On April 14, 2026, the Los Angeles City Council unanimously voted to send a certified citizen-initiated petition that seeks to repeal the city's gross receipts tax on businesses (hereafter, business tax) to the City Administrative Office (CAO) for an economic analysis.

The Los Angeles City Clerk certified the measure on March 23, 2026. Beginning on that date, the City Council had 20 days to do one of the following:

• Adopt the proposal, without alteration
• Submit it, without alteration, for voter approval at a special election, the next regular City election or the next Statewide election
• Refer it to a department or office for a fiscal/other impact report

Because the City Council referred the initiative to the CAO for an economic analysis, the City Council now has 30 days from the referral date to either adopt the proposal or submit it for voter approval.

If the City Council does not adopt the initiative, it would be put before voters either during a special election or during the November 3, 2026, statewide general election (the timeframe for submitting the measure to the next City election has already passed).

If approved by voters, the measure would eliminate the business tax on most businesses operating in the City of Los Angeles, effective January 1, 2028.

Implications

Supporters of the initiative argue that repeal would reduce barriers to doing business in Los Angeles, while opponents caution that the change could significantly impact City revenue, with estimated revenue impacts ranging between $700 - $800 million per year.

The initiative is expected to generate substantial public discussion as the City evaluates the long-term implications of restructuring its business tax system.

EY will continue to monitor this development and issue additional Tax Alerts as warranted.