District of Columbia Property Tax Update Archive
updated march 2020
Changes to DC Tax Deadlines
In response to the COVID-19 outbreak, the District of Columbia made significant changes to certain deadlines for property tax filings and payments. This included (1) extending the payment deadline for improved and occupied hotels, (2) extending the deadline for filing Income & Expense Reports, and (3) extending the deadline for filing Tax Year 2021 appeals.
(1) Extension of Hotel Tax Payments The District passed an emergency law which extended the deadline for the first-half Tax Year 2020 real estate tax payment for improved and occupied hotels and motels. The emergency act provides that the District is permitted not to charge interest or penalties if the first-half payment is made by June 30, 2020. The deadline is normally March 31, 2020. The legislation did not address whether this deadline extension would also apply to associated possessory interest lots. However, after Wilkes Artis lobbied the District of Columbia Office of Tax & Revenue (OTR) for the inclusion of such lots, it appears they will be included in the deadline extension. For all non-hotel properties, the first-half TY 2020 payment deadline remained March 31, 2020.
(2) First Level Assessment Appeals On Friday March 20, 2020, OTR issued a notice revising the deadlines for Tax Year 2021 first level appeals. The appeals due on April 1, 2020, will now be due on April 30, 2020.
(3) Income & Expense Reports The April 15 deadline for filing the Income & Expense report was extended to April 30.
Jonathan L. Cloar, Esquire
Wilkes Artis, Chartered
American Property Tax Counsel (APTC)
Updated december 2019
Capitalization Rates for Low Income Housing Tax Credit Properties
Beginning this past year, the District of Columbia’s Office of Tax & Revenue began adding 15 basis points to the capitalization rates for Low-Income Housing Tax Credit (“LIHTC”) apartment buildings. Although we view the 15 basis point increase as insufficient, we have argued for years that the District should make an adjustment to its base capitalization rates, which are used on market-rate apartment buildings, when valuing LIHTC properties. LIHTC properties are unique because of the restrictions imposed on the rents, the administrative oversight and regulation of the properties, and the fact that they tend to have higher operating expenses than market rate apartments. Additionally, LIHTC properties have rarely sold in the District and deriving a capitalization rate for LIHTC properties based on the sale of market-rate apartment is improper because it fails to account for the risk associated with operating a LIHTC property. We plan to continue to press the District’s assessors to correctly value LIHTC properties instead of treating them like market rate apartment buildings.
Jonathan L. Cloar, Esq.
Wilkes Artis, Chartered
American Property Tax Counsel (APTC)
Updated september 2019
New Real Estate Tax Billing System
The District of Columbia’s Office of Tax & Revenue is in the process of developing a new real estate tax billing system. The District has stated that the new billing system will lead to greater efficiency and accuracy in its billing for real estate taxes. This should lead to a decrease in the number of billing related errors (e.g., improper penalty and interest charges) taxpayers face each year. The District plans to roll out the new system by 2021, in time for the Tax Year 2021 bills.
Jonathan L. Cloar
Wilkes Artis,Chartered
American Property Tax Counsel (APTC)
Updated JUNE 2019
Tax Rate Rollercoaster Lands
The DC Tax Rate Rollercoaster has finally landed. Following a year of uncertainty, increases, and decreases in the commercial property tax rate the D.C. Council has finally provided clarity regarding the rate. In June 2019 the Council passed the Fiscal Year 2020 Budget Support Act. This Act officially increased the top commercial tax rate back to 1.89% from the 1.85% rate the Council set just six months prior. The Council also approved an increase in transfer and recordation taxes (payable upon, e.g., the sale of a property) from 2.90% to 5.00% for commercial properties. These taxes are set to sunset in 2023.
Scott B. Cryder, Esq.
Wilkes Artis, Chartered
American Property Tax Counsel (APTC)
Updated MARCH 2019
Tax Rate Rollercoaster
In the summer of 2018 the District, for the first time in over a decade, changed the real property tax rates for commercial properties. For Tax Year 2019 (October 1, 2018 through September 30, 2019) the District implemented tired commercial tax rates. Those rates are as follows:
New Rates - Tax Year 2019
Assessment Rate
$1 - $5,000,000 1.65%
$5,000,001 - $10,000,000 1.77%
$10,000,001 + 1.89%
The top rate of 1.89% constitutes a 2% increase over the prior top rate of 1.85%. However, in December 2018 the District enacted legislation that reduced the top back to 1.85% for Tax Year 2020 (October 1, 2019 through September 30, 2020). This reduction in the top rate was made possible by revenue associated with a newly created internet sales tax.
In March 2019 Mayor Muriel Bowser released her budget for Tax Year 2020. The proposed budget proposed increasing the top commercial rate back to 1.89%. Mayor Bower’s budget also called for an increase in transfer and recordation taxes (payable upon the sale of a property) from 2.90% to 5.00%. The DC Council will soon start debate on the Mayor’s tax proposals, but it can be safely said that the volatility of the commercial tax rates is on the rise and that the District is looking to commercial property owners to compensate up for slowing tax revenue growth.
