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June 26, 2020

San Francisco Mayor and Board of Supervisors propose new round of revenue-raising business tax overhauls for November ballot

On June 15, 2020, San Francisco Mayor Breed announced a proposed ballot measure that would overhaul the city's business taxes and raise revenue to support the San Francisco (City) budget (hereafter, Mayor's proposal). Key features of the Mayor's proposal include:

  • An increase of the Gross Receipts Tax (GRT) rate
  • A "revenue-neutral" repeal of the payroll tax, effective 2021
  • An increased GRT exemption amount and reduced business registration fees for small businesses

Norman Yee, President of the City Board of Supervisors, responded to the Mayor's proposal with a competing proposal (hereafter, Board President Yee's proposal), described in greater detail below. While these proposals — and others — will continue to be discussed and debated, businesses should anticipate City GRT rate increases will be presented to City voters on the November 3, 2020 ballot.

If either proposal is approved, it would trigger an increase in the GRT rate to replace revenue from the repeal of the payroll tax. In addition, if two previously enacted taxes are invalidated due to pending litigation, then an additional increase in the GRT rate would occur to replace the revenue the City would have to refund to taxpayers.


In 2018, City voters approved, by a simple majority, a commercial rents tax to fund childcare and early education (see Tax Alert 2018-1423), and a special gross receipts tax to fund homelessness services (collectively, Proposition C taxes). The Proposition C taxes quickly became mired in litigation as opponents argued that the taxes required approval by a super majority of voters (i.e., two-thirds of voters) under California's Proposition 13. Although a 2019 San Francisco Superior Court decision rejected these challenges and upheld the Proposition C taxes, that ruling is now on appeal before the California Court of Appeals.

In the meantime, the revenue that was collected is being held by City. If the Proposition C taxes are found invalid, an increased GRT rate would be triggered under the proposals, allowing the City to access the funds being held to supply the refunds.

Mayor's proposal vs. Board of Supervisor's proposal

The Mayor's proposal and Board President Yee's proposal share many of the same provisions. Both proposals would offset a repeal of the payroll tax with a 40% increase in the GRT rate for most industries (although rate reductions would apply in some cases if certain economic conditions are met).

Some of the differences between the two proposals include the following:

  • The increase in the GRT rate due to the invalidation of Proposition C taxes would be effective for 15 years under the Mayor's proposal and 10 years under Board President Yee's proposal.
  • Board President Yee's proposal would permanently reduce the GRT rate by up to 50%, (net of the increased rates due to payroll tax repeal) on manufacturing, retail trade and certain services industries. The Mayor's proposal would reduce the GRT rate on a broader swath of industries, such as the food services, arts, entertainment and accommodation industries. The reduced rate, however, would only apply until City unemployment drops below 4% on an annual basis.
  • Board President Yee's proposal would permanently increase the GRT rate by up to 30% on certain industries (such as financial services, professional services, information, and real estate), effective in tax year 2021. Mayor Breed's plan would provide for a 5% phased-in increase for a narrower set of industries, first implemented when the City's unemployment drops below 7% on an annual basis, and yet again when it drops below 4%.

The City Controller estimates that the Mayor's proposal would raise $288 million for the General Fund in the two-year 2020—2021 budget and $35 million annually, on an ongoing basis.

Other proposals

Supervisor Matt Haney has reintroduced the Excess CEO Compensation tax (Tax Alert 2019-1160), and Supervisor Gordon Mar reintroduced his proposal to impose a City tax on initial public offerings (IPO) (Tax Alert 2019-0973), both previously removed from the November 2019 ballot. The Excess CEO Compensation tax could theoretically raise $60-$140 million annually, according to the City Controller's office, and the IPO tax could raise $30 million annually. Each measure will also be approved for the November 3, 2020 ballot if it meets all legal requirements; garners approximately 9,000 signatures; and is submitted to the City Department of Elections within 180 days of the City's receipt of the ballot title and summary, and 120 days before the November 3 election.


Businesses can provide comments to the City Controller on the Mayor's and Board President Yee's proposals until June 26, 2020, and the Controller's office has promised to provide written answers to any inquiries. Although all of these tax proposals are still preliminary and subject to change, they are obviously high on the agenda of City officials. If presented to the voters, these proposals could be approved for the November 2020 ballot separately or as part of a negotiated package. Given the wide variation in the structure and revenue-raising effect of the proposals, businesses should carefully monitor these and any other proposals as they approach the deadline for presenting measures for voter approval this November.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation Group
   • Allan Holzer (
   • Tyler Caldwell (
   • Charles Horn (
   • Asaf Kletter (