City of San Francisco: New Homelessness Gross Receipts Tax Credits Adopted

Last year, San Francisco voters approved Proposition C, which imposes an additional gross receipts tax on persons, entities, or combined groups engaged in business in the City with over $50 million of gross annual receipts sourced to San Francisco. The additional gross receipts tax was dubbed the “Homelessness Gross Receipts Tax,” and revenues from the tax were earmarked to fund various services for the homeless.  Proposition C passed with just over 60 percent support, but there was some uncertainty over whether an initiative placed on the ballot by voters that raises “special taxes” needed a 2/3 majority vote to pass.  Litigation is currently pending over the issue in San Francisco Superior Court, and the funds generated by the Homelessness Gross Receipts Tax are currently being segregated and held in escrow pending the outcome of the litigation.

In the interim, an ordianance recently approved by the City Council and signed by Mayor London Breed that attempts to free up revenues, sooner rather than later, to begin funding homeless services. To accomplish this, the ordinance adopts a non-refundable tax credit that can be applied against the City Homelessness Gross Receipts Tax equal to ten percent of a person or a combined group’s tax liability for the year. To qualify for the credit, the person or combined group must enter into a binding agreement with the City whereby the person or the combined group waives its right to a refund of tax payments if the Homelessness Gross Receipts tax is later determined to be invalid because it required a 2/3 vote to pass, rather than a simple majority vote.  The tax credit is available for the 2019 tax year and the agreement must be entered into before the person or the group timely files its original annual tax return.

The ordinance also allows a person or a combined group to make an irrevocable gift to the Our City, Our Home Fund to be used to fund homeless services in return for a nonrefundable credit against the Homelessness Gross Receipts Tax equal to 110 percent of the gift amount. If the irrevocable gift is made between January 1 and the date the original annual return is timely filed, the credit is available for the tax year prior to the tax year in which the gift was made. Thus, the gift can be made and the credit can be obtained for the prior tax year, the return for which is yet to be filed. Please contact Joy Gray at 415-963-8613 or Chris Hoge at 415-963-8241 with questions.