Increase In Virginia Grantor’s Tax Shot Down

Governor Kaine’s proposal to raise the statewide Grantor’s Tax was shot down last week. Here’s the press release from the Virginia Association of Realtors®:

"Virginians still awaiting a realistic solution to transportation woes

Virginia legislators’ latest effort at a fiscal fix for transportation collapsed early last Thursday morning…at 1:39 a.m. to be exact.

After first defeating two statewide transportation bills, including one proposed by Governor Kaine (which included a statewide grantor tax), the House approved legislation financing projects in Hampton Roads and Northern Virginia only.

In the House, Kaine’s proposal was defeated 98-0. House members used a sagging real estate market as a reason to vote against the proposed statewide grantor tax.

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Update #2 To Grantor’s Tax

During my closing/settlement today, I spoke with the settlement attorney regarding the Grantor’s Tax. He told me that the clerks of all the local courts in Northern Virginia said that sellers are still required to pay the new Grantor’s Tax because the courts have not been told otherwise by the Virginia Attorney General. Once they hear from the Attorney General, they will let everyone know.

So if you’re settling in the near future, be prepared to pay the higher Grantor’s Tax, but keep an eye out for what happens over the next few weeks.

Official Press Release From NVTA Regarding Today’s Court Ruling

As many of you know, the VA Supreme Court today ruled that the taxing powers given to the Northern Virginia Transportation Authority (NVTA) were unconstitutional. Well, here is the official press release from the NVTA on the matter:

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Virginia Supreme Court Hears Arguments Against Increased “Grantor’s Tax”

The Virginia Supreme Court will hear arguments today in the case of the new transportation taxes (aka increased "Grantor’s Tax") set by the Northern Virginia Transportation Authority (NVTA).

NVTA Vice Chairman is "fairly confident that the NVTA is going to prevail". But Loudoun County Supervisor Eugene Delgaudio (R-Sterling) says that “If the General Assembly has the constitutional power to delegate taxing authority to unelected officials, this will be a record and a precedent for the state of Virginia”.

Here’s an excerpt from the full article:

"The Virginia Supreme Court is set to consider the $335 million constitutional battle over the legality of Northern Virginia’s new transportation taxes today in Richmond.

The state’s highest judicial panel will address lingering legal questions about whether the General Assembly has the power to direct the Northern Virginia Transportation Authority to collect seven new taxes and fees for long-needed transit projects.

Loudoun County and several Republican politicians challenged the NVTA’s powers to tax and borrow that took effect Jan. 1, saying only elected officials have that authority."

Source: LoudounExtra.com

Mortgages Just Got More Expensive For Buyers, But It May Be Sellers Who Pay The Price.

In a post on real/diaBlog, we talked about how Fannie Mae has begun charging an up-front fee of 0.25 percent on all new mortgages bought or guaranteed by them. Freddie Mac will also begin assessing a similar fee. On a $400K mortgage, that’s an extra $1,000 in fees. Based on the fact that Fannie and Freddie own or guarantee over 40 percent of mortgages outstanding, this will directly affect a huge number of future home buyers.

But will it really effect buyers?

Some buyers will have the additional money to pay for this fee. Others may not. Those that do not have the money may wait to buy, unless someone else will pay for the fee. Those that do have the money may still buy, but they will also want someone else to pay for it.

That someone else is the seller.

Much like seller concessions were non-existent in the boom days, but quickly became a tradition once the market turned, the passing of the buck for this fee from buyer to seller will become tradition as well. Sellers will see their net proceeds drop because buyers will want that extra fee paid for by the seller in the form of a concession.

Along with this extra up-fron fee by Fannie, don’t forget about the 500 percent increase in the Virginia Grantor’s Tax. These two fees will increase the cost of selling a residential property going forward.

Let’s look at an example…

Here’s the criteria:

• $440K sales price
• the buyer is obtaining a $400K Fannie Mae-backed mortgage
• the seller is picking up the cost of the new Fannie Mae fee
• the property settles on or after March 9, 2008

Here’s the effect on a seller:

• the seller will have to give an additional $1,000 in seller concessions to cover the Fannie fee
• the seller will pay an additional $1,760 for the Virginia Grantor’s Tax
• a total decrease of $2,760 in net proceeds

As you can see, it’s not exactly small change and the seller ends up taking the hit in the end.

Reminder: Increase In Virginia Grantor’s Tax Takes Effect January 1st

A 500% increase in the Virginia Grantor’s Tax approved as part of a 2007 transportation funding package (HB 3202) will take effect January 1, 2008. The Virginia General Assembly and the Northern Virginia Transportation Authority (NVTA) voted earlier this year to increase the rate to a total of $5.00 per $1,000 to fund regional transportation projects. Currently, the rate is $1.00 per $1,000.

After the vote, the state filed a case in Arlington to ensure that the move was legal. A judge in Arlington County Circuit Court decided in favor of the NVTA.

Loudoun County and Delegate Bob Marshall then filed a counter suit and also appealed the decision to the Virginia Supreme Court. Last month, the Supreme Court granted Loudoun County’s petition for an appeal of the NVTA decision by the Arlington Circuit Court.

