State & Local Tax Impacts of COVID-19 for the District of Columbia – 2021

Thoughtware Alert Published: May 03, 2021 | Updated: Sep 09, 2021
SALT GOV COVID TW - 1

Information current as of August 31, 2021.

COVID-19 has changed life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor or visit our COVID-19 Resource Center for current information as needed.

Information Specific to the District of Columbia

  • District of Columbia is providing an exemption from tolling requirements during the COVID-19 health emergency to Low-Income Housing Tax Credit (LIHTC) transfers not considered sales under the Tenant Opportunity to Purchase Act for corporate income and excise tax purposes. The resolution includes these measures: 1) providing the exemption from the public health emergency tolling requirements to the transfers of interest in a housing accommodation for the purpose of securing federal funding to maintain, increase, or improve affordable housing, or maintaining the long-term affordability of the building; and 2) clarifying that these transfers are still subject to the 90-day notice of transfer requirement.
    • District of Columbia Council Resolution PR24-0054, effective February 2, 2021.
  • The District of Columbia emergency law contains tolling provisions related to LIHTCs due to the COVID-19 pandemic for corporate income and excise tax purposes. The law includes these measures: 1) tolling deadlines for tenants and tenant organizations to exercise their rights under the Rental Housing Conversion and Sale Act of 1980 for the duration of the declared public health emergency plus 30 days; and 2) excepting from tolling certain time periods applicable to notices of transfer for specified LIHTC transfers.
    • District of Columbia B24-0039, passed, effective February 26, 2021, and expires May 27, 2021.
    • District of Columbia B24-0040, effective March 24, 2021, and expires 225 days after taking effect.
  • The District of Columbia has extended the deadline to file and pay all income tax returns until May 17, 2021. The extension is automatic and doesn’t require taxpayers to apply. This extension applies to all D-20, D-30, D-40, standalone Schedule H, D-41, D-40B, and D-65 tax filers and includes combined return filers. Taxpayers may continue to request an extension to file their income, partnership, and franchise tax returns to October 15, 2021, or November 15, 2021, for combined return filers. The deadlines to file estimated tax payments remain unchanged. The first-quarter payments are due April 15, 2021.
    • District of Columbia Office of Tax and Revenue, News Release; March 19, 2021.
  • The District of Columbia enacted the Coronavirus Support Emergency Amendment Act of 2021, which consolidates, updates, and amends previously enacted COVID-19 relief legislation. The changes made by this emergency legislation were previously enacted on an emergency and temporary basis, most recently by Law 23-130. Among its provisions, the emergency legislation provides that, for tax years beginning after December 31, 2017, corporations, unincorporated businesses, and financial institutions are allowed an 80 percent deduction for any apportioned District of Columbia net operating loss carryover, to be deducted from net income after apportionment. The emergency legislation also provides that the following items are excluded from District gross income for purposes of the income and franchise tax: (1) small business loans awarded and subsequently forgiven under the Coronavirus Aid, Relief, and Economic Security Act; (2) public health emergency small business grants awarded under Section 2316 of the Small and Certified Business Enterprise Development and Assistance Act of 2005; and (3) public health emergency grants authorized under §16(m)(1) of the Advisory Neighborhood Commissions Act of 1975.
    • District of Columbia B24-0139, passed, effective March 12, 2021, and expires June 15, 2021.
  • The District of Columbia has extended the real property tax filing deadlines to assist property owners affected by the COVID-19 pandemic. The Office of Tax and Revenue extended the deadline to appeal the tax-year 2022 real property tax assessment to April 15, 2021. In addition, the deadline to file an Exempt Property Annual Use Report and an Income & Expense Report has been extended to May 3, 2021, and May 17, 2021, respectively. However, the real property tax payment deadline will remain March 31, 2021.
    • District of Columbia Office of Tax and Revenue, News Release; March 22, 2021.
  • The District of Columbia issued a notice on the treatment of Paycheck Protection Program (PPP) loans for corporate income and individual income tax purposes. The district gross income doesn’t include PPP loans that are awarded and subsequently forgiven. 
    • District of Columbia Office of Tax and Revenue, Notice 2021-04; April 14, 2021.
  • The District of Columbia Office published information on the individual income tax treatment of unemployment compensation. Taxpayers with less than $150,000 adjusted gross income (AGI) can exclude from income up to $10,200 of unemployment compensation paid in 2020. Taxpayers filing a joint return are eligible for the exclusion only if their combined AGI is less than $150,000. Amounts exceeding $10,200 for each individual are still taxable. The federal exclusion will reflect on district returns because the federal AGI is the starting point for calculating the district tax liability. To claim the exclusion, district taxpayers must 1) file their district return using the federal AGI they reported on their federal return if they didn’t already file their district return and 2) not file an amended district return if they already filed their return. 
    • District of Columbia Office of Tax and Revenue Notice; April 15, 2021.
  • The District of Columbia Office issued guidance clarifying tax treatment of the Paycheck Protection Program (PPP) that provided loans to small businesses to pay certain business expenses. In general, a PPP loan recipient is eligible for loan forgiveness if the loan is spent by the recipient on certain payroll, mortgage interest, rent, or utilities payments. In computing net income, corporations, financial institutions, unincorporated businesses, and partnerships can deduct from gross income all ordinary and necessary expenses paid or incurred during the tax year in carrying on any trade or business.
