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False Claims Act Tax Expansion Bill Advanced by DC Council

The DC Council has once again advanced a bill (the False Claims Amendment Act, B23-0035) that would allow tax-related false claims against large taxpayers! The bill passed a first reading of the Committee of the Whole on Tuesday, November 17, 2020, by a vote of 8-5. The bill is sponsored by Councilmember Mary Cheh, who introduced identical bills over the past few legislative sessions that ultimately were not passed. The troubling bill is now eligible for a second (and final) reading at the next legislative meeting on Tuesday, December 1, 2020. As introduced, the bill would amend the existing false claims statute in the District of Columbia to expressly authorize tax-related false claims actions against a person that “reported net income, sales, or revenue totaling $1 million or more in the tax filing to which the claim pertained, and the damages pleaded in the action total $350,000 or more.” If enacted, it would make the District one of only a few...

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DC and New Jersey Join Mississippi in Disregarding Coronavirus-Caused Remote Work for Tax Purposes

As part of our open letter to state tax administrators urging relief of undue tax administration burdens in light of COVID-19, we urged the disregarding of remote work for tax purposes. The public health necessity for businesses to close central operations and direct employees to work from home should not be used as an “opportunity” to create nexus for affected businesses. Mississippi’s Department of Revenue responded to us very quickly, agreeing with us on that point: “Mississippi will not use any changes in the employees temporary work locations due to the pandemic to impose nexus or alter apportionment of income for any business while temporary telework requirements are in place.” New Jersey’s Division of Taxation also quickly issued a similar statement: “In the event that employees are working from home solely as a result of closures due to the coronavirus outbreak and/or the employer’s social distancing policy, no threshold will be considered to have...

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QHTC You Later: DC Bids Farewell to Historic QHTC Certification Process

The District of Columbia (DC) Office of Tax & Revenue (OTR) implemented sweeping changes to the Qualified High Technology Company (QHTC) certification process this year. As you may remember, beginning last year, OTR implemented a new online QHTC self-certification process for companies to obtain exempt purchase certificates. This year, OTR is expanding the scope of this online self-certification requirement to all QHTC benefits—including exempt sales as a QHTC and other non-sales tax benefits available to a QHTC (summarized here). This change was accomplished through amendments to the QHTC certification regulation (DC Mun. Regs. tit. 9, § 1101) that were proposed by OTR in November 2018 and became final on January 4, 2019. The changes apply to all tax returns due on or after January 1, 2019. So What Changed? Historically, the relevant OTR regulation provided that to claim a credit or other benefit, a QHTC was required to attach a form prescribed by OTR...

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Hearing Scheduled for DC False Claims Expansion – Taxpayers Beware!

DC Council Chairman Phil Mendelson recently announced that a public hearing will take place later this month before the Committee of the Whole to consider a bill (The False Claims Amendment Act of 2017, B22-0166) that would allow tax-related false claims against large taxpayers. The hearing will begin at 9:30 am on Thursday, December 20, 2018, in Room 412 of the John A. Wilson Building. More details on the hearing and opportunity to testify are available here. The bill is sponsored by Councilmember Mary Cheh, and co-sponsors of the bill include Committee on Finance and Revenue Chairman Jack Evans and Councilmember Anita Bonds. Nearly identical bills were introduced by Councilmember Cheh in 2013 and 2016, but did not advance. As introduced, the bill would amend the existing false claims statute in the District of Columbia to expressly authorize tax-related false claims actions against a person that “reported net income, sales, or revenue totaling $1 million or...

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District of Columbia Takes First Step to Decouple from Federal Tax Reform

On December 19, 2017, DC Councilmember Mary Cheh introduced the District Tax Independence Act of 2017 (Act), which would require the Chief Financial Officer (CFO) to submit a report outlining the steps and amendments necessary to decouple the District’s tax deduction laws from federal law. As introduced, the Act would require this report by no later than April 30, 2018. The Act was referred to the Committee on Finance and Revenue the same day it was introduced and has not been taken up by the committee, which has been dormant since and is not currently scheduled to meet again until the Council returns in late January. The legislation is co-sponsored by Councilmembers Allen, Evans, McDuffie, Bonds, Gray, Nadeau, R. White, Grosso, Silverman, T. White, and Chairman Mendelson. Notably, all members of the Committee on Finance and Revenue—including Chairman Evans—are co-sponsors. Practice Note The introduction of the Act signals the Council’s overwhelming...

