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BTAC Backs Oct. 31 Reform Deadline

BTAC Backs Oct. 31 Reform Deadline By SLAV KANDYBA Staff Reporter The citizens committee appointed by the mayor and city council members to formulate business tax reform threw its support behind an Oct. 31 deadline for a complete tax reform package to be passed by city officials. The Business Tax Advisory Committee, meeting for the first time since its very existence was extended to Dec. 31 by the City Council and Mayor James Hahn, voted unanimously in support of the Halloween deadline. That deadline was proposed earlier this month by the Valley Industry and Commerce Association and the United Chambers of Commerce. BTAC also voted to unify all of its tax reform proposals, which were already submitted to the Ad Hoc Committee on Tax Reform, a City Council subcommittee chaired by Tony Cardenas and including members Wendy Greuel and Greig Smith. The vote was essentially a signal to the City Council and Hahn to pass a thorough business tax reform package. “We can’t afford to have pieces pulled off,” said Mel Kohn, a partner in the Encino-based Kirsch, Kohn and Bridge CPA firm and president of BTAC. The tax reform package includes the “third way plan,” which calls for changing L.A.’s tax categories into five rate levels, $145 flat tax on businesses with $100,000 or less in gross receipts, and further expansion of small business tax exemption. There are also provisions to exempt production companies and other creative talent from taxes altogether. Perhaps the most important decision the ad hoc committee will have to make will be whether to recommend BTAC’s proposal to cut taxes 15 percent over five years or the Greuel-Garcetti proposal to cut them 25 percent. If the BTAC recommendation is adopted, the city will collect $54 million less over 2006-2010; if Greuel-Garcetti is implemented, it will collect $90 million less. The city annually collects about $380 million. Hahn’s actions Only a few months ago, the business tax reform movement appeared to be doomed when Hahn proposed to take $4.9 million out of the business tax reform trust fund to balance his budget. When BTAC, VICA and other organizations and businesses protested and City Attorney Rocky Delgadillo declared the move illegal, the funds were restored. Since then, Hahn has changed his position. He held a press conference at a North Hollywood boutique shop to announce a proposal that businesses with less than $100,000 in gross receipts be exempted from taxes. That proposal went even further than what BTAC had recommended. Among the proposals BTAC submitted to the ad hoc committee was one that called for a flat tax of $145 for businesses with $100,000 in gross receipts. At its meeting, BTAC amended its proposal in favor of Hahn’s. Immediately before BTAC met June 24, most of its members attended the ad hoc committee meeting, which was held on the same floor in the City Hall. The ad hoc committee members questioned officials from the Office of Finance about the financial feasibility of business tax reform, and asked for more information. “Today we’re getting through the issue of reporting,” Cardenas said. “We want to be methodical. We want to be as careful as possible.” Greuel was interested in getting more information as well. “I think it would be great to see what other municipalities have done,” Greuel said. The issue of “discovery,” or the collection of taxes from scofflaw businesses, has emerged as a key issue for BTAC. Members of the committee have put pressure on the Office of Finance to enforce the law and pursue tax-evading businesses. System problems A new computerized tax system, called LATAX, was one way that was supposed to be done. But, that system’s implementation has been delayed for almost year, because the system’s vendor, Unisys, has not been able to deliver. The director of the Office of Finance, Antoinette Christovale, told BTAC that LATAX would be up and running as late as October, thus in time for the Oct. 31 deadline. Christovale said the project was 46 percent complete, and the reason for the delay was the large amount of data on businesses to transfer. “We have about 900,000 records which Unisys is converting from the current system to the LATAX system,” Christovale said. “We want to make sure it’s all properly converted.” BTAC’s Kohn said the new system was “an integral part of all city revenues.” “I just hope it finishes before (Dec. 31, when BTAC will be disbanded),” Kohn said. Bonny Herman, president of VICA, was at both the ad hoc and BTAC meetings and thought both made progress. “I feel the momentum today and I’m delighted as we all work towards the Oct. 31 deadline,” Herman said.

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