A provision in the D.C. budget support legislation expands the definition of “tax haven” for purposes of the water’s-edge combined group rules, and lists 39 jurisdictions as “tax havens.”
The District of Columbia Fiscal Year 2016 Budget Support Act of 2015 was signed by the mayor on August 11, 2015. The Act is now transmitted to Congress for a mandatory 30-day review period before becoming law.
Only days when Congress is in session are counted in determining the 30-day period. Thus, the exact date when the legislation would become law is difficult to predict.
One provision—the Combined Reporting Clarification Amendment Act of 2015—makes changes to the District’s combined reporting provisions that were effective for tax years after December 31, 2010.
Under D.C. law, the water’s-edge combined group includes the entire income and apportionment factors of any member doing business in a “tax haven.”
Originally, the District defined “tax haven” as a jurisdiction that, for the tax year in question, had no effective tax, or a nominal tax on the relevant income and:
The statute, however, did not identify specific tax haven jurisdictions.
Under the new 2015 Budget Support Act, the definition of “tax haven” is expanded to include a list of 39 countries that are considered tax havens (i.e., for D.C. purposes of determining the combined group). The 39 listed tax haven jurisdictions are:
|Antigua and Barbuda||Grenada||The former Netherlands Antilles|
|Bahamas||Isle of Man||Samoa|
|Belize||Liechtenstein||St. Kitts and Nevis|
|British Virgin Islands||Malta||St. Vincent and the Grenadines|
|Cayman Islands||The Marshall Islands||Turks and Caicos Islands|
|Cook Islands||Mauritius||U.S. Virgin Islands|
Accordingly, all income and apportionment factors of entities operating in these jurisdictions are to be included in the D.C. water’s-edge combined group.
The D.C. Council is to review the tax haven list biennially or as needed, and the D.C. Chief Financial Officer is to submit revisions to the Council for consideration as the CFO considers necessary.
The Act does not specifically address when the changes are effective and labels the law change as a “clarification.”
For more information, contact a tax professional with KPMG’s State and Local Tax practice:
Leighanne Scott | +1 (703) 286-8251 | firstname.lastname@example.org
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