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D.C. TV Station Is Not “High-Tech Company,” So No Tax Break

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This fall, the District of Columbia Court of Appeals ruled – quite counterintuitively, it would seem – that a contemporary television station is not a “qualified high technology company” (“QHTC”) entitled to the preferential tax treatment established by the Washington, DC City Council to encourage high-tech. Under its narrow reading of D.C. Code § 47-1817.01(5)(A)(iii)(II), the Court disallowed $78,784.84 in sales and use tax breaks to the city’s NBC-Universal subsidiary, WRC-TV. (NBC Subsidiary WRC-TV, LLC, Petitioner, v. District of Columbia Office of Tax and Revenue, Respondent, Case No. 14-AA-174, District of Columbia Court of Appeals, On Petition for Review of an Order of the District of Columbia Office of Administrative Hearings (OTR-17-13); 2015 D.C. App. LEXIS 510; Argued, October 8, 2015; Decided, October 22, 2015)

Washington’s taxation bureaucracy, the Office of Tax and Revenue (“OTR”), had earlier opined that the broadcaster did not qualify for the special reduced tax rate, and insisted that it remit the amount of the shortfall, an outcome supported by the Office of Administrative Hearings Judge who reexamined the issue. The question depended upon whether WRC-TV met the Code’s definitional strictures of “[d]eriving at least 51% of its gross revenues earned in the District from … 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.” On first impression, one would certainly think that it should so qualify.

The television station believes that it deserves the benefit of the reduced tax rate because “it generate[s] its receipts from information and communication technologies, in the sense that it uses [advanced] technologies, equipment and systems to create and transmit the television programming from which it derives most of its revenue through on-air advertising” (citations omitted). Refuting that linkage, OTR argued that there needs to be “a much closer nexus between the activities listed” and the revenue produced, “that the QHTC tax preferences instead were enacted to incentivize companies engaged in the development and marketing of high technology systems and applications to locate in the District of Columbia, rather than provide a boon to companies that purchase the technology to generate revenues” (although that emphasis and language DO NOT APPEAR anywhere in the text of the law). To reinforce its opinion, the revenue authority cites to “the legislative history of the QHTC statute.”

An ancillary document developed by staffers during the process of enactment, the law’s “accompanying committee report states that the Act was designed to increase public revenues in the District of Columbia by promoting the entry and expansion of ‘the “new” high technology economy’ in the District” (emphasis supplied). The Court of Appeals adds, “This statement of purpose, we observe, contains no hint that the D.C. Council saw advantage in providing tax exemptions to companies that merely use technology in their business” – a self-justifying and extremely dubious inference: It is equally true that this characterization of the tax’s intent is entirely consistent with the broadcaster’s interpretation of the law. The Court says that the taxpayer’s construction cannot be right, “or else any company otherwise meeting the definition would gain preferred tax treatment by investing heavily in information and communication technologies that it in turn uses to market its products or services.” It certainly can be argued that the legislation’s ostensible purpose would be perfectly well-served by exactly such actions.

The appellate court crafted its verdict so that there would be virtually no possibility of its being found unreasonable, the standard for overturning the decision. That’s hardly a resounding endorsement, yet, admittedly, there is also some truth in its echoing OTR’s comment that, “If WRC’s sale of advertising via technology-enabled television programming counts as a QHTC activity,” the District might create “the resulting danger of a tax exemption swallowing up the taxation rule.” Or of its being given widespread application and producing the very economic stimulation its proponents apparently sought.

About the Author: Marc Palmer Kram is a Senior Tax Analyst at Wolters Kluwer Tax & Accounting US, where he performs quality control and troubleshooting on the vast taxability database supporting its best-in-class CCH tax-compliance software, and then sometimes writes about what he finds. Learn more about him by visiting his author bio page. Learn more about Wolters Kluwer at and

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