Tax Type
Recordation Tax
Description
Refinanced deed of trust; Lender A and Lender B do not qualify as the same lender.
Topic
Exemptions
Property Subject to Tax
Taxable Transactions
Date Issued
02-18-2011
February 18, 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 "Taxpayer") for recording a refinanced deed of trust. I apologize for the delay in the Department's response.
FACTS
The Taxpayer's original 2006 home mortgage was held by ***** ("Lender A"). In February 2010, the Taxpayer refinanced his mortgage and recorded the refinanced deed of trust in the ***** (the "County"). The County's deed of receipt shows the Taxpayer refinanced with ***** ("Lender B").
The County determined that the Taxpayer was not entitled to the provisions under Va. Code § 58.1-803 D for refinancing with the same lender because Lender A and Lender B did not qualify as the same lender. The Taxpayer contends that 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, and 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 company that holds the deed of trust.
The Virginia Attorney General opined in 1996 Att'y Gen. Ann. Rep. 07191996 (7/19/1996), that a financial institution that merges with, or acquires another financial institution holding existing debt to be refinanced is considered to be the "same lender" for purposes of Va. Code § 58.1-803 D, whereas parent and subsidiary financial institutions structured as separate legal entities do not qualify as the same lender. The issue, therefore, is whether Lender A and Lender B were related but separate legal entities, or whether the Lender B qualifies as the same lender as Lender A.
According to the evidence provided, Lender A is a limited partnership. Limited partnerships are separate legal entities for Virginia tax purposes. See Va. Code § 58.1-390.1. The documentation shows that Lender A is a subsidiary of Lender B. As such, Lender A and Lender B are separate legal entities. Thus, the Taxpayer's refinancing did not occur with the same lender as required by Va. Code § 58.1-803 D, and the Taxpayer is not entitled to the exemption for refinancing a debt with the same lender. Accordingly, the Taxpayer's 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
- Craig M. Burns
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AR/1-4481567449.B
Rulings of the Tax Commissioner