D.C. Schedule I line 6: the $12,000 threshold is a business gross-income test, not a loss threshold #9867

dc_self_employment_loss_addition (D.C. Schedule I, Calculation A, line 6) adds back max(0, filers' self-employment loss deducted in federal AGI − $12,000), with the $12,000 in parameters/gov/states/dc/tax/income/additions/self_employment_loss/threshold.yaml. The law ties the $12,000 to a business's gross income, not to its loss, and the add-back covers only businesses that are "unincorporated businesses" under § 47-1808.01.

Law

• D.C. Code § 47-1805.02(6) (https://code.dccouncil.gov/us/dc/council/code/sections/47-1805.02): every unincorporated business "having a gross income of more than $12,000, regardless of whether it has a net income" must file a return (the D-30).
• D.C. Code § 47-1803.02(a)(2)(D) (https://code.dccouncil.gov/us/dc/council/code/sections/47-1803.02) excludes from D.C. gross income the distributive share of an unincorporated business's net income "to the extent that portion of the distributive share so excluded is directly or indirectly reported by and taxed against any person under the provisions of this chapter".
• D.C. Code § 47-1808.01 (https://code.dccouncil.gov/us/dc/council/code/sections/47-1808.01) excludes several kinds of business from "unincorporated business". Among them: "(3) A trade or business in which more than 80% of the gross income is derived from the personal services actually rendered by the individuals ... and in which capital is not a material income-producing factor"; a business that cannot be incorporated; one incorporable only under Title 29, ch. 5; and qualified high technology companies.
• 2025 Schedule I, Calculation A, line 6 (https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/2025_Schedule_I_021226.pdf): "Pass-through losses from DC unincorporated businesses that exceed the $12,000 threshold (reported as a loss on federal 1040 or 1040-SR return)."
• 2025 D-40 booklet, line b (https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/2025_D40_Book_082026_v1.pdf), the same in 2021 and 2022: "If you had gross business/self-employment income from DC sources of more than $12,000 from an unincorporated business or business activity, see the instructions for D-30 ... to see if you are required to file that return. If you are, do not include the income here, but report it on your D-30 return instead." Line d adds that a D-30 is filed "if capital is a material income producing factor".

Reading

A business that is an unincorporated business under § 47-1808.01 and has more than $12,000 of D.C.-source gross income files the D-30. Its income or loss stays off the D-40, so line 6 adds back its whole federally deducted loss. Any other business, including a personal-service business where capital is not material, stays on the D-40 with no add-back.

Why the model can't apply it yet

policyengine-us has no business gross-receipts input and no personal-service or capital-intensity classification. Applying the law needs a methodology choice. The options include keeping the current approximation, adding inputs that default to today's behavior, or imputing. Each needs a real microsimulation to measure.

Related: #9857 fixes only the dependent-loss part of the same formula. TheAxiomFoundation/rulespec-us#1504 asks Axiom to encode the law as written.