Perspectives

District of Columbia FY 2015 Budget Support Act of 2014

Multistate tax alert | December 5, 2014

​On November 12, 2014, the District of Columbia (“District”) Fiscal Year 2015 Budget Support Act of 2014 (Permanent Act)¹ (“Budget Support Act”) was transmitted to the U.S. Congress.²

Provisions of the Budget Support Act

On November 12, 2014, the District of Columbia (“District”) Fiscal Year 2015 Budget Support Act of 2014 (Permanent Act)1 (“Budget Support Act”) was transmitted to the U.S. Congress.2 In the District, permanent legislation only becomes law after it is approved by Congress,3 which is deemed to occur if Congress does not enact a joint resolution to repeal the legislation within the 30-calendar-day period defined in D.C. Code Ann. § 1-206.02(c)(1). As of the date of this Tax Alert, the projected law date (enactment date) of the Budget Support Act is December 27, 2014.4 If enacted as final law, this legislation would make the following permanent changes to District law:

  • A phased-in reduction of the Unincorporated and Incorporated Business Franchise Tax rates
  • The use of single sales factor apportionment for all business income
  • A revision to the sourcing rules for sales apportionment purposes
  • The exemption of certain investment fund income from the Unincorporated Business Franchise Tax
  • The addition of a new personal income tax bracket and a reduction of personal income tax rates for certain taxpayers
  • The expansion of the sales tax base to include a variety of services

In this Tax Alert we summarize these provisions of the Budget Support Act, which have various effective dates as specified in the discussion that follows.

1 The Permanent Act was preceded by two emergency bills. The first, D.C. Act A20-0377 (B20-0849), was enacted on June 24, 2014 and expired on October 12, 2014. The second, D.C. Act A20-0461 (B20-0957), was enacted on October 6, 2014, before the expiration of the first emergency bill, and is set to expire on February 4, 2015. Consequently, the sales tax provisions have been in effect as of October 1, 2014, and currently remain in effect.
2 D.C. Act 20-0424 (B20-0750).
3 District of Columbia Home Rule Act, D.C. Code Ann. § 1-206.02(c)(1).
4 The projected law date is based on the expiration of the 30-calendar-day review period, which excludes holidays, weekends, and any day in which neither house is in session because of an adjournment or recess of more than three days. Based on the projected law date, the income tax provisions may have potential financial statement implications to calendar year taxpayers in the 2014 fourth quarter. The current status of the Budget Support Act can be found online at http://lims.dccouncil.us/Legislation/B20-0750?FromSearchResults=true.

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