SUMMARY OF THE CALIFORNIA DOCUMENTARY TRANSFER TAX ACT

Background

Beginning January 1, 1968, pursuant to California Statute and County Ordinance (Chapter 21, Article III, Ord. 3982), the Butte County Clerk-Recorder's Office is charged with collecting documentary transfer tax.

The monies collected are deposited to the County General Fund and used to support other departments such as the Sheriff; none is kept by the Clerk-Recorder's office. Collected transfer tax amounts are allocated by code depending on the property location: Unincorporated area goes 100% to the County, Incorporated areas are split 50% to the town or city and 50% to the County.

A County Recorder cannot accept a conveying document for recordation until the proper amount of tax has been paid. The Recorder may rely on the amount of tax declared provided he or she has no reason to believe that the full amount of tax due has not been paid.

Every document subject to the tax that is submitted for recordation must show the location of the lands and if in a city, the name of the city shall be set forth or if in an unincorporated area of the county, that shall be set forth. Documents that do not contain this information cannot be recorded until this determination is made and will necessarily be subjected to a delay in the recording process.

County ordinance also provides that whenever the County Recorder has reason to believe that the full amount of the tax has not been paid, he or she may, by notice served upon any person liable therefore, require him to furnish a true copy of his records relevant to the amount of the consideration or value of the interest or property conveyed, and further provides that any person who makes any material misrepresentation of fact for the purpose of avoiding all or any part of the tax shall be guilty of a misdemeanor.

The tax is levied upon every deed, instrument, or other writing by which any lands, tenements or realty sold when the consideration or value, exclusive of the value of any lien or encumbrance remaining thereon at the time of sale exceeds $100 at the rate of $.55 for each $500 or fractional part thereof. Transactions exempt from the tax are described in Section 11921 et seq. of the Revenue and Taxation Code.

Documents presented for recording that fall within the exempt category must cite the particular code section under which the exemption is claimed and such citation should appear as close to the tax declaration as possible on the face of the transfer document.

The tax declaration must be signed by the party determining the tax or his agent. If signed by an agent, the firm name of the agent should be designated.

Notice: Any misrepresentation of fact is unlawful under County ordinance. Any person who makes such a misrepresentation is subject to prosecution for such offense.

R & T Code Information

(All references are to the Revenue & Taxation Code)

Revenue and Taxation Code 11911(a) allows each county, by ordinance, to impose the documentary transfer tax on realty sold when the consideration or value is greater than $100.00.

The Code of Federal Regulations defines "realty" as "those interest in real property which endure for a period of time, the termination of which is not fixed or ascertained by a specific number of years, such as an estate in fee simple, life estate, perpetual easement and those interests enduring for a fixed period of years but which, either by reason of the length of the term or the grant of a right to extend the term by renewal or otherwise, (i.e. a lease) consist of a bundle of rights approximating those of the class of interest mentioned above." The code further defines "sold" as "a transfer of an interest for a valuable consideration, which may involve money or anything of value" and "consideration" as "some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other."

Definitions

REALTY

Those interests which endure for a period of time, the termination of which is not fixed or ascertained by a specific number of years and those interests enduring for a fixed period of years but which, either by reason of the length of the term by renewal or otherwise, consist of a bundle of rights approximating those of the class of interests mentioned above.

SOLD

Defined as a transfer of any interest for a valuable consideration.

VALUABLE CONSIDERATION

May consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other.

Transfer Tax Test

1. Was an interest in realty conveyed?
2. Was there consideration for the conveyance?

If the answer to both questions is yes, and the consideration or value exceeds $100.00, transfer tax is due and payable.

Public awareness of and compliance with the provisions of this law will help make it possible for your Recorder's Office to continue rendering the excellent recording service to which its patrons have become accustomed.


Transfer Tax Exemptions
R & T Code 11911
1. Value and consideration of conveyance is less than $100.00
2. Conveyance where the liens and considerations are equal or more than the value of the property and no further consideration is given.
3. Bona fide gift. (Note: Property must be unencumbered ~ gift taxes may or may not apply ~ check with your tax accountant.)
R & T Code 11921
1. Deed of Trust or other written instrument securing a debt.
2. Reconveyance upon satisfaction/payment of a debt. *
R & T Code 11922
1. Conveyance wherein the grantee is a national bank.
2. Conveyance wherein a governmental entity acquires title.
R & T Code 11923
1. Conveyance to a receiver, and reconveyance of the realty upon termination of the receivership. *
2. Conveyance confirmed under the Federal Bankruptcy Act.
R & T Code 11924
1. Conveyance to make effective any order of the Securities and Exchange Commission. (Note: Securities and Exchange Commission order must be attached)
R & T Code 11925 (a)
1. Conveyance of an interest in a partnership to a continuing partnership within the meaning of Internal Revenue Code 708 and the continuing partnership continues to hold the property. (Note: original partnership is not terminated) *
R & T Code 11925 (d)
1. Transfer between an individual or individuals and a legal entity or between legal entity or between legal entities that results solely in a change in the method of holding title to the realty and in which proportional ownership interests in the realty, whether represented by stock, membership interest, partnership interest, cotenancy interest, or otherwise, directly or indirectly, remain the same immediately after the transfer. *
R & T Code 11926
1. Conveyance made in lieu of foreclosure where consideration is less than the unpaid debt.
2. Deed from a debtor to a beneficiary in lieu of foreclosure wherein the only consideration is debt cancellation.
R & T Code 11927
1. Conveyance between spouses in dissolution of marriage.
2. Conveyance to divide assets between spouses pursuant to judgment or agreement in dissolution of marriage.
R & T Code 11930
1. Conveyance transferring an interest in real property by reason of death of any person, or a transfer by inter vivos gift whether the interest conveyed is transferred outright or in trust for the benefit of any person or entity.
* May be required to submit documentation to the recorder to verify the validity of the exemption noted.