Business Tax Based on Comparison of Top Executive's Pay to Employees' Pay

Shall the City place an additional tax permanently on some businesses in San Francisco when their highest-paid managerial employee earns more than 100 times the median compensation paid to their employees in San Francisco, where the additional tax rate would be between 0.1%–0.6% of gross receipts or between 0.4%–2.4% of payroll expense for those businesses in San Francisco, for an estimated revenue of between $60-140 million a year?

Digest by the Ballot Simplification Committee

The Way It Is Now: The City collects a tax on gross receipts (Gross Receipts Tax) from some businesses in San Francisco at a rate from 0.16% to 0.65% annually.

Businesses with more than $1 billion in gross receipts, 1,000 employees nationwide and administrative offices in San Francisco pay an administrative office tax (Administrative Office Tax) based on their payroll expense instead of their gross receipts. This tax rate is 1.4% of their payroll expense.

State law limits the amount of revenue, including tax revenue, the City can spend each year. State law authorizes San Francisco voters to approve increases to this limit to last for four years.

The Proposal: Proposition L would place an additional tax on some businesses in San Francisco when their highest-paid managerial employee (Top Executive Pay) earns more than 100 times the median compensation paid to their employees in San Francisco (Employee Pay).

• For a business that pays the Gross Receipts Tax, if its Top Executive Pay is more than 100 times Employee Pay, the business would pay an additional tax from 0.1% to 0.6% of its San Francisco gross receipts.

• For a business that pays the Administrative Office Tax, if its Top Executive Pay is more than 100 times Employee Pay, the business would pay an additional tax from 0.4% to 2.4% of its San Francisco payroll expense.

Proposition L would also increase the limit on the City’s annual tax revenue spending by the amount of additional taxes collected under the proposed tax. The increased limit would last for four years.

A "YES" Vote Means: If you vote "yes," you want to place an additional tax on some businesses in San Francisco when their highest-paid managerial employee earns more than 100 times the median compensation paid to their employees in the City.

A "NO" Vote Means: If you vote "no," you do not want to make this change.

Controller's Statement on "L"

City Controller Ben Rosenfield has issued the following statement on the fiscal impact of Proposition L:

Should the proposed ordinance be approved by the voters, in my opinion, it would result in additional annual revenue to the City in the range of $60 million to $140 million, although results in a given year could vary from this due to economic conditions and the volatility of the tax. The proposed tax is a general tax that would be deposited in the City’s General Fund.

The proposed ordinance would create an additional tax that would generally apply to all businesses engaged in any business in the City where the compensation of the business’s highest-paid managerial employee (“executive pay”) compared to the median compensation paid to the business’s employees based in the City exceeds a ratio of 100:1. For businesses other than an administrative office, the tax rates would be a percentage of gross receipts attributable to the City and, depending on the executive pay ratio, would range from 0.1% to 0.6%. For businesses engaged in business as an administrative office, the tax rates would be a percentage payroll expense attributable to the City and, depending on its executive pay ratio, would range from 0.4% to 2.4%. For context, current City gross receipts tax rates range from 0.075% to 0.650% depending on a business’s industry and size. The ordinance increases the City's appropriations limit by the amount collected for four years.

It is important to note this tax would be a highly volatile revenue source to the City. The narrow base of expected payers, annual fluctuations in the value and form of executive compensation, and potential relocation risk associated with tax increases contribute to high volatility of the proposed tax, and estimates based on prior years’ activity may not be predictive of future revenues.

How "L" Got on the Ballot

On July 28, 2020, the Board of Supervisors voted 11 to 0 to place Proposition L on the ballot. The Supervisors voted as follows:

Yes: Fewer, Haney, Mandelman, Mar, Peskin, Preston, Ronen, Safai, Stefani, Walton, Yee.

No: None.

This measure requires 50%+1 affirmative votes to pass.

The above statement is an impartial analysis of this measure. Some of the words used in the ballot digest are explained in Words you need to know >.

Proponent’s Argument in Favor of Proposition L

CITY LEADERS AGREE ON THE OVERPAID EXECUTIVE TAX

The Pandemic isn't over. Cities around the country are preparing for another spike in the curve by stocking up on medical equipment and hiring nurses, doctors, first responders, and other essential healthcare workers. San Francisco needs to be ready.

Prop L is expected to raise over $140 million every year which would allow the City to hire hundreds of nurses, doctors, and first responders.

