Registers of Deeds need to be aware of a new law that has amended T.C.A. § 67-4-409 relative to quitclaim deeds. Public Chapter 834 was passed to clarify the distinction between true quitclaim deeds and other types of deeds for taxation purposes. This is an important distinction as quitclaim deeds are subject to tax on the actual consideration given for the transfer rather than the greater of the consideration or value of the property.
Under T.C.A. § 67-4-409(a)(1)(D), as amended, a deed is to be treated as a quitclaim deed for taxation purposes if the deed contains language substantially like the language found at T.C.A. § 66-5-103(2): “I hereby quitclaim to A. B. all my interest in the following land (describing it).” According to the new law, a quitclaim deed must only convey the grantor’s interest, whatever that may be, and not the property itself. An example of language evidencing an intent to convey the property itself includes use of a habendum clause (“to have and to hold”). Including warranty language would also show evidence of an intent to convey interest beyond just that of the grantor. Deeds evidencing such an intent should be taxed as warranty deeds.
In examining the language of deeds to determine their type for taxation purposes, it is important to keep in mind that the Department of Revenue has stated the preferential tax treatment of quitclaim deeds must be strictly construed against the party claiming the benefit. The Department has also stated the mere absence of a warranty does not render a deed a quitclaim deed nor is the title of the document dispositive as to its type. The key inquiry for your purposes is whether the deed is merely transferring the grantor’s interest or if it is transferring the property itself. Tax is due on the fair market value of the property when the language in the document shows intent to convey the property itself, or gives warranty, rather than a mere chance of title.
Finally, it is important to note that the revised law only affects the tax treatment of the document. The validity of the underlying transfer is not affected.
If you have any questions or need more information about Public Chapter 834, please do not hesitate to reach out to your CTAS county government consultant.