Form Fr-399 - Qualified High Technology Companies Tax Package Page 5
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32If the amount of the credit exceeds the DC corporate franchise tax
the taxpayer filed a return claiming the credit.
liability, the unused amount may be carried forward but not beyond
The credit may not exceed $5,000 in a taxable year for each
the tenth year following the first year the taxpayer filed a return
qualified employee.
claiming the credit.
IV. Relocation Costs
Key Employee
For taxable years beginning after December 31, 2000, a
A key employee is:
corporate QHTC may claim a credit against its DC corporate
franchise tax for each dollar reimbursed to or paid on behalf of
a)
A member of the board of directors of the QHTC; or
each qualified employee for the cost of relocating the employee
b)
Directly or indirectly the owner of a majority of the QHTC’s
to DC. This credit is not available if the relocation costs are
stock; or
claimed as a deduction by the corporation.
c)
Related to a member of the QHTC’s board of directors or to a
majority stockholder of the QHTC as a spouse or relative within
Qualified Employee
the definition of “dependent” in IRC sec. 152.
A qualified employee is a person employed in DC by a QHTC for
35 hours or more per week in any of the permitted activities.
DC TAXES AND QHTCs
The relocation credit is not allowed:
V. Franchise Tax
a)
Until the QHTC relocates at least two qualified employees
For taxable years beginning after December 31, 2000, a QHTC
from employment outside DC to employment in DC;
filing a DC corporate franchise tax return is granted a reduced
b)
Until the QHTC has employed the qualified employee for
franchise tax rate (6%). In addition, if the QHTC is located in a high-
at least six months in DC in a permitted activity;
technology development zone, there is no franchise tax imposed for
c)
If the qualified employee works less than 35 hours per
five years after the QHTC begins business in that zone. The QHTC
week;
must continue to file a DC corporate franchise tax return during that
d)
If the QHTC has claimed a deduction for the relocation
period. Note: A QHTC that is not a corporation is not eligible for a
costs; or
DC franchise tax rate reduction.
e)
If the employee is a Key Employee.
If the amount of the relocation credit allowable exceeds the
The transfer of ownership of a QHTC will not affect eligibility for
DC corporate franchise tax otherwise due from a QHTC, the
the franchise tax reduction.
unused amount of the credit may be carried forward but not
VI. Personal Property Tax
beyond the tenth year following the first year the taxpayer filed
a return claiming the credit.
Qualified tangible personal property (within the meaning of DC
Which Relocation Costs Qualify?
Code §47-1521(4)) purchased and used or held for use by a
QHTC (corporate and unincorporated) after December 31, 2000,
Qualifying relocation costs include amounts paid by a corporate
is exempt from DC personal property tax for 10 years beginning
QHTC to a qualified employee for reimbursement of:
with the year of purchase.
a)
Moving expenses as defined in IRC section 217(b)(1);
If the tangible personal property is used or is available for use in the
and
eleventh year and thereafter, the property must then be reported
b)
Financial assistance in purchasing a residence, in paying
at 25% of the original cost or exchange value, unless it is qualified
a security deposit or in procuring a one-year lease for
technological equipment (see DC Code §47-1523(b)). In that case
a residence in DC. The commencement date of the
it must be reported at 10% of the original cost or exchange value.
employee’s move or financial assistance must be after
See pages 24-25 of this publication for information on refunds and
December 31, 2000. Only costs related to one relocation
exemptions with respect to tangible personal property.
per qualified employee are allowed.
Limitations on the tax credit for relocation costs
BUSINESS ASSET DEDUCTIONS AND QHTCs
This credit may not exceed –
VII. Deductions for Certain Depreciable Business Assets
a)
$5,000 for each employee who relocates his/her
A QHTC may deduct the lesser of $40,000 or the actual cost of
employment to DC but does not relocate his/her principal
personal property described in IRC section 179(d)(1).
residence to DC. The total annual credit taken by a QHTC
may not exceed $250,000.
If the QHTC is a tenant, the cost of any real property and leasehold
b)
$7,500 for each employee who relocates his/her
improvements may be deducted regardless of whether they become
employment to DC and who also relocates his/her principal
an integral part of the realty.
residence to DC. The total annual credit taken by a QHTC
Improvements must be substantial and made by the QHTC during
may not exceed $1,000,000.
any 24-month period beginning after December 31, 2000. They
Principal residence is determined as of the last day of the first
must also be:
six months of employment in DC by a QHTC.
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