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Voter Ballot Measure Resolution to Restructure Business License Tax Code <br />June 21, 2022 <br />Page 3 <br />2 <br />7 <br />8 <br />4 <br />As part of Phase Two, staff recommended ending several voluntary business <br />license tax “exclusions/exemptions” given under SAMC Chapter 21 for public <br />utilities making franchise payments to the City and for private physicians <br />maintaining patient offices on hospital premises in the City. Staff, however, also <br />recommended establishing a special public policy tax “exemption” for individuals <br />providing immediate and extended family member in-home childcare services. <br />Elimination of tax exclusion for public utilities making franchise payments. <br />Franchise payments relate directly to public utilities’ authorization to work in <br />the public right of way. The 1905 Broughton Act and the Franchise Act of <br />1937 authorize granting a franchise to a public utility to use public streets <br />and highways for public utility purposes. The franchise granted is not a <br />general authorization to do business or to use anything other than public <br />streets and highways. Thus, public utility franchisees are not excluded by <br />state statute from City business license requirements even though they pay <br />an annual franchise fee to the City for use of the public right of way. Their <br />exclusion from Santa Ana business license taxation has been entirely a <br />voluntary one, granted by City ordinance that reflected an earlier desire to <br />facilitate the expansion of public utility services in the first half of the last <br />century. Excepting Santa Ana, only one other of California’s most populous <br />13 cities (Riverside) grants such an exclusion. <br />Elimination of exemption for private physicians maintaining patient offices <br />on hospital premises. The exemption for private physicians maintaining <br />patient offices on hospital premises also reflected an earlier model for the <br />provision of hospital care where hospitals were organized on a nonprofit <br />basis and hence were deemed nontaxable. The exemption for hospitals <br />was extended to include all medical services provided by doctors having <br />admitting rights to said hospitals. The nature of hospitals has changed <br />significantly over time so that such facilities are no longer non-profit. For <br />this reason, a system that exempts physicians from normal business license <br />requirements because of the location of their office within the City is no <br />longer justifiable and results in unequal treatment opposite other <br />physicians. <br />Establishment of a family member childcare exemption. An equitable <br />exception, however, is justifiable in the case of individuals providing <br />childcare services to their own immediate and extended family members <br />residing within the City. Staff recommended that public policy should <br />endeavor to maximize the provision of in-home childcare services, <br />especially when provided by one Santa Ana family member to another.