To amend title 47 of the District of Columbia Code to establish a franchise tax credit
for incorporated businesses as an incentive for regional, national, and international
corporations to locate their headquarters in the District of Columbia.
BE IT ENACTED BY THE COUNCIL OF THE DISTRICT OF COLUMBIA, That this act may be cited as
the "Corporate Headquarters Tax Credit Act of 1999".
Sec. 2. Title 47 of the District of Columbia Code is amended as follows:
(a) The table of contents for the title is amended by inserting the following phrase:
"Subchapter VIIA. Corporate Headquarters Tax Credit.
"§47-1807.21. Definitions.
"For the purposes of this subchapter, the term:
"(1) "Corporate activities" means a corporation's managerial,
professional, and administrative activities regarding the final decision-making process
over its business ventures, subsidiaries, research and development, and regional,
multistate or multinational operations.
"(2) "Corporate headquarters" means the headquarters of a multistate or
multinational incorporated business or the regional headquarters of a corporation doing
business in at least one state in addition to the District.
"(3) "Credit" means the amount computed in accordance with §47-1807.22,
as a reduction of the amount of franchise tax due in a tax year pursuant to subchapter VII
of this chapter.
"(4) "Disqualifying event" means any occurrence which causes a
corporation to fail to maintain its qualification for a franchise tax credit.
"(5) "Disqualifying event tax year" means any tax year during which a
disqualifying event occurs.
"(6) "Eligible costs" means the amount paid or incurred during a tax
year for eligible property acquired for the purposes of locating or expanding a corporate
headquarters in the District and determined pursuant to §47-1807.25.
"(7) "Eligible property" means:
"(A) Real property that is section 1250 property, as defined in §1250(c) of the
Internal Revenue Code, and is a headquarters building, or an expansion of a headquarters,
excluding any portion not occupied or used for headquarters activities;
"(B) Depreciable tangible personal property that is section 1245 property, as
defined in §1245(a)(3) of the Internal Revenue Code, including any type of equipment that
is placed in service at a headquarters building and used primarily for headquarters
activities; or
"(C) Real property leased for the purposes of this subchapter.
"(8) "Expansion" means the physical expansion of an existing corporate
headquarters by at least 25% of rentable space.
"(9) "Headquartered employee" means a natural person who is hired by a
corporation for a full-time job at its headquarters building.
"(10) "Headquarters building" means a real property owned or leased in
the District, with at least 50 % of available space occupied exclusively by a corporation
and used for headquarters activities, solely, or together with manufacturing activities,
and where an average of at least 50 headquartered employees are situated each month during
the tax year.
"(11) "Manufacturing activity" means the production of goods or services
for sales on a continuing basis.
"(12) "New headquartered employee" means a headquartered employee hired
after the employee's corporation qualifies for a credit pursuant to §47-1807.23.
"(13) "Qualified corporation" means a corporation that qualifies for a
franchise tax credit.
"(14) "Recapture" or "recaptured" means the previously allowed
credit or carryovers from previously allowed credits will be disallowed and the amount of
the previously allowed credit or carryovers will be added to the tax liability for a
disqualifying event tax year.
"§47-1807.22. Corporate headquarters credit — authorization.
"(a) For each tax year beginning on or after the effective date of this
subchapter, a corporation that locates a new corporate headquarters or expands an existing
corporate headquarters in the District may qualify for a credit against the District's
franchise tax.
"(b) Subject to the maintenance of the qualification for each year, the credit
shall be computed against the franchise tax due for the year in which the corporation
qualifies and for each of the 4 succeeding tax years.
"(c) The credit shall be computed as follows:
"(1) 5 % of eligible costs incurred by a corporation which hires from 50 to 99 new
headquarters employees;
"(2) 10% of eligible costs incurred by a corporation which hires from 100 to 199
new headquartered employees; and
"(3) 20% of eligible costs incurred by a corporation which hires 200 or more new
headquartered employees.
"(d) At least 50% of employees hired for the purpose of qualifying for the credit
shall be persons who are subject to the District's income taxation.
