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 and outlines the tax obligations for these entities. Specifically, the bill stipulates that pass-through entities can either pay taxes on behalf of their nonresident members or elect to pay taxes on all members' shares. Additionally, it establishes a tax credit for members of pass-through entities based on the taxes paid by the entity.

The bill also includes provisions for the Mayor to regulate the filing of composite returns and the treatment of taxes paid on behalf of nonresident members. It specifies that the tax does not apply to certain entities, such as real estate investment trusts or tax-exempt organizations. Furthermore, the legislation clarifies the liability of partners in a partnership regarding unpaid taxes and sets an applicability date for the new tax provisions starting from income tax years after December 31, 2023. Overall, this amendment seeks to streamline the taxation process for pass-through entities while providing tax relief through credits for their members.