DC Council removes tax advantage for tech companies in upcoming $22B budget

The DC Council approved the city’s budget for its next fiscal year, including nixing a tax incentive for tech firms and approving funds to funnel cash to accelerators in the district. 

After an arduous final vote with last-minute amendments, DC’s governing body moved the nearly $22 billion budget forward to Mayor Muriel Bowser’s desk. Part of that legislation sets aside $2.4 million for a “Tech Ecosystem Fund” to back programming for entrepreneurs, including incubators and accelerator programs. 

But, before the first vote on this budget for the 2026 fiscal year even took place, the council removed Mayor Bowser’s $2.2 million proposal to bring back a tax advantage for “Qualified High Tech Companies.” It was a part of her “growth agenda” included in the budget ask aimed at attracting new businesses and creating new jobs as uncertainty continues at the federal level — notably, mass layoffs. 

It would have adjusted the capital gains tax rate for those companies, which must reach qualifications like having a DC office and having 10 or more employees in the city, from 8.5% to 3%. 

‘Targeted incentives are catalysts — not giveaways’

Although the city’s chief executive did not publicly comment on the tax benefit’s removal, her deputy said the economic development arm of DC remains focused on positioning the city as a solid place to do business. 

“We will continue to advocate for reforms and incentives that will solidify the District’s position as a hub for technology and innovation,” Nina Albert, the deputy mayor for planning and economic development, wrote in a statement regarding the council’s move. 

The elimination of the tax change is disappointing, DC Tech and Venture Coalition founder Kevin Morgan said, but its inclusion in the proposed budget is positive. He noted the possibility of getting it in the budget for fiscal year 2027. 

“It would be nice to have it and to spur investment this coming fiscal year,” Morgan told Technical.ly. “But I think with it not being in there, I think it gives us in the city and everybody involved an opportunity to build and be strategic, and think through a very thoughtful way to grow the sector.”

James Barlia, executive director at the tech incubator Station DC, said the stripping of the tax program “shows there’s still work to do.”

Station DC received $2 million in district funds over the fiscal years 2024 and 2025 to support its launch. 

“If we want to attract top-tier companies and talent, we need decision-makers who understand that targeted incentives are catalysts — not giveaways,” Barlia said. “These programs make it more likely that high-growth companies will grow their businesses, create jobs and reinvest right here in DC.”

The repeal of this benefit for firms was originally implemented in 2024. The reputation of the program, created in 2000, was tarnished by a beleaguered past: It was rolled back in 2019 and was deemed to cost DC more than $40 million a year, per a CFO report the Washington Business Journal reported on at the time. 

While this tax break could generate more capital for the city, it may worsen economic disparities, noted Blaire Rowe Rakowicz, the co-head of the local angel syndicate District Angels. 

“A capital gains tax reduction … could’ve sparked more local capital formation,” said Rakowicz. “That shift would drive founder retention, talent stickiness from our universities and economic growth tied to our proximity to federal power. That said, blanket tax cuts for the wealthy rarely achieve their intended impact and can deepen inequality — those who want to avoid taxes will. If the capital gains cut wasn’t going to catalyze meaningful new investment, it’s fair to question its ROI.”

Cash earmarked for DC startups and incubators 

This tax was eliminated from the budget, but the council approved cash to fund accelerators and incubators. 

“We are excited that Mayor Bowser’s Technology Ecosystem Fund investment was approved in the FY26 budget,” said Deputy Mayor Albert. “This will enable the District to expand the number of tech companies, entrepreneurs and jobs here in DC. ”

Station DC’s Barlia called it a “smart investment” that’ll boost innovation. Morgan from the DC Tech and Venture Coalition agrees. 

“The fact that they funded this, to me, is a huge statement of intent,” Morgan said, “and that the emerging tech sector, innovation sector, and the diversity of the economy, is not just words on paper — but there’s actual action being taken.”

The cofounder behind artificial intelligence-focused risk and compliance startup Aymara, dual headquartered in DC and New York, was heartened by this investment. 

Juan Manuel Contreras “benefited tremendously” from his participation in Halcyon, the Georgetown-based incubator that every year brings founders from across the world to the district to learn and scale. 

“I’m encouraged that the mayor is investing in the Tech Ecosystem Fund to strengthen incubators and accelerators supporting companies like mine,” Contreras said. “Early investment for startups is crucial, especially in regions like DC, where access to venture capital is more limited than in places like the Bay Area.”