify under § 58.1-811(A)(10) of the Code of Virginia.

Statutory Authority

§§ 58.1-203 and 58.1-811 of the Code of Virginia.

Historical Notes

Derived from VR630-14-811, eff. January 1, 1985.

23VAC10-320-120. Taxation of instruments relating to property located in more than one jurisdiction.

A. When a deed conveys real estate located in two separate jurisdictions, the formula for prorating the local tax is:

= $500 (Local tax for jurisdiction #1)

= $25 (Local tax for jurisdiction #2)

B. The formula for the local tax on a deed of trust conveying property located in two jurisdictions is:

= Local tax for jurisdiction #1

= Local tax for jurisdiction #2

Statutory Authority

§§ 58.1-203, 58.1-814 and 58.1-3800 of the Code of Virginia.

Historical Notes

Derived from VR630-14-3801, eff. January 1, 1985.