Tax Parity Act of 1999
Bill 13-193

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A BILL IN THE COUNCIL OF THE DISTRICT OF COLUMBIA

Councilmembers Evans, Catania, Allen, Ambrose, Brazil, Chavous, Orange, Patterson, and Schwartz introduced the following bill, which was referred to the Committee on Finance and Revenue.

To amend Title 47 of the D.C. Code to change the real property tax classes and tax rates, to accelerate depreciation of computer equipment under the personal property tax, to eliminate the personal property tax on the first $50,000 value of personal property, to lower the individual income tax rates, to lower the corporate and unincorporated business franchise tax rates, to change the net operating loss deduction to allow businesses to take District-specific deductions, to change the net operating loss deduction to eliminate carrybacks of the deduction, and to eliminate the sales tax on Internet access.

BE IT ENACTED BY THE COUNCIL OF THE DISTRICT OF COLUMBIA, That this act may be cited as the "Tax Parity Act of 1999".

Sec. 2. Title 47 of the D.C. Code is amended as follows:

(a) Section 47-812(a) is amended by adding new paragraphs (a-3), (a-4), and (a-5) at the end thereof to read as follows:

"(a-3) Notwithstanding the provisions of subsection (a) of this section, the sum of the real property tax rates and the special real property tax rates for taxable property in the District of Columbia for the tax year beginning October 1, 1999, and ending September 30, 2000, shall be:

"(1) $0.96 for each $100 of assessed value for Class One Property;

"(2) $1.34 for each $100 of assessed value for Class Two Property;

"(3) $1.85 for each $100 of assessed value for Class Three Property; and,

"(4) $2.05 for each $100 of assessed value for Class Four Property.

"(a-4) Notwithstanding the provisions of subsection (a) of this section, the sum of the real property tax rates and the special real property tax rates for taxable property in the District of Columbia for the tax year beginning October 1, 2000, and ending September 30, 2001, shall be:

"(1) $0.96 for each $100 of assessed value for Class One Property;

"(2) $1.15 for each $ 100 of assessed value for Class Two Property;

"(3) $1.85 for each $ 100 of assessed value for Class Three Property; and,

"(4) $1.95 for each $ 100 of assessed value for Class Four Property.

"(a-5) Notwithstanding the provisions of subsection (a) of this section, the sum of the real property tax rates and the special real property tax rates for taxable property in the District of Columbia for the tax year beginning October 1, 2001, and ending September 30, 2002, shall be:

"(1) $0.96 for each $100 of assessed value for Class One Property; and,

"(2) $1.85 for each $100 of assessed value for Class Two Property.".

(b) Section 47-813 (c-3)(4) is amended to read as follows:

"(4) Class 4 Property. -- Class 4 Property shall be comprised of all real property which is not Class 1 Property or Class 2 Property or Class 3 Property.".

(c) Section 47-81 3(c) is amended by adding a new paragraph (c-4) at the end thereof to read as follows:

"(c-4) For the property tax year beginning October 1, 2001, and ending September 30, 2002, and for each subsequent tax year, the following classes of real property are established:

"(1) Class 1 Property. -- (A) Class 1 Property shall be comprised of improved residential real property that:

"(i) Is occupied; and,

"(ii) Is used exclusively for nontransient residential dwelling purposes.

"(B) Improved residential real property that is owned by a cooperative housing association shall also be classified as Class 1 Property.

"(C) Improved and occupied multifamily residential real property which is used exclusively for nontransient dwelling purposes shall also be classified as Class 1 Property.

"(D) Unimproved real property which abuts Class 1 Property shall be classified as Class 1 Property if the unimproved real property and the Class 1 Property have common ownership.

"(E) Unimproved real property which is separated from Class 1 Property by a public alley less than 30 feet wide shall be classified as Class 1 Property if the following conditions are met:

"(i) The unimproved real property is less than 1,000 square feet in size;

"(ii) The zoning regulations adopted by the Zoning Commission for the District of Columbia do not allow the building of any structure on the unimproved real property as a matter of right; and,

"(iii) The owner of the unimproved real property also owns the Class 1 Property separated by the alley from the unimproved real property.

