In an effort to address business retention, attraction and growth in one initiative, in July, Mayor Villaraigosa took a series of steps to initiate further reform the City Business License Tax Ordinance. In two letters to the City’s Director of Finance and one letter to the full City Council, Mayor Villaraigosa outlined his specific recommendations, which included:
• Reducing the Gross Receipts Tax rates by another 10%, using similar methodology of the 2004 reform, which succeeded in reducing rates by 15% based on reaching predetermined revenue growth targets.
• Increasing the minimum gross receipts amount to qualify for Small Business Exemption. The amount was originally set at $5,000, increased to $50,000 in 2005, and increased again to $100,000 in 2006 by the City Council. More than ever, small businesses are the backbone of our economy and the key to our recovery. The Mayor would like to see the threshold increased to an amount that will have an immediate impact and thereafter be indexed to grow based on inflation.
• Increasing the maximum gross receipts to qualify for the New Business Exemption. For its first two years of operation, a new business is not required to pay taxes if its gross receipts are less than $500,000. This exemption can be a critical tool used to attract new businesses to Los Angeles and help start-up companies take hold in rough economic times.
• Support the Council to target incentives citywide to attract new job and tax producing businesses to our city.
• Support an amendment to the tax code to prohibit the city from collecting back taxes owed as a result of an administrative Board overruling an earlier Board decision and a rule against reclassification, provided there is no change in business model or operation, for a fixed period of years beyond the ordinary three-year audit cycle.
• Support the Garcetti, Rosendahl and Smith motion regarding the rapidly changing field of multi-media companies.
• Support the implementation of the Airport Hospitality Enhancement Zone business tax relief measure which could help fill the chronically high amount of vacant office space in that area.