Nathan Response on Tax Opinion

8/6/2019 Nathan Response on Tax Opinion

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GOVERNMENT OF THE DISTRICT OF COLUMBIA

Office of the Attorney General

***-ugust 10,2011

BY EMAIL AND HAND DELIVERY

The Honorable David Catania

The Honorable Mary Cheh

Council of the District of Columbia

The John A. Wilson Building

1350 Pennsylvania Avenue NW

Washington, D.C. 20004

Dear Councilmembers Catania and Cheh:

By letter dated June 20, 2011, Mr. Catania asked for the legal opinion ofthis office concerning

the proper interpretation and administration of the 2001 Tax Clarity Act as it pertains to the

recordation tax for commercial properties. By letter dated July 25,2011 we supplied our written

answer to that question setting forth in detail our opinion and the reasons supporting it.

Apparently, you did not like our opinion, since it did not accord with your pre-conceived notions.

By letter dated August 4, 2011, co-signed by the two of you, you ask that we give you a new

opinion letter restating your views as ours. In other words, as a famous wit once said: "When Iwant your opinion, .. .I'll tell you what it is."

More seriously, this is precisely the problem that many of us perceived about the torture memos

produced by the Office of Legal Counsel ofthe U.S. Department of Justice during the

Administration of President George W. Bush. Those opinions, while far more consequential

than one about a recordation tax, smacked of political coercion, rather than dispassionate legal

analysis. They appear designed to suit the preconceptions of the requesters of legal advice to

justify actions the requesters had taken or wanted to take. I do not intend to have this office

succumb to any political pressure to revise a fully considered legal opinion that is legally sound.

We have given you in writing our legal opinion, and we remain convinced that it is correct.

There is nothing in your August letter that we had not considered previously, and nothing in it

convinces us of any error in our analysis. Your letter takes issue with us for including a reference

to the real world consequences of the matter, i.e., that we do not believe that lawsuits would

succeed if brought seeking additional payments from taxpayers on long since concluded

commercial transactions. You do not purport to disagree with that conclusion. If you do not seek

additional taxes for past transactions, then what is the purpose of your inquiry? If you are

concerned, as are we, about future transactions, the solution is the one I set forth in my letter,

441 Fourth Street, NW, Suite 1100S, Washington, D.C. 20001, (202) 724-1301, Fax (202) 741-0580





August 10, 2011

namely, that you, acting with your colleagues on the Council, amend the statute and create a

legislative history that accords with your beliefs.

I note that your own counsel to the City Council, a former top staffer for Ms. Cheh, provided an

opinion with the conclusion that you demand from us. That is, of course, fully available to you

for any use you wish to make of it. However, I respectfully suggest that a careful analysis of that

well-researched, well-written opinion actually supports our conclusion and not yours.

Your own counsel's opinion states that the language of the statute is ambiguous. It spends five

pages trying to make its way through the ambiguity to try to determine the meaning of the

language. The opinion then notes that the legislative history is unclear and finds that the record

is "mixed." It concedes that the fiscal impact statement provided for the legislation "did not

contemplate an increase in revenue-and certainly not in tens of millions" Finally, it concedes,

as it must, that the executive agency charged with administering the act has interpreted the law

contrary to your view and that judicial precedents hold that deference must be accorded to an

expert administrative agency. Yet notwithstanding each of these components - which we

respectfully suggest supports our conclusion - your lawyer reaches a conclusion that accords

with yours. Indeed, the only thing I have seen since we rendered our opinion that is persuasive is

the Council's counsel's explanation of why the language of the statute is ambiguous. In light of

that conclusion, there is no escaping resort to the legislative history, which only underscores the

ambiguity.

Your six-page letter containing your "fervent" beliefs and setting forth your "disappointment" in

our conclusion does not respond to our request in our earlier letter urging the Council to resolve

this matter in a manner clearly available to it by enacting a crystal clear and unequivocal statute,

with an equally clear and unambiguous legislative history, to provide for the tax collectionsgoing forward that both you and the Gray Administration desire. Since you seem so interested in

my advice, I am quite disappointed that you seem loathe to take it.

Finally, your letter indicates that, although you disagree with my interpretation of the Tax Clarity

Act of2000, you are even "far more troubled" by my review of the post-2000 application of the

Act and especially by "the conduct of the CFO after its passage." You remain unwilling as yet to

accept the OCFO's claim that during 2001-2007 it collected the recordation tax on the entire

amount of the indebtedness. And you find "[m]ost troubling" and "the most disconcerting aspect

of this issue" that "if the tax [on the entire amount of the indebtedness] was collected between

2001 and 2007, ... the CFO, at his sole and absolute discretion, stopped collecting a tax that OTR

had purportedly collected for six years, without notification to the Council, the Mayor, or thegeneral public and certainly without a change in the underlying law." Even though you do not

seem to put much stock in my opinions (except where they match yours), your letter asks for my

opinion on two additional questions: 1) Does the CFO have legal authority to set out a policy,

which by its application, is contrary to the plain meaning of a law? 2) Does the CFO have the

legal authority to unilaterally change the application of the law as a policy decision, without

notice to the Councilor the Mayor?





August 10,2011

In the interest of accommodating you and allowing us all to move on to more productive matters,

let me answer your questions briefly.

Your first question is rhetorical. As noted in my previous letter and in the opinion of your

General Counsel, both the statutory language and the legislative history should be considered in

construing a law like the Tax Clarity Act. Here, the legislative history establishes conflict with

the statutory language as to whether the recordation tax should be imposed on the full amount of

the refinance of commercial property debt. This either 1) creates an ambiguity that the CFO, as

the official charged with implementing the Act, could unilaterally fill in a reasonable way by

administrative policy; or 2) establishes clear legislative intent and policy, which the CFO is

bound to follow, despite the plain language of the statute. In the present matter, the latter would

mean that the recordation tax is applicable only to the difference between the new indebtedness

and the principal balance due on the original commercial property debt. Whichever way this

issue is conceptualized, I continue to believe there is not sufficient basis to conclude that theCFO's current policy and practice of applying the recordation tax in this way are unreasonable or

unlawful.

With respect to your second question, I am not aware of any provision in the Tax Clarity Act or

other law that requires the CFO to notify the Mayor or the Council whenever he either 1)

unilaterally adopts/changes an administrative policy, in a reasonable way, to address a statutory

ambiguity; or 2) determines, based on further reading of a statute's language and legislative

history (and other relevant sources) that his office's earlier interpretation was wrong and needs to

be changed to comport with Council legislative intent and policy. That is the legal question and

answer. Apart from the law, whether it is desirable for the CFO, in his discretion, to provide the

Council and the Mayor with formal notice of certain administrative changes affecting tax

collection is up to the CFO, the Council, and the Executive Office of the Mayor to decide. For

what it is worth, I believe prudence, due deference to the Council and the Mayor and good

judgment suggest that such notice should in the normal course be provided.

Respectfully, ..

~~l·~~rvin B. Nathan ----

Attorney General

for the District of Columbia

cc: The Honorable Vincent C. Gray, Mayor

Dr. Natwar M. Gandhi, Chief Financial Officer

All Councilmembers

Nathan Response on Tax Opinion

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