"(F) Class l Property that becomes unoccupied shall be remain classified as Class 1 Property if:

"(i) Unoccupied due to a major fire, flood, or other casualty to the improved real property, if the improved real property was occupied at the time of the casualty, and the major fire, flood, or other casualty occurred during the 12 months preceding the tax year and was not intentionally caused by the owner;

"(ii) The improved real property is actively for sale at a reasonable market price as of June 30 of the preceding tax year;

"(iii) A building or demolition permit has been issued and building or demolition is actively pursued as of June 30 of the preceding tax year; or

"(iv) The improved real property is the subject of a probate proceeding or title to the improved real property is the subject of litigation.

"(2) Class Two Property. -- Class 2 Property shall be comprised of all real property which is not Class l Property."."

(d) Section 47-813(d) is amended by striking the phrase "For the purposes of subsections (b), (c), (c-l), (c-2), and (c-3)" and inserting the phrase "For the purposes of subsections (b), (c), (c-l), (c-2), (c-3), and (c-4)" in its place.

(e) Section 47-813(d-1) is amended:

(l) By striking the phrase "For the purposes of subsection (c-3)" and inserting the phrase "For the purposes of subsections (c-3) and (c-4)" in its place; and,

(2) Paragraph (6) is amended by striking the phrase "in accordance with the provisions of subsection (c-3)" and inserting the phrase "in accordance with the provisions of subsections (c-3) and (c-4)" in its place.

(f) Section 47-813 (e)(l) is amended by striking the phrase "classification of real property under subsections (b), (c), (c-l), (c-2), and (c-3)" and inserting the phrase "classification of real property under subsections (b), (c), (c-1), (c-2), (c-3), and (c-4)" in its place.

(g) Section 47-813(f)(1) is amended by striking the phrase "subsections (c), (c-l), (c-2), and (c- 3)" wherever it appears and inserting the phrase "subsections (c), (c-1), (c-2), (c-3), and (c-4)" in its place.

(h) Section 47-1522 is amended by inserting the phrase "in excess of $50,000 in value" immediately following the phrase "The rate of tax shall be $3.40 for each $100 of value of the taxable personal property"

(i) Section 47-1523 is amended to read as follows:

"(a) The full and true value and the current value of tangible personal property, including taxable leasehold improvements, having a taxable situs in the District shall be reported on the return. The full and true value shall be the original costs of the tangible personal property in an arms-length transaction, computed as of July 1st of the tax year. The current value of the tangible personal property shall be the full and true value less a reasonable allowance for straight line depreciation in accordance with rules promulgated by the Mayor and the provisions under subsections (b), (c), and (d) of this section. Tangible personal property items with a useful life of one year or less shall be reported at cost. No proration of value shall be permitted in anticipation of the disposition of an item of tangible personal property. In no event shall the current value reported be less than 25% of the original cost or exchange value of the tangible personal property, except as permitted under subsection (b) of this section.

"(b) Qualified technological equipment shall be depreciated at the rate of 30% per year, and shall not be depreciated to a value less than 10% of original cost or exchange value.

"(c)( 1 ) The term "qualified technological equipment" means any computer or related peripheral equipment other than the type mentioned in subsection (c)(4) of this section.

"(2) The term "computer" means a programmable electronically activated device that is capable of accepting information, applying prescribed processes to the information, and supplying the results with or without human intervention, and that consists of a central unit containing extensive storage, logic, arithmetic, and control capabilities.

"(3) The term "related peripheral equipment" means any auxiliary machine (whether on-line or off-line) that is designed to be placed under the control of a computer, and operate in conjunction with such computer.

"(4) The term "computer" or "related peripheral equipment" shall not include:

"(A) any equipment that is an integral part of other property that is not a computer;

"(B) typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar devices;

"(C) equipment of a kind primarily used for amusement or entertainment of the user;

"(D) mainframe computers that are capable of simultaneously supporting multiple transactions and multiple users, and having an original cost in excess of $500,000; including any additional memory units, tape drives, disk drives, power supplies, cooling units, and communication controllers that are related peripheral equipment to such computers; or

"(E) computers used in operating industrial processing equipment, equipment used in a computer assisted manufacturing system, equipment used in computer assisted design or engineering system integral to an industrial process, or subunit or electronic assembly comprising a component in a computer integrated industrial processing system.

