L.A. votes multimedia tax break

The city of Los Angeles slashed its business tax on multimedia companies by 80% on Tuesday, a move to gain a greater share of the burgeoning new media business in the region.

The tax cut would be an immediate benefit to as many as 700 companies in the city of Los Angeles, according to city officials. The City Council voted to cut the tax in a 12-0 vote, and the ordinance was later signed by Mayor Richard Riordan.

The move reduces the tax rate from $5.91 per thousand dollars gross receipts to $1.18 per thousand dollars. In changing the rate, the city is moving multimedia businesses from an all-encompassing “professions and occupations” category to a classification of its own.

Before the change, the city’s tax rate had been higher than surrounding cities such as Beverly Hills and Santa Monica, although the new rate is still more than Glendale, Calabasas and Westlake Village, which have no business taxes on multimedia firms.

“Our new rate puts us out in the middle of the pack,” said Steve MacDonald, director of the mayor’s L.A. Business Team. “What this is trying to do is say, ‘We just want to be able to compete on a regional basis.’ ”

The tax reduction was conceived more than a year ago as the city was coming up with an incentive package to lure DreamWorks to Playa Vista. The reduction, however, applies to all multimedia businesses within the city’s borders. The tax reduction was introduced by Councilwoman Ruth Galanter.

Among the companies said to be considering moving back into the city limits is Vortex Media Arts, a producer of computer animation. They were said to have moved out of L.A. for Burbank because of the tax rate. Other businesses that could take advantage of the new rate include multimedia developer Cobalt Moon, which already is planning to move from Santa Monica to L.A., and Digital Domain, which is in need of bigger space than its Venice headquarters affords.

“This is a good message for L.A. that will make us competitive,” Riordan said.

The tax cut generally covers companies that produce audio and visual projects using two or more media, such as computer-generated graphics and video. The reduction is retroactive to Jan. 1, 1997.

City officials believe that the new tax rate will mean a reduction of about $560,000 out of $270 million in annual tax receipts.

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