The case may be considered in January 2008, but the increase is still set to go into effect January 1, 2008.

For more information on the Virginia Grantor’s Tax and it’s implementation check out these documents.

Virginia Grantor’s Tax Update

The Loudoun County Board of Supervisors’ (BOS) case challenging the Northern Virginia Transportation Authority’s (NVTA) ability to impose seven new regional taxes, including a 500% increase in the grantor’s or home seller’s tax, is headed for the Supreme Court of Virginia. The Supreme Court will hear arguments in the case during its January session, which will be held between Jan. 7 and Jan. 11 in Richmond. The Supreme Court will then determine whether the tax is constitutional or not.

Last summer, the Arlington County Circuit Court ruled that the NVTA’s fees and taxes were constitutional and that the General Assembly was within its right when it granted taxing authority to the NVTA during the 2007 legislative session. When the NVTA filed a bond-validation suit, the BOS voted to challenge the constitutionality of the fees.

At the same time it hears the BOS appeal of the Arlington County Circuit Court ruling, the Supreme Court will hear a lawsuit brought by Del. Robert Marshall (R-13) against the NVTA. Apparently, the lawsuits will be heard together in an effort to bring closure on the issue.

An exact date for the appeal is expected to be released closer to the end of the year, but it’s looking like it may be on January 10, 2007.

Source: Dulles Association of Realtors (DAAR)

Related Articles:

Virginia Circuit Court Rules In Favor Of  NVTA And Increase In Grantor’s Tax (8/28/07)

Grantor’s Tax and Northern Virginia Transportation Plan Update (7/3/07)

Virginia Circuit Court Rules In Favor of NVTA and Increase In Grantor’s Tax

Based on a press release we obtained today from the Northern Virginia Transportation Authority (NVTA), it looks like another hurdle has been cleared in order to increase the Grantor’s Tax and other fees in the region. Today, Virginia Circuit Court Judge Benjamin N.A. Kendrick ruled in favor of the NVTA and the Commonwealth of Virginia on all counts of a suit filed on July 13, 2007. In doing so, he also denied the motions and counterclaims of the intervening defendants.

In plain English, this is a fairly big blow to those opposed to the increase in the Virginia Grantor’s Tax and the NVTA plan in general. And one of the only courses of action left is to file an appeal with the Virginia Supreme Court within 15 days.

In case you’d like to read the fine print, here’s a copy of the press realease:

      PRESS RELEASE

      For Immediate Release

      August 28, 2007

      

      Contact:  Kala Quintana

            703/ 524-3322 ext. 104

   kala@nvtdc.org

CIRCUIT COURT UPHOLDS NEW REVENUES FOR THE NORTHERN VIRGINIA TRANSPORTATION AUTHORITY

ARLINGTON, VIRGINIA – Today, Judge Benjamin N.A. Kendrick ruled in favor of the  Northern Virginia Transportation Authority (NVTA) and the Commonwealth of Virginia on all counts in the Bond Validation suit filed on July 13, 2007. In doing so, he denied the motions and the counterclaims of the intervening defendants which include Delegate Bob Marshall (R-13) and others.

Judge Kendrick issued judgments on the following claims by the intervening defendants: 

• Violation of Single Object Rule;
• Unlawful Delegation of Taxing Authority by the General Assembly;
• Pledging Full Faith and Credit of the Commonwealth; and
• Revenues must be paid into the State Treasury.

Judge Kendrick’s ruling included the following holdings:

• HB 3202 did not violate the single object rule which requires that each piece of legislation relate to a single subject.

• The General Assembly had the power to delegate the imposition of the taxes and fees to NVTA.

• NVTA is an independent political subdivision created for a special purpose, not a local or regional unit of general government; therefore, certain sections of the Virginia Constitution that apply to units of general government, such as requiring a referendum before the issuance of bonds, do not apply.

• NVTA’s bonds are not debt of the Commonwealth or any of the local governments.

Through his ruling, Judge Kendrick determined the validity of a number of things, including:

• The bonds NVTA plans to issue;
• The proceedings NVTA undertook to authorize the bonds;
• The intended uses of the proceeds from the sale of the bonds; and
• The taxes and fees imposed by NVTA that will go to repay the bonds.

The intervening defendants have 15 days from entry of a final order to note an appeal to the Supreme Court of Virginia, followed by an expedited briefing schedule.  The final order is anticipated to be entered later this week.

“The Authority is pleased with Judge Kendrick’s ruling today.  We anticipate the intervening defendants in this case to appeal to the Supreme Court of Virginia.  We look forward to having this issue resolved to the benefit of the citizens of Northern Virginia,” said Chris Zimmerman (Arlington), Chairman of the Authority.   

Mr. Zimmerman also reaffirmed that the Authority continues to work toward implementation of the new taxes and fees, to finalize the 22 “ready-to-go” projects, and begin development of a full six-year plan to be funded with the new revenues.   

“Northern Virginians want solutions to the traffic and the gridlock, and the Authority is moving ahead with its work.   We look forward to utilizing the tools that the General Assembly has made available to the Authority and to provide the real transportation solutions that Northern Virginians expect,” said Zimmerman.

