Findings. | |
Short Title. | |
Definitions. | |
Imposition of Tax. | |
Exemptions and Exclusions. | |
Small Business Exemption. | |
Filing; Combined Returns. | |
Tax Collector Authorized to Determine Gross Receipts. | |
Construction and Scope of the Early Care and Education Commercial Rents Tax Ordinance. | |
Administration of the Early Care and Education Commercial Rents Tax Ordinance. | |
Deposit of Proceeds. | |
Expenditure of Proceeds. | |
Amendment of Ordinance. | |
Effect of State and Federal Authorization. | |
Severability. | |
Savings Clause. | |
(a) For more than a decade, San Francisco has been a national leader in early care and education (ECE) with the introduction of the Preschool For All program in 2004. This revolutionary program expanded access, defined and measured quality programs, and supported educators to deliver high-quality early education. Ninety-two percent of San Francisco children attend preschool or transitional kindergarten before attending public kindergarten.
(b) Preschool enrollment of three- to five-year-olds in San Francisco rose from 57% in 2005 to 71% in 2013. Citywide school readiness assessments in 2007 and 2009 charted a similar increase, from 72% of four-year-olds in 2007 to 83% in 2009. These accomplishments are due to the targeted and committed investments of the State and the City and the work of First 5 San Francisco and the Office of Early Care and Education.
(c) However, the City cannot claim the same success when it comes to infants and toddlers under the age of four. Despite medical professionals, child development specialists, and scientific researchers uniformly agreeing that the most critical time in brain development is from birth to age three, and that the brain is 90% developed before a child reaches age five, San Francisco has more than 2,400 children on the waitlist for subsidized ECE, and more than 1,600 of these children are under the age of three. When two-thirds of the children on the waitlist, and in these large numbers, are infants and toddlers, the critical and urgent need for targeted investment in infants and toddlers, akin to the level of City support prioritized for our four-year-olds, becomes dramatically evident.
(d) Three out of four families in San Francisco with children under the age of six have both parents working outside the home, making childcare a necessity, not a luxury. But, as of 2017, infant and toddler early education and childcare can cost a staggering $20,000 a year in San Francisco; in comparison, tuition at UC Berkeley costs $13,600 a year. The heavy toll that childcare costs can take on families is undeniable. In a 2016 poll conducted by the Robert Wood Johnson Foundation, Harvard’s T.H. Chan School of Public Health, and National Public Radio, 71% of the over 1,100 parents polled stated that the cost of childcare is a serious problem for their families.
(e) Without affordable and accessible childcare, one significant consequence is the loss of women from the workforce, a serious problem not just for those women, but for society at large. One stark consequence of losing women in our workforce is the difficulties they face when attempting to return to work in the technology sector after having children. Recent research indicates that such women are 79% less likely to be hired and half as likely to be promoted as other employees, and are offered an average of $11,000 less in salary upon trying to re-enter the technology workforce later in life.
(f) Further, as female employees leave the workforce, the lack of gender diversity in fields like technology and venture capital continues apace. A study conducted by the Deloitte University Leadership Center for Inclusion and the National Venture Capital Association, of 2,500 employees at 217 venture capital firms nationwide, found that lack of family assistance and childcare may be hindering women’s success in venture capital. The same study found that gender diversity in leadership results in greater returns, innovation, and success. Fortune 500 firms that aggressively promote women realize 34% higher profits than those that do not.
(g) Our San Francisco families want and need quality ECE for their children, and society as a whole benefits when we invest in them and their families. Rigorous long-term studies have found a return on investment averaging seven dollars for every dollar spent on quality early learning programs. In addition, children in these studies who have been followed into adulthood have benefitted from increased earnings.
(h) The most effective guarantee of quality ECE is workforce compensation. A 2014 UC Berkeley study showed that educator wages are one of the most important predictors of the quality of education children receive. But today, one third of full-time teaching staff in ECE programs use some form of public assistance to make ends meet. In San Francisco, 92% of our early childcare and education workforce are women; 83% are estimated to be women of color.
(i) Children who come to kindergarten without the skills they need often stay behind and struggle in school. Early childhood care and education programs give children a chance to learn, become excited about school, and be better students over their lifetimes. Investing in ECE helps ensure we have highly-trained and skilled educators, gives our babies and children the best possibility to succeed, while providing essential support for struggling working families.
