District of Columbia Tax Incentives Improvement Act of 2002

Excludes from gross income capital gains on sale or exchange of District assets held for more than two years (presently the figure is five years). Defines what constitutes a District business. Nullifies the exclusion of any trade or business from counting as a District business for reason of consisting predominantly of dealing in intangibles if: (1) at least 30 percent of the employees of such a business are District residents; and (2) at least 50 percent of the wages are paid to District residents.

Extends time line for which provisions of enterprise zone treatment will last. Makes permanent provisions of law pertaining to the first-time homebuyer credit (currently, they last through December 31, 2003). Extends classification of "first-time homebuyer" to certain individuals buying residences due to divorce or separation, and directs the Secretary of Treasury to prescribe regulations to prevent abuses of such provision.

Removes the limitation on the amount of tax-exempt enterprise zone facility bonds that can be issued.

Exempts certain bonds and notes issued by the District Council and the interest thereon from all taxation (except for estate, inheritance, and gift taxes) by the United States, any State or political subdivision thereof, the District, or any possession of the United States.

Sets the tax and withholding rates for nonresident aliens and foreign corporations at zero for payments made by an "exempt insurance company" with respect to a "DC Zone insurance policy" issued by such company (as such terms are defined by this Act). Relieves exempt insurance companies from reporting requirements with respect to amounts paid under a DC Zone insurance policy to foreigners in connection with risks located outside the United States.