N.C. Gen. Stat. §105-228.30 imposes an excise tax on “each instrument by which any interest in real property is conveyed to another person. The tax rate is one dollar ($1.00) on each five hundred dollars ($500.00) or fractional part thereof of the consideration or value of the interest conveyed.”
One question we frequently receive at LM Title is whether divorcing spouses are required to pay excise tax when sorting out real property assets of the marital estate. Another question we receive is whether the absence of stamps on a deed implies that it is a gift, which is void if not recorded within two years from execution under §47-26.
As to the first question, the first time I heard it presented was in private practice when my former law partner, a family law practitioner, randomly came across the statute and became concerned both she and our law firm had tens of thousands of dollars of liability for unpaid taxes for the many deeds recorded for her clients over the years. Her concern was not farfetched, as §105-228.32 is clear the duty to disclose the proper tax amount lies with the party presenting the deed for recording. Today the question will occasionally pop up on the Real Property list serv and the attorneys at LM Title receive phone calls from lawyers asking the question directly.
Analyzing this first question involves reading a 1971 North Carolina AG’s opinion, studying of the North Carolina Equitable Distribution Act, and reviewing multiple appellate opinions from across the United States, including one from the US Supreme Court. I will spare readers this analysis and jump to the conclusion that it is universally accepted, such stamps are not required. The Institute of Government modified the Register of Deeds handbook to reflect this conclusion, and to the best of my knowledge, no recorder’s office in North Carolina expects to collect this tax.
This conclusion helps answer the second question of whether such deeds must be recorded within two years or deemed void under N.C. Gen. Stat. §47-26. As no excise tax is due at recording, its absence provides no evidence the conveyance is a gift deed. Standard deed language implying the transfer was for valuable consideration should prevail, and title examiners can safely conclude such instruments pass title.
Troy is Managing Counsel for LM Title Agency, LLC, a wholly owned subsidiary of Lawyers Mutual serving attorneys throughout North Carolina. Prior to heading the title agency, he worked for Lawyers Mutual as Claims Counsel, focusing primarily on real estate, fraud and technology related claims. His experience includes working as Claims and Subrogation Counsel for a title insurance underwriter and eight years in private practice handing real estate litigation, commercial transactions and residential closings. Contact Troy directly at 919-585-1182 or firstname.lastname@example.org.