"(c) For personal property tax years beginning July 1, 2000, taxpayers who acquired qualified technological equipment on or before June 30, 2000, may calculate the current value of those assets as if the depreciation rate provided in subsection (a) of this section was used from the acquisition date; however, there shall be no credit or refund of tax paid in earlier tax years under the prior depreciation rate.".

(j) Section 47-1801.4 is amended by adding the following new paragraphs (34), (35), (36), and (37) at the end thereof to read as follows:

"(34) "Carryover year" shall have the same meaning as defined in section 172(c) of the Internal Revenue Code.

"(35) "Net operating loss" shall have the same meaning as defined in section 172(c) of the Internal Revenue Code, subject to limitations and modifications provided in this chapter.

"(36) "Net operating loss deduction" means the aggregate of the apportioned net operating loss carryovers to the taxable year.

"(37) "Apportioned net operating loss" means the net operating loss generated in the year of the loss multiplied by the District of Columbia's apportionment formula for the loss Year.".

(k) Section 47-1803.3(a)(14) is amended to read as follows:

"(14) Net operating losses. -- In computing the net income of a corporation, an unincorporated business, or a financial institution, there shall be allowed a deduction for net operating losses, in the same manner as allowed under section 172 of the Internal Revenue Code.

"(A) For tax years beginning after December 31, 1999, net operating loss carrybacks shall not be allowed. Corporations, unincorporated businesses, or financial institutions, shall be allowed a deduction for apportioned District of Columbia net operating loss carryover to be deducted from the net income after apportionment.

"(B) In the year of the loss, the apportioned District of Columbia net operating loss shall be computed by multiplying the District of Columbia apportionment factor for the loss year against the amount of the net operating loss as defined in section 47-1801.4(35) of this title.

"(C) The entire amount of the apportioned net operating loss for any taxable year shall be carried forward to the earliest of the succeeding taxable years to which such loss may be carried. The portion of such loss which may be carried to each of the other taxable years shall be the excess, if any, of the amount of such loss over the sum of the apportioned taxable net income, adjusted by any modifications specified in this chapter, for each of the tax years to which such loss may be carried.

"(D) The provisions of sections 381, 382, and 384 of the Internal Revenue Code apply to carryovers. The limitation amount determined under section 382 shall be applied to net income, after apportionment, in each post-change year to which loss is carried.

"(E) In case of a merger, acquisition, or consolidation, any pre-change losses and built-in losses, to the extent apportioned or allocated to the District of Columbia, with the additions, subtractions, modifications and other adjustments required for purposes of this chapter, shall be carried forward and subtracted in computing District of Columbia taxable income. If an affiliated group files a federal consolidated return for District of Columbia net operating loss purposes, the net operating loss is computed as if the federal return has been filed on a separate basis for the District of Columbia. However, if a company has been given permission by the Mayor to file a consolidate return, only the net operating losses of those corporations filing on the District of Columbia consolidated return may be included in determining the net operating loss deduction.

"(F) No deduction shall be allowed for or with respect to losses connected with income producing activities if the income therefrom would not be required to be either assignable to the District of Columbia or included in computing the taxpayer's District of Columbia net income.

"(G) The Mayor may require a taxpayer to furnish any information necessary to support a claim for deduction under this section, and no deduction shall be allowed unless the information is furnished.".

