Washington DC Economic Partnership District of Columbia Office

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Washington DC Economic Partnership District of Columbia Office of Tax and Revenue Tax Update

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

Tax Revision Commission ¡ ¡ Commission, chaired by former mayor Anthony Williams, released its

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

Tax Revision Commission - 2 ¡ ¡ Mayor is proposing for business taxes Beginning

Tax Revision Commission - 2 ¡ ¡ Mayor is proposing for business taxes Beginning for tax year 2015 l Franchise tax rate of 9. 4% l Single sales factor l An exemption for proprietary trading l 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

Tax Revision Commission - 3 ¡ ¡ ¡ Mayor is proposing for individual taxes

Tax Revision Commission - 3 ¡ ¡ ¡ Mayor is proposing for individual taxes Beginning for tax year 2015 New brackets: l l l 0 - $10 k @ 4% $10 k - $40 k @6. 5% $40 k - $60 k @ 7. 5% $60 k - $350 k @ 8. 5% > $350 k @ 8. 95%

Tax Revision Commission - 4 ¡ Failing to make the Mayor’s cut were: l

Tax Revision Commission - 4 ¡ Failing to make the Mayor’s cut were: l l l 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

Qualified High Technology Company (QHTC) - 1 Revisions, enacted in March 2013: ¡ Eliminates

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

Qualified High Technology Company (QHTC) - 2 o. Eliminates technology zone requirement o. Beginning

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

Sales Tax Rate Change ¡ ¡ ¡ Effective October 1, 2013, the DC sales

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

Clean Hands ¡ ¡ Clean Hands certificate required for a wide variety of DC

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

Restaurant Utility Tax District restaurants are entitled to an exemption from sales tax on

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

Motor Fuel Tax ¡ Rate changes to 8% ¡ 2 different base periods per

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

Individual Income Tax Changes ¡ Personal Exemption & Standard Deduction ¡ ¡ ¡ The

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

Schedule H Property Tax Relief ¡ Increases income eligibility ¡ Increases maximum benefit ¡

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

Same Sex Marriage Tax Issues New law required that a clarification be added to

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. ¡