Arlington Could Extend Tax Breaks to Small Tech Firms

The Arlington County Board is mulling whether to expand the tax breaks it offers to large technology businesses in the county to tech firms with fewer than 100 employees.

Currently, technology firms located in the Rosslyn-Ballston corridor, Crystal City, Columbia Pike and Shirlington only have to pay 50 percent or less of the county’s standard business license tax rate, 36-cent per $100 of gross receipts. For tech companies with between 500 and 999 employees, the rate is 14 cents. For tech companies with more than 1,000 employees, it falls farther to 10 cents.

Tech companies located along the Pike or in Shirlington have no minimum for the amount of employees to qualify for the reduced tax rate. However, in the R-B Corridor and Crystal City — the county’s two “Downtown Technology Zones” — tech firms must have at least 100 employees to pay the 18-cent rate. The County Board could approve waiving the minimum at its meeting this Saturday.

In addition, the Board will vote on whether to expand the parameters for a technology company to qualify for the tax breaks. The ordinance lists a broad range of eligible businesses, but since it was last updated seven years ago, firms in new sectors — the main one being social media — have been left out.

“The fundamentals of the local real estate market have changed,” the staff report, prepared by Arlington Economic Development, states. “Today tenants may choose among more available spaces and sites than ever before. Large deals may come about, but more often an assortment of small and medium deals is required to fill buildings. In many cases, the smaller firms have the most growth potential. They are expanding in a variety of digital economy and creative enterprises such as e-democracy, social media and healthcare data services.”

AED said there have been 12 instances where a tech company that was ineligible for the Technology Zone tax breaks did not choose Arlington to locate. Ten of those instances, the company was smaller than 100 employees.

If the changes are approved, the savings for tech companies in the R-B corridor would amount to approximately $2.25 per square foot of rent for office space, AED estimates.

“While this may not change a business decision on its own, it could be effective in combination with other forms of assistance the County and Commonwealth may provide, or it may help close the gap in rent or other expenses between Arlington and another jurisdiction,” the staff report reads. “AED estimates that — with the proposed changes in place — between five and 10 companies per year may qualify for this incentive.”

Flickr pool photo by Ddimick