"(e) If the amount of credit exceeds the amount of the franchise tax due in any
tax year, the excess may be carried over to reduce the franchise tax due in each of the
succeeding tax years ending with the tenth tax year of the continuous operation of the
corporate headquarters in the District.
"§47-1807.23. Same — qualification.
"(a) In order to qualify for the credit, a corporation must conclusively prove the
following:
"(1) The existence of new headquartered employees in accordance with §47-1807.22;
"(2) The existence of a headquarters building by showing one of the following:
"(A) A certificate of occupancy pursuant to a new construction or expansion;
"(B) The closing of escrow pursuant to the purchase of a building; or
"(C) A lease or the renewal of a lease; and
"(3) The usage of the headquarters building for corporate activities, solely, or
combined with manufacturing activities.
"(b) A corporation shall become qualified on the date it satisfies the
requirements of this subchapter.
"§47-1807.24. Headquartered employees.
"(a) During the applicable tax year, a salaried employee who is employed for 12
full months by the corporation or an employee who is paid an hourly wage and is
employed at least 2,000 hours within that 12-month period by the corporation shall be
counted as 1 full time employee.
"(b) If an employee commences or terminates an employment during the applicable
year, that employee shall be considered a full-time employee only for each month the
employee worked for at least a minimum of 35 hours per week.
"§47-1807.25. Eligible costs — determination.
"(a) Eligible costs shall include only the costs properly incurred on qualified
properties and recorded in the books of the qualified corporation for the purposes of
calculating its taxes.
"(b) Eligible costs shall not include any costs for qualified property on which a
credit was previously allowed pursuant to this subchapter.
"(c) If a headquarters building is not totally occupied by the qualified
corporation, the amount that may be counted as eligible costs shall be determined by
multiplying the total cost of the headquarters building by a fraction; the numerator shall
be the total square footage occupied by the corporation and the denominator shall be the
total square footage of the building.
"(d) The following provisions shall apply to determining the eligible costs of
leased eligible properties:
(1) Except as provided in §47-1807.26(b), eligible costs shall be applicable only to a
lease which becomes binding on or after the effective date of this subchapter and is for a
fixed term of 5 years minimum.
"(2) Eligible costs shall not include any costs attributable to repair or
maintenance, interest, insurance, taxes, security services, or utilities, unless these
costs otherwise would have been capitalized if the lessee were the owner of the property.
"(3) Where a corporation leases a property which became eligible during a
qualified lessor corporation's occupancy, the costs to the lessee corporation shall be
reduced by the amount of the original costs taken into account by the qualified lessor
corporation while occupying the eligible property, except where that qualified lessor's
previously allowed credit is subject to recapture.
"(4) A qualified lessee corporation shall not be allowed to count as eligible the
cost of subleasing any property.
"(5) A lease that begins on or after the effective date of this subchapter shall
be considered a renewal only if the term of the prior lease was for 5 years or more and
the renewal becomes effective at the expiration of the prior lease in accordance with the
prior lease terms.
"(6) Costs associated with the renewal of a lease shall not count as eligible
costs except where a qualified corporation had increased the number of headquartered
employees or the amount of its leased space by at least 10% within the tax year in which
the lease is renewed.
"§47-1807.26. Same — grandfathering disallowed.
"(a) Except for an option contract in existence prior to the effective date of
this subchapter, any costs incurred on or after the effective date of this subchapter for
the construction, lease, or acquisition of an eligible property pursuant to a contract
that was binding prior to the effective date of this subchapter shall not constitute
eligible costs.
"(b) Any successor or replacement contract entered into on or after the effective
date of this subchapter shall be treated as a binding contract in existence prior to the
effective date of this subchapter if the original contract was binding prior to the
effective date of this subchapter. This subsection shall not apply to any amount or costs
not described or mentioned in the original contract.
"§47-1807.27. Recapture.
"(a) If a qualified corporation fails to maintain its qualification in any
applicable tax year, 50% of the previously allowed credit shall be recaptured in the first
disqualifying event tax year and 25% shall be recaptured in any 2 succeeding disqualifying
event tax years, if any, until the full amount of the previously allowed credit has been
recaptured.
