Good evening sf.citi member companies,
I hope you are well this evening.
As promised, I want to provide you with an update on what transpired at this afternoon’s Board of Supervisors meeting as four new tax measures were introduced – the IPO Tax, GRT Tax, CEO Tax, and Commercial Real Estate Tax. Additionally, Supervisor Mar introduced a permanent version of his Public Health Emergency Leave Ordinance. Please find additional details on all five items below, as well as the legislative timeline for ballot measures.
Stock-Based Compensation Tax (also referred to as IPO Tax)
Supervisor Mar introduced a Stock-Based Compensation Tax (also referred to as the IPO Tax) for the November ballot via Supervisorial signature. This tax is projected to raise $50M-$100M per year. The tax on stock-based compensation shall be calculated by multiplying the person’s Stock-Based compensation payroll expense during the tax year by 1.12 percent. Please note, according to the legislation, Stock-Based Compensation is defined as any compensation in the form of, or dependent on the value of, stock interested in a public company, including but not limited to stock, stock options, restricted stock, restricted stock units, stock acquired as a result of employee stock purchase plans, stock appreciation rights, and phantom stock. Stock-Based Compensation Payroll Expense is defined as payroll expense that is attributable to stock-based compensation. This measure is intended to be retroactive to January 1, 2020, and will be a general tax, meaning it only requires 50 percent + 1 vote in order to pass. Co-sponsors of this measure include Supervisors Ronen, Preston, and Peskin.
GRT Tax Measure – Board of Supervisors’ Proposal
President Yee introduced a GRT tax measure that would provide immediate support to close the current budget deficit by unlocking $300M of Prop C (Big C and Baby C) funds. Additionally, this measure would eliminate the payroll tax and replace it with a more equitable gross receipts tax. It is anticipated to generate $181M in ongoing revenue. Please note that President Yee articulated the need for labor, nonprofit providers, and the business community to come together to be part of the conversation. Co-sponsors of this measure include Supervisors Haney and Fewer. Supervisor Mar has introduced an identical measure at the SF Department of Elections.
Please note: Mayor Breed has also introduced a GRT measure intended for the November 2020 ballot. As the Mayor previously stated, the goal is to have one final ballot measure that addresses GRT issues and encompasses the goals of both the Mayor and the Board of Supervisors. Please find more information on that proposal in the sf.citi memo titled, “Back to Work Ordinance + Today’s BOS”. I have also attached the Mayor’s proposal below.
Overpaid Executive Tax (also referred to as CEO Tax)
Introduced by Supervisors Haney, Ronen, Walton and Mar, this measure intends to impose an additional gross receipts tax or an administrative office tax on businesses with a greater than 100:1 ratio of the compensation of the business’ highest-paid employee to the median compensation paid to the business’ employees based in San Francisco. As also detailed in the memo titled “Overpaid Executive Tax and GRT Update”, for the gross receipts tax portion of this measure, the ratio begins at a 0.1% rate if the person or combined group has an Executive Pay Ratio for that tax year of greater than 100:1. The administrative office tax portion of this measure will be measured by the person’s total payroll expense, and the ratio begins at 0.4% of the person or combined group’s total payroll expense attributable to the City for a tax year if the person or combined group has an Executive Pay Ratio for that tax year of greater than 100:1.
Commercial Real Estate Transfer Tax
Supervisor Preston introduced a tax measure that would double the tax on commercial property real estate sales for properties over $10M. This proposal would generate between $100-$150M per year and would authorize the City to acquire, develop, or construct 10,000 units of permanent supportive housing. Currently, cities are prohibited from creating affordable housing prior to voter approval because of the California Constitutional Amendment Article 34. Additionally, this would enable the creation of thousands of units of municipal housing, which would be accompanied by the transfer tax.
Public Health Emergency Leave – Emergency Ordinance
Lastly, Supervisor Mar introduced a permanent version of his Public Health Emergency leave ordinance and exempted large nonprofit social enterprises such as the SF YMCA and Goodwill of San Francisco, San Mateo, and Marin County.
Legislative Timeline – Ballot Measures
Mayor or Four or more Supervisors Proposed Initiatives
- June 16, 2020 – Last date for four (or more) individual Supervisors, or Mayor, to submit proposed initiative measures to the Department of Elections and the Clerk of the Board’s Office.
- July 13, 2020 – Last Regular Rules Committee meeting to have a hearing on a proposed initiative measure submitted by four (or more) Supervisors or the Mayor.
- July 16, 2020 – Last day for a Special Rules Committee meeting to hold a hearing on proposed initiative measures submitted by four (or more) Supervisors or the Mayor.
- July 20, 2020 – Suggested date for the Clerk of the Board to transmit to the Department of Elections the notification that public hearings have been held by the Board of Supervisors on the proposed initiative measures.
Important Deadlines for Board Proposed Initiatives
- July 20, 2020 – Last Regular Rules Committee meeting to recommend the proposed ordinance or declaration of policy to the Board for consideration on July 28, 2020.
- July 28, 2020 – Last regular Board meeting where the Board may adopt ordinances(s) or declaration(s) of policy to be submitted to the electorate.
- July 31, 2020 – Last date to submit to the Director of Elections any ordinance(s) or declaration(s) of policy the Board has voted to submit to the electorate.
Understanding things are moving quickly, we will continue to keep you updated on all of these proposed measures and will be sure to provide you with language as we receive it. We will also be meeting with City Controller Ben Rosenfield this Friday in an industry meeting to discuss the GRT Proposals.
Please let me know if you have any questions and thank you for your continued membership.
Jen
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