Currently, the District of Columbia does not tax income from all state and local (municipal) obligations. It appears this will change.  The D.C. Council recently enacted its 2012 budget legislation which makes changes in the way interest income from state and local government bonds are taxed.

Effective January 1, 2012, interest income from all non-D.C. (i.e., out-of-state) municipal obligations will be subject to D.C. income tax. Interest from D.C. obligations will continue to be exempt from D.C. income tax.

For more information about this development or other tax matters, please contact Aronson tax experts Horace Lamb, Jack Koniszewski or Henry Chiwaya at 301.231.6200.