    • District of Columbia Office of Tax and Revenue, OTR Tax Notice 2021-04; April 14, 2021.
  • District of Columbia legislation repeals the Coronavirus Support Temporary Amendment Act of 2020 and temporarily continues various of its provisions with modifications for individual income, trust income, and corporate income tax purposes. The law includes these measures: 1) excluding from gross income small business loans awarded under the CARES Act, certain public health emergency small business grants, and certain public health emergency grants; and 2) allowing corporations, unincorporated businesses, and financial institutions an 80 percent deduction for apportioned district net operating loss carryover to be deducted from their net income after apportionment for tax years beginning after December 31, 2017. 
    • District of Columbia B24-0140, enacted May 3, 2021, and effective following a 30-day period of congressional review; expiring 225 days after it takes effect.
  • The District of Columbia clarified the personal income tax treatment of unemployment compensation. Taxpayers with less than $150,000 adjusted gross income (AGI) can exclude from income up to $10,200 of unemployment compensation paid in 2020. Taxpayers filing a joint return are eligible for the exclusion only if their combined AGI is less than $150,000. Amounts exceeding $10,200 for each individual are still taxable. The federal exclusion will reflect on district returns because the federal AGI is the starting point for calculating the district tax liability. To claim the exclusion, district taxpayers must file their district return using the federal AGI they reported on their federal return if they did not already file their district return. Taxpayers are not required to file an amended district return if they already filed their return.
    • District of Columbia Office of Tax and Revenue, OTR Tax Notice 2021-06; May 26, 2021.
  • The District of Columbia issued guidance for 2020 personal income tax returns filed without reporting the unemployment exclusion. The District is advising to file an amended return with the Office of Tax and Revenue (OTR) to claim the exclusion. Taxpayers who are filing an amended return by mail should include a copy of the 1099-GS that reports unemployment compensation. Taxpayers who have received a notice from the IRS that it has adjusted their federal return that modifies their federal AGI should enter that modified federal AGI on Line 4 of the amended Form D-40. If taxpayers haven’t received a notice, they may calculate their modified federal AGI by using Schedule 1, Line 7, and the Unemployment Compensation Exclusion Worksheet.  
    • District of Columbia Office of Tax and Revenue, OTR Tax Notice 2021-07; May 26, 2021.
  • The District of Columbia passed COVID-19 emergency legislation, which includes various tax provisions. For tax years beginning after December 31, 2017, corporations will be eligible for an 80 percent deduction for the apportioned state net operating loss carryover to be deducted from the net income after apportionment. The term “COVID-19 relief” is further defined to mean any benefit in cash or kind, including pandemic Supplemental Nutrition Assistance Program benefits, emergency Supplemental Nutrition Assistance Program benefits, and advance refund of tax credits, that is a benefit to a household and was received under federal or district relief due to the COVID-19 public health emergency 2020. Third-party food delivery platforms are now required to collect and remit sales tax imposed under the state’s official code.  
    • District of Columbia B24-0257, effective June 7 through September 5, 2021.
  • The District of Columbia passed temporary coronavirus relief legislation that excludes public health emergency response grants issued under the District of Columbia Public Emergency Act of 1980 from a taxpayer’s gross income for tax years beginning after December 31, 2020. 
    • District of Columbia B24-0244, enacted June 17, 2021, and effective following a 30-day period of congressional review and expires after 225 days.
  • The District of Columbia passed a temporary law canceling property tax sales for Class 1 or Class 2 properties during calendar-year 2021 due to the COVID-19 pandemic. The law includes a measure requiring the Office of the Chief Financial Officer to mail a notice of the cancellation to each person who was mailed a notice of tax delinquency to the same address where the notice of tax delinquency was mailed. 
    • District of Columbia B24-0260, enacted July 21, 2021, and effective following a 30-day period of congressional review; expires after 225 days.
  • The District of Columbia is extending the fiscal year 2021 deadline to pay the annual license fees to the Alcoholic Beverage Control Board due to the COVID-19 pandemic. The emergency regulation includes these measures: 1) setting the September 30 deadline for second-year annual license fees for class C/N and D/N on-premises retailer licensees; 2) requiring class CR, DR, CH, DH, CX, or DX on-premises retailer licensees to pay their third-year annual license fees by September 30; 3) requiring licensees whose licenses were canceled on November 4, 2020, to request reinstatement by September 30; and 4) setting the September 30 endorsement fee due date for certain on-premises retailer licensees. 
    • District of Columbia Alcoholic Beverage Control Board, Emergency Regulations Sections 208.1 et al.; effective June 9, 2021, and shall remain effective for the duration of the extensions of public emergency and public health emergency but in no event after October 7, 2021, unless superseded.
  • The District of Columbia passed emergency legislation providing coronavirus business assistance income tax relief for individual income and corporate income tax purposes. For tax years beginning after December 31, 2020, the law excludes from taxable income public health emergency response grants issued pursuant to the District of Columbia Public Emergency Act of 1980.
    • District of Columbia B24-0342, effective August 5, 2021, and expires on November 3, 2021.

For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.

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