The tax is simple. If the measure passes, any large corporation that pays their top executive 100 times more than their average worker will have a 0.1% surcharge added to their annual business tax payment. The more inequity between the top executive and their workers, the higher the surcharge.

Corporations can avoid the tax by simply paying their executives less or by raising their employees' wages.

We believe that big corporations that can afford to pay their executives million-dollar salaries every year can afford to pay their fair share in taxes to help us recover. Over the last 30 years, executive salaries in the United States have skyrocketed by 940%. But regular workers' salaries have grown by just 11%. Prop L incentivizes companies to invest in their workers, not just their executives.

Prop L is a consensus measure with broad base support. Please join us in voting for Prop L.

San Francisco Democratic Party

San Francisco Labor Council

Assemblymember Phil Ting

Assemblymember David Chiu

State Senator Scott Wiener

San Francisco Democratic Party Chair David Campos

Supervisor Matt Haney

Supervisor Hillary Ronen

Supervisor Shamann Walton

Supervisor Gordon Mar

Supervisor Dean Preston

Supervisor Aaron Peskin

Supervisor Ahsha Safai

Supervisor Norman Yee

Supervisor Sandy Fewer

Supervisor Rafael Mandelman

District Attorney Chesa Boudin

Public Defender Mano Raju

Board of Education President Mark Sanchez

City College Board of Trustees President Shanell Williams

Former State Senator Mark Leno

Former Assemblymember Tom Amianno

Arguments are the opinions of the authors and have not been checked for accuracy by any official agency. Arguments are published as submitted. Spelling and grammatical errors have not been corrected.

Rebuttal to Proponent’s Argument in Favor of Proposition L

With a constant parade of city hall leaders bearing ridiculous, detrimental legislation, Proposition L is one of the most disturbing ballot measures to be put to voters. It's an embarrassing farce, full of flaws and faulty logic, pushed by a destructive socialist agenda to expropriate hard-earned money during these dire economic times.

Let's be clear: This ballot measure is shockingly misleading. If it is approved by voters, nobody wins. This tax will not touch a CEO's pay. It will hurt businesses actually, leading to losses for our local workers already hurting during this pandemic.

City hall leaders are on a rampage to confiscate business executives' earnings, to punish, scapegoat and equalize income. The signers listed in support of this measure will be sorely disappointed with nowhere the payoff expected. Prop L will, however, further push out the city's businesses and retail shop locations. Forget attracting business to the city in the future!

Is there any precedent where a city government mandates the salary a company's executive management should make? The level of sheer audacity should scare every San Franciscan. This dictating to reduce a CEO's pay belongs in a totalitarian communist country, not America. You are not entitled to anyone's hard earned money.

Again, if this measure is approved, who wins? Nobody. Therefore, join me and a broad coalition of appalled San Franciscans across the political spectrum sounding the alarm in opposing this ludicrous tax and vote a resounding NO on Prop L. Visit www.VoteSF.org for more information.

Richie Greenberg

www.RichieGreenberg.org

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Opponent's Argument Against Proposition L

Simply put, it is abundantly clear the author of this misguided ballot measure has no education nor practical experience with regards to economics and statistics.

The damage to our city's business infrastructure is already being hit hard by the current pandemic, and this proposition would serve no meaningful purpose.

Employees' salaries are based on experience and on value to a company. By enacting such a bizarre hocus-pocus tax on executive salaries as Proposition L seeks to impose, the incentive for hiring new entry-level employees (or retraining current employees due to Covid-19 changes in business) would diminish. In other words, companies would reduce or stop hiring low-level employees as an answer to this measure, if it should pass. Moreover, such a tax would most likely prevent the attraction of new businesses to relocate to San Francisco, at such a time as we are seeing unprecedented economic downturn due to the pandemic.

Bear in mind, the sentiment of many of City Hall leaders is that the technology sector has created economic imbalances- yet these same leaders ignore the fact that state of the art advanced medical research facilities and the financial services sectors have a large impact and employee base in the city. An unhealthy obsession with social media and information technology, which city hall leaders suffer from, is blinding them to the reality behind the salary structures.

San Francisco is much more than simply social media tech. Join me in opposing this misguided and bizarre proposition, and send a message to city hall to support our businesses, not chase them them away. Vote NO on Prop L.

Richie Greenberg

www.RichieGreenberg.org

Arguments are the opinions of the authors and have not been checked for accuracy by any official agency. Arguments are published as submitted. Spelling and grammatical errors have not been corrected.

