Tax Type
Recordation Tax
Description
A taxpayer must refinance his debt with the mortgage lender that holds the deed of trust.
Topic
Exemptions
Property Subject to Tax
Records/Returns/Payments
Date Issued
09-19-2011
September 19, 2011
Re: § 58.1-1821 Application: Recordation Tax
Dear *****:
This will reply to your letter in which you request a refund of state and local recordation taxes paid by ***** (the "Taxpayers") for recording a refinanced deed of trust. I apologize for the delay in the Department's response.
FACTS
The Taxpayers, a husband and wife, refinanced their home mortgage in November 2007 through a broker, ***** (the "Broker"), a subsidiary of ***** (the "Bank"), in the ***** (the "County") and paid the recordation tax. Mortgage payments under the agreement were made to the Bank's mortgage servicing center. In May 2010, the Taxpayers again refinanced their mortgage through the Broker.
When the deed was submitted for recording, the County concluded that the Taxpayers were not entitled to the recordation tax exemption for refinancing with the same lender because the mortgage payments were made to the Bank rather than the Broker. The Taxpayers paid the recordation tax based on the entire amount of the refinanced mortgage and filed an appeal, contending the refinanced loan was made through the same lender.
DETERMINATION
Virginia Code § 58.1-803 A imposes the recordation tax on deeds of trust, mortgages, arid supplemental indentures. Under Va. Code § 58.1-803 D, when a deed of trust is used in refinancing an existing debt with the same lender and the tax has been previously paid on the original deed of trust securing the debt, the recordation tax will only apply to the portion of the deed of trust that exceeds the amount originally secured by the original debt.
The Department has defined "existing debt with the same lender" to mean that the lender providing the refinancing must be the same as the lender now holding the existing debt being refinanced. See Public Document (P.D.) 96-384 (12/20/1996) and P.D. 06-3 (1/6/2006). In other words, in order to qualify for the exemption provided in Va. Code § 58.1-803 D, a taxpayer must refinance his debt with the mortgage lender that holds the deed of trust.
According to the evidence, the Taxpayers refinanced their mortgage with the Broker in November 2007. The documentation indicates that the Broker sold its entire interest in the mortgage to the Bank. Under these circumstances, the Department would not consider the Broker to be the same lender for the purposes of Va. Code § 58.1-803 D when the Taxpayers refinanced the mortgage in May 2010, because the Broker retained no interest in the original mortgage. Accordingly, the Taxpayers were not entitled to the exemption from recordation tax for refinancing a mortgage with the same lender.
Based on the foregoing, the Taxpayers' request for the refund of recordation tax paid on the refinanced deed of trust is denied.
The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this determination, please contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
Tax Commissioner
AR/1-4481567449.B
Rulings of the Tax Commissioner