Mayor Vincent C. Gray Proposes Legislation to Modify the D.C. Tech Incentives Program

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WASHINGTON, D.C – Mayor Vincent C. Gray today transmitted legislation to the D.C. Council that will make improvements to the D.C. Tech Incentives Program to assist in building the New Economy he outlined during his State of the District Address. The legislative package consists of three key elements: Investment Tax Rate Reduction, Technology Development Zone Inclusion and a Social E-Commerce Act that will allow the District to incentivize the retention and expansion of LivingSocial in the District of Columbia.

The introduction of the Social E-Commerce Job Creation Incentive Act of 2012 comes on the heels of Mayor Gray’s announcement last month of the Technology Sector Investment Act of 2012. This component will allow LivingSocial to consolidate its corporate headquarters within the District. LivingSocial currently employs over 950 individuals in the District, half of whom are District residents. It has nearly 5,000 employees worldwide.

“In the past year, I’ve made several mentions about how our technology sector is playing a crucial role in the future of our business and economic diversification efforts here in the District,” said Mayor Gray.“LivingSocial is a very large part of the reason why other tech companies of all shapes and sizes have flocked to the District. We want to see that trend continue, and it was important to us to make sure they stayed and expanded in the very place they began — the District of Columbia.”

The District has been in competition with leading national technology centers over the last several months for LivingSocial’s consolidated headquarters. This legislative change amends the District’s existing tech-business incentives. The proposed tax savings to the company could total a maximum of $32.5 million starting in late 2015. This deal allows the District to retain LivingSocial’s growth for years to come, overcoming overtures and offers of subsidy from competing jurisdictions. The negotiations took place through numerous conversations held between Mayor Gray, Deputy Mayor for Planning and Economic Development Victor L. Hoskins, representatives from the Office of the Chief Financial Officer and LivingSocial CEO Tim O’Shaughnessy and his team.

The proposed legislative package projects that LivingSocial will create and retain 2,000 jobs at the company. In order to claim all benefits included within the package, at least 50 percent of LivingSocial’s new hires will have to be District residents. LivingSocial is estimated to generate $166 million in tax revenue to the District over the next 10 years. As introduced, the legislation currently has no negative fiscal impact on District coffers. The performance-based incentive package is an unprecedented effort to require the company to recruit and hire D.C. residents in order to take full advantage of the deal.

As part of this agreement, LivingSocial will engage in partnership activities to hire summer youth, provide social media classes for small businesses and run programs to attract, train and retain software developers. LivingSocial will also bundle daily deal services for businesses in corridors disrupted by construction and streetscape improvements.

The balance of the proposed legislative changes would modify the personal income-tax rate that “angel investors” – individuals who invest their personal funds in start-up businesses – would pay. Instead of the normal rate, those residents who invest in program-participating companies will pay a 3 percent capital-gains rate on angel investments. The impending change is designed to entice angel investors and successful start-up company employees to remain in the District and continue fueling growth of the technology sector locally. The modifications to the program signal a major technical step forward in accomplishing the Gray Administration’s goals for D.C.’s tech sector. The Mayor also announced that his administration will expand the incentives program beyond its current parameters – presently limited to businesses located in pre-identified technology-development zones – to all qualifying District technology businesses no matter where they are located. As a result of this change, all eight wards will gain access to the benefits offered in the revised zone.

“My office looks forward to working with the Council of the District of Columbia to ensure passage of this legislation,” said Deputy Mayor Hoskins. “LivingSocial’s presence in the District has brought national visibility to D.C. as a technology hub, and we look forward to a long and productive partnership with them for years to come.”

The D.C. Tech Incentives Program attracts technology businesses to the District and incentivizes locally owned technology businesses to grow in the District. To qualify for incentives, businesses must be located in the District, employ at least two individuals and derive a majority of revenue from qualifying high-tech activities. Incentives include relocation-expense offsets and modifications to various tax rates. See the website of the Office of the Deputy Mayor for Planning and Economic Development for more information on doing business in D.C.

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MAYORS & CITIES is a Washington, DC Nonprofit , Nonpartisan News Organization that promotes cities as centers of democracy , good governance , leadership and opportunity by strengthening civic engagement on public policies.The magazine also intends to give Mayors , Elected Officials and Citizens the opportunity to make their voices and positions heard in the search for solutions to major problems that our cities are facing today.

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