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Multistate Tax Alert: Changes to D.C. Qualified High Technology Company Incentive Enacted

BAE Decision Upheld


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Overview

On November 1, 2012, District of Columbia Mayor (“Mayor”) Vincent Gray signed Bill 19-0747, the Technology Sector Enhancement Act of 2012 (“Act”). The Act introduced a number of changes to the treatment of Qualified High Technology Companies (“QHTCs”),1  including an expansion of the five-year franchise tax 2  exemption to qualifying taxpayers regardless of location in the District. The Act was submitted to Congress on January 10, 2013, pursuant to the District of Columbia Home Rule Act.3  The Act became law on March 5, 2013 (Law #L19-0211). The provisions apply to tax years beginning on or after January 1, 2012, with certain changes potentially affecting tax periods prior to January 1, 2012.

In this Tax Alert which you can download, we summarize certain provisions of the Act and discuss the District of Columbia Court of Appeals’ recent decision in District of Columbia Office of Tax and Revenue v. BAE Systems Enterprise Systems Inc., which addressed the QHTC “base of operations” requirement.4

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