DC Recordation and Transfer Tax Increase Set for October 1

The District of Columbia Council recently enacted legislation that increases the rate of transfer and recordation taxes for all commercial (Class 2) property where the consideration is $2 million or greater. The rate increase is effective from October 1, 2019 and expires September 30, 2023 (unless renewed).

Both the recordation tax and transfer tax will increase by 1.05% (or 2.1% cumulatively), so instead of paying 2.9% in recordation/transfer taxes for commercial property sales in excess of $2 million, the parties will now pay a total of 5% of the purchase price in recordation and transfer tax.

The legislation was part of the Fiscal Year 2020 Budget Support Act of 2019. Transfers include deeds, leases in excess of a 30-year term and economic interest deeds. The new taxes will be imposed on improved and unimproved property. In addition, the recordation tax security instruments (deeds of trust) in the amount of $2 million or greater increases to 2.5% for commercial (Class 2) properties.

The District of Columbia will aggregate security instruments recorded on the same day and pertaining to the same real property when calculating the tax. Transfers or security interests subject to the new tax rate include mixed use property and if any portion of the building or structure is classified as Class 2 property, the transfer will be taxed at the new rate.