This week, you are receiving two separate "At Issue - Taxes" special editions, each of which provides pertinent information about tax rates and fees that now or will soon apply to AOBA members in Virginia and the District of Columbia. The Maryland edition was delivered by email on June 27; if you would like to receive it again, please contact Shaun Pharr at: spharr@aoba-metro.org.

2008-2009 District of Columbia Tax Rates

REAL PROPERTY TAX

This tax is expressed as a dollar amount per $100 of assessed value. The rates are established by the Council of the District of Columbia and may change from year to year.

Current Classes and Rates

Class	Tax Rate per $100	Description
1	$0.85	Residential real property, including multifamily
2	$1.85	Commercial and industrial real property, including hotels and motels
3	$5.00	Vacant real property (increases to $10/$100 assessed value on October 1, 2008)

For more information about theClass 3 tax rate,visit Vacant Real Property.

Changes to Class 2 Rate beginning October 1, 2008

Tax Year beginning October 1, 2008:

The real property tax rates and special real property tax rates for taxable Class 2 properties in the District of Columbia for the tax year beginning October 1, 2008, shall be:

1. For the first $3 million of assessed value, $1.65 per $100 of assessed value.

2. For the portion of the assessed value exceeding $3 million, $1.85 per $100 of assessed value.

Tax Year beginning October 1, 2009:

1. To determine the Class 2 rate for the first $3 million of assessed value, the District’s Chief Financial Officer (CFO) must compute the rate for the tax year beginning October 1, 2009, as follows:

2. Subtract $1,312,793,900 from the estimated real property taxes to be collected for Class 2 Properties based upon a rate of $1.85 per $100 of assessed value. The CFO shall compute the real property tax rate (rounded up to the nearest penny) for the first $3 million of assessed value for taxable Class 2 Properties by taking this amount and, if it is a positive number, applying the amount to reduce the real property tax rate; provided, that the real property tax rate shall not be less than $.90 per $100 of assessed value.

3. For the portion of the assessed value exceeding $3 million, $1.85 per $100 of assessed value.

Tax Year beginning October 1, 2010 and subsequent years:

1. To determine the Class 2 rate for the first $3 million of assessed value, the District’s Chief Financial Officer must compute the rate for the tax year beginning October 1, 2010 and each tax year thereafter, as follows:

The CFO shall multiply the total amount of taxes received for taxable Class 2 Properties in the District of Columbia for the prior fiscal year by 110%. The CFO must then subtract that amount from the estimated real property taxes to be collected for Class 2 Properties based upon a rate of $1.85 per $100 of assessed value. The CFO must compute the real property tax rate (rounded up to the nearest penny) for the first $3 million of assessed value for taxable Class 2 Properties by taking this amount, and if it is a positive number, applying this amount to reduce the real property tax rate; provided, that the real property tax rate shall not be less than $.90 per $100 of assessed value.

2. For the portion of the assessed value exceeding $3 million, $1.85 per $100 of assessed value.

RESOURCES

DC Office of Tax and Revenue

Real Property Service Center

REAL PROPERTY RECORDATION AND TRANSFER TAX

The District of Columbia collects deed recordation and transfer taxes on real property transactions as follows:

Deed Recordation Tax

The recording of all deeds to real estate in the District. The basis of the tax is the value of consideration given for the property. Where there is no consideration or where the consideration is nominal, the tax is imposed on the basis of the fair market value of the property.

DC Code Citation: Title 42, Chapter 9.

1.45% of consideration or fair market value

Note: For residential properties under $400,000, the rate is 1.1% of consideration or fair market value.

Deed Transfer Tax

Each transfer of real property at the time the deed is submitted for recordation. The tax is based upon the consideration paid for the transfer. Where there is no consideration or where the amount is nominal, the basis of the transfer tax is the fair market value of the property conveyed.

DC Code Citation: Title 47, Chapter 9.

1.45% of consideration or fair market value

Note: For residential properties under $400,000, the rate is 1.1% of consideration or fair market value.

CORPORATE INCOME TAX

Corporate Franchise Tax

Net income of corporations having nexus in the District. All corporations engaging in a trade, business or profession in the District of Columbia must register.

DC Code Citation: Title 47, Chapter 18.

