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Committee moves payroll-exclusion cleanup to full Board ahead of possible gross-receipts vote
Summary
The committee forwarded an ordinance amending the Business and Tax Regulation Code to preserve a small-business payroll expense exclusion through tax years 2012–2015 if voters approve a gross receipts tax, with analyst estimates the change would reduce revenues by roughly $7.3 million over four years if the gross receipts tax passes.
The Budget & Finance Committee recommended forwarding an ordinance that amends Article 12A (Section 906.5) of the San Francisco Business and Tax Regulation Code to prevent termination of the small-business net new payroll expense exclusion for tax years 2012 through 2015 in the event voters enact a gross receipts tax.
Catherine Stefanie, legislative aide to Supervisor Mark Farrell, described the measure as cleanup language to align the earlier payroll exclusion ordinance with the ballot wording for a possible gross receipts measure (Proposition E). She said the amendment would allow eligible businesses to exclude up to $250,000 of net new payroll through 2015 and introduced an additional drafting amendment to avoid an unintended barrier to claiming the exclusion as the payroll tax rate phases out.
Ted Egan of the Controller's Office said the original drafting could have required businesses' payroll tax liability to increase year-to-year before they could claim the exclusion as the payroll tax rate declined under the phase-out; he presented replacement language to allow businesses to benefit even as rates decline. Budget analyst Mr. Rose said the controller's office had previously estimated a $2,000,000 annual reduction in payroll-expense tax revenue from the exclusion (about $8,000,000 over four years) and that under the proposed ordinance and a successful gross receipts vote, the estimated reduction would be $7,300,000 over the four-year term. The analyst recommended technical amendments and a post-term report by the controller's economic analysis office assessing the exclusion's effects.
Chair John Avalos said he had earlier opposed the standalone payroll-exclusion ordinance but would support forwarding the amended measure in the context of the pending gross receipts measure. After a short procedural sequence to ensure amendments and language changes were properly recorded, the committee moved the ordinance forward as a committee report to the November 6 Board meeting (taken without objection).