Rebuttal to Opponent’s Argument Against Proposition L

The San Francisco Democratic Party has done our research and we are officially voting yes on the Overpaid Executive Tax.

Prop L is a consensus measure that is widely supported by Democrats across the political spectrum. We know that during this time of crisis, large corporations need to pay their fair share to help us recover.

Prop L is projected to raise $140 million dollars every year, allowing the City to hire hundreds of nurses, doctors, first responders, and other essential healthcare workers.

The Overpaid Executive Tax only applies to large corporations that pay their executives 100 times more than their average worker. Businesses can avoid the tax by paying their executives less or by simply raising their employees' wages.

Republican Party leaders like Richie Greenberg want you to believe that any taxes on corporations are bad. They believe in a city where the richest people don't have to contribute back to society.

Don't believe the scare tactics of the Republican Party. San Francisco is one of the most desirable cities in the United States for companies to be located. A small .01% of their corporate taxes will have little to no impact on companies that can afford to pay their CEOs millions of dollars year.

The choice is clear. Join large corporations and the Republican Party who oppose Prop L.

Or join the San Francisco Democratic Party and hundreds of Democratic leaders and activists to vote YES on Prop L.

The San Francisco Democratic Party

Arguments are the opinions of the authors and have not been checked for accuracy by any official agency. Arguments are published as submitted. Spelling and grammatical errors have not been corrected.

Paid Arguments in Favor of Proposition L

Paid Argument IN FAVOR of Proposition L

THE SAN FRANCISCO DEMOCRATIC PARTY SUPPORTS PROP L

San Francisco economists are projecting that the pandemic will create a budget deficit of over two billion dollars. We need to make sure that our public hospitals are able to hire nurses, doctors, and first responders so our hospitals aren't overwhelmed by COVID.

We believe that corporations that can afford to pay their executives million-dollar salaries every year can afford to pay their fair share in taxes to help us recover. Over the last 30 years, executive salaries in the United States have skyrocketed by 940%. But regular workers' salaries have grown by just 11%.

This measure not only raises much-needed funds for our healthcare system, it also incentivizes companies to invest in their workers, not just their executives. Businesses can avoid the tax by paying their executives less or by simply raising their employees' wages.

JOIN YOUR FELLOW SF DEMOCRATS AND VOTE YES ON PROP L.

The San Francisco Democratic Party

The true source(s) of funds for the printing fee of this argument: San Francisco Labor Council.

The three largest contributors to the true source recipient committee: 1. SEIU 2015, 2. SEIU 1021, 3. IFPTE Local 21.

Paid Argument IN FAVOR of Proposition L

THE SAN FRANCISCO LABOR COUNCIL SUPPORTS PROP L!

The Labor Council represents tens of thousands of San Francisco workers including healthcare workers and emergency and frontline workers. It's our members who keep your families healthy and safe during medical emergencies.

The pandemic is far from over and San Francisco needs to be ready when the next wave hits. Unfortunately budget projections call for 250 million dollars in cuts to the Department of Public Health over the next two years. And that's after years of being under-staffed and under-funded.

Big corporations who can afford to pay their executives million-dollar salaries can afford to pay their fair share in taxes to help us recover.

If we're going to be prepared for a spike in the curve we'll need to pass Prop L to hire nurses, doctors, first responders, and other healthcare workers.

JOIN SAN FRANCISCO WORKERS AND VOTE YES ON PROP L.

The San Francisco Labor Council

The true source(s) of funds for the printing fee of this argument: Labor Council.

The three largest contributors to the true source recipient committee: 1. SEIU 2015, 2. SEIU 1021, 3. IFPTE Local 21.

Paid Argument IN FAVOR of Proposition L

HEALTHCARE WORKERS SUPPORTS PROP L!

This pandemic has given a renewed respect for the dedicated healthcare workers who fight everyday to limit the spread of COVID-19 and take care of those of us who have tested positive. We are not just nurses and doctors, but patient advocates, residents, and physical therapists.

Prop L - The Overpaid Executive Tax - is calculated to raise $140 million dollars every year, allowing the City to hire hundreds of nurses, doctors, first responders, and other essential healthcare workers. CEOs making millions of dollars a year can pay their fair share to help get us back on track.

JOIN HEALTHCARE WORKERS AND VOTE YES ON PROP L

Local 21

The true source(s) of funds for the printing fee of this argument: Local 21.

Paid Argument IN FAVOR of Proposition L

ESSENTIAL WORKERS SUPPORTS PROP L!