9.975% of taxable income

(9.5% base rate plus a 5% surtax on the base rate)

$100 minimum tax

Unincorporated Business Franchise Tax

Net income of unincorporated businesses with gross receipts more than $12,000. A 30% salary allowance for owners and a $5,000 exemption are deductible from net income to arrive at taxable income.

A business is exempt if more than 80% of gross income is derived from personal services rendered by the members of the entity and capital is not a material income-producing factor. A trade, business or professional organization that by law, customs or ethics cannot be incorporated is exempt.

DC Code Citation: Title 47, Chapter 18.

9.975% of taxable income

(9.5% base rate plus a 5% surtax on the base rate)

$100 minimum tax

SALES AND USE TAX

Businesses in the District are required to pay sales taxes on all tangible personal property and certain selected services sold or rented to businesses or individuals at retail in the District.

General Rate

All tangible personal property and certain selected services sold or rented to businesses or individuals at retail in the District.

Groceries, prescription and non-prescription drugs, Internet access and residential utility services are among those items exempt from the sales tax.

The use tax is imposed at the same rate as the sales tax on purchases made outside the District and then brought into the District to be used, stored or consumed, providing that the purchaser has not paid the sales tax on the purchases to another jurisdiction.

DC Code Citation: Title 47, Chapters 20 and 22.

A five-tier rate structure is presently in effect:

5.75% - General rate for tangible personal property and selected services

9% - Liquor sold for off-the-premises consumption

10% - Restaurant meals, liquor for consumption on the premises, and rental vehicles

12% - Parking motor vehicles in commercial lots

14.5% - Hotels (transient accommodations)

Notes: The following portions of the sales tax go to the Convention Center Fund: 1% from restaurant meals and 4.45% from transient accommodations.

The 12% parking in commercial lots tax is dedicated to the DC Department of Transportation as special purpose revenue.

MISCELLANEOUS TAXES

Economic Interest Tax

This tax is triggered by either one of the following two elements:

80% of the assets of a corporation consist of real property located in the District of Columbia; or
More than 50% ofthe controlling interest of the corporation is being transferred.

The consideration is not always equal to the assessed value of the property. The consideration is what is paid for the interest being transferred. If there is no tangible consideration, then the tax basis will be the assessed value of the property owned by the corporation. DC Code Citation: Title 42, Chapter 11.

2.2% of consideration or fair market value

The tax rate increases to 2.9% on October 1, 2008.

Estate Tax

Levied on the estate of every decedent dying while a resident of the District, and on the estate of every nonresident decedent owning property having a taxable situs in the District at the time of his or her death.

DC Code Citation: Title 47, Chapter 19.

Tax due is determined by using the DC estate tax computation worksheet after computing the exempted amounts.

Public Space Rental

Commercial use of publicly owned property between the property line and the street. DC Code Citation: Title 7, Chapter 10.

All revenue from this tax is dedicated to the DC Department of Transportation as special purpose revenue.

The CFO reminds AOBA members that the vault rental fee is determined using the latest assessments, which are the Tax Year 2009 assessments.

Vault Rental Fee = (Assessed Value of the Land) x (Vault Square Footage) x (Utilization Factor -> from § 10-1103.04(c)). The utilization factor for the first vault of any property is 1.2%, and the rental fee for each subsequent vault is calculated using a utilization factor of 0.30%.

Various rates exist for the following: Vault, Sidewalk (enclosed and unenclosed), Sidewalk Surface, and Fuel Oil Tank

Public Utility Tax

Gross receipts of gas, electric and local telephone companies.

DC Code Citation: Title 47, Chapter 25.

Gross Charges:
10% - residential
11%- nonresidential

Note: 1% of nonresidential utility tax revenues is dedicated to financing construction of a new baseball stadium.

Toll Telecom-munication Tax

Gross receipts of companies providing toll telecommunication service in the District.

DC Code Citation: Title 47, Chapter 38.

Gross Charges:
10% - residential
11%- nonresidential

Note: 1% of nonresidential telecommunication tax revenues is dedicated to financing construction of a new baseball stadium.

