United States: District Of Columbia Qualified High Technology Company Eligibility Status Addressed

Two recent decisions regarding the District of Columbia Qualified High Technology Company (QHTC) designation shed light on what types of activities will enable companies to claim QHTC tax benefits. On October 19, the District of Columbia Office of Tax and Revenue (OTR) issued a declaratory order and found that revenue derived from specific ecommerce activities qualified under the QHTC requirements.1 Three days later, the D.C. Court of Appeals held that a television station was not eligible for QHTC benefits because its sale of advertising via technology-enabled television programming was not considered a qualifying QHTC activity.2

Overview of QHTC Certification and Tax Benefits

The QHTC certification was enacted by the New E-Conomy Transformation Act of 20003 to attract technology-focused businesses to the District. This certification allows qualified taxpayers to utilize certain District tax credits and benefits. To obtain QHTC benefits, taxpayers must complete and attach the Form QHTC-CERT to their District tax return.

In order to be considered a QHTC, a company must certify that it:

  • Is an individual or entity organized for profit;
  • Leases or owns an office;
  • Has 2 or more qualified employees in D.C;
  • Derives at least 51 percent of its D.C. gross revenue from one or more of certain "permitted" activities;
  • Does not derive 51 percent or more of its D.C. gross revenue from operating a retail store or electronic equipment facility in D.C.; and
  • Is registered with the D.C. Government as a business in D.C.4

Once QHTC status has been established, an eligible company is entitled to the following tax benefits and credits:

  • Temporary corporate franchise tax exemption,5
  • Temporary personal property tax exemption,6
  • Business asset deduction,7
  • Unincorporated business franchise tax exemption,8
  • Rollover of capital gain from qualified stock,9
  • Exclusion from combined group reporting,10
  • Retraining costs for qualified disadvantaged employees,11
  • Wages of qualified disadvantaged employees,12
  • Wages of qualified employees,13 and
  • Relocation costs.14

Declaratory Order Addresses QHTC Eligibility of E-Commerce Company

Declaratory Order 2015-2, issued by the OTR, addresses whether a for-profit e-commerce company was eligible for QHTC tax benefits. The company requesting the Order employed an online platform to provide promotion and marketing services to customers that sell admittance to various events, which the Order classified as "licenses." In addition, the company sold tangible personal property and credit card swipers to its customers, and provided consultants to customers for various services. The majority of the company's revenue was derived from two sources:

  1. A service fee earned when customers sold licenses through the company's online platform, representing a percentage of the selling price for these licenses; and
  2. A credit card processing fee charged for all transactions via the online platform that used credit cards.

When applying for the Order, the company had one employee in the District working from a home office, and indicated that it was planning to hire additional employees who might work from home offices in the District, and potentially acquire a District office location.

Based on these facts, the OTR first ruled that the company had proposed an employee presence in the District necessary to meet the criteria under D.C. Code Ann. Sec. 47-1817.01(5)(A)(i) and (ii). The OTR then addressed whether the company derived at least 51 percent of its District gross revenue from the following specified e-commerce activities

Internet-related services and sales, including website design, maintenance, hosting, or operation; Internet-related training, consulting, advertising, or promotion services; the development, rental, lease, or sale of Internetrelated applications, connectivity, or digital content; or products and services that may be considered e-commerce.15

In determining that the company was eligible for QHTC designation because a majority of its gross revenues were derived through e-commerce, the OTR first examined the term "derive." The OTR defined the term "derive" as "to take, receive, or obtain from a specified source."16 Given this definition, the OTR clarified that internet-related services and sales like website design, maintenance, hosting, and operation are performed with regard to the internet, and do not simply constitute transactions that occur over the internet. However the company's gross revenue from credit card service and license fees generated from sales via the internet was e-commerce eligible for QHTC qualification and a permitted activity for purposes of meeting the District gross revenue requirement.17

District Court of Appeals Concludes Television Station is Ineligible for QHTC Status

In NBC Subsidiary WRC-TV, LLC v. D.C. Office of Tax and Rev.,18 the District of Columbia

Court of Appeals affirmed an Administrative Law Judge's ruling sustaining a $78,784.84 sales and use tax assessment, finding that WRC-TV, LLC (WRC) did not qualify for QHTC status.

