On Petition for Review of a Decision of the District of Columbia Office of Administrative Hearings (TRC-800012-04)
The opinion of the court was delivered by: Mcleese, Associate Judge:
(Argued September 19, 2012
Before OBERLY, BECKWITH, and MCLEESE, Associate Judges.
The District of Columbia Office of Tax and Revenue ("OTR") challenges a decision by the Office of Administrative Hearings ("OAH") that BAE Systems Enterprise Systems, Inc. ("BAE") was exempt from the District of Columbia's corporate franchise tax in 2001 and 2002. In finding BAE exempt, OAH concluded that BAE had performed qualifying high-technology activities and had "maintain[ed] an office . . . or base of operations in the District of Columbia" within the meaning of D.C. Code § 47-1817.01 (5)(A)(i) (2001). OTR contends primarily that BAE did not maintain an office or base of operations in the District of Columbia. We affirm.
The "New E-Conomy Transformation Act," D.C. Law 13-256, D.C. Code § 47-1817.01 et seq. (2001), grants certain high-technology companies a temporary exemption from the District of Columbia's corporate franchise tax. To qualify, a company must have two or more employees and must derive at least 51% of its gross revenues from specified high-technology activities, including services involving the Internet or advanced computer software. D.C. Code § 47-1817.01
(5)(A)(ii)-(iii). The company also must "maintain an office, headquarters, or base of operations in the District of Columbia." D.C. Code § 47-1817.01 (5)(A)(i). The exemption is available for five years after the company "commences business," D.C. Code § 47-1817.06 (a)(2)(C), in specific parts of the District of Columbia designated "High Technology Development Zones." 9 DCMR § 1199.1 (2012).
BAE is a Virginia-based private corporation that provides information-technology products and services, primarily to the federal government on the basis of large, long-term contracts. During 2001 and 2002, under contracts with terms ranging from one to seven years, BAE provided services to the federal government at three separate government facilities located in the District of Columbia. It is undisputed that providing those services qualified as high-technology activity. See D.C. Code § 47-1817.01 (5)(A)(iii). It is also undisputed that during 2001 and 2002 approximately 180 BAE employees were working in the District of Columbia while providing those services. Finally, it is undisputed that the places where BAE provided services to the federal government fell geographically within a designated "High Technology Development Zone[ ]." 9 DCMR § 1199.1.
The parties do contest whether BAE maintained an office or base of operations in the District of Columbia. The pertinent facts are undisputed. Revenue generated by work performed under the contracts totaled approximately $44 million in 2001. For 2001 and 2002, BAE reported total D.C. payroll of over $37 million. The contracts required BAE workers to provide services at the government's facilities. BAE employees assigned to the government facilities generally worked full-time, averaging forty hours per week, and typically reported to the same location on a daily basis for the duration of each contract. The government assigned specific work areas in its facilities for BAE employees. Within those designated areas, BAE selected desk and office workspaces for its own employees, and there were signs identifying BAE employees outside of their cubicles or offices. Except in rare circumstances, the employees working for BAE on the contracts did not have additional offices at other BAE locations, and BAE records reflected the addresses of the government facilities as its employees' official places of work.
BAE employees at the government facilities were permitted to work only on matters relating to BAE's contracts with the government. BAE employees could get access to the facilities only as authorized by the government; access was generally restricted to weekday business hours. BAE used government-owned equipment in providing services under the contracts, and it did not own or lease real or tangible personal property in the District of Columbia during 2001 and 2002. For security reasons, BAE was precluded from making public its association with the government facilities. BAE was not identified in any building directory, telephone listing, or external sign, and BAE had no letterhead or business cards identifying its location at the facilities.
In its 2001 and 2002 tax returns, BAE claimed exemption from the District of Columbia franchise tax. OTR subsequently issued a notice of tax deficiency in the total amount of $534,764, taking the position that BAE was not exempt. BAE appealed the notice of deficiency to OAH, which ruled in favor of BAE. OAH concluded that BAE maintained a base of operations in the District of Columbia, because its employees "reported to work at daily locations" in the District of Columbia, to "conduct [BAE's] business of providing services to federal government agencies."
This court will uphold a ruling by OAH unless the ruling is "[a]rbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." D.C. Code § 2-510 (a)(3)(A) (2001). "The proper construction of a statute raises a question of law," Washington v. District of Columbia Dep't of Pub. Works, 954 A.2d 945, 948 (D.C. 2008), and this court generally reviews legal conclusions de novo. See Providence Hosp. v. District of Columbia Dep't of Emp't Servs., 855 A.2d 1108, 1111 (D.C. 2004). Whether BAE maintained an office or base of operations in the District of Columbia is a mixed question of law and fact. In the administrative setting, "[w]e review mixed questions of law and fact under our usual deferential standard of review for factual findings . . . and apply de novo review to the ultimate legal conclusions based on those facts." Hickey v. Bomers, 28 A.3d 1119, 1123 (D.C. 2011) (internal quotation marks omitted).
As previously noted, the pertinent facts are undisputed. Moreover, neither party suggests that OAH's legal determination in this case should be accorded deference. "Although we accord appropriate weight to the interpretation of a statute by the agency which is charged with its enforcement, and which therefore ordinarily has specialized expertise, . . . OAH is vested with the responsibility for deciding administrative appeals involving a substantial number of different agencies." Washington, 954 A.2d at 948. Accordingly, OAH does not have "subject matter ...