Corporations which qualify for and file as Subchapter S corporations for federal income tax purposes are treated the same as corporations which file as regular corporations for federal income tax purposes.
The District of Columbia corporate franchise tax return is prepared for calendar, fiscal and short year S corporations. Using entries from the federal tax return and District of Columbia sections the following forms are prepared for the District of Columbia return:
A copy of the relevant federal forms are provided for filing with the District of Columbia return.
The District of Columbia follows federal depreciation with the exception that any bonus depreciation claimed under JCWA/JGTRRA is not allowed and Section 179 expense is limited to $25,000. The portion of the basis of the asset for which JCWA/JGTRRA depreciation is not allowed is recovered under the rate and method in effect for the rest of the asset basis. The adjustment is automatically reported on Form D-20, Page 1, line 20 (Depreciation), Form D-20, Page 2, line 24 (Other Deductions) or Form D-20, Page 3, Schedule A, Cost of Goods Sold, line 4 (Other Costs per books) as applicable. Statements explaining the adjustment are attached to the relevant lines. Overrides are available on the Income / Deductions worksheet, Deductions section. If depreciation is entered on the federal depreciation sections, totals tab, no automatic adjustment is made and no statement is produced.
In general, no state entries on federal Income & Deductions category, Business worksheet, Deductions section are used to calculate District of Columbia depreciation. The system automatically calculates the adjustment to deductions for current year assets subject to JCWA/JGTRRA from the entries made to calculate federal depreciation on the federal depreciation sections. Assets subject to federal JCWA/JGTRRA bonus depreciation in a prior year will have a Pro Forma with an entry of zero for the JCWA/JGTRRA amount taken for the asset. This entry is used to calculate the depreciation adjustment for the District of Columbia in years after the property was placed in service. The entry is also necessary to automatically calculate the state adjustment to federal gain or loss when the automatic sale feature is used to indicate disposal of the asset. If there is an asset for which federal bonus depreciation was claimed and no Pro Forma was created, you should add the entry described above.
If federal Summary Depreciation section is used to indicate assets subject to JCWA/JGTRRA, no automatic state adjustment will be made. Use District of Columbia Income/Deductions worksheet, Deductions section to enter the adjustment. If federal depreciation exceeds the District of Columbia depreciation, enter the difference as a positive number. If the District of Columbia depreciation exceeds federal depreciation, enter a negative number.
Refer to the explanation of the use of FS and State Code entries in the General Instructions chapter of the federal instruction guide.
The following items from the federal return are carried to the District of Columbia return and do not require additional entries on state worksheets:
Enter interest from U.S. obligations on federal Income & Deductions category, Interest worksheet, Interest Income section. Enter interest from U.S. obligations received from a passthrough entity in the U.S. bond interest box on federal Income & Deductions category, Passthrough Entities section, Income (Loss) section. Amounts entered in these fields are excluded from the District of Columbia return.
Enter municipal bond interest received from states other than the District of Columbia in the Municipal Bonds fields on federal Income & Deductions category, Interest worksheet, Interest Income section. Amounts received from other states entered in these fields are added to the District of Columbia return.
Be sure to indicate the source of municipal bond interest. Enter the source of interest in the "State" column on federal worksheets.
Interest is considered to originate in the state entered on federal General category, Basic Information worksheet, General section, State code field if:
State taxes carry to the federal return only when a "State and City Tax Accrual Option" is selected. Taxes computed on the District of Columbia return carry to page one of the federal return if "Tax to page 1, adjust balance sheet" is entered in the "State and City Tax Accrual Option" box in the "Processing Options" section of General category, Return Options worksheet, Calculation Options section. The tax also accrues to the appropriate sections of the federal balance sheet.
"Tax to page 1, adjust Schedule M-1" carries state taxes computed on the District of Columbia return to page one of the federal return but does not accrue them to the federal balance sheet. If required, a Schedule M-1 book/tax adjustment is made.
"Tax to rental, adjust balance sheet" accrues taxes to the balance sheet but tax expense carries to the rental schedule instead of Form 1120S, page one.
"Tax to rental, adjust Schedule M-1" does NOT accrue taxes to the balance sheet but tax expense carries to the rental schedule instead of Form 1120S, page one.
"Tax to Sch K, adj. balance sheet" accrues taxes to the balance sheet but tax expense carries to the Schedule K and K-1(s), other deductions line, instead of page one, Form 1120S.
"Tax to Sch K, adjust Sch M-1" does NOT accrue taxes to the balance sheet but tax expense carries to the Schedule K and K-1(s), other deductions line, instead of page one, Form 1120S.
If a State Tax Accrual Option is not selected, state taxes computed on the District of Columbia return neither carry to the federal return nor accrue to the balance sheet.
State and city income taxes based on income, entered on federal Income & Deductions category, Business worksheet, Taxes & Licenses section carry to Form D-20, as an addition.
The refund of state and city income taxes, based on income, included in federal taxable income, is included on Schedule E, line 9, Other Non-taxable Income and Additional Deductions. State tax refunds can be entered on federal Income & Deductions category, Business worksheet, Income section.
When using Income & Deductions category, Business worksheet, Income section the source of the state tax refund is determined by the code entered. If no state code is entered, the state taxes are considered to be from the home state entered on General category, Basic Information worksheet, General section. State code field.
Wages or salaries eligible for the federal Employment Credit, which were not deducted on the federal return, carry to District of Columbia Form D-20, Schedule E, line 9, Other Non-taxable Income and Additional Deductions.
The contribution deduction, for Form D-20, is computed from entries on federal worksheets. District of Columbia excludes contribution carryovers and limits the contribution to 15 percent of the District of Columbia net income before the contribution deduction. To override this computation, use the "Contributions" field on Income/Deductions category, Business worksheet, Deductions section.
The difference between contributions allowable on the federal and the District of Columbia returns is adjusted in Schedule E of Form D-20. Do not duplicate this adjustment on Book/Tax Items worksheet, DC Reconciliation section, Increasing Adjustments and Decreasing Adjustments fields.
Entries on federal Income / Deductions Gains and Losses worksheet are used to compute net capital gains and ordinary (Form 4797) gains (losses) as if the corporation was a C corporation. Gains or losses are reported on Form D-20, page one.
The District of Columbia net operating loss is calculated from entries on federal Depreciation and Amortization sections. See the federal guide for use of FS codes. The District of Columbia NOL may be overridden on Income/Deductions category, Business worksheet, Deductions section.
The following items are included from federal Schedule K on Form D-20, page one, to calculate District of Columbia net income:
Entries are available for District of Columbia information on worksheets. In the absence of state entries, information entered on the federal worksheets is used, where applicable, to prepare the District of Columbia return.
In the absence of overrides entered at either the federal or District of Columbia level, officers' compensation entries from federal Income/Deductions category, Business worksheet, Compensation of Officers section carry to Form D-20, page three, Schedule C. Entries made with any of the following F/S codes are used to fill Schedule C when no overrides are present:
| FS | State |
|---|---|
| Blank | Blank |
| S | Blank |
| F | DC |
| S | DC |
If an override is entered at the federal level, entries made with any of the following F/S codes are used to fill Schedule C:
| FS | State |
|---|---|
| S | Blank |
| S | DC |
If an override is entered at the District of Columbia level, all entries on Interview federal Income/Deductions category, Business worksheet, Compensation of Officers section are ignored.
Due to space limitations on the government form, Schedule C will print as a statement if any of the following conditions are met for entries using the above F/S codes:
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