FY 2025 Budget Support Act Funds New Tax Abatement in Central Washington, D.C.

The Council of the District of Columbia held its second vote on the fiscal year (FY) 2025 Budget Support Act (BSA), which was unanimously approved on June 25, 2024. As part of the amended text, the Council funded the Central Washington Activation Conversion Program Amendment Act of 2024, which establishes a new tax abatement program for the "repositioning" of buildings that results in:

• conversion of the building from primarily office to another commercial (non-residential) use or
• an upgrade in the class of existing office space from a class below Class A to Class A or higher

Properties eligible for the abatement must be located within the Central Washington Area as defined in the District of Columbia Comprehensive Plan, plus 1,750 linear feet in any direction, and must convert at least 50,000 square feet to qualify. The dollar amount of the abatement is the amount by which the real property taxes imposed on the subject property would have increased between the base year and the relevant real property tax year, absent the abatement. The abatement period is 15 years.

Permanent and emergency versions of the BSA have been sent to Mayor Muriel Bowser for signature. The FY 2025 budget takes effect on Oct. 1, 2024. However, the authority to begin building out the program is effective as soon as the mayor approves the emergency version of the BSA.

Of note, this tax abatement for repositioned commercial properties is different from the Housing in Downtown tax abatement program – about which Holland & Knight has previously reported – and provides a tax incentive for buildings converting from primarily commercial to primarily residential use.

If you have any questions, please contact the authors.

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