(l) Section 47-1 806.3(a) is amended by adding new paragraphs (3), (4), and (5) at the end thereof to read as follows:

"(3) In the case of a taxable year beginning after December 31, 1999, there is imposed on the taxable income of every resident a tax determined in accordance with the following table:

"(4) In the case of a taxable year beginning after December 31, 2000, there is imposed on the taxable income of every resident a tax determined in accordance with the following table:

"(5) In the case of a taxable year beginning after December 31, 2001, there is imposed on the taxable income of every resident a tax determined in accordance with the following table:

(m) Section 47- 1807.2(a)(3) is amended to read as follows:

"(3) For the taxable years beginning after December 31, 1999, a tax at the rate of 8.5% upon the taxable income of every corporation, whether domestic or foreign, except that, for taxable years beginning after December 31, 1999, the rate of tax shall be 7.5%, and except that for taxable years beginning after December 31, 2000, the rate of tax shall be 6.5%.".

(n) Section 47-1807.2(a)(4) is repealed effective for tax years beginning after December 31, 1999.

(o) Section 47- 1808.3(a)(3) is amended to read as follows:

"(3) For the taxable years beginning after December 31, 1999, a tax at the rate of 8.5% upon the taxable income of every corporation, whether domestic or foreign, except that, for taxable years beginning after December 31, 1999, the rate of tax shall be 7.5%, and except that for taxable years beginning after December 31, 2000, the rate of tax shall be 6.5%.".

(p) Section 47-1808.3(a)(4) is repealed effective for tax years beginning after December 31, 1999.

(q) Section 47-2001(n)(2) is amended as follows:

(1) Subparagraph (D) is amended by striking the word "or" after the phrase "pursuant to a written agreement entered into before January 1, 1996;";

(2) Subparagraph (E) is amended by striking the period at the end thereof and inserting the phrase "; or" in its place;

(3) By adding a new subparagraph (F) to read as follows:

"(F) Sales of Internet access service.

"(i) For the purposes of this paragraph, the term "Internet access service" means a service that enables users to access content, information, electronic mail, or other services offered over the Internet and may also include access to proprietary content, information, and other services as part of a package of Internet access services offered to consumers.

"(ii) Such term does not include the sale of or charges for data processing and information services as defined in subsection (N)(I) and (ii) that do not enable users to access content, information, electronic mail, or other services offered over the Internet.

"(iii) Such term does not include telecommunications services.".

(r) Section 47-2201(a)(2) is amended as follows:

(l) Subparagraph (D) is amended by striking the word "or" after the phrase "pursuant to a written agreement entered into before January 1, 1996;";

(2) Subparagraph (E) is amended by striking the period at the end thereof and inserting the phrase "; or" in its place;

(3) By adding a new subparagraph (F) to read as follows:

"(F) Sales of Internet access service.

"(i) For the purposes of this paragraph, the term "Internet access service means a service that enables users to access content, information, electronic mail, or other services offered over the Internet and may also include access to proprietary content, information, and other services as part of a package of Internet access services offered to consumers.

"(ii) Such term does not include the sale of or charges for data processing and information services as defined in subsection (N)(I) and (ii) that do not enable users to access content, information, electronic mail, or other services offered over the Internet.

"(iii) Such term does not include telecommunications services.".

Sec. 3. (a) Section 2(b) shall apply for tax years beginning after September 30, 1999.

(b) Section 2(h) shall apply for tax years beginning after June 30, 2000.

(c) Section 2(i) shall apply for tax years beginning after June 30, 2001.

(d) Section 2(k) shall apply for tax years beginning after December 31, 1999.

Sec. 4. The Council adopts the fiscal impact statement in the committee report as the fiscal impact statement required by section 602(c)(3) of the District of Columbia Home Rule Act, approved December 24, 1973 (87 Stat. 813; D.C. Code, sec. 1-233(c)(3)).

Sec. 5. This act shall take effect following approval by the Mayor (or in the event of veto by the Mayor, action by the Council to override the veto), approval by the Financial Responsibility and Management Assistance Authority as provided in section 203(a) of the District of Columbia Financial Responsibility and Management Assistance Act of 1995. approved April 17, 1995 (109 Stat. 116; D.C. Code, sec. 47-392.3(a)), a 30-day period of Congressional review as provided in section 602(c)(1) of the District of Columbia Home Rule Act, approved December 24, 1973 (87 Stat. 813; D.C. Code, sec. 1-233(c)(1)), and publication in the District of Columbia Register.