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District of Columbia v. Califano

September 15, 1994


Appeals from the Superior Court of the District of Columbia; (Hon. Eugene N. Hamilton, Trial Judge)

Before Terry and King, Associate Judges, and Belson, Senior Judge.*

The opinion of the court was delivered by: Terry

TERRY, Associate Judge: These three cases, consolidated on appeal, present a single question: whether appellees were entitled, under D.C. Code § 47-1806.4(a) (1990), to credit the amounts they paid in New York under the New York City Unincorporated Business Tax against their District of Columbia income taxes. The trial court granted summary judgment for appellees, ruling that they were eligible for the credit and could lawfully claim it. The District of Columbia appeals from that judgment. We affirm.


The facts have been stipulated and are not in dispute. The parties also agree that the legal issues raised by these three appeals are the same and that the only difference among the three cases is in the amount of taxes, interest, and penalties at issue in each case.

The appellees are Joseph A. Califano, Jr., W. Clark McFadden, II, and Felix B. Laughlin and their wives, Hilary P. Califano, Mary E. Wagner, and Betty G. Laughlin. At all relevant times, they were all residents of the District of Columbia. The three husbands were partners in the law firm of Dewey, Ballantine, Bushby, Palmer & Wood ("Dewey Ballantine"). All three worked in the Washington office of Dewey Ballantine, which has its headquarters in New York.

As a partnership organized under New York law, Dewey Ballantine is subject to New York City's Unincorporated Business Tax ("U.B.T."), N.Y.C. ADMIN. CODE §§ 11-503 (a), 11-508 (a) (1985). *fn1 At Dewey Ballantine each partner has a certain number of shares in the partnership. The partners' compensation is a function of each partner's "sharing percentage" and does not depend on the source of the funds or the partner's residence or domicile. As partners earn, so do they pay: each partner's share of the total New York U.B.T. paid by Dewey Ballantine is the same as his or her sharing percentage. For the years 1987, 1988, and 1989, the tax years at issue here, appellees' shares of the New York U.B.T. totaled almost $87,000.

Appellees sought to have their New York U.B.T. payments credited against their District of Columbia income taxes under D.C. Code § 47-1806.4 (a), but the District denied their requests for a tax credit and granted them only a tax deduction. Appellees then filed a petition in the Tax Division of the Superior Court challenging the assessment of taxes against them. On cross-motions for summary judgment, the court granted judgment for the appellees, holding that they were entitled to a credit on their District of Columbia income tax returns in the amount of the New York U.B.T. that each of them had paid. From that order the District of Columbia has brought this appeal.


The issue before us is whether appellees' payment of the New York U.B.T. meets the criteria for a tax credit set out in the District of Columbia tax code. D.C. Code § 47-1806.4 (a) provides, in pertinent part:

The amount of tax payable under this subchapter by a resident of the District in respect to the taxable year shall be reduced by a credit equal to the amount of individual income tax such individual is required to pay and, in fact, has paid to any state . . . of the United States, or political subdivision thereof . . . upon income attributable to such state . . . for such taxable year or portion thereof while concurrently a resident of the District.

The District advances two reasons why appellees should not be deemed eligible for a credit under section 47-1806.4 (a). First, says the District, the New York U.B.T. is not an "individual income tax"; second, appellees were not "required" to pay the New York U.B.T. We find no merit in either argument.

A. Is the New York U.B.T. an "individual income tax"?

Both of the District's arguments seek to counter appellees' heavy reliance on Bishop v. District of Columbia, 401 A.2d 955 (D.C. 1979), aff'd en banc, 411 A.2d 997, cert. denied, 446 U.S. 966 (1980). Appellees acknowledged at oral argument that their success depends on the applicability of Bishop to this case, but they maintain that Bishop resolves this appeal in their favor. The District responds that Bishop is inapposite because it focused on the District's power to tax and did not address ...

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