We are healthcare, food service, public transportation and grocery store workers who have been on the front line of the pandemic. We often are not provided the protective equipment to do our jobs safely.

San Francisco needs to help us be ready for when the next wave hits. Unfortunately budget projections call for 250 million dollars in cuts to the Department of Public Health over the next two years. And that's after years of being under-staffed and under-funded.

Big corporations who can afford to pay their executives million-dollar salaries can afford to pay their fair share in taxes to help us recover.

If we're going to support essential workers we'll need to pass Prop L to hire nurses, doctors, first responders, and other healthcare workers.

JOIN ESSENTIAL WORKERS AND VOTE YES ON PROP L.

Local 21

The true source(s) of funds for the printing fee of this argument: Local 21.

Paid Argument IN FAVOR of Proposition L

MENTAL HEALTHCARE WORKERS SUPPORT PROP L

As mental healthcare workers, we take care of our patients emotional and mental wellbeing. We are therapists, psychologists, and psychiatrists that care for people who seek out treatment.

The COVID 19 pandemic has caused understandable panic and stress in the majority of the population. San Francisco needs more mental healthcare workers, but the city is facing a budget deficit with significant cuts to the Department of Public Health.

Prop L will help fill in that gap by taxing businesses that pay their executives over 100 times that of their median employee salary. Big corporations that can afford to pay their executives million-dollar salaries can afford to pay their fair share in taxes so we can have a strong healthcare system.

MENTAL HEALTHCARE WORKERS URGE YOU TO VOTE YES ON L!

Local 21

The true source(s) of funds for the printing fee of this argument: Local 21.

Paid Argument IN FAVOR of Proposition L

SF GENERAL HOSPITAL WORKERS SUPPORT PROP L

We are the workers at San Francisco's largest public hospital. And we are proud to be there for San Francisco families when they need us most.

Unfortunately understaffing and budget cuts have made our job more difficult. Now with the city budget deficit of over $1.7 billion dollars, further cuts to staffing will make our jobs more dangerous and will decrease quality of care.

During the pandemic our workers have put their lives on the line to help San Francisco families. CEOs making millions of dollars a year can pay their fair share to help get us back on track.

JOIN THE WORKERS OF SAN FRANCISCO GENERAL HOSPITAL AND VOTE YES ON L

Local 21

The true source(s) of funds for the printing fee of this argument: Local 21.

Paid Argument IN FAVOR of Proposition L

LAGUNA HONDA HOSPITAL WORKERS SUPPORT PROP L

We are the workers at Laguna Honda hospital where we specialize in rehabilitation and care for people with Alzhimers and Dementia. Older individuals are more likely to need hospitalization when they get sick with COVID 19.

Unfortunately budget cuts have made our job more difficult. Now with the city budget deficit of over $1.7 billion dollars, further cuts to staffing will make our jobs more dangerous and will decrease quality of care.

Big corporations have made huge profits during this pandemic as have their top executives who make million-dollar salaries every year. They can afford to pay their fair share in taxes to help us recover.

To prepare for the next spike in the curve, we'll need to pass Prop L to hire nurses, doctors, and other healthcare workers.

JOIN THE WORKERS OF SAN FRANCISCO GENERAL HOSPITAL AND VOTE YES ON L

Local 21

The true source(s) of funds for the printing fee of this argument: Local 21.

Paid Argument IN FAVOR of Proposition L

NURSES SUPPORTS PROP L!

As nurses, we've been on the forefront of the COVID-19 pandemic for almost a year working to keep everyone safe and suppress this virus.

If we're going to be prepared for a spike in the curve, we'll need to pass Prop L to hire nurses, doctors, first responders, and other healthcare workers.

JOIN NURSES AND VOTE YES ON PROP L

SEIU Local 1021

The true source(s) of funds for the printing fee of this argument: San Francisco Labor Council.

The three largest contributors to the true source recipient committee: 1. SEIU 2015, 2. SEIU 1021, 3. IFPTE Local 21.

Paid Argument IN FAVOR of Proposition L

SOCIAL WORKERS SUPPORT PROP L

As social workers, we help working class families, foster kids, healthcare workers and crisis care workers. We see just how hard this pandemic has been for working class people during the economic recession.

While everyday people are struggling to make rent and pay bills, CEOs and other top executives have been making millions of dollars during the pandemic. Income inequality has grown even greater as the wealthiest members of society take more and more of the profits for themselves.

