The City of Los Angeles Office of Finance is administering a Tax Penalty Amnesty Program (Program) from October 1, 2020, to December 17, 2020 for the Los Angeles Business Tax (LABT) and other city taxes.
The Program applies to both registered and unregistered businesses with outstanding taxes. Accordingly, it affords eligible existing taxpayers an opportunity to address underpaid taxes with a waiver of the LABT’s potential 40% penalty.
Due to broadly defined nexus standards, some unregistered businesses might be unaware that they are subject to tax by the city of Los Angeles. Interested unregistered taxpayers should consider the benefits and consequences of the Program before applying for amnesty as the City’s standing voluntary disclosure program may offer more favorable benefits.
The Program applies to existing taxpayers and nonfilers. Some companies may be deemed subject to the Los Angeles Business Tax and not realize it. The LABT’s nexus standard includes conducting, operating, managing, or carrying on a business in the City limits. This includes businesses that do not have a physical location in the City but have employees or agents who enter the City limits for business purposes for seven days or more in a year. The LABT can apply to any type of legal entity, including pass-through and disregarded entities.
Note that the City boundaries are more expansive than one might think. Some neighborhoods in the County of Los Angeles may not include ‘Los Angeles’ in the address but are within the City limits (for example, portions of Century City, Sherman Oaks, and Beverly Hills). Any company that has any business activities in the County of Los Angeles should analyze whether it may have a City of Los Angeles tax filing obligation and could take advantage of the amnesty program or alternatively consider relief under the existing voluntary disclosure program.