April 14, 2008
Alert to CRESPA Settlement Agents Who Closed Transactions Involving Congestion Relief Tax
Alert to CRESPA Settlement Agents Who Closed Transactions Involving Congestion Relief Tax Charged Against Real Estate in Northern Virginia
Refund of Congestion Relief Tax
(applicable only to settlement agents that collected and paid grantor’s taxes to the clerk’s office in the counties of Loudon, Prince William, Fairfax and Arlington and City of Alexandria)
Governor Timothy M. Kaine signed House Bill 1578 (the “Refund Act”) establishing procedures to return taxes and fees collected by the Northern Virginia Transportation Authority (NVTA). The Clerks of the Circuit Courts will work with settlement agents to return the congestion relief fee (a portion of the real estate grantor's tax) to the affected settlement agents within 60 days. The settlement agent must in turn refund the individuals or entities that paid the congestion relief tax. The clerks of court in the affected Northern Virginia jurisdictions (Fairfax, Prince William, Loudon and Arlington Counties and the City of Alexandria) have jointly developed uniform guidelines for the return of the fee within 60 days and have posted on their web sites information identifying each recordation affected. In addition, the clerks’ offices will send to each settlement agent or company an electronic list of their transactions for which refunds are to be made. Once the settlement agent and clerk’s office have verified the accuracy of the information on the list, the clerk will send the settlement agent a check for the total amount of refunds to be disbursed by that particular settlement agent.
Any funds received from the various Clerks of Court pursuant to the Refund Act must be maintained in your CRESPA real estate escrow account from which disbursements to the person(s) entitled to such refund can be made. Under the Refund Act, settlement agents will have ninety (90) days within which to disburse these funds to their affected customers, but in no event later than August 22, 2008. All records applicable to the disbursement of these refunds must be properly maintained and made available for review by your licensing authority. Deducting a fee or expenses for making the refund is improper and would seem to directly conflict with the Act. No interest may be kept on these funds as per Virginia Code § 6.1-2.23 (B).
The Refund Act signed into law on March 25, 2008 provides that any funds that cannot be disbursed to their owner escheats to the Commonwealth of Virginia pursuant to the Uniform Disposition of Unclaimed Property Act, Virginia Code §§ 55-210.1-210.30. Under the Refund Act, the five-year rule for abandonment of property shall not apply. The Unclaimed Property Act requires that the holder of unclaimed funds exercise due diligence to locate the owner when the amount involved is $100.00 or more. Under the Unclaimed Property Act, due diligence is exercised when the settlement agent sends a first-class mailing to the owner’s last known address. Va. Code § 55-210.12 (e). Since the closings affected by the unconstitutional congestion relief tax are fairly recent, contact with the persons entitled to the refund should be successful. In the event the person entitled to the refund cannot be located, the settlement agent must comply with the Unclaimed Property Act. Settlement agents may obtain the forms and instructions from the Unclaimed Property Division of the Department of the Treasury. The website address is: http://www.trs.virginia.gov/Ucp/ucp.asp
If you have any questions regarding this matter, please contact James M. McCauley, Ethics Counsel at (804) 775-0565.