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Thursday, Mar 28, 2024

City Council Extends New Business Tax Exemption

New start-ups in Los Angeles will not have to pay a business tax for 10 years under the terms of an extended tax exemption passed by the Los Angeles City Council today. The motion, introduced by Second District Councilwoman Wendy Greuel and City Council President Eric Garcetti, frees new businesses from paying any business tax for the first 10 years of operation if its taxable gross receipts are less than $500,000. It extends a two-year exemption passed seven years ago. The extension, which can be reconsidered by the council after five years, is part of a major push in recent years by public and private enterprise to make Los Angeles friendlier to business. The city has long been considered one of the costliest places to conduct business, in large part because of its myriad taxes. Last year L.A. ranked as the 16th most expensive city nationwide on the Kosmont-Rose Institute Cost of Doing Business Survey. The current business tax exemption was passed in 1999 and included a sunset clause that expired this month, according to the city’s Department of Finance. In 2004, the city agreed to reduce the tax in phases by 15 percent for businesses generating less than $100,000 over five years and introduce additional cuts when revenues from the business tax exceeded certain thresholds. Some of those cuts were put into place last month, when the council voted to reduce the city’s business tax by 4 percent for 2007, a result of increased revenue and strong business tax numbers in fiscal year 2005-2006. So far, the reforms have had mixed results. The Kosmont study found that decreases to the city’s business tax license made little difference in its affordability. This fall, City Attorney Rocky Delgadillo went so far as to call for an end of the business tax altogether. He argued the money generated from the tax about $420 million, or 10 percent of the city’s budget aren’t worth it because the fees discourage businesses from coming to the city in the first place. Nearly 27,000 new businesses opened in Los Angeles last year.

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