Tax Break for Start-Up Companies Approved

To help boost fledgling businesses, the City Council has 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, passed Tuesday by the council:

* 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 an exemption on back taxes.

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

The new tax breaks will cost $6.7 million to $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 heads 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.