Mayor Gray Signs Tech-Sector Incentives Bill
On November 1st, Mayor Vincent C. Gray signed a bill that will enable the District to grow its economy by more effectively attracting and nurturing companies in the city’s growing technology sector. The Technology Sector Enhancement Act of 2012 provides enhanced financial tools for the District’s tech industry, expanding existing incentives to provide benefits to all qualifying District technology businesses – no matter where in the city they are located.
“The bill that I am signing into law today represents real and important progress in my efforts to grow the city’s emerging technology sector and diversify the District’s economy,” Mayor Gray said. “But important work remains, and we must redouble our efforts to secure passage of the critical tax incentives needed to ensure we nurture and grow this burgeoning industry and create the New Economy I talked about in my State of the District Address. The Council should act without further delay to pass tax incentives that ensure we can compete fairly with other jurisdictions in being tech-business-friendly.”
The new law will especially benefit local start-ups, which will now qualify for five years of corporate income tax abatement starting when they become profitable, rather than when they register for the District’s incentive program. The modifications to the program signal another step forward in accomplishing Mayor Gray’s goal of expanding D.C.’s tech sector.
While last week’s bill signing represents important progress for the Gray Administration and the city’s tech sector, the initial legislation proposed by Mayor Gray also included a tax provision. It was designed to retain the many entrepreneurs who have started and grown successful technology firms in D.C. by creating a capital-gains-tax structure for tech investment that is competitive with other nearby jurisdictions. Those proposed changes to the D.C. Tech Incentives program would have modified the personal income-tax rate that “angel investors” – individuals who invest their personal funds in start-up businesses – would pay. Instead of the current 8.95 percent top rate, those residents who invest in D.C. tech companies would have paid a top capital-gains rate of 3 percent on angel investments.
The substantial impact of federal budget cuts that would result from sequestration adds urgency to the District’s efforts to diversify the local economy. The Gray Administration will continue working with the D.C. Tax Revision Commission and D.C. Council leaders to pass tech legislation that will entice angel investors and successful start-up company employees to remain in the District. A letter about the tax incentives that Mayor Gray wrote to former Mayor Anthony Williams, chair of the Tax Revision Commission, is attached.
The Mayor signed the legislation in his ceremonial office at the John A. Wilson Building alongside other public and private-sector leaders, including At-Large Councilmember David Catania, Deputy Mayor for Planning and Economic Development Victor L. Hoskins, Startup DC Chair Evan Burfield, Greater Washington Board of Trade President & CEO Jim Dinegar, D.C. Chamber of Commerce President & CEO Barbara Lang, Fortify.VC founder Jonathan Perrelli, Endeavor DC founder Michael Goldstein, Personal Chief Operating Officer Doug Wheeler, and other local business leaders.
“We are proud of our business-development efforts to attract and retain tech companies in the District,” said Deputy Mayor for Planning and Economic Development Victor L. Hoskins. “The D.C. Tech Incentives program is always prominent in our discussions with companies. Making the program more widely available will yield continued job opportunities as tech companies grow and here in the District.”
“As a co-founder of a D.C. start-up, I know firsthand the factors that drive the decision about where to locate and build a business. We were pleased to support the city’s effort to improve the D.C. Tech Incentives program to strengthen policies that will help grow businesses like Personal in D.C. and the local economy,” said Doug Wheeler, co-founder and Chief Operating Officer of Personal, which allows individuals to store, share and reuse their important data, notes and files through a secure data vault and private network of trusted people, applications and organizations.
The D.C. Tech Incentives Program attracts technology businesses to the District and incentivizes locally owned technology businesses to remain and grow in the District. To qualify for incentives, businesses must be located in the District, employ at least two individuals and derive a majority of their D.C. revenue from qualifying high-tech activities. Incentives include a five-year exemption from corporate income tax, relocation-expense offsets and modifications to various tax rates. See the website of the Office of the Deputy Mayor for Planning and Economic Development for more information.