Trustee Deed Conveying Real Estate
Documents Subject to Tax
[Opinion - Virginia Attorney General: 1993 at 260]
REQUEST BY: The Honorable John T. Frey Clerk, Circuit Court of Fairfax County 4110 Chain Bridge Road Fairfax, Virginia 22030-4048
OPINION BY: Stephen D. Rosenthal, Attorney General
You ask whether the grantor's recordation tax under § 58.1-802 of the Code of Virginia should be imposed on trustee's deeds conveying real estate to the Resolution Trust Corporation as receiver for a failed savings bank.
Your inquiry concerns two examples of an instrument known as a "trustee's deed." Under each of these instruments, the trustee of real property under a deed of trust transfers the property to the Resolution Trust Corporation (the "RTC"), which has purchased the property at public auction. The auction has culminated foreclosure and sale proceedings instituted against the mortgagor by the trustee at the direction of the RTC, which is also the receiver for the failed savings bank that was the original mortgagee.
II. Applicable Statutes and Regulations
Section 58.1-801 imposes a recordation tax on deeds generally. § 58.1-802(A) imposes an additional tax on each deed . . . by which lands . . . or other realty sold is granted, assigned, transferred, or otherwise conveyed to, or vested in the purchaser. . . .
The tax . . . shall be paid by the grantor, or any person who signs on behalf of the grantor, of any deed, instrument or writing subject to the tax imposed by this section.
Section 58.1-811 provides certain exemptions from these taxes, none of which applies to the facts you present. § 58.1-812(A) states that, "except as otherwise provided in [Chapter 8 of Title 58.1], no deed [or] deed of trust . . . shall be admitted to record without the payment of the tax imposed thereon by law."
The Virginia Department of Taxation has issued regulations to guide clerks of court in implementing recordation taxes. See Va. Dep't of Tax'n, Virginia Recordation Tax Regulations §§ 630-14-800 to 630-14-807, 630-14-809 to 630-14-811, § 630-14-3801 (Jan. 1, 1985) ("VRT Reg."). VRT Reg. § 630-14-802(C) provides that
- the legal incidence of the tax imposed by § [58.1-802] 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.
VRT Reg. § 630-14-802(D)(4) further provides that "[a] deed given by a trustee in a deed of trust for realty sold under foreclosure" is taxable under § 58.1-802.
The RTC was created by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Pub. L. No. 101-73, 103 Stat. 183 (codified as amended in scattered sections of 12 U.S.C.) (the "federal Act"). That Act establishes the corporation as "an instrumentality of the United States." 12 U.S.C.A. § 1441a(b)(1)(A) (West Supp. 1992). The federal Act authorizes the RTC to perform a broad array of functions with respect to failed financial institutions, including acting as conservator and receiver for those institutions. See 12 U.S.C.A. § 1441a(b)(4) (West Supp. 1992). § 1441a(g) further provides that the RTC,
the capital, reserves, surpluses, and assets of the [RTC] and the income derived from such capital, reserves, surpluses, or assets shall be exempt from State, municipal, and local taxation except taxes on real estate held by the [RTC], according to its value as other similar property held by other persons is taxed.
Id. (West Supp. 1992).
III. Federal Act Prohibits Recordation Taxes on RTC
The federal Act prohibits any state or local taxation on the RTC except taxes on its real estate, and the exemption provisions of the federal Act prevail over any conflicting state statutes that may be read to impose recordation taxes against the RTC. A recordation tax is a tax on the privilege of using the state's registration laws; it is not a tax on real estate. Accordingly, a prior opinion of this Office concludes that the RTC itself is exempt from the imposition of recordation taxes. See Op. to Hon. Charles E. King, Jr., Gloucester Co. Cir. Ct. Clk. (Apr. 2, 1992) (copy enclosed).
IV. Incidence of § 58.1-802 Grantor's Tax on Foreclosure Sale Is on Mortgagor and Not on Trustee or Mortgagee
Under Virginia law, however, the general rule is that a trustee under a deed of trust does not obtain title to the property that is the subject of the trust. Instead, the trustee is a mere agent for both the mortgagor and the mortgagee, invested with the power of sale in case of a default by the mortgagor. See 1987-1988 ATT'Y GEN. ANN. REP. 564, 565. Title remains with the mortgagor and passes from the mortgagor only when the trustee sells the property after a default. Id. Accordingly, the incidence of the grantor's tax applicable to a trustee's deed is on the mortgagor, and not on the trustee or mortgagee. Cf. 1987-1988 ATT'Y GEN. ANN. REP. 567, 568 (I.R.S. conveyance of property of delinquent taxpayer to purchaser at tax sale subject to grantor's tax; I.R.S. never held title to property).
Because the incidence of the grantor's tax for recording the trustee's deeds you describe is on the mortgagor, the exemption granted to the RTC under the federal Act does not apply to that tax. Accordingly, it is my opinion that the grantor's tax imposed under § 58.1-802 should be collected before recording trustee's deeds conveying real estate to the RTC.