Tax Law and Guidance    Tax Clarity Act Changes - Businesses, Commercial Property Owners Elimination of 1% credit for timely filed and paid sales tax returns. Promoters of special events are required to provide lists of vendors to the Office of Tax and Revenue. Corporations can elect to file consolidated tax returns. Interest rate for underpayment of taxes has been reduced for 2001 taxes. Business taxpayers will receive automatic interest on refunds held more than 180 days from the latest due date or filed date by the Office of Tax and Revenue. New penalties are in effect for negligence and valuation misstatements. Definition of property owner now includes 30-year lessees and life tenants. Transfer tax now based on sales price of property. Deed tax applies to 30-year lessees and life tenants. Commercial refinancing interests subject to recordation tax with credit for tax previously paid. Elimination of 1% Credit for Timely Filed Sales Tax Return The 1% sales tax credit for timely filed sales tax returns is eliminated. The change is effective for sales months beginning April 1, 2001 (sales tax return due date is May 20). Taxpayers who filed sales tax returns for April, May or June and claim the credit will be billed for the amount of the credit claimed, but will not be charged penalty or interest. Special Events Promoters Must Provide Vendor Lists to Office of Tax and Revenue Effective for special events beginning April 1, 2001, and later, promoters of special events in the District of Columbia must provide lists of vendors to the Office of Tax and Revenue. These lists must be provided 30 days prior and 10 days after the end of the event. Promoters are also responsible for making vendors aware of their sales tax responsibilities to the District of Columbia. A special event is an event that includes 50 or more vendors. Corporations can Elect to File Consolidated Franchise Tax Returns Effective for tax years starting after December 31, 2000, corporations can elect to file consolidated franchise tax returns with the District of Columbia. This election is subject to the following conditions: The affiliated group has elected or is required to file a consolidated federal return. All members of the affiliated group must consent to the filing. The affiliated group will not include any corporation that does not have gross income derived from sources within the District of Columbia. All members of the affiliated group are jointly and severally liable for the return. The District of Columbia may require consolidated filing in certain situations. Regulations are being reviewed to assist those electing to file consolidated returns. Interest Rate for Tax Underpayment Effective for tax periods beginning after December 31, 2000, the interest rate for underpayment of taxes is reduced to 13% simple interest. The current rate is 18%. For tax periods beginning after December 31, 2002, the rate is further reduced to 10% compounded daily.   Q.   Does this mean the interest rate on my 1999 delinquency will be reduced to 13%?   A.   No, only delinquencies for tax periods beginning after December 31, 2000, are subject to the 13% rate. Automatic Interest on Late Franchise Tax Refunds Effective for tax years beginning after December 31, 2000, franchise taxpayers will receive interest if refunds are held more than 180 days. The interest rate will be 6%. The automatic refund applies to timely filed returns.   Q.   From what date is the 180 days counted?   A.   The 180 days is counted from the filing date or return due date, whichever is later. New Penalties for Negligence, Substantial and Gross Misstatements New penalties for tax years beginning after December 31, 2000, as follows: Taxpayer Negligence: Penalty equal to 20% of underpayment. Substantial Valuation Misstatement: Valuation misstatement equal to property basis difference of 200% or more is subject to penalty of 20% of underpayment. Gross Valuation Misstatement: Valuation misstatement equal to property basis difference of 400% or more is subject to penalty of 40% of underpayment. Penalty Threshold: There is no accuracy-related penalty if underpayment is less than $5,000 ($10,000 for corporations). The above penalties are in addition to applicable interest. Definition of Real Property Owner Includes 30-year Lessees The definition of a real property owner is changed to include 30-year lessees and life tenants. This means that 30-year lessees now have the following rights: Receive assessment notices Receive tax bills Appeal assessments Transfer Tax Now Based on Sales Price of Property The deed transfer tax is now based on the sales price of property to make it consistent with the recordation tax. The exception is when the sales price of the property is less than 30% of the assessed value, in which case the transfer tax is based on the assessed value. Deed Tax Applies to 30-year Lessees and Life Tenants Deed taxes now apply to 30-year lessees and life tenants just as they apply to any other "owner". Commercial Refinancing Interests Subject to Deed Recordation Tax with Credit for Taxes Previously Paid Commercial refinancings are subject to deed recordation tax as they have been for some time. This provision allows credit for taxes previously paid for prior refinancings up to the amount of previous refinancing.