Prop L - The Overpaid Executive Tax - will ensure that CEOs making millions of dollars a year pay their fair share back to our communities. With the revenue from this tax, the City will hire hundreds of nurses, doctors, first responders, and other essential healthcare workers to help the working people of San Francisco.

JOIN SOCIAL WORKERS AND VOTE YES ON L

SEIU Local 1021

The true source(s) of funds for the printing fee of this argument: San Francisco Labor Council.

The three largest contributors to the true source recipient committee: 1. SEIU 2015, 2. SEIU 1021, 3. IFPTE Local 21.

Paid Argument IN FAVOR of Proposition L

ER WORKERS SUPPORT PROP L

Emergency Rooms are often the place people turn to when they have no insurance or can't wait to see their regular doctor. We are the workers that take care of you and your loved ones in their most desperate time of need.

The COVID 19 pandemic puts even more stress on our healthcare system. Emergency Rooms have been overflowing with COVID 19 cases without the necessary funding we need to keep up.

Prop L is calculated to raise 140 million dollars every year which will allow the city to hire more healthcare workers and purchase medical equipment to prepare for another spike in the curve. Big corporations that can afford to pay their executives million-dollar salaries can afford to pay their fair share in taxes so we can have a strong healthcare system.

JOIN SAN FRANCISCO ER WORKERS AND VOTE YES ON L

SEIU Local 1021

The true source(s) of funds for the printing fee of this argument: San Francisco Labor Council.

The three largest contributors to the true source recipient committee: 1. SEIU 2015, 2. SEIU 1021, 3. IFPTE Local 21.

Paid Argument IN FAVOR of Proposition L

911 DISPATCHERS SUPPORT PROP L

911 dispatchers are often the first line of defense during times of crisis. We're there for your families when you need us the most and we're dedicated to making sure that you have someone on the phone with you as help arrives.

Our entire healthcare system is being put under extreme stress by the COVID 19 pandemic which has no end in sight. We need to be prepared for a spike in the curve, and that means having the funding to hire the frontline, essential workers our medical system needs.

Prop L only applies to corporations that pay their CEOs 100 times more than their average workers. Big corporations that can afford to pay their executives million-dollar salaries can afford to pay their fair share in taxes so we can have a strong healthcare system.

JOIN SAN FRANCISCO 911 DISPATCHERS AND VOTE YES ON L

SEIU Local 1021

The true source(s) of funds for the printing fee of this argument: San Francisco Labor Council.

The three largest contributors to the true source recipient committee: 1. SEIU 2015, 2. SEIU 1021, 3. IFPTE Local 21.

Paid Argument IN FAVOR of Proposition L

CRISIS CARE WORKERS SUPPORT PROP L

As crisis care workers, we are on the frontlines of de-escalating dangerous and violent situations in emergency rooms, shelters and our streets. We know how to stay grounded and compassionate during high levels of stress.

The pandemic has increased the need for more crisis care workers, but the city is facing a budget deficit which will hurt working people even more during this crisis.

But one group of people have financially benefited during this pandemic - executives at large corporations. By passing Prop L overpaid executives will pay their fair share which will allow the City to hire hundreds of nurses, doctors, first responders, and other essential healthcare workers.

San Francisco needs to prepare for the next wave of COVID 19 cases. We must pass Prop L.

CRISIS CARE WORKERS URGE YOU TO VOTE YES ON L!

SEIU Local 1021

The true source(s) of funds for the printing fee of this argument: San Francisco Labor Council.

The three largest contributors to the true source recipient committee: 1. SEIU 2015, 2. SEIU 1021, 3. IFPTE Local 21.

End of Paid Arguments IN FAVOR of Proposition L

Arguments are the opinions of the authors and have not been checked for accuracy by any official agency. Arguments are published as submitted. Spelling and grammatical errors have not been corrected.

Paid Arguments Against Proposition L

Paid Argument AGAINST Proposition L

VOTE NO ON PROPOSITION L - It's Low

The heavily Socialist Board of Supervisors is determined to drive business from San Francisco.

Rather than tightening their belt on a $13-BILLION dollar city budget, they're on the hunt for fake revenue. Now, they've set their sights on directors of companies in a cynical attempt to round up revenue rather than exercise fiscal discipline.

Why not tax sport stars at the SF Giants, Golden State Warriors and others that earn large salaries? No, because this Board of Supervisors loves to brush up against celebrities and sports stars as one of their perks of power!

It's simple - the market sets the income for salaries, by and large by performance or what others are prepared to pay for services. Executive pay levels are set by boards, and salaries reflect the fact that those jobs require competent, qualified people with narrow expertise.

