After of months of hearings, testimony, and public deliberation, the DC Tax Revision Commission last week presented the DC Council its final plan [PDF] to reform the city’s tax code. As expected, it contains a new services tax that would impose a $100 annual fee per employee on all city employers.

Employers with fewer than four employees would be exempt. There would be no exemptions for lower-income workers employed by the organization, an option initially considered by the commission.

Last fall, the commission was directed by the council to reform the tax code to increase revenues and counter a negative perception of the city’s tax structure. The local services tax was one of 63 options the commission considered.

In justifying the fee in its report, the commission explicitly noted that a “commuter tax” would not pass legal muster and said “the District is home to many nonprofits organizations, all of which are exempt from the District’s business income tax. … These limitations have forced the District to disproportionately shift its tax burden to a smaller base of residents and for-profit businesses.”

The fee would apply to both for-profit and nonprofit employers and to employees regardless of their state of residence.

ASAE met with the commission before the final report was drafted and expressed concern with the proposal on two fronts. First, ASAE argued that it was false to assume that the city’s associations do not contribute to the city’s infrastructure, noting that associations incorporated in DC are required to pay at least nine different taxes and fees. Second, ASAE said that such a fee, while nominal now, could be expanded to cover any budget shortfalls unrelated to the purpose of the fee, which the council has done in the past with other fees.

In a letter to the commission last November, ASAE President and CEO John H. Graham IV, FASAE, CAE, noted the nontax economic contributions that associations make to the city, including economic development through employment and benefits for residents, as well as association educational meetings.

“If the District ultimately assessed a ‘service’ tax on associations within the city, it would not only hurt its revenue stream long-term but completely misunderstand how much of a financial commitment associations already have made to the District,” Graham wrote.

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