U.S. House votes to overturn part of D.C. tax code

A bill passed by the Republican-led House and now in the Senate could overturn parts of D.C.’s tax code for individuals and businesses, which some say could cause chaos for taxpayers.

When Congress passed President Donald Trump’s One Big Beautiful Bill Act last year, the legislation affected local tax laws. Several states and Washington, D.C., decoupled, choosing not to implement some of those provisions in their local tax code.

But Republicans moved legislation to block D.C. from doing that. Democrats have pushed back.

“This will just wreak havoc on the overall system, because the people of the District of Columbia have already begun filling out, in many cases, their tax forms,” Sen. Chris Van Hollen, D-Md., said.

The House version of the bill passed along party lines. If the Senate approves the legislation and Trump signs it, it will throw D.C.’s tax season into chaos, D.C. officials say.

“It’s nothing short of deliberate administrative and fiscal sabotage,” said Del. Eleanor Holmes Norton, D-D.C.

In a letter to Congress, D.C. Chief Financial Officer Glenn Lee warned the District “would need to suspend the current filing season” to update tax forms and guidance, a process that would take months.

Mayor Muriel Bowser and D.C. Council Chairman Phil Mendelson sent a letter explaining, “Disapproval at this stage would create huge administrative challenges, require taxpayers to re-file their taxes, render existing guidance and forms obsolete, and necessitate rapid mid-year changes to tax administration systems. It is unclear how quickly commercial tax preparation software could be updated to accommodate such changes, and District residents and businesses would likely experience confusion, as well as delays.”

“It would be totally disruptive to tax administration,” Mendelson said. “I want to emphasize that the disapproval resolutions have absolutely no effect on the federal budget or federal operations.”

“As of the end of last year, there were a dozen states in addition to the District that had adopted decoupling legislation, including Alabama,” he said. “I mentioned that just ‘cause that’s a red state.”

Republicans who support the legislation say it will allow D.C. residents and businesses to benefit from tax breaks on things, including:

• No tax on tips,
• No tax on overtime,
• American-made car loan interest deduction
• And a senior tax deduction.

The Senate is expected to vote on the legislation early next week.