District of Columbia

Tax incentive evaluation ratings

Tax Incentive Evaluation Ratings: District of Columbia

Rating: Making progress

Key points:

  • The District of Columbia is making progress because the state has adopted a plan for regular evaluation of tax incentives.
  • The first evaluations under the law, published in 2015, included valuable information on the goals and design of incentives.
  • Holding City Council hearings on the evaluations would provide a venue for lawmakers to consider the findings.

District of Columbia evaluation law

Year enacted: 2014.a

Who evaluates: Office of the chief financial officer.

Length of review cycle: Five years.

For more information on state ratings, please visit our interactive map.  

When a 2014 law tasked analysts in the District’s office of the chief financial officer (CFO) with evaluating tax incentives on a five-year cycle, they did not start small. The first evaluation, published in late 2015, reviewed 31 housing tax expenditure programs and 28 specific housing developments for which the City Council had authorized tax incentives.b

The study included a variety of useful information on these tax incentives, detailing the goals of each and the logic behind them. It discussed whether the incentives were consistent with principles of a well-designed tax system, such as treating similar taxpayers equally. The evaluation also recommended improvements to oversight of housing programs and the data available for analyzing them. For example, the authors found that city agencies were not consistently monitoring whether housing developments met required affordability standards and recommended that policymakers clarify who is responsible for this task.c

Analysts in the CFO’s office say they plan to expand their analysis of the economic results of incentives in future studies. In the first report, they lacked the time and data to go in-depth on the programs’ economic impact.d

After studying the city’s environmental tax expenditures,  the office will review economic development incentives next.By reviewing similar tax incentives in the same year, the District is following an approach that has worked well elsewhere, such as in Oregon and Washington.f This strategy allows jurisdictions to compare the results of various programs and identify which are most effective.

The CFO’s office is working to enhance the tax data it collects, a step that the housing study recommended to improve future evaluations. So far, however, the council and other city agencies have not acted on the recommendations in the evaluation.g By law, many states, including Maryland and Washington, hold legislative hearings on new tax incentive evaluations, but the District’s statute lacks such a provision.h Holding council hearings on the evaluations would provide a venue for lawmakers to consider the findings, making improvements to incentives a more likely outcome.

Endnotes

  1. District of Columbia Code § 1-301.157, https://beta.code.dccouncil.us/dc/council/code/sections/1-301.157.html.
  2. District of Columbia Office of the Chief Financial Officer, “District of Columbia Housing Tax Expenditure Review” (October 2015), https://cfo.dc.gov/sites/default/files/dc/sites/ocfo/publication/ attachments/2015%20DC%20Housing%20Tax%20Expenditure%20Review.pdf.
  3. Ibid., 161.
  4. Lori Metcalf, Farhad Niami, and Charlotte Otabor (fiscal analyst, director of economic affairs, and fiscal analyst, respectively, District of Columbia office of the chief financial officer), interview with The Pew Charitable Trusts, May 16, 2016.
  5. Ibid.
  6. Oregon Legislative Revenue Office, “2016 Expiring Tax Credits” (February 2015), 8, https://www.oregonlegislature.gov/lro/Documents/RR%202-15%202016%20Expiring%20Tax%20Credits%202.pdf; Washington Joint Legislative Audit and Review Committee, “10-Year Review Schedule” (September 2016), http://www.citizentaxpref.wa.gov/documents/reviewschedules/2017-2026DraftTenYearSchedule.pdf.
  7. Lori Metcalf (fiscal analyst, District of Columbia office of the chief financial officer), e-mail message to The Pew Charitable Trusts, Dec. 7, 2016.
  8. Iowa Code § 2.48, https://www.legis.iowa.gov/docs/code/2017/2.48.pdf; Maryland Code Ann., Tax–Gen. § 1-308, http://law.justia.com/codes/maryland/2013/article-gtg/section-1-308; Washington Rev. Code Ann. § 43.136.065, http://app.leg.wa.gov/RCW/default.aspx?cite=43.136.065.
State tax incentives
State tax incentives
Report

Improving Tax Incentives for Jobs and Growth

A national assessment of evaluation practices

Quick View
Report

Tax incentives—including credits, exemptions, and deductions—are one of the primary tools that states use to try to create jobs, attract new businesses, and strengthen their economies. Incentives are also major budget commitments, collectively costing states billions of dollars a year. Given this importance, policymakers across the country increasingly are demanding high-quality information on the results of tax incentives.