District of Columbia Taxes

Business Tax Rates—Premium tax rates; prepaid wireless E911 charge.

L. 2010, Act 18-462 (Law 18-223), effective 09/24/2010, enacts the “Fiscal Year 2011 Budget Support Act of 2010,” which increases the premium tax on insurance companies and associations to 2% from 1.7% under D.C. Code Ann. §31-205(b) and D.C. Code Ann. §47-2608(a)(1); the provisions increasing these rates expire on September 30, 2015. The Act also imposes a prepaid wireless charge of 2.0% of the sales price per retail transaction occurring in the District; the amount of the charge must be separately stated on an invoice, receipt, or similar document.

Sales Tax Rates—Medical marijuana and soft drinks.

L. 2010, Act 18-462 (Law 18-223), effective 09/24/2010, enacts the “Fiscal Year 2011 Budget Support Act of 2010,” which imposes a 6% sales tax on gross receipts from the sale of or charges for medical marijuana, as defined in the Legalization of Marijuana for Medical Treatment Initiative of 1999 (D.C. Act 13-138). Effective October 1, 2010, 6% sales tax is imposed on soft drinks, defined as any nonalcoholic beverage with natural or artificial sweeteners, which: (1) does not contain milk or milk products, soy, rice or similar milk substitutes, fruit or vegetable juice (unless the beverage is carbonated), or coffee, coffee substitutes, cocoa, or tea; and (2) that is not prepared for immediate consumption.

Property Tax Rates—Rates for tax year 2011.

L. 2010, Act 18-462 (Law 18-223), effective 09/24/2010, enacts the “Fiscal Year 2011 Budget Support Act of 2010,” which establishes four classes of property for tax year 2011 and thereafter and, for tax year 2011 and thereafter, and sets the tax rate for Class 3 Property at $5 for each $100 of assessed value and for Class 4 Property at $10 for each $100 of assessed value.

CORPORATE INCOME TAX—Withholding.

L. 2010, Act 18-462 (Law 18-223), effective 09/24/2010, enacts the “Fiscal Year 2011 Budget Support Act of 2010,” which provides that an employee receiving wages will on any day be entitled to the withholding exemptions allowed by law, unless the Mayor determines that an alternative withholding method is warranted. An alternative method would require withholding exemptions to be set at zero if the Mayor notifies the taxpayer that the employee has an unpaid tax liability, the employee failed to file a required District of Columbia income tax return, or the employee is subject to a tax refund interception request. Once these conditions no longer apply, the employee can request an increase in withholding exemptions. The legislation also provides that an exemption certificate is invalid if it does not contain the information required, or if it contains false or fraudulent information. An exemption certificate is valid if it states a number of exemptions that is less than the number of exemptions to which the individual is entitled, or a number of additional exemptions less than or equal to the fraction rounded down to the nearest whole number the numerator of which equals the excess of the total of estimated itemized deductions, alimony payments, allowable child care expenses, qualified retirement contributions, business losses, and employer business expenses over the standard deduction allowance, and the denominator of which equals the amount allowed for each exemption for the applicable tax year. The legislation also amends provisions related to withholding personal income tax on lottery winnings to provide definitions and clarify that withholding is required whether winnings are actually or constructively received.

PERSONAL INCOME TAX—Withholding.

L. 2010, Act 18-462 (Law 18-223), effective 09/24/2010, enacts the “Fiscal Year 2011 Budget Support Act of 2010,” which provides that an employee receiving wages will on any day be entitled to the withholding exemptions allowed by law, unless the Mayor determines that an alternative withholding method is warranted. An alternative method would require withholding exemptions to be set at zero if the Mayor notifies the taxpayer that the employee has an unpaid tax liability, the employee failed to file a required District of Columbia income tax return, or the employee is subject to a tax refund interception request. Once these conditions no longer apply, the employee can request an increase in withholding exemptions. The legislation also provides that an exemption certificate is invalid if it does not contain the information required, or if it contains false or fraudulent information. An exemption certificate is valid if it states a number of exemptions that is less than the number of exemptions to which the individual is entitled, or a number of additional exemptions less than or equal to the fraction rounded down to the nearest whole number the numerator of which equals the excess of the total of estimated itemized deductions, alimony payments, allowable child care expenses, qualified retirement contributions, business losses, and employer business expenses over the standard deduction allowance, and the denominator of which equals the amount allowed for each exemption for the applicable tax year. The legislation also amends provisions related to withholding personal income tax on lottery winnings to provide definitions and clarify that withholding is required whether winnings are actually or constructively received.

LIMITED LIABILITY COMPANIES—LLC fees.

