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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: May 25, 2000

FROM: Barry McVay, CPCM

SUBJECT: General Services Administration Acquisition Regulation (GSAR); Tax Adjustment

SOURCE: Federal Register; May 25, 2000, Vol. 65, No. 102, page 33799

AGENCIES: Office of Acquisition Policy, General Services Administration (GSA)

ACTION: Proposed Rule

SYNOPSIS: GSA is proposing to amend the GSAR to add a new clause, 552.270-30, Tax Adjustment, for incorporation into acquisitions of leasehold interest in real property when GSA determines that an adjustment is necessary to account for changes in real estate taxes.

EDITOR'S NOTE: The GSAR is Chapter 5 of Title 48 of the Code of Federal Regulations.

DATES: Submit comments on or before July 24, 2000.

ADDRESSES: Submit written comments to General Services Administration, Office of Acquisition Policy, GSA Acquisition Policy Division (MVP), 1800 F Street, NW, Room 4027, Washington, DC 20405.

FOR FURTHER INFORMATION CONTACT: Cecelia L. Davis, GSA Acquisition Policy Division, 202-219-0202.

SUPPLEMENTAL INFORMATION: The GSAR does not have any clauses that provide for adjustment of rent for changes in real estate taxes. GSA is proposing to add GSAR 552.270-30 to provide a mechanism for adjusting rent due to changes in real estate taxes.

GSA 552.270-30 would provide for the following:

• Paragraph (b) would require that the government make a single lump sum payment for its share in any increase in real estate taxes, or receive an annual rental credit or lump sum payment for its share in any decrease in real estate taxes.
  
  
• Paragraph (c) would require the lessor to furnish the contracting officer with copies of each of the following within ten (10) calendar days of receipt: "(1) any notice which may affect the valuation of land and buildings covered by this lease for real estate tax purposes; (2) any notice of a tax credit or tax refund related to land and buildings covered by this lease; [and] (3) each tax bill related to land and building covered by this lease."
  
  
• Paragraph (d) would provide procedures should the real estate taxes be increased:
  
  
  • The lessor would be required to submit a proper invoice (as described in GSAR 552.232-75, Prompt Payment) for the tax adjustment. The invoice must include the calculation of the adjustment for the tax year, and a copy of all paid tax receipts for the tax year (if the taxing authority does not give tax receipts, the lessor must provide other similar evidence of payment acceptable to the contract officer). The invoice and tax receipts must be submitted no later than 60 days after the final tax payment for the year is due. If the lessor fails to submit a timely invoice and tax receipts, "then the lessor waives its right to receive payment for the increased taxes."
    
    
  • Upon receipt of a proper invoice and evidence of payment, the government would have to pay no later than 30 days after receipt of the invoice or 30 days after the anniversary date of the lease, whichever is later. If the lease terminates before the end of a tax year, payment for the tax increase due would be prorated based on the number of days the government occupied the space.
    
    
• Paragraph (e) would provide procedures should the real estate taxes be decreased:
  
  
  • The government would be entitled to a pro rata credit for the reduction of taxes, and the government will apply the credit as a deduction from rent.
    
    
  • Any credit due after the expiration or earlier termination of the lease would be paid in a lump sum or applied as a rental credit under a succeeding lease, at the contracting officer's direction. If the contracting officer directs the payment of a lump sum, the lessor would be required to make payment within 15 days or interest would start to accrue. The interest rate would be that established by the Secretary of the Treasury under the Contract Disputes Act.
  
  
• Paragraph (f) contains a blank space for the government's percentage of occupancy to be inserted. This percentage would be used to determine the government's share in any tax increases or decreases.
  
  
• Paragraph (g) would state that "the government may direct the lessor upon reasonable notice to initiate a tax appeal or the government may decide to contest a tax assessment on behalf of both the government and the lessor or for the government alone." The lessor would be required to cooperate with the government in such actions.

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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