Why punish them?

This is blatant attempt at redistribution of wealth, certain to drive the last business-minded men and women from our City.

The Controller's statement outlines clearly the unreliability and high volatility of the proposed CEO tax. Prop L won't solve San Francisco's looming budget crisis; it's a false, mistaken tactic for new revenue.

Vote NO ON L. It's a bonafide LOSER!

San Francisco Taxpayers Association

Judge Quentin L. Kopp (Ret.)

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Legal Text

Ordinance amending the Business and Tax Regulations Code 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’s highest-paid managerial employee to the median compensation paid to the business’s employees based in the City; and increasing the City’s appropriations limit by the amount collected under the additional tax for four years from November 3, 2020.

NOTE: Unchanged Code text and uncodified text are in plain font.

Additions to Codes are in single-underline italics Times New Roman font.

Deletions to Codes are in strikethrough italics Times New Roman font.

Asterisks (* * * *) indicate the omission of unchanged Code subsections or parts of tables.

Be it ordained by the People of the City and County of San Francisco:

Section 1. Pursuant to Article XIII C of the Constitution of the State of California, this ordinance shall be submitted to the qualified electors of the City and County of San Francisco at the November 3, 2020, consolidated general election.

Section 2. The Business and Tax Regulations Code is hereby amended by adding Article 33, consisting of Sections 3301 through 3313, to read as follows:

ARTICLE 33: OVERPAID EXECUTIVE GROSS RECEIPTS TAX

SEC. 3301. SHORT TITLE.

This Article 33 shall be known as the “Overpaid Executive Gross Receipts Tax Ordinance,” and the tax it imposes shall be known as the “Overpaid Executive Gross Receipts Tax.”

SEC. 3302. DEFINITIONS.

Unless otherwise defined in this Article 33, the terms used in this Article shall have the meanings given to them in Articles 6, 12-A, and 12-A-1 of the Business and Tax Regulations Code, as amended from time to time. For purposes of this Article, the following definitions apply.

“Compensation” means wages, salaries, commissions, bonuses, property issued or transferred in exchange for the performance of services (including but not limited to stock options), compensation for services to owners of pass-through entities, and any other form of remuneration paid to employees for services.

“Executive Pay Ratio” means the ratio of the annual Compensation paid to the person or combined group’s Highest-Paid Managerial Employee for a tax year to the median Compensation paid to the person or combined group’s full-time and part-time employees based in the City for that tax year, determined on a full-time equivalency and annualized basis. For purposes of this definition:

(a) An employee is “based in the City for [a] tax year” if the employee’s total working hours in the City for the person or combined group during the tax year exceeds the employee’s total working hours in any other local jurisdiction for the person or combined group during the tax year.

(b) Compensation paid to a part-time employee for the tax year shall be converted to a “full-time equivalency” by multiplying the part-time employee’s Compensation for the tax year by 40, and dividing the result by the average number of hours the part-time employee worked per week during the tax year for the person or combined group.

(c) Compensation paid to an employee who was employed by the person or combined group for only a portion of the tax year shall be “annualized” by multiplying the employee’s Compensation (or, as stated, for a part-time employee, full-time equivalent Compensation) for the tax year by 52, and dividing the result by the number of weeks that the employee was employed by that person or combined group during the tax year.

“Highest-Paid Managerial Employee” means the individual employee or officer of a person or combined group with managerial responsibility in a business function who received the most Compensation for a tax year.

SEC. 3303. IMPOSITION OF TAX.

(a) Except as otherwise provided in this Article 33, commencing with tax years beginning on or after January 1, 2022, for the privilege of engaging in business in the City, the City imposes an annual Overpaid Executive Gross Receipts Tax on each person engaging in business within the City where the Executive Pay Ratio for the tax year of that person or the combined group of which it is a part exceeds 100:1.

(b) The Overpaid Executive Gross Receipts Tax shall be calculated as follows:

(1) 0.1% of the person or combined group’s taxable gross receipts for a tax year if the person or combined group has an Executive Pay Ratio for that tax year of greater than 100:1, but less than or equal to 200:1;

(2) 0.2% of the person or combined group’s taxable gross receipts for a tax year if the person or combined group has an Executive Pay Ratio for that tax year of greater than 200:1, but less than or equal to 300:1;

(3) 0.3% of the person or combined group’s taxable gross receipts for a tax year if the person or combined group has an Executive Pay Ratio for that tax year of greater than 300:1, but less than or equal to 400:1;

(4) 0.4% of the person or combined group’s taxable gross receipts for a tax year if the person or combined group has an Executive Pay Ratio for that tax year of greater than 400:1, but less than or equal to 500:1;

(5) 0.5% of the person or combined group’s taxable gross receipts for a tax year if the person or combined group has an Executive Pay Ratio for that tax year of greater than 500:1, but less than or equal to 600:1; or

(6) 0.6% of the person or combined group’s taxable gross receipts for a tax year if the person or combined group has an Executive Pay Ratio for that tax year of greater than 600:1.