L. 2010, Act 18-462 (Law 18-223), effective 09/24/2010, enacts the “Fiscal Year 2011 Budget Support Act of 2010,” which authorizes the Mayor to set and revise limited liability corporation (LLC) fees for filing, furnishing, or issuing any document or certificate, license fees, and miscellaneous fees and charges, rather than having them prescribed by statute. Such fees and charges have to be established by rules, and any proposed rules have to be submitted to the Council for a 90-day period of review. The legislation enacts rules incorporating a new fee schedule for LLCs.

LIMITED LIABILITY COMPANIES—LLC fees.

L. 2010, Act 18-543, effective 10/05/2010 (expires 01/03/2010), repeals the “Fiscal Year 2010 Balanced Budget Support Temporary Act of 2010 (Act 18-461 (Law 18-222), effective 09/24/2010). Act 18-461 authorized the Mayor to set and revise limited liability corporation (LLC) fees for filing, furnishing, or issuing any document or certificate, license fees, and miscellaneous fees and charges, rather than having them prescribed by statute. Such fees and charges had to be established by rules, and any proposed rules had to be submitted to the Council for a 90-day period of review. The legislation enacted rules incorporating a new fee schedule for LLCs.

LIMITED LIABILITY PARTNERSHIPS—LLP fees.

L. 2010, Act 18-462 (Law 18-223), effective 09/24/2010, enacts the “Fiscal Year 2011 Budget Support Act of 2010,” which authorizes the Mayor to set and revise limited liability partnership (LLP) fees and charges for filing of documents and issuance of certificates and other documents, for providing certified copies of statements, for recording statements, and for taking other actions. Such fees and charges have to be established by rules, and any proposed rules have to be submitted to the Council for a 90-day period of review rather than a 45-day review period. The legislation enacts rules incorporating a new fee schedule for LLPs.

LIMITED LIABILITY PARTNERSHIPS—LLP fees.

L. 2010, Act 18-543, effective 10/05/2010 (expires 01/03/2010), repeals the “Fiscal Year 2010 Balanced Budget Support Temporary Act of 2010 (Act 18-461 (Law 18-222), effective 09/24/2010). Act 18-461 authorized the Mayor to set and revise limited liability partnership (LLP) fees and charges for filing of documents and issuance of certificates and other documents, for providing certified copies of statements, for recording statements, and for taking other actions. Such fees and charges had to be established by rules, and any proposed rules had to be submitted to the Council for a 90-day period of review rather than a 45-day review period. The legislation enacted rules incorporating a new fee schedule for LLPs.

SALES AND USE TAX—Taxation of medical marijuana and soft drinks.

L. 2010, Act 18-462 (Law 18-223), effective 09/24/2010, enacts the “Fiscal Year 2011 Budget Support Act of 2010,” which imposes a 6% sales tax on gross receipts from the sale of or charges for medical marijuana, as defined in the Legalization of Marijuana for Medical Treatment Initiative of 1999 (D.C. Act 13-138). Effective October 1, 2010, 6% sales tax is imposed on soft drinks, defined as any nonalcoholic beverage with natural or artificial sweeteners, which: (1) does not contain milk or milk products, soy, rice or similar milk substitutes, fruit or vegetable juice (unless the beverage is carbonated), or coffee, coffee substitutes, cocoa, or tea; and (2) that is not prepared for immediate consumption. Also, bonds for tax increment financing can be issued before January 1, 2014 (previously, January 1, 2010).

SALES AND USE TAX—Pending legislation—restaurant and store exemption.

The District has sent to Congress for review the “Supermarket Tax Exemption Clarification Temporary Amendment Act of 2010,” to correct the list of entities that are eligible for tax exemptions beginning October 1, 2010. Beginning on or after October 1, 2010, a qualified restaurant or retail store (previously, a qualified supermarket, qualified restaurant, or retail store) will not be eligible for an exemption under D.C. Code Ann. §47-3802(a) until the fiscal effect of the new exemption is included in an approved budget and financial plan. (L. 2010, Act 18-545, effective after a 30-day period of Congressional review.)

PROPERTY—Abatements; property classes; rates.

