The city of Los Angeles has rolled out another amnesty program for businesses that haven’t paid their taxes, but this time the city is not expecting a tax revenue bonanza.

That’s because this is the third amnesty for L.A. businesses in 12 years and most owners that either didn’t know they owed taxes or dodged their tax liabilities have already taken advantage of the earlier opportunities to come clean.

So when the amnesty period closes on Dec. 2, city officials expect to take in about $5.5 million in back taxes, compared with more than $20 million in each of the two previous amnesties.

“It’s the law of diminishing returns,” said Lloyd Greif, chief executive of middle-market investment banking firm Greif & Co. in downtown Los Angeles. Greif also chairs the city’s Business Tax Advisory Committee, which earlier this year recommended phasing out the city’s gross receipts tax over 15 years.

“Once you’ve done this a couple times, you’ve probably got most of the businesses that didn’t realize they had to pay the gross receipts tax,” Greif said. “And once a business participates in an amnesty, the city knows who they are and makes sure they pay up in succeeding years.”

Nonetheless, local business leaders are welcoming the latest amnesty, saying any break for business owners is a good thing.

“This is a great opportunity for businesses that have had trouble determining their gross receipts tax,” said Gary Toebben, chief executive of the Los Angeles Area Chamber of Commerce. “It’s also a great opportunity for those who for any reason have gotten behind on their taxes.”

Most of the back taxes owed are from the city’s gross receipts tax. That’s a tax on top-line revenues, not profits. The rates vary according to industry classification. The lowest rate is $1.01 for every $1,000 of gross receipts, which is paid by wholesalers and internet-based businesses, among others. The highest rate is $5.07 for each $1,000 in gross receipts, paid by accounting, law and other professional service firms. New businesses with less than $500,000 in revenues are exempt for the first two years; most small businesses with less than $300,000 in sales are also exempt.

But the amnesty also applies to several other taxes businesses pay the city, such as taxes on telephone and utility services, hotel rooms and parking lot operations. Businesses that take advantage of the amnesty to pay their back taxes can have their penalties reduced by as much as 40 percent.

“The amnesty provides financially strapped businesses an opportunity to reduce their tax liability and generates much needed revenue for the city of Los Angeles to pay for essential services,” said Antoinette Christovale, the city’s finance director and treasurer.

Of course, businesses might ask how much of an amnesty it really is, since they must pay all their back taxes plus interest and penalties. The significant break is that the penalties are reduced. But for those with several years’ worth of unpaid taxes, the final bill can still be big. However, the city does offer a 12-month payment plan.

Greif said he hopes this will be the last time the city has to address gross receipts taxes in an amnesty. That’s because the proposal to eliminate the business tax entirely over a 15-year period is scheduled to come before the Los Angeles City Council later this fall. And Mayor Eric Garcetti has repeatedly called for the elimination of the gross receipts tax.

Tax exodus

Local business groups have long pushed for the city to eliminate the gross receipts tax. They say the tax on revenue is an unfair burden on businesses. In the annual Cost of Doing Business Survey published by Los Angeles economic development consultant Larry Kosmont, Los Angeles consistently ranks as the most expensive city to do business in, due mostly to the gross receipts tax. As a result, the groups say, businesses either leave or decide or open in neighboring cities with lower tax rates.

The proposal from the Business Tax Advisory Committee calls for a phased approach to eliminating the gross receipts tax. In the first five-year phase, businesses in the most heavily taxed categories and those in highly mobile industries – such as entertainment – would see their rates cut 50 percent. In the next five years, those businesses would see their rates cut another 50 percent, while all others would see reductions of 50 percent. After the final five years, the tax would disappear entirely.

“The way we’ve structured it, each year many business owners would pay less in gross receipts tax than the previous year until it’s down to zero,” Greif said.

The only catch: if in a particular year the city is unable to take in enough revenue from other sources to make up for the loss of gross receipts tax revenue, the rate reductions will be put on hold. So if the city endures another recession, it could take longer than 15 years to eliminate the tax.