Councilmember Silverman Introduces Bill Creating New Education Tax Credit to Offset Deduction Cap

*Download a two-page explainer of this bill here.

The legislation comes in response to the recently passed federal tax reform bill limiting District income and property tax deductions for residents at $10,000.

Today, D.C. Councilmember Elissa Silverman (I-At Large) introduced legislation creating a new local income tax credit for donations to the District in support of public education. The District of Columbia Education Charitable Donations Act of 2018 would support District public schools and potentially help more than 100,000 income tax filers in the District avoid a new penalty from the Republican tax bill just signed into law.

”District residents will benefit from having an additional charitable deduction on their federal returns, and the District will benefit from the charitable donation to our schools,” Silverman said. “It’s a win-win for the District and smart progressive tax policy.”

The bill would help District residents offset the new federally-imposed cap on state and local taxes by allowing them to donate to a new District of Columbia Public Education Investment Fund. Donations to the fund would support the District’s public schools, and residents would receive a nonrefundable credit on their District tax returns worth 90 percent of the donation. The donation could also be deducted on federal taxes, as residents were previously able to do with the state taxes that they paid. Because the credit is not a full dollar-for-dollar replacement, the legislation is expected to slightly increase revenue to the District.

“The new federal cap on deductions targets our residents for simply living in a city like DC,” said Silverman. “This bill will provide local funding for our schools, incentivize donations by giving a local tax credit, and, at the same time, lower the federal tax burden for residents who don’t even get a full vote in Congress.”

The recently passed federal tax legislation caps state and local tax deductions on federal income taxes at $10,000. Previously, taxpayers had been able to deduct the full amount of any District income, sales, or property taxes they had paid during the tax year. In 2015, over 130,000 District taxpayers deducted an average of $17,000 in state taxes on their federal returns. This is why more than 11,000 District residents rushed to pre-pay their property taxes at the end of 2017 before the new rules took effect.

The legislation introduced today is similar to proposals recently introduced by Democratic state leaders in neighboring Maryland, as well as California and New Jersey.

The bill was referred to the Committee on Finance and Revenue with comments from the Committee on Education. Six councilmembers co-introduced the legislation: Ward 1 Councilmember Brianne Nadeau, Ward 6 Councilmember Charles Allen, Ward 7 Councilmember Vincent Gray, and At-Large members Robert White, Anita Bonds, and David Grosso. Ward 8 Councilmember Trayon White signed on as a co-sponsor.