The City of Los Angeles (City) has enacted an Amnesty Program (Program) for a limited period beginning 10/1/2020 and ending 12/17/2020. The Program is an effort to encourage new taxpayers to come forward and to reduce the financial tax burden on the existing City taxpayers. The Program is available to both registered as well as unregistered taxpayers.
Who is Subject to City Taxes?
Any person or legal entity including Partnership, Pass-through entity, Corporation and Disregarded entity that are either located within the City limits or are subject to the City taxes as result of carrying on business in the City’s jurisdiction. Entities without any physical presence may establish nexus with the City by virtue of having employees or contractors working from within the City limits.
Is a Business Located within the City Limits?
While the City’s taxable jurisdiction can be expansive and confusing to taxpayers, there are several locations that may still fall under City limits including certain portions of unincorporated Los Angeles County. Notably, Santa Monica and Beverly Hills (and other cities) have their own city business filing requirements. In order to determine whether a business is located in the City of Los Angeles’ jurisdiction, follow the map online here.
The Benefits of the Amnesty Program
Upon filing an application under the Program, taxpayers (both registered and unregistered) must pay any outstanding principal, interest and fees owed to the City. The main benefit of the Program is the elimination of penalties of up to 40 percent of taxes due. The Program is offered for the City taxes below:
- Business Taxes
- Communications Users Taxes
- Transient Occupancy Taxes
- Parking Occupancy Taxes
- Electricity Users Taxes
- Gas Users Taxes
- Commercial Tenant's Taxes
For more information, click here for FAQs.
Existing Voluntary Disclosure Program (VDP)
While this Program may seem beneficial for many taxpayers, certain eligible[1] taxpayers may take advantage of the City’s separate VDP. The VDP is an existing program that is for Business Tax in the City. Notably, other City taxes do not have a VDP.
Upon qualifying for the VDP, eligible taxpayers may have the benefit of a five-year lookback period with possible abatement of penalties associated with the business tax. Notably, the normal maximum assessment period is an eight-year lookback. Interest would still apply, similar to the Amnesty Program, to any tax due as part of the VDP.
GHJ’s Observation
Taxpayers who are subject to taxation in the City of Los Angeles may consider either the Amnesty Program or VDP depending upon their eligibility. Below are considerations for certain business situations.
- While unregistered eligible taxpayers may take advantage of either the Amnesty Program or the VDP, taxpayers who are registered with the City of Los Angeles may only take advantage of the Amnesty Program.
- Taxpayers who have previously been contacted by the Office of Finance may not be eligible for VDP; however, they may still qualify for the Amnesty Program.
- For taxpayers eligible for the VDP, and with over five years of liability outstanding for Business Tax, the VDP may be a better option.
Please contact a GHJ tax advisor with any questions or to discuss how the proposed tax changes may affect you or your business.
[1] To meet eligibility requirements for the VDP, the taxpayer must not have been contacted by the City Office of Finance regarding its City tax liabilities and must not be currently under audit for, or otherwise contesting, such liabilities. The taxpayer must not have previously filed an application for a City Business Tax Registration Certificate, been registered with the City Office of Finance or filed a City Business Tax renewal form. The taxpayer must not be engaged in business within the City limits.