L. 2010, Act 18-462 (Law 18-223), effective 09/24/2010, enacts the “Fiscal Year 2011 Budget Support Act of 2010,” which repeals D.C. Code Ann. §47-1082(c) and D.C. Code Ann. §47-1082(d) that provide for forgiveness of property taxes assessed or paid by Studio Theatre, Inc. from January 1, 2005 forward; and repeals §3 of the Heights on Georgia Avenue Tax Exemption Act of 2009, §3 of the Studio Theatre Housing Property Tax Exemption Equitable Relief Act of 2009, §3 of the Jubilee Housing Residential Rental Project Real Property Tax Exemption Act of 2010, §3 of the Campbell Heights Residents Real Property Tax Exemption Act of 2010, §3 of the Park Place at Petworth, Highland Park, and Highland Park Phase II Economic Development Act of 2010, and §3 of the IHOP Restaurant #3221 Tax Exemption Clarification Temporary Act of 2010 which make abatements/exemptions under those Acts conditional on the inclusion of their fiscal effect in an approved budget and financial plan. Property tax abatements are added for the First Congregational United Church of Christ and modified for the Kelsey Gardens Redevelopment Project. The Mayor is authorized to grant property tax exemptions to nonprofits locating in emerging commercial neighborhoods. Also, a 30-year limited abatement of property tax is provided for real property owned by The Pew Charitable Trusts, and a payment in lieu of tax is provided for Union Station Redevelopment Corporation. Bonds for tax increment financing can be issued before January 1, 2014 (previously, January 1, 2010). Finally, the legislation establishes four classes of property for tax year 2011 and thereafter and, for tax year 2011 and thereafter, and sets the tax rate for Class 3 Property at $5 for each $100 of assessed value and for Class 4 Property at $10 for each $100 of assessed value.

PROPERTY—Pending legislation—restaurant and store exemption.

The District has sent to Congress for review the “Supermarket Tax Exemption Clarification Temporary Amendment Act of 2010,” to correct the list of entities that are eligible for tax exemptions beginning October 1, 2010. Beginning on or after October 1, 2010, a qualified restaurant or retail store (previously, a qualified supermarket, qualified restaurant, or retail store) will not be eligible for an exemption under D.C. Code Ann. §47-3802(a) until the fiscal effect of the new exemption is included in an approved budget and financial plan. (L. 2010, Act 18-545, effective after a 30-day period of Congressional review.)

PROPERTY—Pending legislation—mixed use development project.

The District has sent to Congress for review the “14W and Anthony Bowen YMCA Project Tax Abatement Implementation Clarification Temporary Act of 2010,” to clarify the real property tax abatement provided to the 14W and Anthony Bowen YMCA project. The 14W and the Anthony Bowen Property will be exempt from real property taxation for 20 consecutive years, 10 years capped at $68,400 (previously, the Fiscal Year 2008 rate), with a 10% increase per annum in years 11 through 20, until the annual real property taxation equals 100%. In addition, the Act amends the definition of the “14W and the YMCA Anthony Bowen Property” to mean the real property and improvement described as Lot 64 (formerly Lots 18, 19, 20, 120, 121, 160, 161, 828, and 835), Square 234, owned by Perseus Realty, LLC (or as the land for such lots may be subdivided into a record lot or lots or assessment and taxation lots, condominium lots, air rights lots, or any combination in the future). (L. 2010, Act 18-546, effective after a 30-day period of Congressional review.)

PROPERTY—Pending legislation—redevelopment project abatement.

The District has sent to Congress for review the “Kelsey Gardens Redevelopment Project Real Property Limited Tax Abatement Assistance Clarification Temporary Act of 2010,” to clarify that the real property tax abatement previously provided for the Kelsey Gardens redevelopment project is predicated on obtaining a mortgage from either the U.S. Department of Housing and Urban Development or any other commercial mortgage entity (not just the U.S. Department of Housing and Urban Development). The real property tax abatement will expire on the stated maturity date of a mortgage from either the U.S. Department of Housing and Urban Development or other commercial mortgage entity. (L. 2010, Act 18-547, effective after a 30-day period of Congressional review.)

CIGARETTE, ALCOHOL & MISCELLANEOUS TAXES—Hospital assessment.

L. 2010, Act 18-543, effective 10/05/2010 (expires 01/03/2010), repeals the “Fiscal Year 2010 Balanced Budget Support Temporary Act of 2010 (Act 18-461 (Law 18-222), effective 09/24/2010). Act 18-461 required each hospital in the District to pay an annual assessment as follows: (1) for fiscal year 2010, $500 per licensed bed, payable by September 1, 2010, and (2) for fiscal years 2011 through 2014, $1,500 per licensed bed. Assessments not paid on time were subject to 1.5% interest per month or fraction plus an administrative penalty of 10% of the assessment. St. Elizabeth's Hospital and any hospital operated by the federal government were excluded from the assessment.

ESTATE & GIFT, INHERITANCE, AND TRANSFER—Estate and generation skipping tax.

