Office of Finance report relative to the implementation of a business tax amnesty program for cannabis businesses. (Referred to the Government Operations and Budget and Finance Committees)

The Office of Finance has prepared a report for the City Council detailing a proposed business tax amnesty program specifically for cannabis businesses. This program aims to address significant outstanding tax liabilities, which currently total approximately $150 million for currently licensed businesses, after excluding out-of-statute liabilities and businesses no longer operating.

Program Details:

• Waiver of Penalties: All accrued penalties would be waived for businesses that pay their full tax liability, including interest.
• Installment Agreements: Businesses can enter into installment agreements for up to 12 months to resolve their outstanding tax debt. A down payment is required upon execution.
• Audits: Businesses applying for amnesty that have not been audited in the last two years will be audited. Any changes identified in the audit may affect the tax liability covered by the amnesty.
• Program Termination: Failure to make monthly installment payments or pay monthly business taxes will result in termination of the agreement and cancellation of the amnesty.

Potential Enhancements (Optional):

• Interest Waiver: Waiving accumulated interest in addition to penalties.
• Extended Installment Agreements: Allowing installment agreements for up to 36 months.

Financial Projections:

• The recommended program (12-month installments, no interest waiver) anticipates waiving approximately $20 million in penalties and generating $30 million in additional tax revenue over twelve months.
• With both enhancements (36-month installments and interest waiver), the anticipated additional revenue could be $10 million over twelve months.

Timing and Resources:

The Office of Finance recommends implementing the program in November/December 2025 to allow for earlier revenue generation, though this presents resource challenges. An alternative window is March/May 2026. The program requires an estimated $300,000 in additional funding for overtime and salaries to manage inquiries and processing.