December 19, 2017
Norton Gets Wins in Tax Bill for Economic Development in Low-Income D.C. Neighborhoods and D.C. Utility Ratepayers After Working with Conferees to Ensure Equal Treatment for D.C.
WASHINGTON, D.C.- Congresswoman Eleanor Holmes Norton (D-DC) today announced that she secured important wins for the District of Columbia in the Republican tax conference report after working with conferees on equal treatment for the District. Norton said that while she opposes the conference report, she nevertheless fought to ensure that D.C. would benefit from changes to the tax code.
Norton expressed her gratitude to Senator Tim Scott (R-SC), with whom she worked closely to ensure that his provision to create new tax incentives for businesses to invest in low-income communities also applied to the District. Norton has been pressing her own bill to designate certain high-poverty neighborhoods in D.C., including parts of Wards 5, 7 and 8, as federal empowerment zones in which federal tax incentives are available to businesses that locate and invest there. Norton got unique federal tax incentives for investment in D.C. included in a 1997 tax bill, which helped to revitalize D.C. neighborhoods and the District's economy, but the incentives expired in 2011.
Norton also got language in the conference report to clarify that utilities in D.C. would be treated in the same favorable manner as utilities in states. If D.C. utilities were not treated the same, D.C. residents would have had to pay higher utility rates.
"I thank my good friend Senator Tim Scott, with whom I have worked since he was a Member of the House, for working closely with me to ensure that his provision in the tax bill to help low-income communities also applied to D.C.," Norton said. "Senator Scott has been willing to assist us when I have raised issues with him and has been fair to the District. Although some sections of D.C. have experienced record economic development, that development has not reached some neighborhoods in Wards 5, 7, and 8. It is critical that we provide incentives for businesses to create jobs in D.C. neighborhoods that need them most. The special tax incentives that I won for D.C. in the past, which expired in 2011, had significant effects on many D.C. neighborhoods and on the District's economy.
"In addition, our language makes crystal clear that D.C. public utilities are exempt from the limitation on the deductibility of interest. If they had not been, costs for Washington Gas and Pepco would have risen, meaning higher rates for D.C. residents."
Below is additional background information on the two tax provisions.
The conference report creates new tax incentives for businesses to invest in low-income communities, referred to as Opportunity Zones. The provision is based on a bipartisan bill, the Investing in Opportunity Act, introduced by Senator Scott. Scott got the provision included in the Senate version of the tax bill, but it was not included in the House version. Scott, who was on the conference committee, got it included in the conference report. The original provision allowed "governors" of states to designate a limited number of zones in their states as Opportunity Zones. D.C. is treated as a state for most purposes of the tax code. While Norton confirmed with Scott's office that the intent of the provision was to include D.C., the language was ambiguous at best, and Norton did not want to risk an interpretation after passage that the D.C. mayor would not be considered a "governor" for purposes of the provision. The final provision was changed to allow the "chief executive officer" of a state to designate a zone, and the joint explanatory statement accompanying the conference report indicates that the change from "governor" to "chief executive officer" was made to clarify that the D.C. mayor can designate zones.
The conference report limits the deductibility of interest expenses for business debt, but exempts certain entities from the limitation, including public utilities. A public utilities provision in existing law expressly referred to utilities in both states and D.C. The deductibility limitation in the House and Senate bills only referred to states. While D.C. is treated as state for most purposes of the tax code, Norton was concerned that the Treasury Department or a court could have made a negative inference that Congress meant to exclude D.C. in the deductibility provision in the conference report. However, Norton got a provision included in the joint explanatory statement accompanying the conference report clarifying that utilities in D.C., like those in states, are exempt from the limitation.