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Catania/Cheh Letter to AG Re RecordationTax

Catania/Cheh Letter to AG Re RecordationTax

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Published by Mike DeBonis

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Published by: Mike DeBonis on Aug 09, 2011
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August 4,2011
Irvin B. Nathan
Attorney General for the District of Columbia
441 4th Street, NW
Washington, DC 20001
Dear Attorney General Nathan:
Thank you for your reply to the request for a legal opinion to analyze and determine,"whether the Tax Clarity Act required collection of recordation tax on the whole debt at the time
ofrefinance for purchase money deeds of
trust or mortgages."! We hope you will understand
our surprise and disappointment when we received your letter dated July 25, 201 i, as it barelyaddressed the question posed to your office, but discussed at great length a separate question:whether the District of Columbia should consider "litigation to reassess prior payments to seek
additional amounts of
tax on past recordations." In taking this detour, your office unexpectedly
utilized non-legal analysis by equating the plain meaning ofthe law and its legislative history, aswell as completely ignoring relevant case law on the subject. 2 In short, your legal opinion inresponse to the question posed was not a legal opinion at all in that it failed to apply wellaccepted legal principles, as one should expect from the Office of
the Attorney General.Therefore, we are again requesting a clear statement from your office, supported byappropriate legal authority, to the following question only:
"Does the Tax Clarity Act require that the real property recordation tax
apply on the entire indebtedness for a refinanced deed of trust or mortgage
(whether it be in the form ofa new deed of
trust or mortgage, an amended and
restated deed oftrust or mortgage or other documentation of similar import) if
original indebtedness was securèd by a corrunercial purchase money mortgage or
i See Letter from Councilinember David Catania to Attorney General Irvín Nathan, dated June 30, 201 i, attached as
Exhibit A.
2We notice that your letter failed to make any mention of 1137 1 rjh Street Associates, Limited Partnership v. District
Columbia, 769 A.2d 155 (2001). We can only assume that, since your letter concedes that the plain language ofthe statute is clear that the recordation tax on the full amount of indebtedness was due, that there was no need to
address this case law in support of
that conclusion. Nevertheless, as the question presented in the June 2SiIi letter
was to determine if
the recordation tax should have been imposed, we ñnd the absence of any discussion of 1137
19'h Street Associates to be conspicuous.
purchase money deed of trust that was exempt from recordation taxes under D.C.Code Section 42-1 102(5)?''
As further clarification, we are only asking for a legal opinion on refinances of purchase money
deeds of
trust or mortgages on commercial property, not residential property, and we make the
assumption that recordation taxes were not paid on the original indebtedness. For purposes of
brevity, we will hereafter refer to commercial purchase money deeds of trust and commercial
purchase money mortgages as simply, "purchase money loans".
Your July 25, 2011 Response
Your July 25th letter appears to answer the question in the preceding paragraph in the
affirmative - i.e. you state, "(0 Jur plain reading ofthe Act, particularly as compared with its
former language, suggests that the recordation tax should be assessed on the full amount of theindebtedness, to the extent that no recordation tax was paid on the original indebtedness."However, you then go on for pages about contrary legislative history and address arguments that
"could be made" if
the District were to decide to collect these taxes. This analysis is used to
excuse the OTR's disregard of the plain meaning of
the law, but, in fact, this analysis raises evenmore difficult questions.In order to be clear as to what we are asking of you, we think it is important to address
some aspects of
your July 25th letter which caused us particular concern.
. Plain Meaning
While your July 25th letter states that a "plain reading of the Act" requires the collectionof recordation tax on the entire indebtedness, you muddy the waters by suggesting that
legislative intent can outweigh the plain meaning of the law. In doing so, you offer a tortured
account of the actual legislative history of the Act. As a co-author of this letter was one of
four co-introducers ofthe Act, we disagree with your characterization of
the legislative intent
and note that your discussion of it is unnecessary in light of the fact that the plain meaning of the
statute is clear.
It is well established that, when the statutory language is plain and unambiguous, thestatute must be enforced according to its terms.3 Put another way, courts "must presume that
(the) legislature says in a statute what it means and means in a statute what it says there.',4 Had
your analysis understood this basic legal tenet, or had it been supported by appropriate statutory
law or case law, there would likely be no need for a further request. But the remaining aspects of
your J wy 25th letter open a door that should have been shut by your "plain meaning" analysis and
J See, e.g., Dodd v. United States, 545 U.S. 353, 359 (2005); Lamie v. United States Trustee, 540 U.S. 526, 534
(2004); Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A., 530 U.S. 1,6 (2000); Caminetti v. United
States, 242 U.S. 470, 485 (1917); see also; District of
Columbia v. Gallagher, 734 A.2d 1087, 1091 (D.C. 1999).
4 Dodd, supra at 357 (quoting Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253-54 (1992)); See also Bedroc
Ltd. v. United States, 541 U.S. 176, 183 (2004).
must now be clarified. This is a consequence of an analysis that does not appreciate that it
should "not resort to legislative history to cloud a statutory text that is clear.,,5
. Legislative History
For reasons which are unknown to us, the conclusion to the section titled, "the Act," from
your July 25th letter, ends with, "(b)ut that is not the end of
the matter for, as you know, whencourts interpret legislation they do not end their analysis with the plain language, particularlywhen the interpretation or implementation of the agency differ from that reading and when
contrary legislative history is available." (Emphasis added.) Yet you cite no real evidence of
contrary legislative history, but instead proffer several "arguments that could be made" to
support the notion that the legislature's silence on this particular provision of
the Act equals a
contrary legislative history.
First, neither the Attorney General, nor the District's Chief Financial Officer ("CFO"),
should attempt to decipher the intent of
the legislature when the law is clear.6 Second, alegislature's silence does not constitute a contrary legislative history. Third, the legislative
history of this Act is not silent on this matter and the preponderance of evidence in the legislativehistory that relates to the mortgage recordation tax expressly recognizes the effects that the
change in the plain meaning of the law would have on the commercial real estate community; 7
namely, that it would require the collection oftaxes on the full amount ofpurchase money loans
during a refinance.
That the Council chose not to respond to the concenis raised by members of thecommercial real estate community in writing does not mean it was unaware that a change to the
law would have negative tax implications on this community (and therefore, generate additional
tax revenue for the District of Columbia, which was one of the primary reasons for passage of
the Tax Clarity Act). There is no requirement that "every permissible application of a statute be
expressly referred to in its legislative history.,,8 Furthermore, had you done even a cursoryreading of
the Council's Committee Report on the Act, you would know that not every changeproposed by the Act was discussed at length, as the Report addresses just a few of the manychanges that would occur from its passage.
S See also Ratzlafv. United States, 510 U.S. 135, 147-48 (1994) which states"... (courts) do not resort to legislative
history to cloud a statutory text that is clear."6 See e.g., INSv. Cardoza-Fonseca, 480 U.S. 421, 452-53 (1987) (concurring), wherein Justice Scalia explains:
"Judges interpret laws rather than reconstruct legislators' intentions. Where the language of
those laws is clear, weare not free to replace it with an unenacted legislative intent."
7 See the testimony ofthe D.C. Land Title Association and the testimony of
the Apartment and Office BuildingAssociation in the memorandum dated September 28, 2000, titled, "Report on Bill 13-586, "Tax Clarity Act of
2000" (the "Report"), which is set forth in my letter to you of June 30, 20 i l.l Moskal v. United States, 498 U.S. 103, i 1 1(1990); .See also, Pittston Coal Group v. Sebben, 488 U.S. 105, 115(1988) ("It is not the law that a statute can have no effects which are not mentioned in its legislative history.").

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