Friday, October 19, 2001
City Leaders Laud Legislation to Give Them FTB Business Tax Information
By ROBERT GREENE, Staff Writer
City officials yesterday greeted with enthusiasm and a degree of relief a bill that gives them new clout to find business tax cheaters and increase the flow of revenue into Los Angeles.
The measure, Assembly Bill 63 by Gil Cedillo, D-Los Angeles, does what a succession of bills over the last five years failed to do—require the state Franchise Tax Board to share with the city its register of businesses here that pay state taxes.
Los Angeles officials estimate that they lose close to $70 million a year from firms located here that don’t bother paying their city business license taxes. But they also believe that a large number of those businesses do pay the state, and the data-sharing will allow them to look up businesses in the state registry with Los Angeles addresses, and warn them to pay up.
“I am thrilled,” city Controller Laura Chick said about the bill, signed Sunday by Gov. Gray Davis. “It’s going to give us a very effective tool to locate businesses that are not paying. And with the revenue we will hopefully be able to do what we really want to do, and that is to lower business taxes across the board.”
Data-sharing with the Franchise Tax Board has been attempted in the Legislature each year and often has come close to passage, only to fail at the last minute. A similar bill by Cedillo fell a vote short last year. In earlier years, it failed because it was joined with controversial bills on home-based businesses.
Getting the state information was a key part of local business tax reform, begin by Mayor Richard Riordan in 1998 and promoted by new Mayor James Hahn. Businesses and, increasingly, City Hall, want to streamline the often confusing business license tax categories, lower rates and use the tax system to encourage start-up ventures.
The bill comes just in the nick of time for Los Angeles, which began a tax amnesty program this month for businesses that are behind in their city taxes. Critics have argued that few business owners who remain off the local tax rolls would voluntarily step forward to become legal unless they believe that city tax collectors, who so far have been unable to find them, suddenly know where to look.
AB 63 will let the city know where to look, city Finance Director Antoinette Christovale said. She said she is asking the Franchise Tax Board to include information about the bill in a letter to businesses later this month—letting them know that the city will soon have the tool to find tax scofflaws.
“It really will enhance the amnesty program,” Christovale said. “My feeling is that once these businesses are aware that we can identify them, they will take advantage of the second chance.”
Mel Kohn, an Encino accountant who has worked for three years on the bill and its predecessors as a member of the city’s Business Tax Advisory Committee, called AB 63 the culmination of “a long struggle.” He said that ideally the new revenue that would result would be put in a tax relief trust fund for businesses that have shouldered their tax burden.
A looming recession was no reason to step back from tax relief, Kohn said.
“I would say to the city, now is the time to keep what you have and get more businesses in,” he said.
Cedillo, too, said the bill would help stave off the economic downturn.
“The state is going to be scrambling too,” Cedillo said. “This just makes it clear to people who do pay their taxes that no one is unfairly getting away with anything.”
Copyright 2001, Metropolitan News Company