Trump tax bills

City fights Trump over new D.C. hotel's tax bills

By Josh Gerstein

The city of Washington, D.C. is fighting Donald Trump's legal drive to cut his tax bills for the luxury hotel he's set to open in the Old Post Office Building next month.

Lawyers for the city are arguing that part of the suit Trump filed in June challenging assessments related to the new hotel was brought too late and the rest was brought too soon, according to a motion the city submitted Monday asking to throw the case out.

Attorneys for the Republican presidential candidate and real estate mogul contend that the roughly $1.7 million annual tax bills for the development for 2015 and 2016 were too high because the complex was only partially completed and because the city used erroneous methods in calculating the value of the lease Trump signed with the federal government in 2013 to take over the historic Pennsylvania Avenue complex for between 60 and 100 years.

Trump's suit, filed in D.C. Superior Court, did not state or estimate what he considers a fair assessment of the value of the lease, but documents released Monday along with the city's response show that Trump's development company argued that the lease was worth about $28 million — a far cry from the roughly $98 million value the city originally applied and the $91 million assessment issued after Trump filed initial appeals.

The filings show that as early as March of last year, the city knew Trump was preparing to make trouble about the taxes on the new hotel. "Paid Under Protest and Without Prejudice" is handwritten across the front and often the back of the checks paying the bills.

In the new filing, the city notes that insurance provisions in the lease issued by the General Services Administration deem the value of the building to be $150 million as of 2014 and $220 million when construction was substantially completed. A bank loan financing the project appears to be based on a value of at least $210 million, lawyers from D.C. Attorney General Karl Racine's office added.

The disagreement surrounding the tax bills is just a small part of the acrimony hanging over the project as Trump's team prepares for what it is billing as a "soft opening" of the Trump International Hotel Washington D.C. on September 12.

After Trump made caustic comments about Mexican immigrants during his presidential announcement speech last year, two well-known chefs set to open major eateries at the new hotel — Jose Andres and Geoffrey Zakarian — both backed out. Lawsuits Trump promptly filed against companies associated with each chef are currently in litigation.

Many city officials and local business promoters who might have been expected to trumpet the opening of the new hotel seem likely to stay away, at least through the November election where Trump will be the national GOP standard-bearer. Immigrant rights groups have already protested at the new development and plan more demonstrations that could limit guest interest in staying at the hotel, which is currently offering rooms for its opening starting at an eye-popping $895 a night.

Trump and his team have said they're confident about the success of the project, but have argued in court papers that the cancellation of the two planned restaurants could reduce business for rooms at the hotel. (A branch of the BLT Steak chain is taking over one of the restaurant spaces.)

The court filing Monday argues that Trump's development company for the hotel was more than eight months late in filing the court challenge to the 2015 assessments, can't sue over the $1.7 million bill for 2016 because half of it is still unpaid, and can't challenge its 2017 assessments in court until those bills are paid and the city's review process is completed.

"Like the timely filing of a refund suit for Tax Year 2015, the payment of tax before suing for tax years 2016 and 2017, and the exhaustion of administrative remedies prior to suit for Tax Year 2017, jurisdiction still matters," city lawyers wrote, dropping a footnote saying they were paraphrasing comments by the late musical legend Prince. "The technicalities of tax statutes must be adhered to."

A lawyer handling the tax dispute for Trump, William Bosch, did not respond to an email Monday night seeking comment on the city's filing.

The taxes in dispute are not typical real estate taxes, since the federal government remains the owner of the Old Post Office property and pays no taxes on federally-owned land and buildings. In 2000, the city created a new "possessory interest" tax to capture revenue from private companies leasing space on government property that is otherwise tax exempt.

The new D.C. tax was challenged in court by the developers of Union Station. That litigation was settled and the bill for the project was eventually reduced.