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Tax officials reduce Trump’s tax bill on D.C. hotel by nearly $1 million

Donald Trump’s company successfully appealed the assessment of its D.C. hotel, reducing its tax bill by nearly $1 million. (Photo Linda Davidson/The Washington Post)

President Trump’s D.C. hotel received a $53.6 million reduction in its 2018 assessment from the District of Columbia tax office, saving his company nearly $1 million.

The District tax office initially valued the Trump International Hotel, in the federally owned Old Post Office building, at $163,587,412, according to a Jan. 12 written agreement.

D.C. assesses property two years ahead of when it is taxed, meaning the 2018 bill is based on an assessment of the building from 2016, the year it opened.

Apparently the hotel did not debut as strongly as tax officials initially expected however, because after receiving additional information from the Trump Organization, the office agreed to reduce the assessment to $110 million, 32.7 percent less.

The change will reduce the property’s 2018 tax bill from $3,020,367 to $2,029,000, for a savings of $991,367.

Because the Trump Organization does not own the building — it leases the property from the General Services Administration — the company is responsible for paying possessory interest taxes, a stand-in for property taxes applied to businesses on public land.

In a statement to The Washington Post, D.C. Chief Financial Officer Jeffrey S. DeWitt said the initial assessment was “based on assessments on the city’s other luxury hotels and the rents paid to GSA on leases to single users for entire office buildings.”

DeWitt said the new assessment was agreed to “after the city received actual cost and income information through discovery in the appeal process and we believe represents a fair value.”

A Trump Organization spokeswoman declined comment.

Trump resigned from his company when he entered the White House but still benefits from the project financially, despite his company leasing the property from the federal government.

The arrangement has prompted an outcry and a series of lawsuits from ethical experts, good government groups and elected Democrats, in part because the hotel does business with foreign governments.

It isn’t unusual for commercial property owners to appeal their tax assessments. Hundreds do so every year, through a three-step appeals process that ends with a D.C. Superior Court finding if the two sides can’t come to an agreement.

D.C. assessed the building at $91 million the three previous years, when the it was either mostly vacant or under construction. Tax records show that the Trump Organization appealed assessments in previous years, but received no reduction from the tax office, an appeals board or the court.

Vernon W. Johnson, III, an attorney at Nixon Peabody in Washington, said that most tax appeals are not effective but that the Trump Organization must have provided convincing information that the business was not worth as much in 2016 as the assessors expected.

“That tells me that the owner was able to show the tax office that the actual income was much lower than the District was assuming, and the District must have been receptive to that because they agreed without further appeals,” he said.

DeWitt’s office did not disclose the information it received from the Trump Organization that changed the assessment. However according to records provided by the company to the GSA — and made public by Congressional Democrats — Trump lost more than $1.1 million in the period the hotel was open from September to October, shortly before the election. Such losses could reduce the tax assessment, experts said.

After Trump won the election, the hotel’s fortunes seemed to swing dramatically, as it earned a $1.97 million profit in the first four months of 2017 according to financial statements the GSA accidentally posed online.

Attorney David A. Fuss of Wilkes Artis represented the hotel for the Trump Organization in previous years, and declined to discuss the property. But he said that “it’s not an uncommon result” to see property owners win appeals, particularly on complex properties that are difficult to compare.

“Possessory interest taxes are rather on the new side in the District of Columbia, and there’s a deeper analysis that has to be undertaken,” he said. The same taxes apply to shops in Union Station and to the Howard Theatre, a private business that operates in a city-owned venue.

Although Trump received only 12,723 votes in D.C., compared to 282,830 for Hillary Clinton, officials said his company received a fair shake from the assessment process, which is independent of the administration of D.C. Mayor Muriel E. Bowser (D).

Gregory C. Syphax, chair of the D.C. Real Property Tax Appeals Commission, which hears some appeals but did not weigh in on Trump’s 2018 assessment, said: “No matter who they are, everyone gets treated the exact same way.”

Follow Jonathan O’Connell on Twitter: @oconnellpostbiz