Bulletin: DC2017002

Dear Associates:

The purpose of this Bulletin is to advise agents that the District of Columbia’s First Time Homebuyer Recordation Tax Credit (“FTHB Credit”) will go into effect on October 1, 2017. Emergency legislation amending the current law is likely to be passed on October 3, 2017, and will be retroactive to October 1, 2017.

Action:

On October 2 and 3, 2017:  

• Use the First Time Homebuyer Application found here: https://otr.cfo.dc.gov/node/1272871. 
   
• For transfers involving more than one lot (e.g., parking units, side lots, etc.), allocate the purchase price between unit/house and additional lot(s). Currently, the First Time Homebuyer tax credit can only be used to reduce the recordation tax for ONE lot, even if the first time homebuyer is buying multiple lots (e.g., condo unit and parking unit) simultaneously.
   
• For all grantees and adult household members, including those not listed on the deed, obtain and submit to the Recorder of Deeds (ROD) with the Deed the following:
   
  • Federal Tax Returns (Form 1040); schedules do not have to be submitted;
     
  • Most Current TWO Pay Stubs; and
     
  • If self-employed, a notarized current Profit and Loss Statement made under penalties of perjury.
     
• Additional documentation to be submitted to the ROD with the deed:
   
  • TWO copies of the Homestead Deduction Application;
     
  • Copy of the Closing Disclosure form or settlement statement;
     
  • If a household member is unemployed, a notarized affidavit stating the household member is unemployed;
     
  • If applicant previously owned a property in DC that was his/her primary place of residence, a copy of a settlement agreement or court order showing that the applicant did not obtain an ownership interest in that property.

After October 3, 2017 (provided the emergency legislation is passed):  

• Look for an updated First Time Homebuyer Application on ROD’s website.
   
• All lots conveyed by the same deed will qualify for the reduced recordation tax. You will not have to allocate the purchase price between, for example, the dwelling unit and parking unit.
   
• Submit only the following documents for all grantees and adult household members (in addition to the application) with the Deed:
   
  • Federal Tax Returns (Form 1040) excluding schedules;
     
  • Homestead Deduction Application (two copies may still be necessary); and
     
  • Copy of the Closing Disclosure form or settlement statement.

Note: The District retains the right to audit an application after recordation and may require the additional documentation from the homebuyer at that time.

Background:

In December 2016, the District enacted the First Time Homebuyer Tax Benefit Amendment Act of 2016 (the “Act”) which authorized a reduction in the recordation taxes for first time homebuyers of eligible property. The recordation tax for qualifying buyers will be reduced to 0.725% no matter the purchase price, provided, however, that the maximum purchase price for a property to qualify as an eligible property is $625,000. In 2017, the Fiscal Year 2018 Budget Support Act of 2017 modified some of the Act’s terms and set the Act’s effective date for October 1, 2017. The original method for implementing the FTHB Credit raised many concerns for the title industry. The District of Columbia Land Title Association (“DCLTA”) has been working with the ROD and DC Council to amend the existing law to minimize the time it takes to get a deed submitted with an FTHB Credit on record and post policy implications for additional recordation taxes owed by an applicant that is found after closing not to qualify for the FTHB Credit.  

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.