The Download: D.C. mayor wants to change way tech companies are taxed


Chip Paucek, chief executive of Landover-based 2tor, talks with employees. The online education firm recently raised $26 million from investors to fund an expansion of its online academic programs. (Jeffrey MacMillan/Capital Business)

District Mayor Vincent Gray is proposing two changes to the way the city taxes technology companies and their local investors.

Under the first proposal, District residents who invest in technology companies or take on equity as part of their employment would be subject to a 3 percent capital gains tax on investments they hold for two years or longer.

The District has no existing capital gains tax rate, but instead requires an individual who holds an equity stake in a technology company to pay his or her regular income tax rate, which can often be higher.

David Zipper, the city’s director of business development and strategy, said the proposed change aims to grow the number of early-stage investors who reside in the city, while also encouraging the founders of tech start-ups to remain in the city after they cash in on their venture.

The second proposal would impact the way that qualified high-technology companies — a broad category that includes such industries as the life sciences, software development and Web site design — pay corporate income taxes.

Currently, there are geographic zones within the District where high-tech companies are exempt from corporate income taxes for five years. That five-year period begins after a firm registers with the District’s Office of Tax and Revenue, Zipper said.

Gray is now suggesting that those geographic boundaries be dropped, thus exempting high-tech companies in every corner of the city from paying corporate income tax during the five years after they register with the city.

“We want to make sure it’s as easy as possible for tech entrepreneurs and business people to set up their business in the city without worrying about which streets are in and which streets are out,” Zipper said.

Gray plans to introduce the proposals to the D.C. Council on April 17.

The Office of the Deputy Mayor for Planning and Economic Development has made more aggressive moves in recent months to foster the city’s burgeoning technology industry. In January, the city finalized a $100,000 grant to establish “The Fort,” the District’s first start-up accelerator.

$26M for 2tor

The coffers at 2tor just got bigger.

The Landover-based online education firm has raised $26 million from investors to continue expanding its academic programs. The company partners with universities to develop an online version of their curricula.

Last week the company announced it will collaborate with the University of North Carolina at Chapel Hill to provide an online Master of Public Administration degree. It already has a partnership with the School of Nursing at Georgetown University.

Chief executive Chip Paucek said each academic partnership costs the company roughly $10 million as employees work with faculty members and administrators to convert each component of their on-campus programs to the Web.

The online and on-campus programs often charge students a comparable amount for tuition and confer graduates with the same degree, meaning the quality of both programs should be identical.

“You can do something less expensive and not have it be as good,” Paucek said. “But 2tor’s premise is that we’re going to build something transformative. We’re trying to take [the university] to preeminence in its online piece, and that’s really the goal behind the company.

So what does the school put forward? Their reputation, Paucek said.

“The reputational side is probably more important,” Paucek said. “You have to have a dean and provost and faculty that are ready to embrace making these students equal in every way to their on-campus schools.”

To date, 2tor has raised $96 million. Tondern Capital, an affiliate of Pittsburgh-based Hillman Co., joins existing investors in the latest financing round. Bethesda-based Novak Biddle Venture Partners was one of 2tor’s early backers.

Making an App-pointment

Two Leesburg-based entrepreneurs have debuted an app for your smartphone that promises to suggest events based on you’re location and when you have free time on your calendar.

Called TimeRazor, the app can also monitor traffic congestion and suggest when you need to leave in order to make it to the event on time.

It’s the brainchild of Victoria Clark and Jeff White. The duo met while working at Deltek, an enterprise software and information services firm in Herndon. Deltek acquired White’s previous venture, an online marketplace for government contractors that is now called GovWin.com.

The creators began building TimeRazor last summer with the help of $3.4 million in upstart capital.

“There’s so much information that we have about a user’s day,” Clark said. “Whether that data source is where you live and where you work or basically your calendar information, we kind of have a sense of where you’re going to be and how you live your life.”

Apps can be a tricky business proposition. There are hundreds of thousands of them available for download, and event applications in particular tend to be a crowded category.

Steven Overly covers the business of technology, biotechnology and venture capital in the Washington region for The Washington Post and its weekly Capital Business publication. In that capacity, he has written about start-up struggles, investment trends and major drug discoveries.
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