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

2. 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

3. Tax Revision Commission - 2  Mayor is proposing for business taxes  Beginning for tax year 2015 Franchise tax rate of 9.4% Single sales factor An exemption for proprietary trading 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

4. Tax Revision Commission - 3  Mayor is proposing for individual taxes  Beginning for tax year 2015  New brackets: 0 - $10k @ 4% $10k - $40k @6.5% $40k - $60k @ 7.5% $60k - $350k @ 8.5% > $350k @ 8.95%

5. Tax Revision Commission - 4  Failing to make the Mayor’s cut were: 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

6. 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

7. 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

8. 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

9. 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

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

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

12. 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

13. 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

14. 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.