Corporate franchise tax — Imposition and rate
The District of Columbia levies a franchise tax "for the privilege of carrying on or engaging in any trade or business within the District and of receiving income from sources within the District" on every corporation, whether domestic or foreign. For taxable years beginning after December 31, 2017, the tax rate is 8.25% of the corporation's taxable income.
A minimum tax also applies: $250 if District gross receipts are $1 million or less, and $1,000 if District gross receipts exceed $1 million. Corporations and financial institutions are not exempt from the minimum tax even if their business or source income is otherwise exempt under other provisions of the tax code.
Source: D.C. Code § 47-1807.02
Taxable income — Definition and federal conformity
Unable to confirm as of 2026-05-26.
Nexus standard — Business activity or physical presence
A corporation has franchise tax nexus with the District if it is engaged in business activity within the District that is not protected by Public Law 86-272, or if it has physical presence in the District. Physical presence includes maintaining an office, warehouse, or other place of business in the District, having employees present in the District, or owning or leasing property in the District. Business activity unprotected by P.L. 86-272 includes services performed in the District and activities beyond mere solicitation of sales of tangible personal property.
Apportionment formula — Single-sales-factor method
For tax years beginning after December 31, 2014, the District apportions all business income of multistate corporations using a single-sales-factor formula. A corporation multiplies its business income by the sales factor—the ratio of the corporation's sales in the District during the tax period to the corporation's total sales everywhere during the tax period—to determine District taxable income.
Source: D.C. Code § 47-1810.02(d-2)
Filing due date — Corporate franchise tax returns
Corporate franchise tax returns (Form D-20) are due on or before the 15th day of the fourth month following the close of the taxable year. For calendar-year filers, this means the return is due April 15. If the due date falls on a weekend or legal holiday, the return is due the next business day. The Chief Financial Officer may grant an extension of up to six months to file upon request.
Source: D.C. Code § 47-1805.03
Combined reporting — Mandatory unitary reporting
The District of Columbia requires combined reporting for corporations and unincorporated businesses engaged in a unitary business with one or more related entities. This requirement applies to tax years beginning after December 31, 2010, and replaced the prior consolidated-return election regime. A taxpayer engaged in a unitary business with related parties must file a combined report that includes the income and apportionment factors of all unitary group members, whether or not those members have District nexus.
Unitary business test
A "unitary business" is defined as a single economic enterprise made up of separate parts of a single business entity or a commonly owned or controlled group of business entities that are sufficiently interdependent, integrated, and interrelated through their activities to provide synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts. The test requires both (1) common ownership or control (more than 50% of voting power or ownership interest) and (2) functional integration producing mutual benefit.
Water's-edge default rule
Absent a worldwide election, combined reporting is calculated on a water's-edge basis. Under water's-edge combined reporting, the combined group includes only:
- Members incorporated in the United States or formed under the laws of any U.S. state, the District, or any U.S. territory or possession;
- Members (regardless of place of incorporation) whose average property, payroll, and sales factors within the United States is 20% or more;
- Domestic international sales corporations (DISCs) and foreign sales corporations (FSCs) described in I.R.C. §§ 991–994 and §§ 921–927; and
- Other members specified in D.C. Code § 47-1810.07(a)(2).
Worldwide election
A combined group may elect worldwide unitary combined reporting, which includes all members of the unitary business regardless of where located. The election must be made on a timely filed original return by every member of the unitary business subject to District tax. Once made, the election is binding for 10 years. Withdrawal or reinstatement before the 10-year period expires requires written request for reasonable cause based on extraordinary hardship due to unforeseen changes in District tax law or policy, and only with written authorization from the Chief Financial Officer. Upon expiration of the 10-year period, a taxpayer may withdraw from the election by written notice within one year of expiration; the withdrawal is then binding for another 10-year period.
Combined group composition
The combined group includes all persons whose income and apportionment factors are subject to combination—specifically, persons "of the kind that are subject to tax or would be subject to tax if doing business in the District" under D.C. Code Chapter 18, Title 47, even if those persons do not have nexus with the District. This encompasses corporations, unincorporated businesses, financial institutions, utility companies, and transportation companies engaged in the unitary business, excluding certain entities such as insurance companies unless otherwise required.
Designated agent
One member of the combined group must serve as the designated agent responsible for filing the combined report on behalf of all taxpayer members. The combined report aggregates income and apportionment factors at the combined-group level, then apportions the combined income to the District using a single-sales-factor formula, and allocates shares to each taxpayer member with District nexus.
