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Citys Business Tax Ordinance / Small / New Business Exemption Program / Los Angeles Municipal Code (LAMC) / Section 21.19

Council File 25-1474

Under review — the city is studying whether to raise its small-business tax exemption for the first time in two decades, weighing options from $200,000 to $1 million in annual revenue cost. The Budget Committee is hearing it out this month.

Introduced
2025-12-09
Last changed
2026-09-11
Status
open
Expires
2028-09-11
Committee
Budget and Finance Committee
Mover
MONICA RODRIGUEZ
Second
BOB BLUMENFIELD

Brief

Councilmember Monica Rodriguez introduced a motion to create a new business exemption program under the City's Business Tax Ordinance, designed to provide tax relief to qualifying small startups. The full City Council adopted the measure 13-0-2 on February 25, 2026. The Office of Finance has since submitted implementation documents, and the Budget and Finance Committee is currently reviewing the program's operational framework, with meetings scheduled for mid-September 2026.

Full summary

Los Angeles currently exempts businesses with global gross receipts under $100,000 from its Business Tax — a threshold set in 2006 and unchanged for two decades. Councilmember Monica Rodriguez, seconded by Bob Blumenfield, introduced a motion directing the Office of Finance to study the feasibility and fiscal impact of raising that threshold, and to survey how other California cities handle small business tax exemptions. The Council adopted the motion 13-0-2 on February 25, 2026. In response, the Office of Finance submitted a detailed analysis in April 2026. The report found that roughly 45 percent of all business tax filers — about 143,500 businesses — already claim the current $100,000 exemption. Among the roughly 170,000 businesses that do pay some tax, more than half report in-City gross receipts below $300,000, though because tax rates are low, those 91,000 businesses collectively pay only about $32 million annually, averaging less than $350 each. The Office modeled four potential new thresholds and their estimated annual revenue impacts: raising the threshold to $200,000 would exempt an additional 33,000 businesses at a cost of $13 million in lost revenue; to $300,000 would exempt 52,000 more at a cost of $25 million; to $500,000 would exempt 73,000 more at a cost of $44 million; and to $1,000,000 would exempt 95,000 more at a cost of $79 million. The report noted that smaller threshold increases are more efficient — the jump from $100,000 to $200,000 relieves 33,000 businesses for $13 million, while the final increment from $500,000 to $1,000,000 relieves only 22,000 additional businesses at a cost of $35 million. Any increase could be phased in over multiple years, as was done with the last threshold change in 2004-2006. Comparing Los Angeles to other California cities, the Office of Finance found significant variation. San Francisco restructured its business tax in 2024 to exempt businesses under $5 million in receipts but charges all businesses an annual filing fee starting at $55. San Jose's exemption threshold is under $31,300 and adjusts annually. Long Beach, San Diego, and Oakland provide no exemption, though Oakland is considering one. Santa Monica matches Los Angeles at $100,000 but adds a $75 filing fee. Los Angeles currently charges no filing fee. The Budget and Finance Committee received the Office of Finance report in April 2026 and has been deliberating since. After a continuance in early September, the committee scheduled the item for a hearing on September 15, 2026. No threshold change has been enacted yet; the committee must decide whether to recommend a specific new exemption level to the full Council.

Activity (11)

  • 2026-09-11 Budget and Finance Committee scheduled item for committee meeting on September 15, 2026.
  • 2026-09-01 Budget and Finance Committee continued item to September 15, 2026 .
  • 2026-08-28 Budget and Finance Committee scheduled item for committee meeting on September 1, 2026.
  • 2026-04-14 Office of Finance document(s) referred to Budget and Finance Committee.
  • 2026-04-13 Document submitted by Office of Finance, dated April 13, 2026.
  • 2026-02-27 Council action final.
  • 2026-02-25 Council adopted item, subject to reconsideration, pursuant to Council Rule 51.
  • 2026-02-20 City Clerk scheduled item for Council on February 25, 2026.
  • 2026-02-17 Budget and Finance Committee approved item(s) .
  • 2026-02-13 Budget and Finance Committee scheduled item for committee meeting on February 17, 2026.
  • 2025-12-09 Motion referred to Budget and Finance Committee.

Documents (12)

Council votes (1)

  • 2026-02-25 Vote — 13-0-2 · Regular

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