The Pass-Through Entities Income Tax and Tax Credit on Certain S Corporations and Partnerships Amendment Act of 2025 amends Chapter 18 of Title 47 of the District of Columbia Official Code to allow pass-through entities, such as S Corporations and Partnerships, to elect to be taxed at the entity level for income taxes. The bill introduces a new subchapter, VII-C, which includes definitions and provisions related to the taxation of these entities. Specifically, it establishes a tax on pass-through entities based on their distributive shares or pro rata shares of nonresident members, with the option for entities to pay taxes on all members' shares. Additionally, the bill allows members to claim a tax credit for their proportionate share of the tax paid by the pass-through entity.

Furthermore, the bill outlines the treatment of taxes paid on behalf of nonresident members and provides regulations for filing composite returns. It also specifies that certain entities, such as real estate investment trusts and tax-exempt organizations, are exempt from the tax. The provisions of this act will apply to income tax years beginning after December 31, 2023, and a new subsection is added to allow members of pass-through entities to claim a credit against their income tax for taxes paid by the entity.