A Small-Business Break

Faced with protests from small-business owners, the Los Angeles City Council voted Tuesday to waive penalty fees and interest charges for late payments by those who owe the city $500 annually or less in business taxes.

Council members said setting the limit at $500 will make sure that the city is helping small businesses and individuals who may have been unaware of the tax obligation. The waiver covers any penalties for taxes owed for 2000, 2001 and 2002 and applies only until June 30, 2003. Firms still have to pay their taxes for 2003, which are due Feb. 28.

“The small business is the backbone of our local economy and we believe strongly that the city should not chase away business but actually keep business in the city of Los Angeles,” said Councilwoman Wendy Greuel.

The council action was in response to controversy sparked last month when the city sent letters to 151,000 people who had reported business income to the state but had not paid any business taxes to the city.

The city did not know how many of the 151,000 state filers earned at least $5,000 annually, which is the threshold for paying city business taxes, but the letter said that the recipient “may owe business taxes for conducting businesses within the city.”

That resulted in thousands of responses from small business owners who said they did not know they owed the taxes.

Under the waiver approved Tuesday, a typical business with $85,000 in annual gross receipts that owes $500 in city business taxes is likely to save $900 in interest and penalties that the city would otherwise have charged for the last three years.

Mayor James K. Hahn supported the waiver, even though it could cost the city $1 million of the $3 million the government had hoped to collect as part of the crackdown on firms not paying business taxes.

“The goal of this entire program is to increase compliance,” said Deputy Mayor Jonathan Kevles.