A new law that will tax the sales of apartment co-ops is supposed to take effect this week. But few — even among city hall officials — seem to know what the law says.
Cooperative owners and real estate experts say they’re not sure what will happen when the law takes effect Thursday.
“There’s a dearth of guidance on this,” said David Horrigan, president of the District of Columbia Cooperative Housing Coalition. Owners “haven’t received any instruction on how it’s supposed to be collected, how it’s supposed to be remitted — none of those things.”
The D.C. Council passed a final version of the tax last week but hasn’t handed over the new law to the city tax office, spokeswoman Natalie Wilson said. Yet that won’t stop the tax office from collecting the tax starting Thursday.
In the meantime, the finance office is using “unofficial information” for guidance — and any answer “remains subject to change,” Wilson said.
The new tax is part of Mayor Adrian Fenty’s effort to close a budget gap. The administration hopes to raise nearly $23 million over the next four years from hundreds of city co-ops, Wilson said.
» About 300 co-ops in D.C.
» New tax expected to raise about $5.1 million in fiscal 2010, $22.8 million in fiscal 2010-13
» Takes 2.2 percent of sales less than $400,000
» Takes 2.9 percent of sales $400,000 or more
But the guessing game has the D.C. Council’s switchboard working overtime.
“We’ve been having hot and heavy e-mail traffic on that sucker,” said Jeff Coudriet, an aide to D.C. Councilman Jack Evans, D-Ward 2, who chairs the council’s finance committee.
Co-ops have been in the District since the 1920s. Unlike condos — where a piece of property is bought — a purchaser is buying “shares” in a quasi-corporation and gets use of the apartment for his or her buy. Owners have used that distinction to escape real estate sales taxes for generations.
Some real estate brokers are using the tax confusion to get buyers moving before Thursday’s deadline.
“It was a big incentive to get them settled,” agent Katie Wethman said.