Effect on prior consolidated returns
Any taxpayer election to file consolidated returns under former D.C. Code § 47-1805.02(5)(C) and 9 DCMR § 109 was automatically revoked for tax years beginning after December 31, 2010. Federal consolidated return elections are not recognized for District purposes; combined reporting is the exclusive method for unitary businesses.
Source: D.C. Code § 47-1805.02a; D.C. Code § 47-1810.07; D.C. Code § 47-1801.04(55); 9 DCMR § 156
Sales factor sourcing — Transition from Joyce to Finnigan method
Prior law: Joyce method (tax years beginning through December 31, 2025)
For tax years beginning on or before December 31, 2025, the District follows the Joyce method of apportionment for combined reporting groups. Under the Joyce method, each member of a combined group is treated as a separate taxpayer for purposes of determining whether sales are included in the District sales factor numerator. Sales to District customers by a combined group member that lacks District nexus are excluded from the District sales factor numerator, even if another member of the same combined group has District nexus.
This means that only sales made by nexus members are sourced to the District for purposes of calculating the combined group's apportionment percentage. A non-nexus member's District sales do not appear in the numerator of the sales factor, regardless of the unitary relationship.
New law: Finnigan method (tax years beginning after December 31, 2025)
For tax years beginning after December 31, 2025, the District transitions to the Finnigan method. D.C. Code § 47-1805.02b provides: "a combined group of entities will be treated as one taxpayer for purposes of sourcing unitary receipts, as required by this chapter, and the apportionment factor attributes in the numerator, as required by this chapter, will be derived from all the members of the combined group, regardless of whether a member has nexus with the District of Columbia."
The Finnigan method treats the entire combined group as a single taxpayer for apportionment purposes. If any member of the combined group has District nexus, then all members' District sales are included in the District sales factor numerator, even if the selling member itself lacks sufficient District contacts to establish nexus independently. This aggregation applies only to the calculation of the apportionment factor; a member without nexus does not become subject to District tax solely because another group member has nexus.
Enactment and congressional review
The Finnigan mandate was enacted on September 18, 2024, as section 7002(b) of the Fiscal Year 2025 Budget Support Act of 2024 (D.C. Law 25-217), permanent legislation that survived congressional review.
In February 2026, Congress passed and the President signed H.J. Res. 142 (Pub. L. No. 119-78), a joint resolution of disapproval that nullified the "D.C. Income and Franchise Tax Conformity and Revision Temporary Amendment Act of 2025" (D.C. Act 26-217 / D.C. Law 26-89). That temporary legislation — a different law enacted in December 2025 — addressed federal conformity provisions (standard deduction, personal exemptions, child tax credit, depreciation, and similar items) and did not contain or affect the Finnigan provision. D.C. Act 26-217 and D.C. Law 25-217 are distinct enactments with similar numbering; the congressional disapproval targeted only the former.
As of June 2026, D.C. Code § 47-1805.02b remains in effect, and the District applies the Finnigan method to all combined groups for tax years beginning after December 31, 2025.
Source: D.C. Code § 47-1805.02b Source: D.C. Law 25-217, § 7002(b) Source: H.J. Res. 142, Pub. L. No. 119-78 Source: D.C. Law 26-89
Estimated tax payment requirements
Corporations, financial institutions, and unincorporated businesses required to file a District franchise tax return must make quarterly estimated tax payments if the franchise tax for the taxable year can reasonably be expected to exceed $1,000. The estimated tax obligation is governed by D.C. Code § 47-1812.14 and implemented through regulations at 9 DCMR § 149.
Threshold for required estimated payments
Interest on underpayment of estimated tax is not imposed for a taxable year if (1) the tax shown on the return (or, if no return is filed, the tax), reduced by applicable credits and timely estimated payments, is less than $1,000, or (2) the preceding taxable year was a taxable year of 12 months and the entity did not have any liability for tax for that preceding year. This $1,000 de minimis threshold is set forth in D.C. Code § 47-4204(e).
Due dates for installment payments
If estimated franchise taxes are paid in installments, corporations and unincorporated businesses must pay four installments during the taxable year. The installments are due on the 15th day of the 4th, 6th, 9th, and 12th months of the taxable year. For a calendar-year taxpayer, the installment due dates are April 15, June 15, September 15, and December 15. If a due date falls on a weekend or legal holiday, the payment is due the next business day.
