Key figures
District of Columbia accounting
2026, with sources
A franchise tax that is an income tax
DC calls its corporate income tax a franchise tax. Every corporation that carries on business in DC or receives income from DC sources files Form D-20 with the Office of Tax and Revenue and pays 8.25% of DC taxable income. The minimum tax is $250, or $1,000 when DC gross receipts exceed $1 million, and it is owed regardless of profit.
For the tax provision, the DC franchise tax is a state income tax under ASC 740: current DC tax, deferred items for DC’s differences from federal, and the minimum tax when there is no income. It is not the kind of franchise tax Delaware charges for being incorporated.
Combined groups and market sourcing
DC requires unitary combined reporting. By default a unitary group reports on a water’s-edge basis; it may elect worldwide combination instead. A Delaware parent with a DC-based operating subsidiary is typically one combined group, filing on the combined schedule with a November 15 extended due date for calendar-year members.
Income is apportioned by a single sales factor for tax years beginning after December 31, 2014. Sales other than tangible goods are in DC if the taxpayer’s market is in DC; a service is sourced to DC to the extent it is delivered to a location in DC. An example: a software company with $5 million of revenue and $500,000 of taxable income, $250,000 of it from services delivered to DC customers, apportions 5%, or $25,000, to DC and pays $2,062.50 (8.25%), well above the $250 minimum it would owe at that level of DC receipts if it had no income.
Where DC differs from federal
DC does not allow the federal special depreciation allowance under §168(k), so bonus depreciation taken federally is recovered over normal lives for DC. That is a recurring deferred item for a company buying equipment.
Net operating losses work differently too. DC apportions the loss in the year it arises and deducts it after apportionment in later years; carrybacks are not allowed. A company whose DC factor grows quickly as it adds DC customers can find that its early DC losses, apportioned at a small factor, shelter less than expected.
The federal baseline
This page covers what District of Columbia adds. The federal rules underneath it apply here too.
Common questions
Is DC’s “franchise tax” like Delaware’s?
It is DC’s corporate income tax. Every corporation that carries on business in DC or has DC-source income files Form D-20 and pays 8.25% of its DC taxable income, with a minimum of $250, or $1,000 once DC gross receipts pass $1 million. There is no separate capital or net worth tax.
Do we owe DC tax if we lose money?
Yes, even at a loss. The minimum tax applies whether or not there is income, so a loss-making startup with DC customers or staff pays at least $250 a year.
Accounting next door
- MDMaryland accountingMaryland taxes corporations at a flat 8.25% on separate-company returns, with a single receipts factor and services sourced to the customer. For 2025 it decoupled from federal R&D expensing.
- VAVirginia accountingVirginia taxes corporations at a flat 6% with a double-weighted sales factor and cost-of-performance sourcing. It conforms to the IRC as of December 31, 2025 but decoupled from the 2025 R&D expensing and from bonus depreciation.
Founder guides on this
- US GAAPUS GAAP for early-stage startups, in plain EnglishAccrual accounting, revenue recognition (ASC 606), leases (ASC 842), stock compensation and capitalized software: what each means for a small company.
- R&D taxThe R&D tax credit and Section 174A for startupsEngineering salaries can earn a federal R&D credit against payroll tax, and Section 174A lets you deduct US research again. What qualifies, what to track.
- FundraisingAudit-ready books before your Series AInvestors, lenders and auditors ask for the same things: accrual statements, reconciled accounts and support for every balance. How to be ready first.
More of the District of Columbia guide
- ReceivablesReceivables and sales tax in District of ColumbiaSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in District of ColumbiaPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- PayrollPayroll taxes and employer rules in District of ColumbiaWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in District of ColumbiaRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in District of ColumbiaCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
- DC Code § 47-1807.02 — Corporate franchise tax rate and minimum tax
- DC Office of Tax and Revenue — DC Business Franchise Tax Rates
- DC Code § 47-1810.02 — Apportionment and market-based sourcing
- DC Code § 47-1810.07 — Water’s-edge combined reporting
- DC Code § 47-1803.03 — Deductions (bonus depreciation, NOLs)
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.