Scott B. Cryder, Esquire
Wilkes Artis, Chtd.
American Property Tax Counsel (APTC)
Updated september 2018
Enacted Changes to Commercial Property Tax Rate
In March of this year, Mayor Muriel Bowser proposed to increase the commercial tax rate by $0.02 to help pay for dedicated Metro funding. Her proposal would have increased the tax rate from $1.85 per $100 of assessed value, for each dollar of assessed value over $3 million, to $1.87 per $100 of assessed value. The first $3 million of assessed value would continue to be taxed at $1.65. After deliberation, DC Council amended Mayor Bowser’s proposal by further increasing the commercial tax rates and abolishing the previous blended rate structure. The new rates, finalized this past month following the mandatory Congressional review period, are as follows:
New Rates - Tax Year 2019
Assessment Rate
$1 - $5,000,000 1.65%
$5,000,001 - $10,000,000 1.77%
$10,000,001 + 1.89%
Unlike the existing rates, the new rates are not blended. For example, if your property is assessed for $10,000,000 the property will be taxed entirely at the 1.77% rate. If, however, your property is assessed for $10,000,001 the property will be taxed entirely at the 1.89% rate. For example, a $100M office building will see an increased tax liability of $46,000. There is no change to the residential rate of 0.85%. The changes will take effect for Tax Year 2019 (October 1, 2018 through September 20, 2019).
Scott B. Cryder, Esq.
Wilkes Artis, Chtd.
American Property Tax Counsel (APTC)
Updated march 2018
Proposed Changes to Commercial Property Tax Rate
As part of her proposed budget, Mayor Muriel Bowser has included a $0.02 increase in the commercial real property tax rate to help pay for dedicated Metro funding. Her proposal would increase the tax rate from $1.85 per $100 of assessed value, for each dollar of assessed value over $3 million, to $1.87 per $100 of assessed value. The first $3 million of assessed value would continue to be taxed at $1.65. While Mayor Bowser characterizes her proposal as a 1% tax increase, the tax rate is only one part of the equation. The other part of the equation is the assessment. Over the past 10 years the commercial tax rate has not meaningfully changed, yet the average office building’s RET liability has increased 122%. Increasing the tax rate by any amount only compounds the increased tax burdens District tenants are already facing. Landlords should continue to pursue their appeal rights to minimize these increases.
Scott B. Cryder, Esq.
Wilkes Artis, Chartered
American Property Tax Counsel (APTC)
Updated July 2017
Significant Appellate Actions by D.C. Office of the Attorney General
In September, 2016 the Tax Division of D.C. Superior Court issued a decision in Union Investment Real Estate GMBH v. District of Columbia, Tax Docket No. 2010 CVT 10219 (D.C. Super. Ct. Sept., 27 2016) completely rejecting the District’s assessment of a large commercial office building and adopting the taxpayer’s expert’s value. In January, 2017 the Tax Division of D.C. Superior Court issued a decision in Harrington Hotel Co., Inc. v. District of Columbia, Tax Docket No. 2010 CVT 9849 (D.C. Super. Ct. January 31, 2017) holding that the District’s unilateral decision to change the manner in which it calculated public space rental charges was arbitrary and capricious. As a result, the Court ordered the District to refund to the taxpayer that portion of the rental charge resulting from the arbitrary change. The Office of the Attorney General subsequently appealed both decisions to the D.C. Court of Appeals. However, before briefing even commenced the District withdrew its appeals in both cases, preserving these significant victories for the taxpayers. Both cases were litigated by Wilkes Artis, Chartered.
Scott B. Cryder, Esq.
Wilkes Artis, Chtd.
American Property Tax Counsel (APTC)
UPDATED DECEMBER 2016
Significant Trial Court Decision
The Tax Division of D.C. Superior Court recently issued a decision in Union Investment Real Estate GMBH v. District of Columbia, Tax Docket No. 2010 CVT 10219, p. 4, (D.C. Super. Ct. Sept., 27 2016) completely rejecting the District’s assessment of a large commercial office building and adopting the taxpayer’s expert’s value. The court held that when a property is leased at above market rents that expire in the short-term it was improper for the District to capitalize the exiting above market rents. Rather, the court held that the appropriate valuation methodology is to impute market rents and then add back the excess rent to the stabilized value. The court also rejected the District’s capitalization rate, holding that its unexplained decision to simply add 30 basis points to the prior year’s standard capitalization rate was not rationally based or reflective of generally accepted appraisal methodology.
Scott B. Cryder, Esq.
Wilkes Artis, Chtd.
