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Tax Breaks to Begin for More Companies

The clock is ticking for small business owners in L.A. to apply for a new city designation that exempts them from paying 2007 business taxes. The tax break is open to all businesses with total annual gross receipts of less than $100,000, said Antoinette Christovale, the general manager of the city’s Finance Department, which administers taxes in L.A. “The primary benefit of the small business exemption tax break is that you pay no tax as long as you qualify and file your business tax return timely,” she said “The taxes otherwise paid could be reinvested in your business.” The one catch is that businesses must still file tax forms with the city, only earlier: before Wednesday, Feb. 28. Christovale said business owners could either mail or e-mail the tax forms or file in person with the Finance Department. The department operates a Valley office in the Van Nuys Civic Center, at 6262 Van Nuys Blvd., in room 110. The department has sent out information about the program to about 300,000 businesses and took out ads in newspapers and broadcast outlets. So far, only about 39,000 have taken advantage of the tax breaks, although that number is expected to spike around 100,000 by the end of the month, Christovale said. New breaks The small business tax exemption is the latest in a series of tax reforms instituted by the city in recent years. The effort, starting in the late 1990s after the formation of the Los Angeles Business Tax Advisory Committee, looked to eliminate the city’s complex tax code, which included 64 categories and myriad qualifications. The City Council in 1999 reduced some of those categories and agreed to tax exemptions. In 2004, it enacted a 15 percent reduction for businesses generating less than $100,000 over five years and agreed to cut the business tax when city tax revenues exceeded certain thresholds. The bulk of the benefits went into effect last year, when the business tax dropped 3.1 percent and additional tax cuts went to qualified businesses in the entertainment industry and businesses that brought in less than $50,000. This year, the tax dropped 4 percent a consequence of increased revenue and strong business tax numbers in fiscal year 2005-2006 and the minimum jumped to $100,000. (This is also the first year some entertainment businesses can qualify for an additional exemption of up to $300,000.) Those decreases also dovetail with another passed by the City Council in December to exempt new start-up businesses in L.A. from paying a business tax for 10 years if gross receipts are less than $500,000. The move, introduced by Second District City Councilwoman Wendy Greuel, extended a two-year tax exemption for new businesses. Mel Kohn, former chairman of the Los Angeles Business Tax Advisory Committee, said that by taking out small businesses, the tax code is much easier to comprehend while still bringing in funds. “It took out all of these lower-end taxpayers. They clogged up the tax system,” he said. “That made the system simpler from the taxpayer’s side.” But Kohn said the system could still be simplified even more. “When you bring business in, it brings in a lot of other things: jobs, revenue,” he said. “We still have the problem of businesses moving to other cities. We need businesses in the city.”

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