"(b) A reduction in the number of full-time corporate headquartered employees
below 50 in the case of a corporation that receives a 5% credit; or below 100 in the case
of a corporation that receives a 10% credit; or below 200 in the case of a corporation
that receives a 20% credit, shall be a disqualifying event for which the previously
allowed credit shall be recaptured as follows:
"(1) For the 5% credit, the full amount of the previously allowed credit shall be
recaptured.
"(2) For the 10% credit, the amount of the previously allowed credit shall be
reduced to 5% if the corporation qualifies for a 5% credit pursuant to §47-1807.22(c)(1)
and the excess shall be recaptured.
"(3) For the 20% credit, the amount of the previously allowed credit shall be
reduced to 10% if the corporation qualifies for a 10% credit pursuant to
§47-1807.22(c)(2) or 5% if the corporation qualifies for a 5% credit pursuant to
§47-1807.22(c)(1).
"(c) Unless previously recaptured, any credit that is attributable to eligible
costs incurred for eligible property that is depreciable tangible personal property shall
be recaptured if the property is removed from the District, disposed of, or used for any
disqualifying event within 3 years from the date the property is placed in use. This
recapture shall apply regardless of any other disqualifying event that may have initiated
the recapture of other amounts.
"(d) Unless previously recaptured, any credit that is attributable to eligible
costs incurred for eligible property that is real property shall be recaptured if the
property is disposed of, or used for any disqualifying events within 3 years from the date
the property is placed in use. This recapture shall apply regardless of any other
disqualifying event that may have initiated the recapture of other amounts.
"(e) Notwithstanding any other subsection in this section, in the event that a
corporation ceases to be subject to District taxation, any recapture amount shall be due
in the last tax year in which the corporation is subject to District taxation.
"§47-1807.28. Penalties.
"Any corporation, or person acting on behalf of a corporation, who knowingly and
willfully makes any false or deceptive statement, submits any false or deceptive record,
or commits fraud upon the District in any manner for the purpose of obtaining the benefits
provided by this subchapter shall be ordered to pay the District an amount equal to 3
times the damages caused to the District in addition to any other civil or criminal
penalties provided by the laws of the District. The Corporation Counsel may bring a civil
action to recover the damages.
"§47-1807.29. Rules and annual report.
"(a) The Mayor, within 60 days of the effective date of this subchapter, shall
issue rules to implement this subchapter. The rules shall be submitted to the Council for
a review period of 45 days, excluding Saturdays, Sundays, holidays, and days of Council
recess. If the Council does not approve the proposed rules, by resolution, within the
45-day period of review, the proposed rules shall be deemed approved.
"(b) The Chief Financial Officer of the District of Columbia shall report annually
to the Mayor and the Council on the implementation of this subchapter. The annual report
shall include the identity of all qualified corporations, their locations, the number of
their headquartered employees, the amount of credit approved for each corporation, any
recaptures, and such other matters as the Chief Financial Officer may choose or the Mayor
or the Council may request.".
Sec. 3. Fiscal impact statement.
The Council adopts the fiscal impact statement in the committee report as the fiscal
impact statement required by section 602(c)(3) of the District of Columbia Self-Government
and Governmental Reorganization Act, approved December 24, 1973 (87 Stat. 813; D.C. Code
§1-233(c)(3))
Sec. 4. Effective date.
This act shall take effect following approval by the Mayor (or in the event of a veto
by the Mayor, action by the Council of the District of Columbia to override the veto),
approval by the Financial Responsibility and Management Assistance Authority (as provided
in section 203(a) of the District of Columbia Financial Responsibility and Management
Assistance Act of 1995, approved April 17, 1995 (109 Stat. 116; D.C. Code §47-392.3(a)),
30-day period of Congressional review as provided in §602(c)(1) of the District of
Columbia Self Government and Governmental Reorganization Act, approved December 24, 1973
(87 Stat. 813; D.C. Code §1-233(c)(1)), and publication in the District of Columbia
Register.
