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Sunday, May 26, 2024

CPAs Flock to Meetings on New Tax Code

Professional tax preparers by the hundreds are going to city-sponsored meetings where this year’s changes in L.A.’s business tax code are being explained. Officials at the Office of Finance have spoken to hundreds of people the last few weeks as they stepped up their outreach efforts after the changes went into effect Jan. 1 On Wednesday, Jan. 11, more than 130 CPAs met at the Marvin Braude Constituent Service Center in Van Nuys for a two-and-a-half hour presentation from Office of Finance employees. Terrance Manocchio, Chief 1 of the Tax Permit Division in the Office of Finance, said he’s spoken at several meetings in the last few months, mostly to CPAs, but he also spoke for the first time to tax attorneys in Beverly Hills. “I want to emphasize that as part of the outreach program regarding tax reform we have been on Channel 35, the cable station, and we’ve also had ads on KFWB, the mayor is on one of those,” said Manocchio Plenty of tax professionals are still out of the loop when it comes to city business taxes, officials said. Tax reform has been making headlines over the last few years, but Mel Kohn, the vice chair of VICA’s Taxation Committee, said that most CPAs and tax preparers are largely unaware of the changes. The reform bill, signed by then-Mayor James K. Hahn in 2004, provides for an across the board 15 percent reduction in business taxes over several years, the first 3.1 percent of which took effect on January 1. Additionally, any business with less than $50,000 in annual gross receipts is exempt from city business taxes altogether. “I was able to put all the parties together, I talked to Wendy Greuel and (deputy chief of staff) Leslie Pollner,” Kohn said. “The Office of Finance got involved and Cal CPAs helped to set it up and get the word out to their members,” said Kohn. “(The Office of Finance) asked ‘how many people are going to show up,’ and I told them, if people get enough notice, you’re going to have a big crowd. We were there for two and a half hours, and we could have kept going all afternoon.” Kohn said it’s easy to overlook changes in city business taxes. “A lot of people don’t get news about city taxes in their daily mail, you don’t get tax services every week like you do from the IRS and the Franchise Tax Board, so it’s hard to keep up to date,” Kohn said. The 15 percent across the board rate cut will be phased in over the next few years, as long as the city’s revenue stream does not decrease during that time The rate cut will affect more than 260,000 large businesses. Next year, the exemption for businesses making under $50,000 annually will extend to businesses making less than $100,000, effectively eliminating city business taxes for 80 percent of the businesses within Los Angeles. Councilmembers Eric Garcetti and Wendy Greuel, who authored the reform legislation, have said that extra state money used to identify businesses neglecting their city business taxes will generate the revenue needed to push through further cuts in the coming years. Cutting business taxes is the latest in a series of attempts to make the City of Los Angeles more business friendly. While Nevada, Texas and other states have unveiled marketing efforts aimed at luring businesses out of California, Los Angeles has seen even its close neighbors like Burbank, Glendale and the Santa Clarita Valley take away business. Starting earlier this month, retail businesses pay a minimum of $107.42, and an additional $1.43 for every $1,000 over $75,000 in gross receipts, down from $110.86 and $1.48, respectively. Professionals will pay a $103.13 minimum plus $5.73 for every $1,000 over $18,000. Eric Garcetti has said that Los Angeles already has been able to successfully attract businesses when the business tax is eliminated. For example, the Hollywood Redevelopment district will be the new home of ratings agency Nielsen Entertainment which will bring 500 employees. It was drawn to the area partly because it was offered an exemption from local business taxes. Kohn and the Business Tax Advisory Council first tackled the issue when then-Mayor Richard Riordan made it a priority. Kohn credited Hahn with taking the idea even further and proposing that the city’s smallest businesses be exempt from taxes altogether, freeing auditors to chase after larger, non-compliant companies. Although the bill was signed before Mayor Antonio Villaraigosa took office, he has pledged since July to support measures that will help Los Angeles become the most business friendly city in the state. Manocchio said that most of the assembled tax professionals had questions about apportionment, the proper way to file taxes for professionals in Los Angeles billing clients outside of the city, or vice versa. He also answered questions from real estate agents, who are taxed differently than brokers. Under the new rules, creative artists earning up to $300,000 per year are also exempt from taxes, and many CPAs had questions about whether their clients qualified. “We try to educate people as much as we can, but we can’t talk about everything, we’d be there for days,” said Manocchio. For those who aren’t able to meet Manocchio or another city employee during an outreach training session, which will be offered periodically as demand dictates, Kohn said the Office of Finance’s Web site at www.lacity.org/finance, has been greatly improved and describes all of the changes in business taxes. The department has about 10 employees manning its tax hotline and more will be added as needed.

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