(c) For purposes of this Section 3303, “taxable gross receipts” means a person or combined group’s gross receipts, not excluded under Section 3304, attributable to the City. The person or combined group’s gross receipts that are attributable to the City shall be determined in the same manner as in Article 12-A-1, as amended from time to time.

(d) Notwithstanding any other subsection of this Section 3303, every person engaging in business within the City as an administrative office, as defined in Section 953.8 of Article 12-A-1, shall pay an annual overpaid executive administrative office tax if the Executive Pay Ratio for the tax year of that person or the combined group of which it is a part exceeds 100:1. This overpaid executive administrative office tax shall be measured by the person’s total payroll expense, as defined in Section 953.8(f) of Article 12-A-1, that is attributable to the City. If a person is a member of a combined group, then its tax shall be measured by the total payroll expense of the combined group attributable to the City. Such person or combined group shall pay only the overpaid executive administrative office tax, and not the tax imposed under other subsections of this Section 3303, but a person or combined group may be liable for the administrative office tax imposed by Section 953.8 of Article 12-A-1 and the homelessness administrative office tax imposed by Section 2804(d) of Article 28 in addition to the overpaid executive administrative office tax imposed by this subsection (d). Unless specified otherwise, this overpaid executive administrative office tax shall be considered part of the Overpaid Executive Gross Receipts Tax for all purposes. The overpaid executive administrative office tax shall be calculated as follows:

(1) 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, but less than or equal to 200:1;

(2) 0.8% 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 200:1, but less than or equal to 300:1;

(3) 1.2% 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 300:1, but less than or equal to 400:1;

(4) 1.6% 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 400:1, but less than or equal to 500:1;

(5) 2% 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 500:1, but less than or equal to 600:1; or

(6) 2.4% 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 600:1.

SEC. 3304. EXEMPTIONS AND EXCLUSIONS.

(a) An organization that is exempt from income taxation by Chapter 4 (commencing with Section 23701) of Part 11 of Division 2 of the California Revenue and Taxation Code or Subchapter F (commencing with Section 501) of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, as qualified by Sections 502, 503, 504, and 508 of the Internal Revenue Code of 1986, as amended, shall be exempt from taxation under this Article 33, only so long as those exemptions continue to exist under state or federal law.

(b) For only so long as and to the extent that the City is prohibited from imposing the Overpaid Executive Gross Receipts Tax, any person upon whom the City is prohibited under the Constitution or laws of the State of California or the Constitution or laws of the United States from imposing the Overpaid Executive Gross Receipts Tax shall be exempt from the Overpaid Executive Gross Receipts Tax.

(c) For purposes of this Article 33, gross receipts shall not include receipts that are excluded from gross receipts for purposes of the gross receipts tax imposed by Article 12-A-1.

(d) A person or combined group exempt from the gross receipts tax as a small business enterprise under Section 954.1 of Article 12-A-1 shall also be exempt from taxation under this Article 33. But the exemption in this subsection (d) of Section 3304 shall not apply to persons subject to the overpaid executive administrative office tax in subsection (d) of Section 3303.

SEC. 3305. COMBINED RETURNS.

(a) Persons subject to the Overpaid Executive Gross Receipts Tax shall file returns at the same time and in the same manner as returns filed for the gross receipts tax imposed by Article 12-A-1, including the rules for combined returns under Section 956.3, as amended from time to time.

(b) If a person is subject to the Overpaid Executive Gross Receipts Tax, but is not required to file a gross receipts tax return under Article 12-A-1, such person or combined group’s Overpaid Executive Gross Receipts Tax return shall be filed at the same time and in the same manner as if such person or combined group were required to file a gross receipts tax return under Article 12-A-1.