At issue was WRC's claim that it derived at least 51 percent of its revenue from the following high technology activities, specified in the QHTC statute:

Information and communication technologies, equipment and systems that involve advanced computer software and hardware, data processing, visualization technologies, or human interface technologies, whether deployed on the Internet or other electronic or digital media, including operating and applications software; Internet-related services, including design, strategic planning, deployment, and management services and artificial intelligence; computer modeling and simulation; high-level software languages; neural networks; processor architecture; animation and full-motion video; graphics hardware and software; speech and optical character recognition; high-volume information storage and retrieval; data compression; and multiplexing, digital signal processing, and spectrum technologies; . . .19

WRC argued that this definition was relevant to its own activities since WRC used advanced technology to create and transmit television programming and sales of advertising. Essentially, WRC claimed that it generated receipts from information and communication technologies. The OTR argued that if WRC's sale of advertising was found to be a high technology activity, then accounting, brokerage or law firms would also qualify for QHTC treatment as they could argue the provision of technology-intensive services for fees (in lieu of advertising) qualified as high technology revenues.

The Court of Appeals agreed with the OTR, holding that the qualifying activities described in the QHTC statute had to have a closer connection to the QHTC's revenues than the mere purchase and use of high technology equipment and systems. Looking at legislative intent, the Court of Appeals determined that the New E-Conomy Transformation Act of 2000, which created the QHTC designation, was not intended to give benefits to those who simply purchased and used high technology. The Court noted that data on which the District relied to develop a revenue estimate for this legislation only accounted for high technology businesses, not general businesses that merely used high technology to facilitate their businesses. Finally, the Court noted that the OTR had substantial latitude to interpret the definition of high technology as such term evolved over time.


The District historically has not published much guidance on local tax matters, so the issuance of the Order, followed closely in time by a Court of Appeals opinion on a subject as highly specific as the QHTC designation, is notable. The Order and the Court's opinion focus on different aspects of the QHTC qualifying activity list, as the Order addressed ecommerce activities and the Court examined the extent of high technology activities. But the Order and Court's opinion are clearly interrelated, in that the Order specifically relied on the District Office of Administrative Hearings' earlier decision in WRC to clarify and limit the definition of "derived" under the gross revenues test to prevent mere users of high technology from claiming the QHTC designation. The Court's decision endorses the guidance released by the OTR in the Order, even though the company that requested the Order ultimately received QHTC status due to its substantial e-commerce activities.

One can surmise that the OTR is taking a closer look at QHTC self-certifications to confirm (or in some cases reject) that the self-certifying company is in fact a QHTC. Given the vast expansion of high technology products and businesses since the original adoption of the QHTC statute, and the significant benefits that a qualifying company may accrue, scrutiny by the OTR on these issues is likely to continue.

The Order and the Court of Appeals' decision indicate that the definition of a high technology company for purposes of QHTC classification is not confined by common interpretations of the term, and that the OTR's interpretation of such term carries significant weight. While these developments may make it more difficult for companies that marginally use high technology in their general businesses to obtain the QHTC certification, companies should continue to evaluate their revenue streams to determine whether their e-commerce, high technology or other operations could qualify as high technology under the definitions and rulings prescribed by the District.


1 District of Columbia Office of Tax and Revenue, DO 2015-2 (Oct. 19, 2015).

2 NBC Subsidiary WRC-TV, LLC v. D.C. Office of Tax and Rev., No. 14-AA-174 (D.C. Ct. App. Oct. 22, 2015).

3 D.C. Law 13-256 § 403(b); 48 D.C. Reg. 730.

4 D.C. CODE ANN. § 47-1817.01(5); 2014 Publication FR-399, Qualified High Technology Companies, D.C. Office of Tax and Revenue.

5 D.C. CODE ANN. § 47-1817.06(a)(2).

6 D.C. CODE ANN. § 47-1508(a)(10). Pursuant to personal property as defined by D.C. CODE ANN. § 47-1521(4) and qualified technological equipment as defined by D.C. CODE ANN. § 47-1523(b).

7 D.C. CODE ANN. § 47-1803.03(18).

8 2014 Publication FR-399, Qualified High Technology Companies, D.C. Office of Tax and Revenue.

9 D.C. CODE ANN. § 47-1817.07.

10 D.C. CODE ANN. § 47-1801.04(39); D.C. MUN. REGS. tit. 9, § 157.3.

11 D.C. CODE ANN. § 47-1817.04.

12 D.C. CODE ANN. § 47-1817.05.

13 D.C. CODE ANN. § 47-1817.03.

14 D.C. CODE ANN. § 47-1817.02.

15 D.C. CODE ANN. § 47-1817.01(5)(A)(iii)(I).

16 NBC Subsidiary WRC-TV, LLC v. D.C. Office of Tax and Rev., OAH Case No. 2013-OTR-00017 (D.C. O.A.H. Jan. 17, 2014).

17 The OTR also held that the company did not operate an online retail store and was not precluded from qualifying as a QHTC on that basis. D.C. CODE ANN. § 47-1817.01(5)(B).

18 No. 14-AA-174 (D.C. Ct. App. Oct. 22, 2015).

19 D.C. CODE ANN. § 47-1817.01(5)(A)(iii)(II).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.