Tax Type
Recordation Tax
Description
Corporate Supplemental Indenture
Topic
Documents Subject to Tax
Date Issued
09-06-1984
[Opinion - Virginia Attorney General: 1984 at 395]
REQUEST BY: Honorable Warren E. Barry Clerk, Circuit Court of Fairfax County
OPINION BY: Gerald L. Baliles, Attorney General
OPINION:
You have asked for guidance regarding the computation of State recordation tax on a corporate supplemental indenture securing corporate bonds. Your inquiry arises from the following circumstances.
The corporation owns property in several localities in Virginia. It seeks to record the supplemental indenture in all the localities within the Commonwealth in which there is property securing the bonds to be issued under the indenture. In so doing, it has determined the value of the property in each locality and has submitted to each locality the proportionate amount of State tax based upon the respective values located therein. You ask whether in computing the State recordation tax each such locality should apply the rate based upon the amount of the obligation secured by all property located within the Commonwealth or the rate based only upon that portion of the amount secured by property in the particular locality.1
1 The clerk collects the State tax and submits it to the State. The locality does not derive any benefit from this particular tax.
In order to answer your question, it is necessary to test the corporation's assumption that it is, in fact, permissible for the corporation to pay a portion of the State recordation tax to each locality in which it seeks to record the supplemental indenture.
Section 58-55 of the Code of Virginia imposes a tax upon the recordation of deeds of trust or mortgages which provide for an initial issue of bonds and permit the issuance thereafter of additional bonds under a supplemental indenture. Although this statute imposes a State tax, it is collected by the clerk of the circuit court where the instrument is first presented for recordation. See § 58-62.2
2 Section 58-62 provides: "The tax on every deed, contract or other instrument shall be determined and collected by the clerk in whose office it is first offered for recordation and such instrument may thereafter be recorded in the office of any other clerk without the payment of any tax." (Emphasis added.)
This Office has held that the measure of recordation tax under § 58-55 is the value of the security described. See Reports of the Attorney General: 1981-1982 at 388 and 1975-1976 at 387. Pursuant to § 58-62, the entire amount of State recordation tax should be collected by the clerk in whose office the instrument is first presented for recordation. See 1975-1976 Report of the Attorney General at 390. As an abstract proposition, it would be improper to apportion the State tax in any manner among a number of localities enumerated in that instrument, because such a procedure would conflict with § 58-62.3
3 Compare the situation in which a single obligation is secured by several deeds of trust on property lying in several different jurisdictions within the Commonwealth. The total tax owed for recordation of all the deeds of trust may not exceed the tax otherwise imposable upon the maximum amount of the obligation secured. The tax payable to each of the jurisdictions in which a separate deed of trust is recorded would be the proportionate tax based upon the value of the property in the jurisdiction which secures the deed of trust recorded.
Assuming that such tax was collected by the clerk of the first office in which the supplemental indenture is offered for recordation, the rate of tax to be applied by that clerk is governed by the provisions of § 58-55, which provide as follows:
"On and after July 1, 1978, the maximum tax on the recordation of any deed of trust or mortgage or on any indenture supplemental thereto shall be determined in accordance with the following schedule:
On the first $ 10,000,000 of value as determined pursuant to this section, 15c. upon every $ 100 or portion thereof;
On the next $ 10,000,000 of value as determined pursuant to this section, 12c. upon every $ 100 or portion thereof;
On the next $ 10,000,000 of value as determined pursuant to this section, 9c. upon every $ 100 or portion thereof;
On the next $ 10,000,000 of value as determined pursuant to this section, 6c. upon every $ 100 or portion thereof; and
On all over $ 40,000,000 of value as determined pursuant to this section, 3c. upon every $ 100 or portion thereof."
Although it appears from your letter that the corporation has improperly submitted the recordation tax, it is harmless error if the aggregate amount of tax collected by each locality equals the amount of tax that originally should have been collected in the first office of recordation. To refund each amount and recollect that tax in one office now would be administratively burdensome and serve no useful purpose.
I have been advised that the corporation consulted with an individual of the Virginia Department of Taxation and received approval for the method of calculating the tax due before presenting the supplemental indenture for recordation. Accordingly, I have advised the Auditor of Public Accounts, who concurs with this Opinion, that as long as the tax collected in each jurisdiction was appropriate in relation to the value of the secured property in that jurisdiction, he should not hold the clerks involved accountable for the improper manner in which the tax was collected.4
4 It is my understanding that the tax rate used by the corporation was the effective rate calculated in accordance with § 58-55 as if all the tax had been paid in one locality. Thus, the total amount of tax collected should equal the amount required by that section.
Attorney General's Opinion