WATER AND SEWER CHARGES

The DC Water and Sewer Authority (WASA) provides water and sewer services for retail customers in the District. Gradual rate increases are required to cover the cost of a 10-year, $3.1 billion capital improvement program to upgrade the District’s water and sewer system and to meet federal requirements for controlling water pollution.

WASA is proposing an 8.5% increase to the water and sewer rates, which if adopted, will be effective October 1, 2008.

Service

Current Rates

Proposed Rates

(Effective 10/1/2008)

Water Rate

$2.14/one hundred cubic feet

$2.32/one hundred cubic feet

Sewer Rate

$3.23/one hundred cubic feet

$3.51/one hundred cubic feet

BASEBALL STADIUM FEES

The “Ballpark Financing and Revenue Act of 2004” (D.C. Official Code § 47-2762) imposes an annual ballpark fee on all businesses, based on their District gross receipts. The fee schedule is as follows:

(1) Each feepayer with annual District gross receipts of $5,000,000 to $8,000,000 shall pay $5,500;

(2) Each feepayer with annual District gross receipts of $8,000,001 to $12,000,000 shall pay $10,080;

(3) Each feepayer with annual District gross receipts of $12,000,001 to $16,000,000 shall pay $14,000; and

(4) Each feepayer with annual District gross receipts of greater than $16,000,001 shall pay $16,500.

All feepayers must remit the fee on or before June 15 of each year. Please note that the law only exempts those feepayers exempt under D.C. Official Code § 47-1802.01. Entities are required to file the Ballpark Fee return and pay the applicable fee electronically in accordance with the instructions contained in the FR-1500 Ballpark Fee Instructions and Worksheets and Notice Regarding Electronic Filing Requirements for Professional Baseball Ballpark Fee. For additional information regarding baseball-related fees and taxes, click on the following link: Baseball-Related Fees and Taxes .

Electronic payments can be made by accessing the following website: www.taxpayerservicecenter.com.

E-911 TAX

The District imposes an E-911 tax on all local exchange carriers, including wireline and wireless carriers and interconnected Voice Over Internet Protocol (“VOIP”) service providers that connect users who dial or enter the digits 9-1-1 to the District's public safety answering points. *These taxes are typically passed on to customers and appear on phone bills. The rates are as follows:

1. For wireline local exchange service:

a. $0.76 per exchange access line in the District;

b. $0.62 per Centrex line in the District; and

c. $0.62 per private branch exchange station in the District;

2. For wireless telephone exchange service, $0.76 for each telephone number that has a District of Columbia billing address; and

3. For interconnected VoIP service $0.76 for each line, trunk, or path that can access to, connect with, or interface with 911 service based on primary place of use.”

ENVIRONMENTAL PROTECTION CHARGES

Stormwater Management and Pollution Control

Currently, the District of Columbia Water and Sewer Authority collects a stormwater fee as follows:

1. For multifamily residential buildings, the fee shall be equal to 1.4% of the charge for water and sewer services;

2. For all other properties, the fee shall be equal to 2% of the charge for water and sewer services.

As of October 1, 2008, the rate and methodology will change. The FY 2009 Budget Support Act of 2008 requires that WASA collect a stormwater charge established by the Director of the DC Department of the Environment (DDOE), and provides that “A landlord shall not pass a storm water charge to a tenant that is more than the storm water charge prescribed by the Director.”

INCREASES TO BUSINESS LICENSE FEES

As part of the Fiscal Year 2009 budget, the District recently adopted measures that will increase existing business licensing fees and extend the requirement for a business license to new categories.

General Business Licensing Fee: A general business license will be required for all businesses engaging in any business transaction in the District that have a business tax identification number and which are not otherwise required to obtain an endorsement under a license endorsement category. If a business entity is comprised of principals who are required to maintain licenses granted or regulated by a local, state, or national certification board or body, the entity and its licensed principals shall not be required to obtain a General Business License.

Charge: $200/biennial fee

New General Contractor/Construction Manager License: required for individuals or businesses engaged in general contracting or construction management.

Charge: $500/biennial fee

Basic Business License/Endorsements: New licenses and renewals

	Current	Proposed
Basis Business License	$35	$70
Endorsement	$10	$25

For additional information visit: http://mblr.dc.gov/information/bbl/index.asp