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Council considers tax exemption for small businesses

(Published March 8, 1999)

By OSCAR ABEYTA

Staff Writer

Small businesses in the District may soon receive some much-anticipated tax relief if the city council acts quickly to enact proposed legislation.

A bill currently in the Committee on Finance and Revenue would exempt small businesses with annual gross receipts of $1 million or less from having to pay the cityís "personal property tax" imposed on the value of business equipment and supplies.

For the bill to have an immediate impact on small businesses, in time for the July 1 tax filing deadline, the legislation would have to become law by May 1, according to Stephen Kranz of the cityís Office of Tax and Revenue. If the council does not enact the bill by then, businesses would not be able to take advantage of the exemption until July 1, 2000.

The proposal has the support of many in the business community as well as the cityís chief financial officer. The councilís finance committee, chaired by Ward 2 Councilman Jack Evans, heard testimony in support of the legislation at a March 4 public hearing.

"Small businesses in the District are by no means small when to comes to their significance to the city," said Curtis Etherly of the Greater Washington Board of Trade, stressing the need to offer tax incentives to small businesses. "They are more than the little economic engines that could."

City finance officials estimated that the billís enactment would cost the District $17 million per year, although they admitted the cost to the District could be much higher because the method of estimating costs may have under-represented the impact of the bill.

Kranz said the chief financial officerís office based its estimates on information submitted by businesses that paid the recently imposed arena tax, but said that database may not fully represent the number of businesses that would qualify for the exemption.

Kranz told the committee that limiting eligibility for the tax exemption to businesses with annual gross receipts of less than $500,000 would lower the fiscal impact on the District government to about $13 million a year.

But Councilman Phil Mendelson, D-At large, told Kranz the goal is to increase the number of businesses eligible for the tax break, not to limit it.

Another bill currently under consideration by the finance committee would give tax credits to small businesses that take out certain types of business loans through the Small Business Administration.

Copyright 1999, The Common Denominator