Demise of the Master Business License in the District of Columbia
 
December 12, 2003
 
David W. Briggs- Washington

On July 8, 2003, the Council of the District of Columbia finally put to rest much of the confusion and frustration generated over the prior 24-plus months related to the establishment of a “Master Business License” program for the District of Columbia. Arising out of the government reform efforts of the mid-1990s, the Master Business License program was promoted as comprehensive business licensing program for businesses operating in the District of Columbia, and a simplification of what was thought to be a complex, yet antiquated, licensing structure that began at the turn of the 1900s.

The Master Business License program was intended to provide a mechanism to simplify business licensing in the District, as well as to provide the District government with a way to understand for the first time who was conducting business within the District. Ill-conceived and administered, the program imposed many unintended burdens and consequences on those trying to operate in the District of Columbia. The imposition of low monetary thresholds meant that the most modest of business operations, such as a babysitter or the neighborhood lawn boy, had to apply for and obtain a Master Business License, if they had income in any calendar year that exceeded the $2,000 threshold. Additionally, the imposition of administrative requirements that all zoning conditions related to the operation of the business had to be satisfied, and that the business had to have “clean hands” with regard to District tax and fee liabilities, made it difficult for many businesses to obtain a Master Business License.

The outcry from businesses caught in the web of administrative bureaucracy, especially from smaller businesses, became great. This pushed the council to re-evaluate the Master Business License program. With the support of the Mayor, council members Harold Brazil and Sharon Ambrose proposed reform legislation to their council colleagues that attempted to mitigate much of the adverse impacts of the Master Business License program. Council members Brazil and Ambrose, along with the Mayor, hoped to preserve a program that would, in part, continue to provide: (a) a system to establish a comprehensive database of businesses operating in the District to be used as a weapon to confront “fly by night” operations that plagued many District residents, and (b) a revenue stream that figured prominently in the most recent District 2004 budget compromise reached by the council and the Mayor in the Spring of 2003.

A majority of the council could not be convinced that the Brazil/Ambrose “fix” of the Master Business License program would respond to constituent demands. Thus, in a compromise adopted at the July 8, 2003 emergency session prior to its summer recess, the Council adopted the “Streamlining Regulation Act of 2003.”

The Streamlining Regulation Act of 2003 essentially removes any regulation of, and the requirement to obtain a license for, any business that was not required to have a business license prior to the enactment of the Master Business License program, as part of the Second Omnibus Regulatory Reform Amendment Act of 1999. The new program, called the “Basic Business License” program, requires licensure only of those businesses that pose a health or safety risk to residents of the District of Columbia. Obviously, businesses such as hotels, restaurants, beauty and barber shops, gasoline stations, and entertainment establishments will be covered. However, the District has also identified a myriad of other business activities, both obvious and not so obvious, that fit into the category of businesses that require a Basic Business License.

Essentially, the activity engaged in by the business will determine whether a Basic Business License is required. A business that has historically required special inspections, approvals and investigations in order to operate in the District of Columbia must file for and continuously maintain a Basic Business License, as well as any applicable endorsements related to the specific business activity. A Basic Business License will be required regardless of the gross income of the business. Also, its status as a profit or non-profit organization will not be determinative of whether a business is required to obtain a Basic Business License. A business required to obtain a Basic Business License may find that it also needs to obtain several offered endorsements to its Basic Business License in order to cover the multiplicity of regulated business activities that it performs. Additionally, a business must obtain a Basic Business License for each of its business locations in the District of Columbia.

In the wake of enactment of the Streamlining Regulation Act of 2003, the District of Columbia Department of Consumer and Regulatory Affairs has been quick to establish a Web site that describes the Basic Business License program. The site provides an interactive tool to assist businesses to determine, based upon their unique business activities, whether or not a Basic Business License is required for its business operations, and what endorsements to the Basic Business License will be required for its specific business operations. Further information can be found online at: http://mblr.dc.gov/information/need_lic/index.shtm.

Those responsible for preparing this new legislation have been sensitive to the fact that many businesses had previously obtained licenses under the Master Business License program. Accordingly, the Act specifically provides that previously licensed businesses can continue to operate under their Master Business License until it expires, and will not be required to immediately obtain a Basic Business License with the appropriate endorsements in order to legally operate. Additionally, those businesses that had previously obtained Master Business Licenses, but which are no longer required to be licensed under the Basic Business License program, can allow their Master Business Licenses to expire without the need to obtain a Basic Business License.

The Streamlining Regulation Act of 2003 and the Basic Business License program do not change any other legal requirements of D.C. law, such as the requirement that all businesses operating in the District of Columbia under “trade names” must register their trade name and true identity with the District of Columbia.

Hopefully, the District of Columbia has adopted a program that is both politically and administratively acceptable so that in the future the District council will not feel pressured to impose another regulatory structure on the business community. More than anything else, the District’s businesses deserve an operating environment that is stable and provides continuity. On the licensure front, the last years have left many businesses distracted from their principal focus — establishing and operating an economically successful business in the District. We hope that the Basic Business License program adopted by the Streamlining Regulation Act of 2003 will provide a stable environment, at least on the regulatory front.

For more information, e-mail David W. Briggs at david.briggs@hklaw.com or call toll free, 1-888-688-8500.