In a decision Thursday that could save the District more than half a billion dollars, the D.C. Court of Appeals reinstated a special income tax on nonresidents who are partners in Washington real estate partnerships.
Reaching back to a 1947 federal law, a three-judge appellate panel ruled that a lower judge had erred when he struck down a D.C. law that required unincorporated businesses to file tax returns with the District.
The appeals court, led by Senior Judge James Belson, said the investors’ arguments were “misplaced” and ordered the tax to be reinstated.
The real estate investors were fighting for a refund of more than $241,000, but the city said losing the tax would cost the District more than $580 million over the next four years.
The tax on unincorporated businesses brought in more than $117 million in fiscal 2005 alone, city officials said.
Gerald H. Sherman, lawyer for the real estate developers, said his clients would consider asking for a rehearing. Asked whether the decision would damage the real estate business in the District — as had been claimed by critics of D.C.’s tax — Sherman said: “At the moment, I’m simply a lawyer trying to decide what’s good for my client.”
He said: “I thought we were right; I still think we were right, but obviously the court disagreed.”
