DC Recordation Tax Rate Increase Does NOT Apply to Most Transfers

September 30, 2008

D.C. Recordation Tax Rate Increase effective October 1, 2008
ONLY applies to Economic Interest Deeds, NOT to most transfers

On September 17, 2008, the D.C. Office of Tax and Revenue issued a Notice of an increase in the Recordation Tax rate for Economic Interest Deeds from 2.2% to 2.9% effective October 1, 2008. This increase is applicable ONLY to deeds that evidence a transfer of an economic interest in real property, NOT to most deed transfers.

A transfer of an economic interest in real property "occurs upon the conveyance, vesting, granting, bargaining, sale, or assignment, directly or indirectly, of a controlling interest by 1 or more persons or by 1 or more transactions, within any 12-month period, in any corporations, partnership, association, trust, or other entity that, during the 12 month period immediately preceding the transfer of an economic interest in real property: (1) Derives more than 50% of its gross receipts from the ownership or disposition of real property in the District; or 2) Holds real property in the District that has a value comprising 80% or more of the value of its entire tangible asset holdings." (See D.C. Code Annotated, Section 42-1102.02). Accordingly, this increase will only apply in very limited circumstances and will NOT apply to most residential or commercial real estate sales. In fact, according to Larry Todd, D.C. Recorder of Deeds, this will affect only 10-15 recordings per year.

The Transfer and Recordation Tax rates for all other real property transfers in the District remain the same, namely 1.1% of the sales price for all residential purchases below $400,000.00 and 1.45% for all non-residential purchases and residential purchases of $400,000.00 and above. Typically, the Seller pays the Transfer Tax (1.1% or 1.45%) and the Purchaser pays the Recordation Tax (1.1% or 1.45%).

The foregoing was prepared by the Law Firm of Darby, Nalls, Smyth & Muldoon, LLC, General Counsel to Counselors Title, LLC for general informational purposes. It is not intended as legal advice. Any additional detailed questions should be directed to an accountant or a tax attorney.