Tax Parity Rates and Unincorporated Business Franchise Tax Rate Clarification Temporary Act of 2002
Bill 14-574

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ENGROSSED ORIGINAL

A BILL IN THE COUNCIL OF DISTRICT OF COLUMBIA

BE IT ENACTED BY THE COUNCIL OF THE DISTRICT OF COLUMBIA, That this act be cited as the "Tax Parity Rates and Unincorporated Business Franchise Tax Rate Clarification Temporary Act of 2002".

TITLE I. TAX PARITY RATES CLARIFICATION.

Sec. 101. This title may be cited as the "Tax Parity Rates Clarification Temporary Act of 2002".

(a) Chapter 8 is amended as follows:

(1)(a) Section 47-812(b-5)(2) is repealed. 

(2)(b) Section 47-813(c-5) is repealed.

(b) Section 47-1806.03(a) is amended as follows:

(1) Paragraph (4)(B) is repealed.

(2) Paragraph (5) is repealed.

(3) Paragraph (6)(A) is amended to read as follows: 

"(6)(A) In the case of a taxable year beginning after December 31, 2002, there is imposed on the taxable income of every resident a tax determined in accordance with the following table:

(4) Paragraph (7)(A) is amended to read as follows:

"(7)(A) In the case of a taxable year beginning after December 31, 2003, there is imposed on the taxable income of every resident a tax determined in accordance with the following table:

(5) A new paragraph (8) is added to read as follows:

"(8)(A) In the case of a taxable year beginning after December 31, 2004, there is imposed on the taxable income of every resident a tax determined in accordance with the following table:

(B) Subparagraph (A) of this paragraph shall not apply if the certification by the Chief Financial Officer required by §47-387.1 demonstrates that the accumulated general fund balance for the immediately preceding fiscal year is less than 5% of the general fund operating budget for the current fiscal year, the nominal GDP growth is less than or equal to 3.5%, or the real GDP growth is less than or equal to 1.7%.".

TITLE II. TAX PARITY UNINCORPORATED BUSINESS FRANCHISE TAX RATE CLARIFICATION.

Sec. 201. This title may be cited as the "Tax Parity Unincorporated Business Franchise Tax Rate Clarification Temporary Act of 2002".

Sec. 202. Section 47-1808.02(a) of the District of Columbia Official Code is amended as follows:

"(3A) A surtax at the rate of 2.5% on the tax determined under paragraph (2) of this subsection, as applicable.

(b) Paragraph (4) is amended to read as follows:

"(4) A surtax at the rate of 2.5%, separate from and in addition to, the surtax imposed by paragraph (3A) of this subsection, on the tax determined under paragraph (2) of this subsection, as applicable, for any tax period beginning after September 30, 1994.".

Sec. 203. Applicability.

(a) Section 202(a) shall apply for any tax period beginning after September 30, 1992.

(b) Section 202(b) shall apply for any tax period beginning after September 30, 1994.

Sec. 204. Repealer.

Section 47-1808.03(a)(3A) and (4) are repealed effective for all tax periods beginning after December 31, 2002.

TITLE III. FISCAL IMPACT STATEMENT; EFFECTIVE DATE.

Sec. 301. Fiscal impact statement.

The Council adopts the attached fiscal impact statement 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. Official Code §1-206.02(c)(3)).

Sec. 302. Effective date.

(a) 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), and shall remain in effect for no longer than 90 days, as provided for Temporary acts of the Council of the District of Columbia in section 412(a) of the District of Columbia Home Rule Act, approved December 24, 1973 (87 Stat. 788; D.C. Official Code § 1-204.12(a)).

(b) This act shall expire after 225 days of its having taken effect.

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Government of the District of Columbia
Office of the Chief Financial Officer

Natwar M. Gandhi
Chief Financial Offices

TO: The Honorable Linda W. Cropp
Chairman, Council of the District of Columbia

FROM: Natwar M. Gandhi
Chief Financial Officer

DATE: March 4, 2002

SUBJECT: Fiscal Impact Statement: "Tax Parity Rates Clarification Emergency Act of 2002"

REFERENCE: Bill Number Not Available - Draft Legislation as Introduced

Conclusion

Funds are sufficient in the FY 2002 budget and the proposed FY 2003 through FY 2006 budget and financial plan to implement the provisions of the proposed legislation. The proposed legislation will result in additional tax collections of $34 million in FY 2002 and $141 million in FY 2002 through FY 2005.

Background

Title I of the proposed legislation reduces the highest income tax rate of 9.3 percent to 9.0 percent for tax year 2003. Then additional reductions to this rate will continue from 9.0 percent to 8.7 percent in tax year 2004 and then 8.5 percent in tax year 2005. Title II of the proposed legislation requires the unincorporated business franchise tax rate be fixed at 2.5 percent. This rate is applicable for any tax year beginning after September 30, 1994.

Financial Plan Impact

Funds are sufficient in the FY 2002 budget and the proposed FY 2003 through FY 2006 budget and financial plan. The proposed legislation will result in additional tax collections as presented in the table below.

Impact to Local General Fund Revenue
($ in millions)