The District of Columbia Office of Tax and Revenue (OTR) has announced a series of tax changes effective October 1, 2025, and throughout fiscal year 2026 . These changes, enacted through the Fiscal Year 2026 Budget Support Amendment Act, affect individuals, businesses, and consumers across the District. For DC residents, businesses, and tax professionals, understanding these changes is essential for accurate tax planning and compliance. This guide provides a comprehensive overview of the key changes. Sales and Use Tax Changes General Sales Tax Rate The general sales tax rate on tangible personal property, digital goods, and taxable services will remain at 6.0% through September 30, 2026. Beginning October 1, 2026, the rate will increase to 7.0% . This delayed increase gives businesses time to prepare for the change, including updating point-of-sale systems and adjusting pricing strategies. Specific Rate Changes Several specific sales tax changes are also taking effect: Commercial Bingo: Beginning October 1, 2025, gross receipts from commercial bingo will be subject to sales tax at 7.5% Transient Accommodations: The temporary increase in the sales tax rate on hotel rooms and other transient accommodations to 15.95% has been extended through September 2027 Food and Beverage: Sales of food or drink prepared for immediate consumption are subject to tax at 10% Vehicle Rentals: Sales or charges for the rental of motor vehicles and utility trailers are now taxed at 10.25% Individual Income Tax Changes The Budget Support Act includes several adjustments to individual income tax provisions. Taxpayers should review their withholding and estimated tax payments to ensure they reflect the current tax structure. Estate Tax Exclusion Increase For estates of decedents who die on or after January 1, 2026, and on or before December 31, 2026, the estate tax exclusion (zero bracket) amount is increased to $4,988,400 . This adjustment reflects inflation and provides relief for smaller estates. Cigarette and Tobacco Tax Increases The District has increased taxes on tobacco products: Cigarettes: The total cigarette tax increased from $5.03 to **$5.07 per package of 20 cigarettes** Other Tobacco: The tax rate on other tobacco products is 64% of wholesale sales, and the rate for little cigars increased to $0.2535 per little cigar Motor Fuel Tax Adjustment The motor fuel surcharge increased from $0.118 to **$0.122 per gallon** on the sale of gasoline, gasohol, and other motor vehicle fuel . This surcharge is in addition to the base tax of $0.235 per gallon. Recordation Tax Relief for First-Time Homebuyers For first-time homebuyers, the cap on the purchase price for a residential property eligible for the reduced rate of recordation tax is increased from $753,000 to **$777,000** for tax year 2026 . Income ceilings for eligible households are also increased. Real Property Tax The Tax Year 2026 special real property tax rate for certain properties is set at 23.4% . How Nova Tax & Accounting Services Can Help At Nova Tax & Accounting Services, we help DC residents and businesses navigate the District’s complex tax landscape. Our team provides tax preparation, planning, and compliance services tailored to the unique rules of Washington DC. For more information, visit https://novataxservices.com/ or schedule a consultation. External Links: DC Office of Tax and Revenue – Notice of Tax Changes DC Office of Tax and Revenue – Taxable and Non-Taxable Services
The 2026 Virginia General Assembly session brought a significant expansion of local taxing authority that will affect businesses and consumers across the Commonwealth. Under the new law, localities may now impose an additional 1% sales tax if approved by voters in a referendum . This represents a major shift in how local governments can fund infrastructure projects—particularly school construction and renovation. For businesses operating in Virginia, this change creates both compliance obligations and strategic considerations. Understanding the new law is essential for accurate tax collection, pricing decisions, and long-term planning. What the New Law Allows Under the legislation enacted in 2026, any Virginia locality may increase its sales tax rate by 1% if approved in a local referendum . Previously, only nine cities and counties had the authority to place such a measure on the ballot. How Funds Must Be Used The additional revenue must be dedicated to specific purposes: School construction or renovation (the primary authorized use) Public transportation (for certain localities that qualify) The dedicated funding source cannot be applied to existing debt service for projects that began before the tax takes effect. However, it can help accelerate payment on new debt, strengthening local governments’ financial position. Important Exemptions The 1% local option increase does not apply to: Food purchased for home consumption (groceries will continue to be taxed at the reduced rate of 1% statewide) Essential personal hygiene products This exemption structure means that approximately 20% of all retail spending remains at the lower rate, shielding essential household purchases from the additional tax burden. Implications for Virginia Businesses Point-of-Sale System Updates Businesses operating in localities that approve the tax will need to update their point-of-sale systems to reflect the new rate. This is particularly important for: Retailers with multiple locations across different localities Online sellers shipping to addresses in affected localities Service providers subject to sales tax Compliance and Reporting Businesses must ensure they are collecting and remitting the correct amount of sales tax based on the locality where the sale occurs. Virginia’s sales tax return process will reflect the new rates for affected jurisdictions. Competitive Considerations Businesses in border areas may face competitive pressure if neighboring localities do not adopt the tax. Consumers may shift purchasing behavior to avoid the additional 1% tax, particularly for large-ticket items. Timeline and Next Steps The first referendums under the new law are expected to appear on ballots as early as November 2026 . Localities that approve the tax will coordinate with the Virginia Department of Taxation to implement the new rate. Businesses should monitor referendum results in their localities and prepare to update systems accordingly. The Virginia Department of Taxation will provide guidance on implementation timelines and filing requirements. How Nova Tax & Accounting Services Can Help At Nova Tax & Accounting Services, we help Virginia businesses navigate changes in tax law and ensure compliance with state and local requirements. Our team can assist with sales tax registration, filing, and strategic planning to minimize the impact of rate changes. For more information, visit https://novataxservices.com/ or schedule a consultation. External Links: Virginia Tax – New Virginia Tax Laws Virginia Tax – 2026 Legislative Summary
