Congress has passed a joint “disapproval” resolution for “The DC Income and Franchise Tax Conformity and Revision Temporary Amendment Act of 2025,” DC Act 26–217 (Act), which decoupled from various tax provisions in the One Big Beautiful Bill Act (OBBBA), P.L. 119–21. House Joint Resolution 142 passed the House of Representatives and Senate on February 4 and February 12, 2026, respectively. The resolution is now headed to President Donald Trump for signature. This means that the Act’s decoupling legislation has been repealed. To the extent DC did not previously decouple from the relevant Internal Revenue Code provisions, it now conforms its franchise (corporate income) and individual income taxes to the federal tax law changes made in the OBBBA.1
The passage of HJR 142 is a rare exercise of Congress’ oversight authority as pertaining to local DC laws. In fact, HJR 142 is only the fifth time Congress has formally disapproved of a District law since the Home Rule Act was adopted and the first time Congress has done so with respect to a tax bill.2 For context, the US Constitution’s District Clause (Art. I, § 8, cl. 17) gives plenary authority to Congress over the District of Columbia. Pursuant to that clause, Congress granted the District limited self-governing authority via the District of Columbia Self-Government and Government Reorganization Act of 1973 (Home Rule Act).3 District acts – legislation that is approved by the DC Council and Mayor – are typically transmitted by the Council Chairman to the Speaker of the House and Senate President for a 30-calendar-day period of congressional review. Under the Home Rule Act, a transmitted act will take effect unless, during such period, Congress enacts into law a joint resolution disapproving of the Act.4
The District adopts “rolling” conformity to the Internal Revenue Code (IRC), which means any references to the IRC in DC’s tax code automatically update as the IRC is amended.5 DC’s tax code thus automatically conformed with the changes made by OBBBA unless DC had previously decoupled from a provision. To-date, many other states have decoupled from OBBBA due to the financial impact the federal law changes may have on state budgets and finances, of which most states – unlike the federal government – cannot run deficits.
In September, DC’s Chief Financial Officer noted in a letter that the fiscal impact of the OBBBA was “more than offset” by the increased revenue. However, the letter noted that strong corporate earnings and stock market growth had led to the increases in revenue, those sources are volatile and less connected to the local economy which “reduces the overall stability and resilience of [DC’s] revenue streams and economic base.” To increase revenue stability, DC passed the Act to decouple from a variety of the OBBBA’s corporate and individual income tax changes. The Act became law without Mayor Bowser’s signature on December 20, 2025, and transmitted to Congress on December 30, 2025.6
The Act made numerous tax law changes decoupling DC from OBBBA for both individual income tax and corporate income tax. The individual income tax decoupling relates to, in part:
- Higher basic standard deduction amounts and maintaining the standard deduction at the TCJA levels;7
- The deduction for qualified tips;8
- The deduction for overtime earnings;9
- The deduction for personal car loan interest payments;10 and
- The $6,000 deduction for qualified senior taxpayers;11
The DC act also decoupled from various corporate income tax amendments, including:
- OBBBA added IRC § 174A, which provides a full deduction for businesses’ domestic research or experimental expenditures in the same year as when incurred. The statute also allows this treatment to be taken on a retroactive basis for open periods. The DC act would have instead allowed such deduction to be amortized over a 5-year period and prohibited the election to open years’ returns;
- The increase to the limit on interest that businesses may expense under IRC § 163(j) from 30% of the business’s adjusted taxable income, by adding back depreciation, amortization, and depletion;12 and
- The special depreciation deduction for new investments in qualified production property at IRC § 168(n).
Regardless of Congress disapproving of the Act, the District will remain decoupled from the OBBBA’s amendments to IRC §§ 168(k) (current expensing for certain qualified property) and 179 (enhanced small business expensing). The District’s tax code had already decoupled from these provisions.13
The District did not fully decouple from OBBBA when it adopted the Act. In particular, the Act did not decouple from OBBBA’s changes to IRC §§ 951A (GILTI conversion to Net CFC-Tested Income) and 162(m) ($1 million limit for compensation of certain covered employees). As a rolling conformity jurisdiction, therefore, the District conforms to those provisions, both of which will likely increase revenues for the District.
The District’s Act decoupling from OBBBA is on the verge of being repealed via congressional oversight upon the President’s signature.
In the event that the Act is repealed, if a taxpayer has already submitted their 2025 return, then they should consider whether they need to submit an amended return to comply with these changes.
1 The passage of the OBBBA in 2025 resulted in a variety of federal tax law changes, including: the conversion of the Global Intangible Low Taxed Income regime to the Net CFC-Tested Income regime under IRC § 951A (and several other related changes affecting international tax law, except IRC § 250 as DC is a “line 28 state”); changes to certain expensing provisions such IRC §§ 168(k), 174, and 179; changes to the business interest expense limitations under Section 163(j); the “no tax” on tips, overtime income, and car loan interest provisions; and many other amendments to federal tax law.
2 See H.J. Res. 26, 118th Congress (disapproving the Revised Criminal Code Act of 2022); S.J. Res. 84, 102nd Congress (disapproving the Schedule of Heights Amendment Act of 1990); H. Res. 208, 97th Congress (disapproving the District of Columbia Sexual Assault Reform Act of 1981); Sen. Con. Res. 63, 96th Congress (disapproving of the Location of Chanceries Amendment Act of 1979).
3 See S. 1435, 93d Cong., 1st Sess. (1973).
4 DC Code § 1-206.02(c)(1).
5 DC Code § 47-1801.04(28).
6 However, the District may be disputing whether Congress timely adopted HJR 142 within the 30-day review period because the District’s Legislative Information Management System indicates an earlier transmittal date, such that the Act became law and took effect on February 12, 2026. B26-0458 – DC Income and Franchise Tax Conformity and Revision Temporary Amendment Act of 2025, DC Legislative Information Management System, available at https://lims.dccouncil.gov/Legislation/B26-0458.
7 IRC § 63.
8 IRC § 224.
9 IRC § 225.
10 IRC § 163(h)(4).
11 IRC § 151(d)(5)(C).
12 IRC § 163(j)(8)(A)(v).
13 See DC Code Ann. § 47-1803.03(a)(7) (“No deduction shall be allowed for the special depreciation allowance under section 168(k) of the Internal Revenue Code of 1986.”), -(18)(A) (“There shall be allowed as a deduction for the cost of property elected to be treated as not chargeable to capital account under section 179 of the Internal Revenue Code of 1986 an amount equal to the lesser of $25,000 or the actual cost of the property for the year the property is placed in service.”).
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