Council Separates Elements of District Tax Code from the Federal, Funds Family Tax Savings and Child Tax Credit, Reinstates Temporary Juvenile Curfew

In any other DC context, the phrases "decoupling" and "rolling conformity" might be thought to reference romantic breakups or narcotics. However, here at the Council, where seemingly dry or arcane terminology can often rule the day, our legislative action regarding these two terms drew a bright line of demarcation between who federal and District governments and tax policies choose to benefit.

At our most recent Legislative Meeting, the Council voted on an emergency basis to decouple elements of the District's tax code from the federal, following Congress' passage of the so-called One Big Beautiful Bill Act (OBBBA). In doing so, and in light of revised revenue estimates by the District's Chief Financial Officer (CFO), the Council also voted to dedicate a portion of the newfound revenue to two purposes: an accelerated full local match for the federal Earned Income Tax Credit (EITC) and the establishment of a local child tax credit of $1,000 per child for eligible families.

In regards to tax policy, the District has long been what is known as a "rolling conformity" jurisdiction. This means that unless distinct action is taken to the contrary, whenever federal tax policy changes, the District's tax policy automatically follows suit and mirrors the change. In cases where the District chooses to part ways with the feds and take its tax policy in a different direction, specific legislation must be passed to make this so. This effort of distinction is known legally as "decoupling."

In its emergency legislative action at the most recent meeting, the Council chose to decouple thirteen of the eighty-four tax-related provisions of the OBBBA. The thirteen selected provisions include several of the higher-ticket items, such as the elimination of taxes on tips and overtime, an increased standard deduction, and a special depreciation allowance for certain qualified property. These thirteen items were chosen for both financial and pragmatic reasons: due to their comparative heft as well as the administrative challenge of administering tax changes (including some that are retroactive) at the eleventh hour of preparing for tax filing season.

By taking action on a limited set of tax changes, and on by initially doing so only using emergency (effective for ninety days) and temporary (effective for 225 days) legislation, the Council meets the fierce urgency of now but will later have the opportunity, through permanent legislation, to garner public input on these changes, reverse (and recouple) any decouplings later deemed to be problematic, and/or to proceed with additional decouplings among the sixty-nine items left untouched by the present bill.

During the meeting, the bill was successfully amended to dedicate funds to two District tax policy changes seen as benefiting the very taxpayers who are potentially most struggling in the present financial environment: lower and moderate income individuals and families, especially with children.

The first change is an acceleration of the District's Earned Income Tax Credit match from tax year 2029 to tax year 2025. Initially implemented as a forty percent match starting in tax year 2019, the match was seventy percent last year, and was expected to bump up to eighty-five percent for tax years 2025 to 2028 before reaching one hundred percent parity with the federal EITC in 2029. Via the amended decoupling bill, the full leap from seventy to one hundred percent will instead occur in the present tax year, 2025, meaning people can start to file for it within weeks. The District EITC can be paid out in a lump sum, or in monthly installments, which can allow for easier family budgeting.

The second change is the creation of a child tax credit of $1,000 per child (under age 18), starting in tax year 2026. In order to best target the local program's impact (and to offset biases built into the now-permanent version of the federal child tax credit), the District credit focuses on individual earners who make under $75,000 a year, and couples who earn under $90,000 a year. The Council had previously created and funded a District child tax credit in its budget legislation for Fiscal Year 2025, but when the mayor struck the program from the subsequent year's budget, the resulting funding gap was too large for the Council to backfill at the time. When the federal child tax credit was implemented during the COVID pandemic, it was shown to have powerful anti-poverty impacts, and it is hoped that the District version of the measure will do the same.

A third element of the proposed amendment to the decoupling bill, regarding the taxation of municipal bonds interest, was removed from the amendment and the bill prior to final passage.

Temporary Juvenile Curfew

In other action at the Council's most recent Legislative Meeting, the Council passed emergency and temporary legislation to reinstate a temporary youth curfew program. The Council first passed an emergency version of the measure at its July 1 Legislative Meeting, but the bill expired on October 5. A second emergency version of the bill was scheduled for consideration at the Council's October 7 meeting, but the vote on the bill was postponed so that a desired public hearing on the measure could be held. The hearing was held on October 30, potential juvenile unrest occurred in the Navy Yard area on October 31, and a different style of juvenile curfew (broader geography, fewer hours) was enacted by the mayor on November 1. This queued up the Council consideration of its second emergency and related temporary curfew measure.

Under those measures, police or the mayor can designate specific, defined geographic zones for extended, temporary curfew applicability. In these zones, the expanded curfew remains in place for up to four days, would go into effect at 8PM, and would designate that only gatherings of more than eight youth would constitute a curfew violation. Zones could only be put into place for cause-either crime occurring in the zone in the prior thirty days, or that an anticipated gathering of a large group of youth is likely to result in public safety problems (such as the recent trend of flash mob-like youth gatherings advertised online and via paper flyers). The curfew zones must be publicly posted in advance within the zone, and youth must be given a verbal notice to disperse prior to any enforcement actions. These declarations of need to disperse have seemingly proven successful-this summer's temporary extended curfew zones resulted in zero actual arrests for curfew violation.

Also approved on an emergency basis was an expansion of the District's generalized youth curfew. Under the prior curfew, on weekends year-round, and daily during the months of July and August, the curfew is in place from 12:01AM to 6AM. On weeknights from September through June, the curfew was in place from 11:01PM until 6AM. The prior generalized youth curfew applied to all those under the age of seventeen (meaning it capped out with sixteen year olds).

Under the emergency and temporary extension of the curfew passed at the most recent Legislative Meeting, the generalized youth curfew would be extended to cover all youth under the age of 18 (meaning it caps out with seventeen year olds), and the start time for the curfew would be 11PM (instead of midnight), seven days a week, twelve months a year.

Passage of the temporary version of the curfew bill will require a second vote of the Council. A permanent version of the bill was introduced on Halloween and a hearing has been scheduled on the permanent measure on December 4. That bill will require two Council votes for passage.

Other Measures

Other action at the most recent meeting included:

• the second of two necessary votes on permanent legislation mildly scaling back required early childhood educator pay scales, due to insufficient funds
• approval of an emergency and temporary measure to clarify green building requirements on certain government funded residential buildings
• approval of an emergency and temporary measure to clarify the definition of what constitutes a private for-hire vehicle operator
• approval of an emergency and temporary measure restating/reinstating a longstanding ninety-seven percent property tax exemption for beloved regional anti-hunger organization Food & Friends
• withdrawal of a proposed disapproval of a budgeting reprogramming request, with the understanding that warnings regarding the Council's intolerance for agency overspending is extreme, recent hearings on the topic have shown a necessary light on the problem, and that future budget reprogramming requests in subsequent years will likely face formal Council disapproval

The Council's next scheduled Legislative Meeting will be held on December 2.