Tennessee Real Estate Transfer Tax and Exemptions (Tenn. Code Ann. § 67-4-409)

bgIndexContentThe Tennessee Real Estate Transfer Tax is codified at Tennessee Code Annotated § 67-4-409.  TCA 67-4-409(a) requires that “all transfers of realty, whether by deed, court deed, decree, partition deed, or other instrument evidencing transfer of any interest in real estate” are subject, upon recordation, to a tax of $0.37 per $100.00 (the “Transfer Tax”) calculated based on the greater of “the consideration for the transfer;” or “the value of the property” (“Transfer Tax Formula”).  The Transfer Tax is paid in consideration of the privilege of recordation and applies to both residential and commercial transactions.

As in most states, there are several exemptions from the requirement to pay the Transfer Tax, including transfer of a leasehold estate, creation or dissolution of a tenancy by the entirety, deeds of division in kind of realty formerly held by tenants in common, release of a life estate to the beneficiaries of the remainder interest, deeds executed by an executor to implement a testamentary devise, domestic settlement decrees, transfers by a transferor of real estate to a revocable living trust created by the same transferor or by a spouse of the transferor, or deeds executed by the trustee of a revocable living trust to implement a testamentary devise by the trustor of the trust. TCA 67-4-409(a)(2)-(3). A transfer of real estate will not be subject to the recordation tax if it is made pursuant to a Bankruptcy Chapter 11 Plan of Reorganization.  TCA 67-4-409(e).  Also, the recording and re-recording of all transfers of realty in which a municipality is the grantee are exempt from the Transfer Tax.

For purposes of calculating the Transfer Tax in connection with recording of a Quit Claim Deed, the actual consideration shall be used rather than the above Transfer Tax Formula.  TCA 67-4-409(a)(4).

Warranty deeds being sent for recordation in Tennessee must contain an oath regarding the amount of the Transfer Tax due based on the Transfer Tax Formula.  TCA 67-4-409(a)(6)(A).  Affidavits of value are usually placed below the signature blocks of the deed and state: “I hereby swear that the actual consideration of value, whichever is greater, for this transfer is $_______.”  Misrepresentation of value is considered perjury.  Tennessee does not require a separate form, like the Georgia PT-61 Transfer Tax Form, to be completed at the time of conveyance.

 The grantee party usually pays the Transfer Tax, but this can be negotiated between the parties.  The tax is collected by the register of the county in which the instrument is being recorded.  The Transfer Tax shall not exceed $100,000.00 in the aggregate for each transaction.  67-4-409(h)(1).

If you need assistance with calculation of your Transfer Tax or any other component of your commercial real estate transaction, please contact the commercial real estate attorneys at Thompson Burton PLLC.