L. 2010, Act 18-462 (Law 18-223), effective 09/24/2010, enacts the “Fiscal Year 2011 Budget Support Act of 2010,” provides that effective January 1, 2011, certain formula clauses are to be construed to refer to federal estate and generation-skipping transfer tax rules applicable to estates of decedents dying on December 31, 2009. The Act provides that a will or trust of a decedent who dies after December 31, 2009 and before January 1, 2011, that contains a formula referring to the “unified credit,” “estate tax exemption,” “applicable exemption amount,” “applicable credit amount,” “applicable exclusion amount,” “generation-skipping transfer tax exemption,” “GST exemption,” “marital deduction,” “maximum marital deduction,” or “unlimited marital deduction,” or that measures a share of an estate or trust based on the amount that can pass free of federal estate taxes or the amount that can pass free of federal generation-skipping transfer taxes, or that is otherwise based on a similar provision of federal estate tax or generation-skipping transfer tax law, will be deemed to refer to the federal estate and generation-skipping transfer tax laws as they applied with respect to estates of decedents dying on December 31, 2009. However, this provision will not apply with respect to a will or trust that is executed or amended after December 31, 2009, or that manifests an intent that a contrary rule will apply if the decedent dies on a date on which there is no then-applicable federal estate or generation-skipping transfer tax.

PUBLIC UTILITIES—Prepaid wireless E911 charge.

L. 2010, Act 18-462 (Law 18-223), effective 09/24/2010, enacts the “Fiscal Year 2011 Budget Support Act of 2010,” which imposes a prepaid wireless chare of 2.0% of the sales price per retail transaction occurring in the District. The charge must be collected by the seller from the consumer, and remitted to the District. The amount of the charge must be separately stated on an invoice, receipt, or similar document.

INSURANCE—Premium assessment equalization.

L. 2010, Act 18-462 (Law 18-223), effective 09/24/2010, enacts the “Fiscal Year 2011 Budget Support Act of 2010,” which increases the premium tax on insurance companies and associations to 2% from 1.7% under D.C. Code Ann. §31-205(b) and D.C. Code Ann. §47-2608(a)(1). The provisions increasing these rates expire on September 30, 2015. The Health Maintenance Organization Act of 1996 is amended to require publicly funded health maintenance organizations and prepaid health plans to pay the same premium assessment that is levied on commercial health maintenance organizations. Thus fees, receipts, or consideration received pursuant to the District Medicaid program, the Healthy DC Program, and the DC HealthCare Alliance are no longer excluded from taxable amounts received by such organizations or plans as policy and membership fees, and net premium receipts or consideration. Also, the term “health maintenance organization” now includes prepaid health plans. Policy or membership fees, net premium receipts, or consideration received from or paid by the D.C. Department of Health Care Finance is excluded from “direct gross receipts” for purposes of the assessment that is levied on the direct gross receipts of insurers and health maintenance organizations under the Insurance Regulatory Trust Fund Act of 1993.

INITIAL TAXES OR QUALIFICATION—Corporate fees.

L. 2010, Act 18-462 (Law 18-223), effective 09/24/2010, enacts the “Fiscal Year 2011 Budget Support Act of 2010,” which authorizes the Mayor to set and revise corporate fees for filing, furnishing, or issuing any document or certificate, license fees, and miscellaneous fees and charges, rather than having them prescribed by statute. Such fees and charges have to be established by rules, and any proposed rules have to be submitted to the Council for a 90-day period of review. The legislation enacts rules incorporating a new fee schedule, which includes an additional fee to cover the costs of enhanced technological capabilities of the Corporations Division. This fee is imposed beginning June 1, 2010 and expiring October 1, 2013, in an amount equal to 10% of the total cost of any filing or document that is submitted to or requested from the Corporations Division.

INITIAL TAXES OR QUALIFICATION—Corporate fees.

L. 2010, Act 18-543, effective 10/05/2010 (expires 01/03/2010), repeals the “Fiscal Year 2010 Balanced Budget Support Temporary Act of 2010 (Act 18-461 (Law 18-222), effective 09/24/2010). Act 18-461 authorized the Mayor to set and revise corporate fees for filing, furnishing, or issuing any document or certificate, license fees, and miscellaneous fees and charges, rather than having them prescribed by statute. Such fees and charges had to be established by rules, and any proposed rules had to be submitted to the Council for a 90-day period of review. The legislation enacted rules incorporating a new fee schedule, which included an additional fee to cover the costs of enhanced technological capabilities of the Corporations Division. This fee is imposed beginning June 1, 2010 and expiring October 1, 2013, in an amount equal to 10% of the total cost of any filing or document that is submitted to or requested from the Corporations Division.