75D - PH - BUSINESS LICENSE TAX ORDINANCE

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REQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: JANUARY 22, 2013 TITLE: BUSINESS LICENSE TAX PENALTY ABATEMENT ORDINANCE CITY MANAGER RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: APPROVED ? As Recommended ? As Amended ? Ordinance on 15` Reading ? Ordinance on 2"d Reading ? Implementing Resolution ? Set Public Hearing For_ CONTINUED TO FILE NUMBER Adopt an ordinance amending Chapter 21 of the Santa Ana Municipal Code to establish a business license tax penalty abatement procedure and to amend various sections of the code relating to reporting, administrative procedures and authority, as well as enforcement and collection of business license taxes and also adding various sections relating to the right to elect an alternative tax deposit rule, as well as alternate tax reporting rules, and tax assessment methods. DISCUSSION In 2009, the Finance Department began exploring alternatives methods that would encourage delinquent businesses to either file or update their business license without tremendous fear of exorbitant penalties and fees. As a result, the Finance Department implemented a Business License Tax Amnesty Program between 2010 and 2012. The Amnesty Program allowed unlicensed businesses and independent contractors to have their delinquency penalties abated based on current year tax rates. Licensed businesses that had misfiled their business license taxes were also allowed to file corrected statements and have their past due penalties and interest owing abated based on current year tax rates. Over 12,500 letters were sent to prospective unlicensed businesses/independent contractors based on data received from the state and county. The initial expectation was to capture business licenses outstanding as well as the associated fees. The success of the program was established immediately as revenues estimated originally at $250,000 were doubled in six months. Its success allowed the program to be continued through September, 2012, and has generated $1.6 million in additional revenue, and added over 4,000 new paid business license tax accounts. The Finance Department now would like to include the abatement process as the standard for collecting the business license tax. The proposed ordinance would institute the business license tax penalty abatement procedure as a permanent part of SAMC Chapter 21, the Business License Tax Code. As proven through the Amnesty Program, lowering the cost for complying with the City's business license tax requirement encourages businesses and independent contractors who are unlicensed or who have misfiled their taxes to come into compliance. By using an abatement 7501-1