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OFFICE OF TAX AND REVENUE
NOTICE OF PROPOSED RULEMAKING
The Deputy Chief Financial Officer of the District of Columbia Office of Tax and Revenue (OTR) of the Office of the Chief Financial Officer, pursuant to the authority set forth in Section 317 of the District of Columbia Deed Recordation Tax Act of 1962, approved March 2, 1962 (76 Stat. 11; D.C. Official Code § 42-1117 (2012 Repl.)), as amended; Section 2(c)(3) of the District of Columbia Recordation of Economic Interests in Real Property Tax Amendment Act of 1989, effective September 9, 1989 (D.C. Law 8-20; 36 DCR 4564 (June 30, 1989)); Section 201(a) of the 2005 District of Columbia Omnibus Authorization Act, approved October 16, 2006 (120 Stat. 2019; P.L. 109-356, D.C. Official Code § 1-102.24d (2012 Repl.)); and the Office of the Chief Financial Officer Financial Management and Control Order No. 00-5, effective June 7, 2000, hereby gives notice of its intent to amend Chapter 5, TAX ON RECORDATION OF DEEDS, of Title 9, TAXATION AND ASSESSMENTS, of the District of Columbia Municipal Regulations (DCMR), by amending Sections 501 through 526.
The proposed amendments will update the regulations to reflect current law and will eliminate obsolete provisions. The regulations generally reflect the section numbers at which the various provisions of the District of Columbia Real Estate Deed Recordation Tax Act of 1962 were codified in the 1981 edition of the District of Columbia Code. These provisions were recodified in the 2001 edition of the District of Columbia Official Code. In the 2001 edition, the statutes governing the recordation tax were moved to Chapter 11 of Title 42 of the District of Columbia Official Code, which resulted in the renumbering of each of these provisions. As a result, the statutory citations in the regulations no longer reflect the current codification of the statute. The regulations are being amended to update these statutory references so that they reflect the current codification of the District’s laws.
Other statutory provisions have been amended subsequent to the issuance of the regulations. For instance, tax is now imposed on recorded instruments relating to leases with a term of 30 years or more, whereas at the time the relevant regulations were drafted, tax was imposed only on documents relating to leases with a term of 99 years or more. The regulations accordingly are being updated to reflect the current provisions of the statutes. Additionally, certain provisions of the regulations are being clarified or restated in light of court rulings, such as Columbia Realty Venture v. District of Columbia, 433 A.2d 1075 (D.C. 1981), made subsequent to the issuance of certain provisions of the regulations. Finally, certain administrative positions or interpretations of the operative statutes involving particular types of recurring transactions are being incorporated in the regulations.
OTR gives notice of its intent to take final rulemaking action to adopt these regulations in not less than thirty (30) days from the date of publication of this notice in the D.C. Register.
Chapter 5, TAX ON RECORDATION OF DEEDS, of Title 9, TAXATION AND ASSESSMENTS, of the DCMR is amended as follows:
Section 500, General Provisions, is amended as follows:
Subsection 500.1 is amended to read as follows:
500.1 The provisions of this chapter are adopted under authority of § 317 of the
District of Columbia Real Estate Deed Recordation Tax Act of 1962, Pub.
L. 87-408 (also referred to in this chapter as the “Act”), as amended (D.C.
Official Code § 42-1117 (2001 ed.)).
In Subsection 500.5, strike the phrase “a person” each place that it appears and insert the phrase “an individual” in its place.
Subsection 500.8 is amended to read as follows:
500.8 For purposes of the Recordation of Economic Interests Act, the phrase “Holds real property” means the ownership by, or lease or ground rent for a term (with renewals) of at least thirty (30) years to, a corporation, partnership, association, trust or other entity of real property located in the District of Columbia.
A new Subsection 500.9 is added to read as follows:
500.9 For purposes of the Act, the term “refinance” does not include the issuance of a new series of bonds secured by an indenture that also secures previously issued bonds.
