The document summarizes tax updates and proposals from the District of Columbia's Tax Revision Commission and Mayor Gray's FY2015 budget. Key points include proposed changes to business taxes like franchise rates and brackets, individual income tax brackets, eliminating some QHTC benefits, decreasing the sales tax rate, and increasing property tax relief benefits and eligibility.

1. Washington DC Economic Partnership
District of Columbia
Office of Tax and Revenue
Tax Update
Stephen M. Cordi
Deputy Chief Financial Officer
April 16, 2014

2. Tax Revision Commission
 Commission, chaired by former mayor
Anthony Williams, released its
recommendations to the Council on
February 12, 2014
 Made 10 major recommendations of which
5 have been picked up, at least in part, by
Mayor Gray in his FY 2015 budget proposal

3. Tax Revision Commission - 2
 Mayor is proposing for business taxes
 Beginning for tax year 2015
 Franchise tax rate of 9.4%
 Single sales factor
 An exemption for proprietary trading
 Unified treatment of tobacco tax –
essentially taxing other tobacco products
on the basis of the rate the cigarette tax
is applied to the wholesale price of
cigarettes

4. Tax Revision Commission - 3
 Mayor is proposing for individual taxes
 Beginning for tax year 2015
 New brackets:
 0 - $10k @ 4%
 $10k - $40k @6.5%
 $40k - $60k @ 7.5%
 $60k - $350k @ 8.5%
 > $350k @ 8.95%

5. Tax Revision Commission - 4
 Failing to make the Mayor’s cut were:
 Expand the sales tax to more services – primarily
construction services
 Add a use tax line to income tax returns
 Increase general sales tax from 5.75% to 6%
 Increase standard deduction & personal
exemption to federal level & expand EITC to
singles
 Raise the estate tax threshold to $5.25 million
 Levy a local services fee of $25 per quarter on
non-governmental employers

6. Qualified High Technology
Company (QHTC) - 1
Revisions, enacted in March 2013:
 Eliminates exclusion for capital gain from
the sale of a QHTC asset held more than 5
years
 Mandates that the minimum requirement
for 2 employees work in DC
 Requires that the 51% requirement of
income from high tech activities relate to
DC income only

7. Qualified High Technology
Company (QHTC) - 2
oEliminates technology zone
requirement
oBeginning 1/1/12, the 5-year period
of the 0% franchise tax rate does not
start until QHTC has taxable income
oLimits the amount of franchise tax
relief at the 0% rate to $15 million

8. Sales Tax Rate Change
 Effective October 1, 2013, the DC
sales tax rate decreases to 5.75%
 This decrease applies only to the
general 6% sales tax.
 It does not affect the sales tax on
medical marijuana

9. Clean Hands
 Clean Hands certificate required for
a wide variety of DC related
activities
 Failure to file a required return is
now a basis for denying clean hands

10. Restaurant Utility Tax
 District restaurants are entitled to
an exemption from sales tax on
their utility use
 Must be separately metered or sub-
metered restaurants.
 Includes: Pizzeria, delicatessen, ice
cream parlor, cafeteria, take-out
counter and caterer, and banquet
and food processing areas in hotels.

11. Motor Fuel Tax
 Rate changes to 8%
 2 different base periods per year
 FY 2014 Rate – Revised Notice

12. Individual Income Tax Changes
 Personal Exemption & Standard
Deduction
 The base CPI for the COLA changed last
year and indexing added.
 Amounts will be analyzed annually.
 Interest on Out of State Bonds.
 Taxation of interest on out of state bonds is
repealed.
 Schedule H Property Tax Relief

13. Schedule H Property Tax Relief
 Increases income eligibility
 Increases maximum benefit
 Allows > 1 filing unit per household
 Adds a cost of living adjustment
 Applicable as of 1/1/2014

14. Same Sex Marriage Tax Issues
 New law required that a clarification
be added to the estate tax form for
same sex marriage
 The Supreme Court and
subsequent IRS Ruling negates the
need for preparing Dummy returns
for income and estate tax and the
required form clarification.