Washington DC Considers Tech Legislation

July 28, 2000

The “New E-Conomy Transformation Act of 2000," legislation introduced in the District of Columbia (DC) Council, contains eleven incentives designed to help transform the DC economy. Councilmember David A Catania and the New E-conomy Advisory Group comprised of seven business leaders, developed the incentives targeted at companies engaged in e-commerce, Internet-based businesses, information technology, and other sectors of the New Economy. The Advisory Group identified barriers to locating in the District such as workforce development, affordable facilities and then crafted incentives designed to help businesses overcome them. 

A brief summary of each incentive is listed below: 

Workforce Development

  • Employment Opportunity Relocation Cost Credits: Encourages high technology companies to locate in the District by providing a $5,000 per-employee tax credit to each company that moves at least 10 full-time jobs into the District for a total of up to $100,000 per company. 
  • Employment Wage Credits: Offers a tax credit equal to 10 percent of employees' salaries at a high technology company for the first 24 months of employment. The credit would be capped at $5,000 per employee per year. 
  • Employment and Training Wage Credits for Temporary Assistance to Needy Families [TANF] Recipients: In order to encourage companies to train and employ TANF recipients, the bill provides a retraining tax credit equal to the full cost of retraining. In addition, the bill includes an expanded wage credit equal to 50 percent of the salary of a TANF recipient, capped at $15,000 per employee per year for the first 24 months of employment. 

Affordable Facilities 

  • Lease Guarantees: Provides lease guarantees for qualified companies by the District government in order to assist them in securing leases within the District. 
  • Access to DC Public School and other District Government Facilities: Directs the Mayor and the Superintendent of Schools to carry out a study on underutilized District-owned space within their inventory. Authorizes the Mayor to lease available spaces at reasonable, below-market rates to qualified companies. In exchange, lease conditions would include a requirement to assist schools through internships and training programs for students and teachers, and other services. 
  • Real Property Tax Abatement on Improved Properties: In order to encourage developers to upgrade buildings and real property, the bill offers a property tax abatement for improvements. For a limited time, the entity that improves the property will be taxed at the unimproved assessment of the building or property. Under appropriate circumstances, this will include abatement for tenants. 

Targeted Financial Incentives 

  • Personal Property Tax Exemptions: Exempts from personal property tax 75 percent of the value of personal property held by a high technology company for the first five years. The exemption is 50 percent for the next five years. 
  • Sales/Use Tax Exemptions: Intangible properties sold over the Internet would be exempt from sales and use taxes. Also, companies would be exempt from paying sales tax on the purchase of certain essential equipment and technology
  • Corporate Income Tax Reductions: Reduces the corporate franchise tax for high technology companies to 6 percent, placing it in parity with Virginia. Additionally, allows the Mayor and the Council to designate High Technology Development Regions in which qualified high technology companies would be subject to a zero percent corporate franchise tax. 
  • Deductibility of Tangible Personal Property: Increases the value of tangible personal property companies can “expense” in the first year. 
  • Unincorporated Franchise Tax: Eliminates the Unincorporated Franchise Tax on qualified high technology companies. 

High technology companies are those involved in any of the following: advanced materials and processing; engineering, production, and defense technologies; electronic and photonic devices and components; and information and communication technologies. 

The legislation was introduced by six of the thirteen council members in June; a first hearing was held July 14, 2000. Additional action on the initiatives is not likely until September. For more background on the legislation and the Advisory Group, visit http://www.dcneweconomy.com