Virginia Transportation Bill HB 2313 having financial consequences for RE sellers unless amended by the Governor or loses a legal challenge on the grounds that it violates the Virginia Constitution.
That’s right. With the passing of the massive Transportation Bill HB 2313, which applies a “Regional Congestion Relief Fee” Virginia homeowner’s grantor’s taxes (paid by the seller) will increase by $0.25 for every $100 of the sales price. Just as our real estate market is starting to recover, our elected legislators in the Virginia General Assembly clip our wings by increasing the taxes sellers pay at the time of sale. You may be asking yourself, how can these “leaders” be so out of touch? It is as if they are unaware that many homeowners are still underwater and struggling to come up with money needed at the closing table as it is. Needless to say, increasing the cost will not stimulate our real estate market, so why would they do it? The justification across the board from special interest groups who supported it and the legislators who voted for it is that Virginia needs to raise taxes in order to reduce commute times in an effort to attract businesses to Virginia and improve quality of life for existing residents. Leaving aside the obviously polarizing discussion over where the line should be drawn between increasing taxes and reducing spending, one is still left wondering how legislators justify spending real estate recording taxes/fees throughout Northern Virginia to pay $300 Million dollars toward Phase II of the Silver Line in the name of congestion relief. The bill indicates that the fees paid in Northern Virginia municipalities will go to the Northern Virginia Transportation Authority and will be returned to those jurisdictions proportionately. I decided to look into “The Authority” and this is what it is comprised of; Virginia’s Planning District 8, which includes: The counties of Arlington, Fairfax, Loudoun and Prince William; the cities of Alexandria, Fairfax, Falls Church, Manassas and Manassas Park; the towns of Dumfries, Herndon, Leesburg, Purcellville and Vienna. For more information on District 8, you can find it on the web here:
Wait, put down the knife, there is a chance that this legislation will be modified by the Governor but even if it isn’t it is still quite possible that it will face legal challenges and be found unconstitutional. There are several areas that at least one expert is suggesting could expose it to legal challenge; Discriminatory local tax being called a fee (VA Supreme Court ruled against similar in 2008 also violates the “home rule” principle), uniform taxation (In Virginia’s Constitution http://constitution.legis.virginia.gov/ Article X, Section 1), local taxation only on real estate (and Article X, Section 4), taxes added to the bill in conference committee in violation of the Jefferson Manual on Legislative Order. If you want to know more, the detailed article that appeared in the Washington Post can be found here: http://www.washingtonpost.com/opinions/vas-transportation-bill-is-unconstitutional/2013/02/25/3d73abee-7f88-11e2-a350-49866afab584_story.html
Please find below the language for the fee/tax in HB 2313:
§ 58.1-802.2. Regional congestion relief fee.
In addition to any other tax or fee imposed under the provisions of this chapter, a fee, delineated as the “regional congestion relief fee,” is hereby imposed on each deed, instrument, or writing by which lands, tenements, or other realty located in any county or city embraced by the Northern Virginia Transportation Authority established pursuant to § 15.2-4830 is sold and is granted, assigned, transferred, or otherwise conveyed to or vested in the purchaser or any other person, by such purchaser’s direction. The rate of the fee, when the consideration or value of the interest, whichever is greater, equals or exceeds $100, shall be $0.25 for each $100 or fraction thereof, exclusive of the value of any lien or encumbrance remaining thereon at the time of the sale, whether such lien is assumed or the realty is sold subject to such lien or encumbrance.
The fee imposed by this section 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 fee imposed by this section.
No such deed, instrument, or other writing shall be admitted to record unless certification of the clerk wherein first recorded has been affixed thereto that the fee imposed pursuant to this section has been paid.
Fees imposed by this section shall be collected by the clerk of the court and deposited into the state treasury as soon as practicable. Such fees shall then be deposited into the Northern Virginia Transportation Authority Fund established under § 15.2-4838.01 as soon as practicable.