Council Approves Proposal to Eliminate Business Tax on Mutual Funds & Closes Double-Taxation Loophole
Los Angeles—A proposal by Councilwoman Jan Perry to reform the city’s business tax and eliminate the mutual funds tax was approved by the City Council today. Under the proposal, the gross receipts on mutual funds would be phased out in three years, beginning in tax year 2012, until it is fully eliminated.
The reform addresses the inequity in the taxing of this sector as compared with surrounding cities. Currently, Los Angeles is the only jurisdiction in California that is known to enforce business tax collection on mutual funds and mutual fund managers. Other jurisdictions only tax mutual fund managers. The State and Federal governments do not tax mutual funds.
“At a time when job creation and retention is of the utmost importance, it is our responsibility to send a clear message that Los Angeles is a business-friendly city. Business tax reform has long been a part of this equation. The elimination of the mutual fund tax is the natural first step as we are the only jurisdiction in the state of California to tax mutual funds,” said Perry.
The City’s Chief Legislative Analyst (CLA) cited in their report that since no other city in the State enforces tax on this class of business, the City is at a competitive disadvantage. After a thorough analysis of the issue, they recommended that the City would need to eliminate taxation on mutual funds in order to improve competitiveness in this sector. Mutual fund managers would still be taxed under the proposal.
“On behalf of the millions of investors who have been paying the Los Angeles City business tax on their mutual fund investments, we applaud the City’s efforts. The mutual fund exemption ordinance will benefit these mutual fund investors who are saving for retirement, education and other important goals. It would reduce the taxes paid by mutual funds, but not the taxes paid by their management companies”, said Cathy Heron, a senior vice-president and senior counsel of Capital Research and Management Company.
Councilwoman Perry represents the Ninth Council District, which encompasses the most culturally diverse and vibrant communities in Los Angeles, including Bunker Hill, Little Tokyo, and South Los Angeles.