Form Fr-399 - Qualified High Technology Companies Tax Package Page 6
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32• an addition to the basis of the property which exceeds
held by a taxpayer, other than a corporation, for more than six
the greater of an amount equal to the adjusted basis of
months the taxpayer may elect to defer recognition of gain unless
it was previously deferred.
the property at the beginning of the 24-month period or
$5,000;
However, if a taxpayer purchases qualified stock within 60
• at least 51% of the cost of the additions are improvements
days of selling other qualified stock, gain is recognized. Gain is
which facilitate the business of the QHTC on the premises;
recognized to the extent gain realized on the sale exceeds the
and
cost of the qualified stock purchased.
• finished before January 1, 2003.
The taxpayer’s holding period is determined without regard to IRC
VIII. Unincorporated Business Franchise Tax Exemption
section 1223. This treatment does not apply to gain considered
ordinary income under IRC sections 1245 or 1250.
A QHTC that is not a corporation is exempt from the
unincorporated business franchise tax but not from the $100
HIGH-TECHNOLOGY DEVELOPMENT ZONES AND QHTCs
minimum tax requirement. A completed QHTC-CERT form must
be filed with a D-30, the unincorporated business franchise
A QHTC located in a high-technology development zone is exempt
tax return.
from DC corporate franchise tax for five years after the date it
begins business in the zone.
IX. Capital Gain and QHTCs
The zones, also called priority development areas, are:
Qualified capital gain from the sale or exchange of a QHTC’s
capital assets held for more than 5 years is not includible in
• Downtown East;
computing DC gross income. Qualified capital gain does not
• Capital City Business and Industrial;
include:
• Capital City Market;
•
gain attributable to real property or an intangible asset not
• Georgia Avenue;
an integral part of a QHTC; and
• Southeast Federal Center/Navy Yard;
•
gain occurring before January 1, 2001 or after December
• Any District-designated Foreign Trade or Free Trade Zone
31, 2007.
(19 U.S.C. 81a et. seq.);
• Any federally-approved enterprise or empowerment
The term “qualified capital gain” means gain recognized on the
zone;
sale or exchange of a capital asset as defined or treated in the
• Any federally-approved enterprise community;
Internal Revenue Code (DC Code §47-1801.04(10)(A),(B)).
• Any designated development zone (DC Code, Title 5,
a)
The term “qualified capital gain” does not include gain:
chap. 14);
1)
Treated as ordinary income under IRC sections
• Any designated housing or development opportunity area
1245 or 1250 if IRC section 1250 applied to all
or new or upgraded commercial center;
depreciation rather than just to additional
• Transit Impact area; and
depreciation;
• Minnesota Avenue.
2)
Attributable to real property or an intangible asset
which is not an integral part of a QHTC’s business
For the exact boundaries of each of these zones refer to DC Code
operations in DC; or
§1-2295.20 or call 202-442-6500.
3)
Attributable, directly or indirectly, in whole or in
Please note that a real property tax abatement benefit and various
part, to a transaction with a related person.
other financial incentives of a non-income/franchise tax nature
Rollover of capital gain from qualified stock to other qualified
are provided for QHTCs in the New E-Conomy Transformation
stock. Qualified stock is that which satisfies the requirement for
Act of 2000.
small business stock under IRC section 1202(a) and is issued
by a QHTC. Where gain is realized on the sale of qualified stock
-4-
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