Section 501, Exemptions from the Recordation Tax, is amended as follows:
Subsection 501.1 is amended to read as follows:
501.1 The only allowable exemptions from the recordation tax are those enumerated in § 302 of the Act (D.C. Official Code § 42-1102) or otherwise expressly provided by statute.
Subsection 501.2 is amended to read as follows:
501.2 The denial of an exemption applied for under the authority of § 302 of the Act (D.C. Official Code § 42-1102) may be appealed to the Superior Court of the District of Columbia within 6 months of the date on which the Recorder of Deeds mails written denial of the exemption, in the same manner as is provided for the appeal of a denial of a real property tax exemption applied for under the authority of D.C. Official Code § 47-1009.
In Subsection 501.3, strike the word “transferred” and insert the word “acquired” in its place; and strike the phrase “D.C. Code § 45-922(2)” and insert the phrase “D.C. Official Code § 42-1102(2)” in its place.
Section 502, Payment of the Recordation Tax, is amended as follows:
Subsection 502.1 is amended by adding at the end thereof a new sentence to read as follows:
“Deeds are required to be recorded as provided by D.C. Official Code § 47-1431.”
A new Subsection 502.1a is added to read as follows:
502.1a The Act applies to deeds reflecting the transfer of property or an interest in property from one person to another, whether the transfer occurs by conveyance or operation of law, including a transfer resulting from a merger, consolidation, liquidation or reorganization.
In Subsection 502.3, strike the phrase “D.C. Code § 45-924” and insert the phrase “D.C. Official Code § 42-1104” in its place.
In Subsection 502.4, strike the word “302” and insert the word “301(5)” in its place; strike the phrase “D.C. Code § 45-921(5)” and insert the phrase “D.C. Official Code § 42-1101(5)” in its place.
In Subsection 502.5, insert the phrase “the term “estimated market value”” after the phrase “shall have the same meaning as”; strike the phrase “D.C. Code” and insert the phrase “D.C. Official Code” in its place.
In Subsection 502.8, strike the last sentence in each of examples 1, 2 and 3.
In Subsections 502.11 and 502.12, strike the phrase “Code §§ 45-935 and” each place that it appears and insert “Official Code §” in its place.
A new Subsection 502.14 is added to read as follows:
502.14 When a single transaction includes a transfer of property or an interest in property by a deed that is taxed under the Act as well as property or an interest not taxed under the Act, the consideration shall be allocated between the taxed deed and nontaxed property or interest transferred for purposes of assessing the tax on the deed. The allocation shall be made on the recordation tax return and substantiated by documents establishing the agreement of the parties as to the allocation at the time of the transfer. The taxpayer has the burden of establishing the amount of consideration allocable to any nontaxable property or interest in property. In the absence of an allocation by the taxpayer, all consideration shall be allocated to the deed, unless otherwise adjusted by the Recorder of Deeds. The Recorder of Deeds shall not be bound by any allocation made on a recordation tax return and may adjust the allocation on audit.
A new Subsection 502.15 is added to read as follows:
502.15 When a deed which conveys interests in real property located both within and outside the District of Columbia, the consideration for the deed or the amount of debt secured shall be allocated between the two categories of property, and the tax shall be imposed on the consideration for the deed or the amount of debt secured that is allocable to property within the District. The tax applies to the consideration payable or the amount of the debt secured in the same ratio that the value of the real property that is located in the District bears to the value of the entire property in the deed. The allocation shall be made on the recordation tax return and shall include such substantiation as the Recorder of Deeds shall deem appropriate.
Section 503, Recordation Tax Returns, is amended as follows:
Subsection 503.6 is amended to read as follows:
503.6 If exemption is claimed under § 302(3) of the Act (D.C. Official Code § 42-1102(3)) a copy of the filed real property tax exemption application (Form FP 300) shall accompany the deed at the time of recordation., If exemption is claimed under § 302(4) of the Act (D.C. Official Code § 42-1102(4)), the return shall also show the purpose or purposes for which the property was acquired and shall be accompanied by all documents and other information that the Recorder of Deeds deems necessary to determine the exempt or taxable status of the deed.
