D.C. hearing backs pass-through entity tax but flags equity and implementation questions

The Committee as a Whole of the Council of the District of Columbia held a public hearing on March 19, 2026, on Bill 26-324, the Pass Through Entities Income Tax and Tax Credit on Certain S Corporations and Partnerships Amendment Act of 2025, a proposal to allow eligible pass-through entities to elect to be taxed at the entity level and to provide an equivalent credit to individual members.

Chair Phil Mendelson opened the hearing, read the bill’s purpose and noted that roughly 36 other jurisdictions have adopted similar workarounds to the federal SALT deduction cap. He said the Council intends to accept written testimony for two weeks and will consider drafting changes before markup.

Business groups, tax policy experts and small-business owners told the committee they favor a PTE-style mechanism but urged careful drafting. Jeanette Hubbard, president and CEO of the D.C. Chamber of Commerce, said the measure would restore competitive parity with Maryland and Virginia and is revenue neutral ‘‘for the district’’ as drafted. Small business owner Diana Mubarak urged emergency adoption so firms could claim the benefit in the current tax year.

Several tax-policy witnesses and attorneys recommended building the relief on the District’s existing Unincorporated Business Tax (UBT) rather…