American Property Tax Counsel (APTC)
Updated September 2016
Management Changes on the Horizon
The D.C. Office of Tax and Revenue (“OTR”) is poised to enter a new phase of leadership in the coming months as several key management positions have yet to be filled or will soon become vacant. Last year, Mr. Robert Farr retired as the Director of Real Property Tax Administration, the department responsible for real property assessments and billing. Now over a year later, his permanent replacement has not yet been selected. In addition to Mr. Farr’s retirement, we have also learned that Mr. Stephen Cordi, the Deputy Chief Financial Officer for the Office of Tax and Revenue, will soon be departing as well. These two gentlemen had lengthy tenures with OTR and were responsible for overseeing the implementation of D.C. new assessment methodology. Given the importance of these positions, we will closely monitor the ongoing hiring process.
Scott B. Cryder, Esq.
Wilkes Artis, Chtd.
American Property Tax Counsel (APTC)
Updated June 2016
Mounting Evidence of Flaws in District's Assessment Methodology
Since the District overhauled its assessment methodology for commercial office buildings in 2014, it has argued that its methodology is appropriate for both stabilized and non-stabilized buildings. In particular, the District has argued that non-stabilized buildings trade at similar rates to stabilized buildings. The District has provided no concrete evidence for this claim, instead relying on a few newspaper articles that ostensibly support this position. However, there is a growing body of sales of non-stabilized properties that provides concrete evidence that such properties trade at a discount to stabilized properties. Will the assessors and the Tax Commission finally accept this fact? We shall see.
Scott B. Cryder, Esq.
Wilkes Artis, Chtd.
American Property Tax Counsel (APTC)
Updated March 2016
DC Issues Tax Year 2017 Assessments
The District recently issued its proposed Tax Year 2017 real property assessments. Based upon our analysis, the average increase for office buildings is around 5%. When coupled with the large increases property owners have seen over the past two years, typical increases can range from 30% to 50% over this three year period. The District has justified these large, across-the-board increases by pointing to the sales of stabilized, core-plus properties. However, with a growing body of sales of non-stabilized assets trading at significant discounts to core properties (with more such sales in the pipeline), it will be harder and harder for the District to justify its increases for non-stabilized buildings. While we hope the District will finally recognize this dichotomy, past experience does not make us optimistic.
Scott B. Cryder, Esquire
Wilkes Artis, Chartered
American Property Tax Counsel (APTC)
Updated December 2015
Upcoming Tsunami of Assessment Appeals
Two years ago the D.C. Office of Tax and Revenue (“OTR”) changed its assessment methodology for large office buildings, switching from a leased-fee valuation approach in which costs to stabilized were factored into the analysis to a fee simple approach in which no consideration was given to costs to stabilized. Due to timing quirks of the District’s assessment cycle and the general “pay-to-play” rule, taxpayers have not yet been able to challenge these changes in D.C. Superior Court. This will all change in 2016 as taxpayers filed record numbers of refund petitions this past September. You should expect to see taxpayers vigorously challenging many aspects of the District’s new methodology.
Scott B. Cryder, Esquire
Wilkes Artis, Chartered
American Property Tax Counsel (APTC)
Updated March 2014
Questionable Changes in DC Deadlines Proposed
The D.C. Office of Tax and Revenue (“OTR”) has resuscitated long-tabled legislation that would significantly alter assessment and appeal deadlines. Under OTR’s most recent draft, the deadline to issues assessments would be moved three months from March 1st to June 1st. In addition, the deadline for property owners to file their income and expense reports with the District would be moved back one month from April 15th to March 15th. OTR’s stated goal for these proposed changes is to allow assessors an opportunity to use a property’s most recent income and expense data in deriving assessments. It is unclear how this would benefit the assessment process, however, since OTR now employs a general “fee simple” valuation approach that relies on market rents and market expenses rather than a property’s actual performance. Moreover, the change in the date for the issuance of assessments would have cascading effects on the entire appeal process and would dramatically compress the appeal timeline. The likely result of this compression is fewer administrative reductions during the appeal process due to inadequate time for assessors to conduct their analyses and render decisions. This will ultimately increase the total number of appeals, particularly at the court level. Careful review of this legislation and full understanding of its effects will be needed in the coming months.
Scott B. Cryder, Esquire
Wilkes Artis, Chartered
American Property Tax Counsel (APTC)
Updated June 2014
District of Columbia Wrestles With Possible Changes to the Assessment Cycle
For the new annual assessments issued this year the District of Columbia has completely overhauled its valuation methodology for large office buildings. For well over a decade the District has valued large office buildings using in place rents/expenses and deducting costs associated with leasing vacant space or space occupied under leases expiring in the near term. Starting this year, however, the District has moved towards a "fee simple" approach – using market rents and market expenses and making no adjustments for upcoming leasing costs. As a result of this change, the average assessment has increased by nearly 13% with some properties seeing much larger increases. While there has been a large outcry in the commercial real estate community regarding this new methodology and the attendant increases, the District has stood by its assessments as "reflecting market value." This has already resulted in a large increase in the number of commercial assessment appeals.
Wilkes Artis, Chartered
Scott B. Cryder
American Property Tax Counsel (APTC)