Section 505, Extension of Time for Filing Returns, is amended as follows:
The section title is amended by striking the text following “505,” and inserting the word “[Reserved]” in its place. The remainder of the section is repealed.
Section 508, Inspection of Returns and Other Documents Related to Deeds, is amended by adding a new Subsection 508.3 to read as follows:
508.3 The Recorder of Deeds or the Deputy Chief Financial Officer may disclose returns or information reported on returns to a contractor obligated to the District of Columbia to store documents or information to provide other services related to tax administration to the extent that the disclosure relates to the obligations of the contractor. Returns or return information may also be disclosed to a contractor obligated to the District to incorporate such returns or return information, or to prepare them for incorporation, into an electronic storage and retrieval system for the use of the District.
Section 511, Deeds Issued Pursuant to Foreclosure Proceedings, is amended as follows:
In Subsections 511.1 and 511.2, strike the phrase “D.C. Code § 45-923” each place that it appears and insert the phrase “D.C. Official Code § 42-1103” in its place.
Section 512, Recordation of Revocable Trust Deeds is amended to read as follows:
512.1 The following deeds shall be exempt from the tax imposed by the Act: (a) a deed by a transferor that conveys bare legal title to the trustee of a revocable trust, without consideration for the transfer, where the transferor is the beneficiary of the trust; (b) a deed to property transferred to a beneficiary of a revocable trust as the result of the death of the grantor of the revocable trust; and (c) a deed to property transferred by the trustee of a revocable trust if the transfer would otherwise be exempt under § 302 of the Act (D.C. Official Code § 42-1102) if made by the grantor of the revocable trust.
Section 513, Uniform Commercial Code (UCC) Articles 9 Filings, is amended as follows:
In Subsection 513.2 strike the phrase “, Located at 515 D Street, NW Washington, DC 20002”.
In Subsection 513.5, strike the phrase “-- located at 515 D Street, NW Washington, DC 20002”.
In Subsection 513.6, strike the word “336.2(b)” and insert the word “336.3” in its place.
Section 517, Transfers of Controlling Interests, is amended as follows:
In Subsection 517.3, strike the word “napital” and insert the word “capital” in its place.
Section 519, Consideration Allocable to Real Property, is amended by adding new Subsection 519.3a to read as follows:
519.3a A purchase money mortgage or deed of trust securing indebtedness incurred to acquire an economic interest is exempt from tax if it is:
(a) Recorded simultaneously with the filing of the economic interest deed; or
(b) Executed within 30 days from the date of execution of the economic interest deed and it is recorded within 30 days from the date of recordation of the economic interest deed.
Section 520, Mergers, Consolidations, and Liquidations, is amended as follows:
Subsection 520.2 is amended by adding at the end thereof a new sentence to read as follows: “However, a liquidating distribution of the real property shall be a taxable transfer under the Act.”.
Section 523, Miscellaneous, is amended as follows:
Subsection 523.1 is amended by inserting the word “ultimate” before the phrase “ownership interest”.
Section 526, Leases, is amended as follows:
The section title is amended by striking the text following “526,” and inserting the word “[Reserved]” in its place. The remainder of the section is repealed.
Comments on this proposed rulemaking should be submitted to Robert McKeon, Deputy Chief Counsel, Office of Tax and Revenue, no later than thirty (30) days after publication of this notice in the D.C. Register. Robert McKeon may be contacted by mail at DC Office of Tax and Revenue, 1101 4th Street, SW, Suite 750W, Washington, DC 20024; telephone at (202) 442-6513; or email at robert.mckeon@dc.gov. Copies of this rule and related information may be obtained by contacting Robert McKeon as stated herein.
