The Attorney General for the District of Columbia, Brian L. Schwalb, has announced a settlement with billionaire Michael Saylor and his company, MicroStrategy, Inc., in which they will pay $40 million to resolve a lawsuit alleging violations of the District’s False Claims Act and tax laws. This settlement is considered the largest income tax recovery in District history. The lawsuit alleged that Saylor falsely claimed to live in lower-tax Virginia and Florida to avoid paying income taxes to the District of Columbia as a city resident. Saylor, with an estimated net worth of $4.8 billion, is known for his personal holdings of bitcoin and investments in MicroStrategy, which has heavily invested in cryptocurrency.
The False Claims Act imposes liability on those who commit violations of the tax law and also provides whistleblower protections for those who report wrongdoing. The District’s FCA was amended in 2020 to include specific references to taxation and increase rewards for informants who report tax fraud. The lawsuit against Saylor alleged that he failed to pay income taxes owed to the District from 2014 to 2020. The OAG intervened in the case and filed a complaint against Saylor and MicroStrategy, claiming that Saylor avoided paying over $25 million in District income taxes by falsely claiming residency in Virginia and Florida. The complaint also accused MicroStrategy of issuing false information, such as the wrong address on Saylor’s tax forms.
The District alleged that Saylor lived in D.C. but claimed residency in Virginia and Florida to avoid paying higher taxes in the District. The OAG provided evidence, including social media posts and Excel logs tracking Saylor’s physical location, to support their claims. Saylor and MicroStrategy denied any wrongdoing, with Saylor maintaining that he has been a resident of Florida since 2012 and disputing the allegations that he was ever a resident of the District of Columbia. As part of the settlement agreement, Saylor must comply with the District’s tax laws, file income tax returns, and pay income taxes to the District in any year where he owns or rents a residence in D.C. and is present there for at least 183 days.
MicroStrategy also issued a statement confirming that the lawsuit was a personal tax matter involving Saylor, and the company was not responsible for overseeing his individual tax responsibilities. As part of the settlement, Saylor will pay the $40 million settlement amount to the District, and MicroStrategy will not be obligated to make a financial contribution. Shares of the company were up 3.33% following the announcement of the settlement. The OAG’s statement emphasized the importance of holding tax cheats accountable and ensuring that all residents, regardless of wealth or status, are subject to the law. Schwalb stated that the settlement with Saylor and MicroStrategy sends a clear message that tax evasion will not be tolerated in the District of Columbia.
