Testimony of Jenny Reed, Policy Director, At the Public Hearing on B20-348, “The Tax Clarity Equity Amendment Act of 2013”

Chairman Evans and members of the Committee, thank you for the opportunity to testify today.  My name isJenny Reed, and I am the Policy Director of the DC Fiscal Policy Institute.  DCFPI engages in research and public education on the fiscal and economic health of the District of Columbia, with a particular emphasis on policies that affect low- and moderate-income residents.  

I am here today to testify on Bill 20-348, “The Tax Clarity Amendment Act of 2013.”  DCFPI has concerns with legislation.  While the bill has been depicted as needed to address a flaw in DC’s tax code that can lead an individual or business’s income to be taxed twice, the reality is more complex.  In essence, the bill would address a tax dispute between the Potomac Electric Power Company (“Pepco”) and the District — in Pepco’s favor — and it would do so in a way that could allow other individuals or businesses to claim tax refunds.  Given the complexities of current tax law as it applies to Pepco’s case, and the high cost to the District of the proposed legislation, we believe that it is better to require Pepco and other affected taxpayers to attempt to resolve these issues through the courts.  We also have concerns about the proposed financing of the legislation and suggestions for how the District should amend the bill if it proceeds. 

The bill would allow any taxpayer who had their federal income adjusted by the Internal Revenue Service (IRS) prior to 2001 to claim a tax credit, based on that adjustment, for the amount of the resulting decrease in DC tax.  It is DCFPI’s understanding that this bill came about because the Pepco felt that the Office of Tax and Revenue (OTR) incorrectly denied their claims for a credit, but as noted, this bill would apply to any taxpayer.  

Pepco argues that the denial of the credit results in inappropriate double taxation of their income.  .  However, for several reasons, DCFPI feels that legislation, at this time, is not the appropriate vehicle to resolve this issue.  Let me elaborate why.

To read the complete testimony, click here.