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MTC Marketplace Seller Voluntary Disclosure Initiative Underway

Yesterday, the application period opened for the limited-time MTC Marketplace Seller Voluntary Disclosure Initiative opened and it will close October 17, 2017. Since our last blog post on the topic detailing the initiatives terms, benefits and application procedure, six additional states (listed below) have signed on to participate in varying capacities. The lookback period being offered by each of the six states that joined this week is described below. District of Columbia: will consider granting shorter or no lookback period for applications received under this initiative on a case by case basis. DC’s standard lookback period is 3 years for sales/use and income/franchise tax. Massachusetts: requires compliance with its standard 3-year lookback period. This lookback period in a particular case may be less than 3 years, depending on when vendor nexus was created. Minnesota: will abide by customary lookback periods of 3 years for sales/use tax and 4 years (3...

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DC Council Introduces False Claims Expansion – Taxpayers Beware!

Last month, a bill (The False Claims Amendment Act of 2017, B22-0166) was introduced by District of Columbia Councilmember Mary Cheh that would allow tax-related false claims against large taxpayers. Co-sponsors of the bill include Chairman Jack Evans and Councilmember Anita Bonds. Specifically, the bill would amend the existing false claims statute to expressly authorize tax-related false claims actions against persons that reported net income, sales, or revenue totaling $1 million or more in the tax filing to which the claim pertained, and the damages pleaded in the action total $350,000 or more. The bill was referred to the Committee of the Whole upon introduction, but has not advanced or been taken up since then. Nearly identical bills were introduced by Councilmember Cheh in 2013 and 2016. Practice Note: Because the current false claims statute includes an express tax bar, this bill would represent a major policy departure in the District. See D.C. Code...

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D.C. Council Holds Hearing on New Tax to Fund Unprecedented Family Leave Benefits

Yesterday, the D.C. Council Committee of the Whole held an advocates-only hearing on the Universal Paid Leave Act of 2015 (Act), which was introduced on October 6, 2015 by a majority of councilmembers. As introduced, this bill establishes a paid leave system for all District of Columbia (District) residents and all workers employed in the District. It allows for up to 16 weeks of paid family and medical leave, which would more than double the amount of weeks (and dollar cap) of any U.S. state-sponsored paid-leave program. While other state paid family and medical leave programs are paid by the employees themselves, the benefits for employees of a “covered employer” (i.e., private companies in the District) would be funded by a one percent payroll tax on the employer. There has been talk of setting a minimum threshold of employees (i.e., 15-20 employee minimum) for an employer to be covered by the Act, although such a requirement does not exist in the current...

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Tax Haven List Repealed by D.C. Council

After being in effect for only a week, the Council of the District of Columbia (Council) unanimously enacted legislation today that will repeal the list of tax haven jurisdictions specifically enumerated in the D.C. Code. The legislation, titled the Fiscal Year 2016 Second Budget Support Clarification Emergency Amendment Act of 2015 (Act), was introduced on September 22, 2015, after the list created an uproar from singled-out countries and the business community alike. The tax haven list was passed on August 11, 2015, as part of the Fiscal Year 2016 Budget Support Act of 2015 (BSA), which became effective on October 22, 2015. The inclusion of the tax haven list in the BSA was as a supplement to the tax haven criteria that already existed in the D.C. Code. As passed today, Section 6 of the Act repeals the tax haven list (and accompanying language) added by the BSA in August and restores the relevant D.C. Code provisions to their pre-BSA state. Thus, effective...

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D.C. Proposes Law to Allow Indefinite Suspension of Limitation Period for Assessment and Collection

The Fiscal Year 2016 Budget Support Act of 2015 (BSA), introduced by the Washington, D.C. Council at the request of Mayor Muriel Bowser on April 2, 2015, contains a subtitle (see Title VII, Subtitle G, page 66-67) that would give the Office and Tax and Revenue (OTR) complete discretion to indefinitely suspend the period of limitation on assessment and collection of all D.C. taxes—other than real property taxes, which contain a separate set of rules and procedures. The change to the statute of limitation provision would eliminate a fundamental taxpayer protection that exists today in all states. Those concerned should reach out to members of the D.C. Council to discourage adoption of this subtitle of the BSA. Current Law Under current law, the amount of tax imposed must be assessed (in other words, a final assessment must be issued) within three (3) years of the taxpayer’s return being filed. See D.C. Code § 47-4301(a). Practically speaking, this requires the...

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