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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 studied raising its small business tax exemption threshold (frozen at $100,000 since 2006) and found options ranging from $200,000 to $1 million, with estimated annual revenue costs between $13 million and $79 million. A committee approved an amended version in September, but Council hasn't voted on the final proposal yet.

Introduced
2025-12-09
Last changed
2026-09-15
CFMS file status
File open See note on file status
Expires
2028-09-15
Committee
Budget and Finance Committee
Mover
MONICA RODRIGUEZ
Second
BOB BLUMENFIELD

This is the City Clerk's status for the council file itself, not the outcome of the measure. A file often stays open after the Council has already adopted an item. The summary above reflects the latest recorded action.

Brief

Councilmember Monica Rodriguez introduced a motion to create a small business exemption program under the City's Business Tax Ordinance, modifying LAMC Section 21.19. The motion, seconded by Bob Blumenfield, was approved by Budget and Finance Committee in February 2026 and adopted by Council on February 25, 2026 by a vote of 13-0-2. The Office of Finance submitted implementation documents in April, which triggered a second committee review; the committee approved an amended version on September 15, 2026. The ordinance is now final.

Full summary

Councilmember Monica Rodriguez introduced a motion directing the Office of Finance to study the feasibility and fiscal impact of raising the threshold for the small business exemption to the City's Business Tax, which is codified in LAMC Section 21.29. Under current law, businesses with global gross receipts not exceeding $100,000 are exempt from the tax, provided they file their renewal on time. That threshold has been frozen since 2006, when the City completed a two-phase increase from the previous $5,000 limit. The motion also requested a comparative survey of how other California cities treat small businesses for tax purposes. After the motion was adopted by Council 13-0-2 on February 25, 2026, the Office of Finance submitted a detailed feasibility report in April 2026. The report analyzed tax year 2025 data covering approximately 313,000 business filers, of whom roughly 143,500 — about 45 percent — already qualified for the existing exemption. Finance presented four threshold options and their estimated annual revenue impacts: raising the exemption to $200,000 would forgo roughly $13 million in tax revenue while exempting an additional 33,000 businesses; a $300,000 threshold would cost $25 million and exempt 52,000 more businesses; $500,000 would cost $44 million and exempt 73,000; and a $1 million threshold would cost $79 million and exempt 95,000. The report noted that smaller threshold increases are comparatively efficient, adding large numbers of businesses to the exemption at a relatively modest revenue cost. Finance also noted that any change could be phased in over multiple years to soften the budget impact, as was done with the 2004 increase. The comparative survey found that Los Angeles, at $100,000, offers a more generous exemption threshold than San Jose (approximately $31,300) and matches Santa Monica, though Santa Monica charges a $75 filing fee that LA does not. San Francisco restructured its business tax in 2024 to exempt businesses under $5 million in gross receipts, but pairs that with mandatory annual filing fees. Long Beach, San Diego, and Oakland offer no small business exemptions, though Oakland was considering a one-time exemption for new businesses. The Finance report was referred back to Budget and Finance Committee in April 2026. After continued deliberations and scheduling adjustments through the summer, the committee approved an amended version of the item on September 15, 2026. The specific threshold ultimately selected in the amendment is not reflected in the available documents, but the file remains open pending any further Council action on the amended item.

Activity (12)

  • 2026-09-15 Budget and Finance Committee approved as amended .
  • 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 (15)

Council votes (1)

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

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