Start-Ups Aided as Council Passes Tax Reform Package

To help boost fledgling businesses in Los Angeles, the City Council on Tuesday passed a package of tax reforms that includes a tax break on start-up companies’ first $500,000 in revenue.

The tax reform package--long heralded by Mayor Richard Riordan and business leaders--will also allow businesses the option of filing taxes for fiscal years instead of calendar years.

Also under the new law:

* Start-up businesses will pay no city business tax in their first taxable year of operation on revenue under $500,000. This change takes effect Jan. 1, 2001. New businesses that are formed in 2000 will be eligible for a back-taxes exemption.

* Firms that make $5,000 or less will pay no city taxes. To be eligible, companies need to obtain a business tax registration crtificate and an exemption letter from the city clerk. This reform goes into effect Jan. 1, 2001.

The new tax breaks will cost between $6.7 million and $8.2 million a year, but those losses should be offset by increased tax revenues from new businesses, officials said.

Councilman Mike Feuer praised the reforms as the beginning of an overhaul of the city’s tax code and a way to lure entrepreneurs. “Having lower taxes and a simpler code will help bring them to Los Angeles and keep them here,” he said.

Feuer chairs the Ad Hoc Committee on Tax Reform, which is working with the Business Tax Advisory Committee on other reforms.

Those committees are looking at other issues, including streamlining income categories for businesses, forming common rates for similar industries and developing a minimum tax of $75 to $100 for small businesses.