On July 30, 2013, the District of Columbia retroactively repealed the provision that would have subjected most tax-exempt bonds owned by D.C. residents to D.C. income tax. This change restores the historic position of the District of Columbia exempting from D.C. income tax the interest on municipal bonds issued by any state or municipality. Therefore, municipal bond interest income earned by individuals, estates, and trusts will be exempt from taxation in D.C.
Previously the District of Columbia had enacted legislation that would have subjected municipal bond interest to tax to take effect on January 1, 2012. Later legislation delayed the effective date to January 1, 2013. The most recent legislative action repeals the provision completely. For more information on the new law, please visit The D.C. Office of Tax and Revenue's website.