Refinance and Modification Recordation Tax Exemptions on Commercial Property in DC

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Parties submitting Deeds, Memorandum of Lease, Deeds of Trust, Modifications and Easements to the Recorder of Deeds for filing in the District of Columbia will be required to present a properly completed FP 7 form as well as supportive documentation in order to have their request for exemption from taxation considered.

The District of Columbia provides for exemption from Transfer and Recordation Tax on Deeds under § 42–1102 of the Code for documents defined as “Deeds” below:

(3) (A) The word “deed” means any document, instrument, or writing, including a security interest instrument, wherever made, executed, or delivered, pursuant to which:

(i) Title to real property is conveyed, vested, granted, bargained, sold, transferred, or assigned;

(ii) An interest in real property (including an estate for life) is conveyed, vested, granted, bargained, sold, transferred, or assigned;

(iii) A security interest in real property is conveyed, vested, granted, bargained, sold, transferred, or assigned; or

(iv) A transfer of an economic interest in real property is evidenced pursuant to § 42-1102.02.

(B) The word “deed” shall not include a will or a lease or ground rent for a term (with renewals) that is less than 30 years.

 Applicable Legislation District of Columbia Official Code, Title 42 Real Property Chapter 11 Recordation tax on Deeds, as last amended by Fiscal Year 2013 Budget Support Emergency Act of 2012, subtitle L, title VII, DC Act 19-383, as outlined in (OTR Tax Notice 2012-6 issued by the Office of Tax Revenue of the Government of the District of Columbia)

Commercial Refinance Exemption Requirements

The new Deed of Trust shall be taxed on the excess of the principal amount of the refinance instrument over the principal balance due on the existing debt.  The principal balance of the existing debt is exempt from tax only to the extent that any tax due was paid or exempt at the time of recordation.  The Deed of Trust being submitted must contain within the body and/or header the recording information and principal balance of the existing debt and statement that the filing is a refinance of the existing debt.  The data entered on the FP 7 must match the data contained within the Deed of Trust being filed.

An FP 7 C showing the outstanding principal balance of the existing debt, the principal balance of the existing debt, recording data of existing debt and recordation tax paid (or exempted) is to be provided together with copies of applicable pages of the existing Deed of Trust.

A refinance is a new loan which is used to pay off and extinguish an existing loan that is secured by the same property.  A copy of the payoff letter and settlement statement must be provided with the submission as evidence. 

Commercial Modification Exemption Requirements

The Modification or Amended and Restated Deed of Trust shall be taxed on the excess of the principal amount of the modified (including amounts paid to borrower on the existing security interest instrument during the preceding 12 months) instrument over the principal balance due on the existing debt.  The principal balance of the existing debt is exempt from tax only to the extent that any tax due was paid or exempt at the time of recordation.  The Modification being submitted must contain within the body and/or header the recording information and principal balance of the existing debt and statement that the filing is a modification and/or restatement of the existing debt.  The data entered on the FP 7 must match the data contained within the Deed of Trust being filed.

An FP 7 C showing the outstanding principal balance of the existing debt, the principal balance of the existing debt, recording data of existing debt and recordation tax paid (or exempted) is to be provided together with copies of applicable pages of the existing Deed of Trust.

 

A letter from the existing lender must provide the principal balance, state that no advances have been made to the borrower within a 12 month period, and identify the property.  A copy of the letter and settlement statement must be provided with the submission as evidence. 

 

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Detailed information on Transfer/Recordation Tax Exemptions and FP forms can be located on:

http://otr.cfo.dc.gov/publication/rod-4-required-claiming-exemption-recordation-or-transfer-taxes

 

 

 

November 28 2016

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