Los Angeles city officials are considering cutting or even eliminating business taxes on mutual funds.

Los Angeles is one of the few cities in California that levies a gross receipts tax on both mutual funds and the investment entities that manage them. The practice started in 1975 when several mutual funds agreed to a nominal tax. Many of those original mutual funds are no longer based in Los Angeles, but the practice of taxing funds continues.

The city eventually classified mutual funds as professional services and taxed them at the highest rate, which now stands at $5 per $1,000 in revenue. This is on top of the gross receipts tax the city imposes on investment management companies.

Recently, downtown L.A.-based Capital Group Cos., an investment company that manages some of the largest mutual funds in the nation, raised concerns with city officials about what it sees as double taxation. In the case of mutual funds, which are by definition owned by investors, the company wondered why an investor based in Boston or in Fargo, N.D., should have to pay a portion of the L.A. business tax.

“It’s our belief that a mutual fund is a passive investment owned by investors throughout the country and that the fund is separate from the investment management company,” said Chuck Freadhoff, spokesman for Capital Group.

In response to these concerns, City Council members Dennis Zine and Jan Perry on Aug. 20 asked staff for a report on reducing the gross receipts tax on mutual funds or exempting the funds entirely from the tax.

“The current taxing system has become overly burdensome,” Perry stated in her request. “The city’s current practice has created a scenario where we run the risk of being noncompetitive and run the risk of driving away high-quality professional jobs and businesses that have a high multiplier effect throughout the local economy.”

City workers will respond to the council in the next couple of months. At that point, the council could ask for an ordinance on the matter.

Break on Fees

Many cities have hiked fees on business as they seek to close budget gaps. But that’s not the case in Whittier. The City Council in that southeast Los Angeles County community recently took a number of steps to improve the business climate, including extending reductions of fees.

A year ago, the city cut fees for temporary banner sign permits to $25 from $152 and cut most building permit and planning entitlement fees by 50 percent. In June, the council extended those cuts for another budget year.

Whittier also expanded a commercial façade improvement program, which includes loans of up to $75,000 to commercial property owners in some areas of the city where leasing has been difficult.

“During the past 12 months, the city has made significant strides in offering new business assistance programs and becoming more business friendly, particularly during this time of economic strife,” Mayor Greg Nordbak wrote in the July newsletter of the Whittier Chamber of Commerce. “By extending these incentives, the city will continue to show the business community our commitment to business owners, property owners and economic development.”

Tax Crackdown

More than 11,000 businesses in Los Angeles County have received notices from state tax regulators this month telling them to file their 2008 tax returns or face steep penalties and fees.

The state Franchise Tax Board sent out notices to 11,167 businesses in the county and more than 40,000 businesses statewide that had not filed 2008 tax returns. The notices give the businesses 30 days to file a return or to show why a return is not necessary. If the businesses fail to meet that deadline, they will be assessed additional penalties, interest and fees.

After the board sent out similar notices in 2009 to businesses that hadn’t filed 2007 tax returns, the agency collected $38 million from those businesses.

Heat Update

The California Chamber of Commerce has welcomed a state worker safety board’s amendments to heat regulations.

On Aug. 19, the California Occupational Safety & Health Standards Board approved amendments to a regulation aimed at preventing heatstroke and other heat-related illnesses among outdoor workers.

The original regulation required employers to provide shade for workers when the outside temperature exceeds 85 degrees. Employers were also required to take additional steps when the temperature hits 95 degrees. The amendments allow employers some alternatives to providing shade, including the use of portable misting fans.

The chamber, in a statement, called the amendments “a balanced approach to protecting the health and safety of outdoor workers while recognizing the realities of outdoor workplaces for employers.”

Staff reporter Howard Fine can be reached at [email protected] or at (323) 549-5225, ext. 227.