The District of Columbia recently enacted the Relieve High Unemployment Tax Incentives Act of 2018, authorizing a variety of incentives for qualified businesses that are located in high unemployment areas. The legislation also includes a film credit for the District, and allows the mayor to establish tax increment financing (TIF) for high unemployment areas.
To be eligible, a business must be a “qualified company,” defined as a for-profit entity that will create new jobs and generate new revenues by making a substantial capital investment in the minimum amount of $50 million by constructing a new building or making improvements to an existing building in a high unemployment area. A ‘high unemployment area’ is a geographical area that suffers from seven percent unemployment at a rate of seven percent or more for three consecutive months in a year, according to the Department of Employment Services’ data.
A qualified company can receive a tax abatement on real and personal property of up to 100 percent of the tax due for new investments and expansions of existing businesses, for up to 30 years. For a qualified company that leases property as a ‘qualified tenant,’ meaning a lease of a least three years in a high unemployment area, a tax credit of $2.50 per square foot is available for up to five years. A qualified company can also receive an employment tax credit of up to 20 percent on the first $15,000 in wages paid to residents of the District, or up to $3,000 per qualified employee, for up to 10 years.
A qualified company must submit an application to the District to document that it meets the eligibility requirements, and must annually certify that 50 percent of its full-time employees are District residents.
Other incentives from the legislation include a 10 percent tax credit on eligible production costs for a qualified film produced in the District, and the potential for the District to establish a TIF area to encourage private investment in a high unemployment area.
Businesses that are considering locating in the District, or considering an expansion of current operations in the District, should review their plans and determine if they may meet the requirements for these incentives. Businesses that are eligible should consider applying for the tax abatements and credits afforded to companies that locate in the designated high unemployment areas.