Small Retailer Property Tax Relief Credit Government of the District of Columbia Office of the Chief Financial Officer Small Retailer Property Tax Relief Credit Office of Tax and Revenue Keith J. Richardson- Deputy Chief Financial Officer Joseph Parran- Director, Returns Processing Administration Norman Evans- Program Analyst November 1, 2018

Disclaimer Forms identified in this presentation are drafts and are subject to change pending District of Columbia and/or Congressional approval. Timely notification of any form changes due to legislation will be announced on the DC website.

Small Retailer Property Tax Relief Credit Eligibility Requirements Issues In Implementation Forms

Small Retailer Property Tax Relief Credit Starting January 1, 2018, small businesses engaged in the business of making sales at retail and meeting certain eligibility requirements may claim a refundable tax credit against franchise taxes. The tax credit equals the total class 2 real property taxes paid by a business for a retail owned location in the District during the taxable year not to exceed $5,000; or 10% of the total rent paid by the business for a retail rental location not to exceed $5,000.

Small Retailer Property Tax Relief Credit The Small Retailer Property Tax Relief Credit does not apply if: the business is exempt from or receives any tax credits towards its real property tax. the rental retail location or the owned retail location is otherwise exempt from real property tax.

Small Retailer Property Tax Relief Credit Eligibility Requirements The business must own or lease a building or part of a building in the District that: is classified, in whole or in part, as Class 2 Property as defined in DC Code § 47-813; is the primary place of the retail business of the corporation or unincorporated business; has a Certificate of Occupancy for commercial use; and is a retail establishment from which the business of selling tangible personal property is conducted, or in or from which any retail sales are made.

Small Retailer Property Tax Relief Credit Eligibility Requirements A business, whether incorporated or unincorporated, is eligible to claim the credit if the business: files a sales tax return has less than $2.5 million in federal gross receipts or sales; and is current on all District tax filings and payments.

Small Retailer Property Tax Relief Credit Implementation Issues Unincorporated businesses must file a form D-30 Unincorporated Business Franchise tax return to claim the credit. The small retailer property tax relief credit statute does not prohibit businesses which may be exempt from sales tax from claiming the credit. Such businesses (for example QHTCs) must file a sales tax return and report the exempt sales. The small retailer property tax relief credit statute does not prohibit a business from deducting rent as a business expense while also claiming the credit based on 10% of the rent paid.

Small Retailer Property Tax Relief Credit Implementation Issues The statute does not prohibit a member of a combined group from claiming the credit if it otherwise qualifies. It appears that a member of a combined group may claim the credit if it is engaged in the business of making sales at retail in the District; has less than $2.5 million in federal gross receipts or sales (even if it is a member of a combined group that has total federal gross receipts or sales exceeding $2.5 million); rents or owns qualified retail rental or qualified retail owned property that is not exempt from real property tax or receives any other credits towards its real property tax; and has a Certificate of Occupancy for commercial use.

Forms The Small Retailer Property Tax Credit is claimed by filing Schedule SR

Schedule SR, Con’t.

Schedule UB Business Credits, Con’t. After calculating the amount of the credit on Schedule SR, Line 5, the amount is transferred to Schedule UB, Line 11 if the qualified business is incorporated, or Line 21 if unincorporated.

Form D-20/D-30 From Schedule UB the credit is then carried over to Line 41(d) of form D-20 for incorporated businesses, and Line 41(d) of form D-30 for unincorporated businesses.