The District of Columbia (D.C.) enforces a structured tax regime that applies to corporations, partnerships, LLCs, and other entities engaged in business within its jurisdiction. Businesses must comply with the Business Income Tax, which carries a flat rate of 8.25%, along with a mandatory minimum tax tied to gross receipts. Filing deadlines follow the federal calendar, with extensions available through Form FR-120.
Pass-through entities such as S corporations, partnerships, and LLCs classified as partnerships are not taxed at the entity level. Instead, income or losses flow directly to the owners, partners, or shareholders, who must report them on individual income tax returns. D.C.’s personal income tax is progressive, ranging from 4% for incomes under USD 10,000 up to 10.75% for incomes above USD 1 million. Filing for individuals typically uses Form D-40, with extensions allowed through Form FR-127.
Compliance requirements include estimated tax declarations when liabilities exceed USD 1,000 for businesses or USD 100 for individuals. Penalties for late filings or payments are steep—5% per month, capped at 25%, plus daily compounding interest of 10% per annum.
Altogether, D.C. emphasizes strict compliance through defined deadlines, progressive personal tax rates, and consistent penalties. Entities operating in D.C. must remain proactive in meeting tax obligations to avoid financial and legal consequences.
Business Income Tax
All corporations, partnerships, LLCs, and other entities engaged in business in D.C. are required to file a business income tax return.
- The corporate tax rate is 8.25%.
- Minimum tax is set based on gross receipts:
- USD 250 if gross receipts are USD 1 million or less
- USD 1,000 if gross receipts exceed USD 1 million
Due Date: Returns are due by the 15th day of the fourth month after the end of the tax year.
Estimated Tax: Corporations with tax liability of USD 1,000 or more must file a declaration of estimated franchise tax using Form D-20ES.
Extension: Businesses can obtain a six-month extension to file by submitting Form FR-120. However, this does not extend the deadline for payment.
Filing Requirements:
- Corporations: File Form D-20, Corporation Franchise Tax Return
- Partnerships & LLCs: File Form D-30, Unincorporated Business Franchise Tax Return
Pass Through Entity Tax
In D.C., S corporations, partnerships, LLPs, and LLCs classified as partnerships are not taxed at the entity level. Instead, their income passes through to the owners, partners, or shareholders, who report it on their personal returns.
D.C. applies progressive personal income tax rates:
| Income Bracket | Tax Rate |
| Not over USD 10,000 | 4% |
| USD 10,001 – 40,000 | USD 400 + 6% of excess over 10,000 |
| USD 40,001 – 60,000 | USD 2,200 + 6.5% of excess over 40,000 |
| USD 60,001 – 250,000 | USD 3,500 + 8.5% of excess over 60,000 |
| USD 250,001 – 500,000 | USD 19,650 + 9.25% of excess over 250,000 |
| USD 500,001 – 1,000,000 | USD 42,775 + 9.75% of excess over 500,000 |
| Over USD 1,000,000 | USD 91,525 + 10.75% of excess over 1,000,000 |
This framework ensures higher earners contribute proportionately more to state revenue while maintaining progressivity.
Filing Requirements:
- Owners, partners, or shareholders report income on Form D-40, Individual Income Tax Return.
- Returns are due on the 18th day of the fourth month after the end of the tax year. If the date falls on a weekend or legal holiday, the due date moves to the next business day.
Extensions: Individuals may request a six-month extension using Form FR-127. This extends the filing date but not the payment deadline.
Estimated Tax:
- Shareholders, partners, or members must file a declaration of estimated tax if expected liability exceeds USD 100.
Penalties and Interest:
- Late filing: 5% per month, capped at 25% of tax due.
- Interest: 10% per annum, compounded daily, applies to late payments.
- Penalties and interest apply equally to both business income tax and pass-through entity income tax.
This dual compliance framework ensures accountability at both the entity and individual levels.
Conclusion
The District of Columbia has established a comprehensive tax regime designed to hold both businesses and individuals accountable. Corporations and partnerships face an 8.25% business income tax, with minimum taxes tied to gross receipts. Filing deadlines and estimated payment obligations require diligence, and extensions cover filing only, not payment.
For pass-through entities, income shifts to owners, partners, or shareholders, who are taxed under a progressive personal income tax system with rates ranging from 4% to 10.75%. Filing deadlines align closely with federal rules, and penalties for non-compliance are significant, combining late fees with daily compounded interest.
D.C.’s tax compliance framework demonstrates the importance of timely reporting, accurate estimated payments, and strict attention to filing requirements. Businesses and individuals alike must stay organized to maintain good standing and avoid penalties, reinforcing the District’s focus on consistent tax administration.