For nonprofit organizations in Virginia and Washington DC, federal grants represent both opportunity and obligation. A grant award is not simply a transfer of funds—it is a contract with the federal government that comes with strict requirements for how money is spent, documented, and reported. When those requirements are not met, the consequences can be severe: questioned costs, repayment demands, audit findings, and in some cases, suspension from future federal funding. The Treasury Department’s April 2026 announcement of a Form 990 transparency initiative signaled that government grants and contracts will face increased scrutiny. Treasury Secretary Scott Bessent stated plainly: “Public money and tax-exempt status demand public accountability”. For organizations receiving federal funds, the message is clear: grants management is not administrative busywork. It is a compliance discipline that protects your funding and your mission. The Grant Life Cycle: From Pre-Award to Closeout Effective grants management spans two broad stages: pre-award and post-award. Each stage has distinct compliance obligations and risks. Pre-Award: Planning and Decision-Making The pre-award phase is about deciding whether to pursue a grant and preparing a competitive application. Key activities include: Assessing mission alignment. Does the grant opportunity align with your organization’s exempt purpose? Pursuing funding for activities outside your mission can create compliance risk. Evaluating organizational capacity. Can your team manage the administrative requirements? Federal grants often require detailed financial reporting, time and effort tracking, and procurement documentation. Developing a realistic budget. The program and finance teams should collaborate on the budget, ensuring the numbers are complete, compliant, and manageable once the grant is awarded. Post-Award: Execution, Monitoring, and Compliance Once a grant is awarded, the compliance obligations begin in earnest. Key steps include: Reviewing and documenting award terms. The first step after award should be reviewing the terms and conditions, including the period of performance, reporting requirements, and any restrictions on spending. Setting up the grant in the accounting system. Every restricted grant should have its own distinct identifier—a grant code, unique class, or project ID—so spending can be tracked cleanly by award. Without that structure, reporting becomes manual and painful. Clarifying roles and responsibilities. A RACI matrix (Responsible, Accountable, Consulted, Informed) helps map who is responsible for each activity across finance, program, development, and leadership. Internal Controls: The Foundation of Grant Compliance Internal controls are the policies and procedures that ensure grant funds are spent as intended, reported accurately, and supportable under audit. Documented controls preserve organizational knowledge, promote consistency, and support continuity as teams evolve. Key Controls for Grant Management Authorization and approval. Funders and auditors want to know who can approve grant expenses, what limits apply, and where that is documented. Automated accounts payable workflows create a clear audit trail. Segregation of duties. Ideally, the person requesting a purchase is not the one approving and recording it. When staffing is limited, compensating controls—such as secondary review or board oversight—help, as long as they are documented. Documentation and record retention. Approvals, cost justifications, allocation methodologies, and exceptions must be documented and retained. Time and effort reporting. Salary and benefit costs must be allocated using a documented, reasonable, and consistently applied method that accurately reflects the work performed. Timesheets or activity reports offer the clearest support. Common Grants Management Pitfalls Even well-intentioned organizations can run into trouble. Common pitfalls include: Unallowable costs. Charging expenses that are not permitted under the grant terms—such as alcohol, lobbying, or certain administrative costs—can result in questioned costs and repayment demands. Inadequate documentation. Missing receipts, timesheets, or approval records can lead to audit findings. Procurement violations. Federal procurement rules require competition for purchases above certain thresholds. Program staff must understand that procurement rules apply directly to them. Failure to monitor subrecipients. Organizations that pass grant funds to subrecipients must monitor how those funds are used. Late or inaccurate reporting. Financial and programmatic reports must be submitted on time and accurately reflect grant activities. Virginia and DC Compliance Considerations Virginia: Nonprofits receiving state grants may have additional reporting requirements. Organizations with gross annual revenue of $750,000 or more must provide a financial review performed by an independent CPA when maintaining their Virginia sales tax exemption. Virginia Tax may require a full audit for organizations with revenue of $1.5 million or more. Washington DC: Organizations must maintain their DC tax-exempt status by filing Form FR-164 and renewing as required. DC franchise tax applies to unrelated business income. How Nova Tax & Accounting Services Can Help At Nova Tax & Accounting Services, we help nonprofit organizations strengthen their grants management practices and prepare for audits. Our team provides internal controls assessment, grant compliance reviews, and training for finance and program staff. We also offer audit and assurance services designed specifically for organizations receiving federal and state grants. For more information, visit https://novataxservices.com/audit-attestation-services/ . External Links: Uniform Guidance (2 CFR Part 200) IRS Federal Government Grants Compliance Strategy Virginia Tax Nonprofit Requirements