Officials in Washington D.C. have taken $2.6 billion in the taxable value of more than 500 commercial properties off the table following a series of settlements negotiated with the Office of Tax and Revenue. In most cases, decisions to settle the matters, which involve properties owned by several of the most influential developers in the area, were contrary to recommendations made by staff appraisers.
In some cases, the properties in question were worth several millions of dollars. When the value for tax purposes was reduced by 40 per cent or more, it resulted in savings of tens (or in some cases hundreds of thousands) of dollars in tax savings for the property owner. The total value of the settlements adds up to $48 million in potential revenue the District will not be able to collect, an important issue for a city which is already short of cash.
Tax officials have stated the move to settle the issue stems from a decision to save on the cost of tax appeal litigation. These decisions have led to controversy, with the matter coming to the attention of both internal auditors and the FBI, which has launched an investigation, according to unnamed sources.
In 2009, there were 35 settlements worth $83 million in reductions. The numbers were lower in 2010, when there were only 11 settlements with a total reduction of $43 million. The 164 settlements in 2012 with a $2.6 billion in property value represents a huge jump from previous years.
The $2.6 billion figure which was written represents only a small percentage of the city’s $246 billion property tax base, which also includes residential properties, lots, and buildings. Commercial buildings in the District were valued at $71 billion in 2012, and commercial property owners pay higher tax rates than people who own residential properties.
The tax rate for commercial properties is $1.65/$100.00 of assessed value for the first $3 million and $1.85 for every $100.00 above it. In contrast, residential properties are taxed at a flat rate of $0.85.
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