The Arlington County Circuit Court ruling affirms the Authority’s ability to issue bonds and levy the seven taxes and fees authorized by the General Assembly in the Comprehensive Transportation and Funding Reform Act of 2007. The revenues will result in over $300 million annually in new transportation funding for Northern Virginia. 

At its July 12, 2007 meeting the Authority approved 22 “ready-to-go” transit, roadway and pedestrian improvements totaling $102 million which would be funded by the initial bond issuance.

Court minutes of the proceedings will be posted to the Authority’s web site as soon as they are available at: www.TheNoVaAuthority.org.

The seven regional taxes and fees are:

• 2% Transient Occupancy Tax
• Grantor’s Tax of 40 Cents
• 2% Tax on Vehicle Rentals
• Safety Inspection Fee of $10
• Initial Vehicle Registration Fee of 1%
• 5% Sales Tax on Auto Repair
• Regional Vehicle Registration Fee of $10

The NVTA jurisdictions also have the option of raising additional revenues locally.  Each of the localities may choose to impose one of the following revenue sources:

• Local Vehicle Registration Fee
• Additional Commercial Real Estate Tax
• Impact Fees on new development

NVTA Who’s Who

The voting members of the Authority include:

Hon. Christopher Zimmerman  NVTA Chairman; Arlington County

Hon. Martin Nohe    NVTA Vice Chairman; Prince William County

Hon. Gerry Connolly    Fairfax County

Hon. Scott York    Loudoun County

Hon. William D. Euille   City of Alexandria

Hon. Robert F. Lederer   City of Fairfax

Hon. David F. Snyder   City of Falls Church

Hon. Harry J. “Hal” Parrish, II  City of Manassas

Hon. Bryan Polk    City of Manassas Park

Hon. Jeff Frederick    Virginia House of Delegates

Hon. Vince Callahan   Virginia House of Delegates

Hon. Jeanne-Marie Devolites-Davis Virginia Senate

Julia A. “Judy” Connally   Governor’s Appointee, CTB Member

Margaret Vanderhye   Governor’s Appointee

Non-voting members:

Matthew O. Tucker    Director, DRPT

Dennis Morrison    Administrator, Northern District Office, VDOT

For more information, contact the Northern Virginia Transportation Authority by going to www.TheNoVaAuthority.org.

## NVTA ##

Grantor’s Tax & Northern Virginia Transportation Plan Update

The Northern Virginia Transportation Authority (NVTA) will hold a public hearing on Thursday, July 12th to consider enacting the seven taxes and fees in HB 3202 (ncluding the increase to the Grantor’s Tax). The hearing will take place at Mary Ellen Middle School, 7130 Leesburg Pike in Falls Church at 7:00PM. For more information, click here.

In reality, Fairfax County including Arlington, Alexandria and Falls Church are in favor of this passing while Loudoun County is opposed. If the bill is passed with an increase of 40 cents for $100 for the Grantor’s Tax, Loudoun County would raise/provide an estimated $39.8 million of the $163.6 million in additional revenue for Virginia. But the only $16 million Loudoun County would actually get back is at the center of the debate. A large percentage of the funds raised would go to projects outside of Loudoun County.

Related Articles:

Increase In Virginia Grantor’s Tax And The Rest Of The Northern Virginia Transportation Plan

Increase In Virginia Grantor’s Tax And The Rest Of The Northern Virginia Transportation Plan

As some of you may or may not know, the Virginia General Assembly is increasing the Grantor’s Tax as part of the Northern Virginia Transportation Plan passed last March. Currently, the Grantor’s Tax is $1 per $1000 of the sales price or assessed value, whichever is greater. The Virginia General Assembly approved an increase from $1 to $5 per $1000 effective July 1, 2007. The latest news is that they are delaying the increase until September 1, 2007 and may only be raising it to $4 per $1000.

As a seller of a $400,000 property in Virginia, the new rate of $5 per $1000 means an increase from $400 to $2,000. Even if the lesser amount of $4 per $1000 goes into effect, the amount would be $1,600, an increase of $1,200.

But wait, there’s more…

According to NVAR, here are some other things included in the plan:

• 2 percent increase in the rental car tax
• 2 percent increase in the hotel/motel occupancy tax
• $10 increase in the vehicle safety inspection fee
• 1 percent initial vehicle registration fee (for new car purchases or those moving into the region)
• 5 percent sales tax on auto repairs
• $10 regional auto registration fee

In addition, the authority may choose to implement the following optional revenues:

• Annual commercial real estate fee of up to 25 cents per $100
• $10 local car registration fee
• Commercial/residential impact fee (amount to be determined)

This seems to be quite a topic of discussion as seen in recent (and most likely future) media coverage in Loudoun County as well as the rest of Virginia. At this point, no one knows the exact date when the increase will go into effect nor the size of the increase.  But we will keep a close eye on this and will continue chatting with title companies, settlement attorneys and others to get the latest updates. As soon as we know more, we’ll let you know.

Further Reading:

Home Sellers To Pay Most For New Roads – by Jason Jacks of Loudoun Times Mirror

Virginia HB3202

Northern Virginia Transportation Alliance