(c) For purposes of this Article 33, a lessor of residential real estate is treated as a separate person with respect to each individual building in which it leases residential real estate units, notwithstanding Section 6.2-15 of Article 6, as amended from time to time, or subsection (a) of this Section 3305. This subsection (c) applies only to leasing residential real estate units within a building, and not to any business activity related to other space, either within the same building or other buildings, which is not residential real estate. The Tax Collector is authorized to determine what constitutes a separate building and the number of units in a building.

SEC. 3306. TAX COLLECTOR AUTHORIZED TO DETERMINE GROSS RECEIPTS.

The Tax Collector may, in the Tax Collector’s reasonable discretion, independently establish a person or combined group’s gross receipts within the City and establish or reallocate gross receipts among related entities so as to fairly reflect the gross receipts within the City of all persons and combined groups.

SEC. 3307. CONSTRUCTION AND SCOPE OF THE OVERPAID EXECUTIVE GROSS RECEIPTS TAX ORDINANCE.

(a) This Article 33 is intended to authorize application of the Overpaid Executive Gross Receipts Tax in the broadest manner consistent with its provisions and with the California Constitution, the United States Constitution, and any other applicable provision of federal or state law.

(b) The Overpaid Executive Gross Receipts Tax imposed by this Article 33 is in addition to all other City taxes, including the gross receipts tax imposed by Article 12-A-1, as amended from time to time. Accordingly, by way of example and not limitation, persons subject to both the Overpaid Executive Gross Receipts Tax and the gross receipts tax shall pay both taxes. Persons exempt from either the gross receipts tax or the Overpaid Executive Gross Receipts Tax, but not both, shall pay the tax from which they are not exempt.

SEC. 3308. ADMINISTRATION OF THE OVERPAID EXECUTIVE GROSS RECEIPTS TAX ORDINANCE.

Except as otherwise provided under this Article 33, the Overpaid Executive Gross Receipts Tax Ordinance shall be administered pursuant to Article 6 of the Business and Tax Regulations Code, as amended from time to time, including all penalties and other charges imposed by that Article.

SEC. 3309. DEPOSIT OF PROCEEDS; EXPENDITURE OF PROCEEDS.

The Overpaid Executive Gross Receipts Tax is a general tax. Proceeds from the tax shall be deposited in the City’s general fund and may be expended for any City purposes.

SEC. 3310. AMENDMENT OF ORDINANCE.

The Board of Supervisors may amend or repeal this Article 33 by ordinance without a vote of the people except as limited by Article XIII C of the California Constitution.

SEC. 3311. EFFECT OF STATE AND FEDERAL AUTHORIZATION.

To the extent that the City’s authorization to impose or to collect any tax imposed under this Article 33 is expanded or limited as a result of changes in state or federal statutes, regulations, or other laws, or judicial interpretations of those laws, no amendment or modification of this Article shall be required to conform the taxes to those changes, and the taxes are hereby imposed in conformity with those changes, and the Tax Collector shall collect them to the full extent of the City’s authorization up to the full amount and rate of the taxes imposed under this Article.

SEC. 3312. SEVERABILITY.

(a) Except as provided in subsection (b), if any section, subsection, sentence, clause, phrase, or word of this Article 33, or any application thereof to any person or circumstance, is held to be invalid or unconstitutional by a decision of a court of competent jurisdiction, such decision shall not affect the validity of the remaining portions or applications of this Article. The People of the City and County of San Francisco hereby declare that, except as provided in subsection (b), they would have adopted this Article and each and every section, subsection, sentence, clause, phrase, and word not declared invalid or unconstitutional without regard to whether any other portion of this Article or application thereof would be subsequently declared invalid or unconstitutional.

(b) If the imposition of the Overpaid Executive Gross Receipts Tax in Section 3303 is held in its entirety to be facially invalid or unconstitutional in a final court determination, the remainder of this Article 33 shall be void and of no force and effect, and the City Attorney shall cause it to be removed from the Business and Tax Regulations Code.

SEC. 3313. SAVINGS CLAUSE.

No section, clause, part, or provision of this Article 33 shall be construed as requiring the payment of any tax that would be in violation of the Constitution or laws of the United States or of the Constitution or laws of the State of California.

Section 3. Appropriations Limit Increase. Pursuant to California Constitution Article XIII B and applicable laws, for four years from November 3, 2020, the appropriations limit for the City shall be increased by the aggregate sum collected by the levy of the tax imposed under this ordinance.

Section 4. Effective and Operative Dates.

(a) The effective date of this ordinance shall be ten days after the date the official vote count is declared by the Board of Supervisors.

(b) This ordinance shall become operative on January 1, 2022.