GREUEL HEADS NEW CITY PANEL GROUP WILL DRAFT PLAN TO REFORM BUSINESS TAX.

Byline: Harrison Sheppard Staff Writer

A City Council committee began delving Thursday into plans to reform Los Angeles' much-criticized business tax structure, promising to make substantive improvements soon rather than simply conduct another study of the system.

Councilwoman Wendy Greuel's ad hoc committee on business tax reform, meeting for the first time, asked officials to draft a plan to tighten the rules governing the account that pays for tax reform efforts and to examine whether more city staff is needed to work on tax collection.

The committee was formed recently after more than three years of study by a citizens advisory committee, whose recommendations have been stalled in council for several months. The council formed its own committee - actually a re-formation of a committee that had been disbanded three years ago - partly in the hope a council committee would have more authority and ability than one run by volunteer citizens without a staff.

``This is an action committee, not a study committee,'' said Greuel, who chairs the ad hoc panel.

Among the main issues the group plans to tackle are: reducing the number of business tax categories, down from 64; eliminating or reducing the gross receipts tax, which businesses claim is unfair; and addressing the pass-through issue, in which businesses are charged tax even if they are collecting revenue on behalf of another business, such as a subcontractor.

The committee asked the City Attorney's Office to draft an ordinance to revise the business tax reform fund, which is used to pay for studies and other related efforts. Officials are concerned that the requirements for spending in the fund are too loose, allowing, for example, city employees who work on tax reform to charge their time, overhead and administrative costs to the fund, rather than their own departmental budgets.

Business groups throughout the city are eager for changes to the tax structure, which they say is ultimately costing the city money because it is driving business out of Los Angeles.

Brendan Huffman, who represents the Los Angeles Area Chamber of Commerce and a coalition of other businesses citywide, said he is optimistic the new committee will take some real action.

``They're actually looking at key reforms to improving L.A.'s business climate,'' Huffman said. ``Things are happening.''

Businesses in the coalition including San Fernando Valley groups such as the United Chambers of Commerce, the Valley Industry & Commerce Association and the Economic Alliance.

Mayor James Hahn supports the business tax reforms proposed by the citizens committee but recently he said the city's budget crisis may slow down reform efforts.

Deputy Mayor Matt Middlebrook said that at the very least the city should have a finalized reform package in place and ready to be implemented once the economy picks up. Over the long-term, officials hope business tax reform can generate more revenue for the city by attracting business.

``When we do have money, we want to have agreed-upon recommendations ready to go,'' Middlebrook said. ``As opposed to where we are now, where we don't have specific recommendations on how best to do things like reform the gross receipts tax.''