Required installment amounts
Each required installment is generally equal to 25% of the required annual payment. The required annual payment is the lower of (1) 100% of the tax shown on the return for the current year, or (2) 100% of the tax shown on the return for the preceding year (if the preceding year was a 12-month year and a return showing a liability was filed). D.C. Code § 47-4204(b) sets out the calculation methodology, which follows the federal estimated tax rules under I.R.C. § 6655. Corporations may reduce later installments if an amended declaration is filed to reflect changed circumstances; if any amendment is made after the 15th day of the 9th month of the taxable year, any increase in estimated tax must be paid at the time of making the amendment.
Penalty for underpayment
Interest is added to any underpayment of estimated tax at the rate specified in D.C. Code § 47-4201. The underpayment for each installment is the excess of the required installment over the amount paid on or before the due date. The period of underpayment runs from the installment due date to the earlier of (1) the 15th day of the 3rd month following the close of the taxable year (March 15 for calendar-year filers), or (2) the date the underpayment is paid. For most taxpayers, the annual franchise tax return is due on the 15th day of the 4th month following the close of the taxable year, so the interest period for underpayments ends one month before the return due date.
Form and filing
Corporations and unincorporated businesses file declarations of estimated tax and make payments using Form D-20ES (for corporations) or Form D-30ES (for unincorporated businesses). The declaration must be filed in accordance with 9 DCMR § 149.5, and payments may be made electronically through the MyTax.DC.gov portal or by check. Overpayments of estimated tax may be credited against the next succeeding taxable year's estimated tax or applied to prior-year deficiencies. D.C. Code § 47-1812.14 provides that no refund of estimated tax is made unless a complete return is filed.
Source: D.C. Code § 47-1812.14 Source: D.C. Code § 47-4204 Source: 9 DCMR § 149
Sales sourcing rules — Market-based sourcing for non-tangible-property sales
The District of Columbia applies market-based sourcing rules to determine which sales are included in the District sales factor numerator for purposes of the single-sales-factor apportionment formula. The sourcing rules differ based on whether the sale involves tangible personal property or other types of sales.
Tangible personal property — Destination sourcing
Sales of tangible personal property are sourced to the District if the property is delivered or shipped to a purchaser within the District, regardless of the f.o.b. point or other conditions of the sale. Alternatively, sales are sourced to the District if the property is shipped from an office, store, warehouse, factory, or other place of storage in the District and either (1) the purchaser is the United States government, or (2) the taxpayer is not taxable in the state of the purchaser.
Sales other than tangible personal property — Market-based sourcing
For tax years beginning after December 31, 2014, the District applies market-based sourcing to sales other than sales of tangible personal property. Under this standard, sales other than sales of tangible personal property are in the District if the taxpayer's market for the sales is in the District. This represents a departure from cost-of-performance sourcing, which the District used prior to 2015.
The taxpayer's market for sales is in the District under the following circumstances:
Real property transactions For the sale, rental, lease, or license of real property, the market is in the District if and to the extent the property is located in the District.
Tangible personal property rental, lease, or license For the rental, lease, or license (not sale) of tangible personal property, the market is in the District if and to the extent the property is located in the District.
Services For the sale of a service, the market is in the District if and to the extent the service is delivered to a location in the District. The statute does not further define "delivered to a location" or provide a hierarchy of delivery-location rules for services with multiple possible delivery locations.
Intangible property For intangible property that is rented, leased, or licensed, the market is in the District if and to the extent the property is used in the District. The statute contains a special rule for intangible property utilized in marketing a good or service to a consumer: such intangible property is deemed used in the District if that good or service is purchased by a consumer who is in the District.
For intangible property that is sold (rather than rented, leased, or licensed), the statute treats the transaction differently depending on the type. Capital gains and losses from sales of intangible personal property are allocated (not apportioned) to the District if the taxpayer's commercial domicile is in the District. Sales of intangible property other than capital assets are governed by the general "all other receipts" exclusion rule: such receipts are excluded from both the numerator and denominator of the sales factor.
Reasonable approximation and throwout rule
If the state or states of assignment cannot be determined under the primary sourcing rules, the state or states of assignment must be reasonably approximated. If the taxpayer is not taxable in the state to which a sale is assigned (or if the state of assignment cannot be determined or reasonably approximated), the sale is excluded from the denominator of the sales factor. This is commonly known as a "throwout" rule.
Authority for implementing rules
The Chief Financial Officer is authorized to issue rules to implement the sales sourcing provisions, though no comprehensive regulations had been published as of the knowledge cutoff date.
Source: D.C. Code § 47-1810.02(g)