The Pass-Through Entities Income Tax and Tax Credit on Certain S Corporations and Partnerships Amendment Act of 2025 aims to amend Chapter 18 of Title 47 of the District of Columbia Official Code. This legislation allows pass-through entities, such as S Corporations and Partnerships, to elect to be taxed at the entity level for income taxes. It introduces a new subchapter (VII-C) that defines key terms related to pass-through entities, outlines the tax obligations for these entities, and establishes a tax credit for members of pass-through entities based on the taxes paid by the entity itself.

The bill specifies that pass-through entities can choose to pay taxes on behalf of their nonresident members or opt to pay taxes on all members' shares. It also details how the tax is calculated and the conditions under which members can claim credits against their income tax for the taxes paid by the pass-through entity. Additionally, the legislation includes provisions for the Mayor to create regulations regarding composite returns and exemptions for certain entities. The new tax provisions will apply to income tax years beginning after December 31, 2023.