A new tax on income from out-of-state municipal bonds that kicked in this year on District residents is “causing chaos” with accountants, according to Ward 2 Councilman Jack Evans.
The confusion over which bonds to tax and which ones to leave along is perplexing accountants as they try to make sense of the law during tax season. The problem lies in the fact that only interest earned on muni bonds purchased on or after Jan. 1 this year are being taxed.
But as bonds are bundled in portfolios and then turned over, it’s becomming difficult to decifer which bonds apply to the new tax and which ones were grandfathered in.
“No one can figure out what to do here,” Evans said. “This is a prime example of members of the council who have no idea what they’re doing when they’re doing it.”
The tax was proposed by Council Chairman Kwame Brown in the 2012 budget as a way of avoiding Mayor Vincent Gray’s proposed income tax hike on the District’s top earners. At the time, the tax would have applied to interest earned on all out-of-state-bonds. But in the fall, Evans was the one who pushed through a successful amendment to seperate the newly purchased bonds from the old ones so as not to punish those who’d already purchase bonds expecting them to be tax exempt.
