certificate of benefits

The District of Columbia (DC) Office of Tax & Revenue (OTR) implemented sweeping changes to the Qualified High Technology Company (QHTC) certification process this year. As you may remember, beginning last year, OTR implemented a new online QHTC self-certification process for companies to obtain exempt purchase certificates. This year, OTR is expanding the scope of this online self-certification requirement to all QHTC benefits—including exempt sales as a QHTC and other non-sales tax benefits available to a QHTC (summarized here). This change was accomplished through amendments to the QHTC certification regulation (DC Mun. Regs. tit. 9, § 1101) that were proposed by OTR in November 2018 and became final on January 4, 2019. The changes apply to all tax returns due on or after January 1, 2019.

So What Changed?

Historically, the relevant OTR regulation provided that to claim a credit or other benefit, a QHTC was required to attach a form prescribed by OTR (i.e., Form QHTC-CERT) to each applicable tax return or claim for refund. See DC Mun. Regs. tit. 9, § 1101 (prior to Jan. 4, 2019). Effective January 4, 2019 with the finalization of the amended regulation, this procedure now requires every QHTC to submit a Self-Certification request online via MyTax.DC.gov on an annual basis and obtain a “certificate of benefits” letter from OTR each year. No tax exemptions or benefits will be allowed without a valid certificate of benefits letter that is obtained prior to or concurrently with the filing of a return on which the benefits are claimed. Thus, to claim QHTC benefits on a monthly sales tax return for January 2019, the certificate of benefits will need to be requested from OTR for review/processing prior to the upcoming mid-February return deadline. Unlike the procedure in the past, the certificate of benefits letter obtained online will be deemed to attach to any tax return due and filed during the period for which the certificate is valid and unexpired. The certificate of benefits is expected to be valid for one (1) calendar year from the date it is issued/approved by OTR. Unlike prior years, the new regulation requires all benefits applications filed by a QHTC to include all of the following information:

  1. Taxpayer ID Number
  2. Name
  3. Address
  4. Sales Tax Account Number
  5. NAICS Code
  6. Information demonstrating QHTC eligibility (including attaching proof of DC office location, such as a current lease agreement)
  7. First year certified as QHTC
  8. Explanation of principal business activity
  9. Amount of QHTC Exempt Sales/Purchases from the prior year (broken down by period)
  10. Number of QHTC employees hired
  11. Number of QHTC employees hired who are District residents
  12. Schedules detailing QHTC employee credits
  13. Number of QHTC jobs created in the past year
  14. Gross revenue
  15. Gross revenue earned from QHTC activities in the District

Practice Note: Companies that have historically claimed one or more of the tax benefits available to QHTCs and wish to continue to do so in 2019 need to carefully review the amended regulation and OTR guidance to ensure the new certification process (including providing a laundry list of data not required historically) is understood and submitted in a timely manner. Those with questions about the new QHTC certification process or timing are encouraged to contact the authors.