(Added by Proposition C, 6/5/2018, Eff. 7/20/2018, Oper. 1/1/2019)
This Article 21 shall be known as the “Early Care and Education Commercial Rents Tax Ordinance,” and the tax it imposes shall be known as the “Early Care and Education Commercial Rents Tax.”
(Added by Proposition C, 6/5/2018, Eff. 7/20/2018, Oper. 1/1/2019)
(a) Unless otherwise defined in this Article 21, the terms used in this Article shall have the meanings given to them in Articles 6 and 12-A-1 of the Business and Tax Regulations Code, as amended from time to time. All references to Sections of the Planning Code are to the text of those Sections as of June 5, 2018.
(b) For purposes of this Article 21, the following definitions shall apply:
“Area Median Income” or “AMI” means Area Median Income for the San Francisco area, derived from the U.S. Department of Housing and Urban Development, adjusted solely for household size, as described in Administrative Code Section 10.100-81(c).
“Base Amount” means the Controller’s calculation of the amount of City appropriations (not including appropriations from the Fund and exclusive of expenditures funded by private funding, development impact fees, or prior period balances, or funded or mandated by state or federal law) for Baseline Programs for the Baseline Year, as adjusted in the manner provided in subsections (g) and (h) of Section 2112.
“Baseline Programs” means all programs serving children of all ages under six that are allocated funding through OECE.
“Baseline Year” means the Fiscal Year July 1, 2017 through June 30, 2018.
“Commercial Space” means any building or structure, or portion of a building or structure, that is not “residential real estate,” as that term is defined in Section 954.1(c) of Article 12-A-1 of the Business and Tax Regulations Code, as amended from time to time. Notwithstanding the preceding sentence, Commercial Space shall not include any building or structure, or portion of a building or structure, that is used for: (a) Industrial Use as defined in Section 102 of the Planning Code; (b) Arts Activities as defined in Section 102 of the Planning Code; or (c) Retail Sales or Service Activities or Retail Sales or Service Establishments, as defined in Section 303.1(c) of the Planning Code, that are not Formula Retail uses as defined in Section 303.1(b) of the Planning Code.
“Eligible Programs” are described in Section 2112(d)(1) of this Article 21.
“Fiscal Year” means the period starting July 1 and ending on the following June 30.
“Fund” means the Babies and Families First Fund described in Section 2111 of this Article 21.
“OECE” means the City’s Office of Early Care and Education, described in Section 2A.310 of the Administrative Code, or its successor.
“State Median Income” or “SMI” means the state median income, adjusted for family size, calculated by the California Department of Finance under California Education Code Section 8263.1.
“Warehouse Space” means Commercial Space that is used for Commercial Storage, for Volatile Materials Storage, for Wholesale Storage, or as a Storage Yard, as each of these capitalized terms is defined in Section 102 of the Planning Code.
(Added by Proposition C, 6/5/2018, Eff. 7/20/2018, Oper. 1/1/2019; amended by Ord. 235-18, File No. 180753, App. 10/12/2018, Eff. 11/12/2018, Oper. 1/1/2019)
(a) Except as otherwise provided in this Article 21, for the privilege of engaging in the business of leasing Commercial Space in properties in the City, the City imposes an annual Early Care and Education Commercial Rents Tax on each person engaged in business in the City that receives gross receipts from the lease of Commercial Space in properties in the City. For purposes of this Article 21, the term “lease” includes any “sublease.”
(b) The Early Care and Education Commercial Rents Tax shall be calculated by applying the following percentages to the person or combined group’s gross receipts from the lease of Commercial Space in properties in the City:
(1) 1% to the person or combined group’s gross receipts from the lease of Warehouse Space in properties in the City; and
(2) 3.5% to the person or combined group’s gross receipts from the lease of all other Commercial Space in properties in the City.
(c) The Early Care and Education Commercial Rents Tax shall become operative on January 1, 2019.
(Added by Proposition C, 6/5/2018, Eff. 7/20/2018, Oper. 1/1/2019)
(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 21, only so long as those exemptions continue to exist under state or federal law.
(b) For purposes of this Article 21, gross receipts from the lease of Commercial Space shall not include receipts from the leasing of Commercial Space to (1) organizations described in subsection (a) of this Section 2105; or (2) federal, state, or local governments.
(c) For purposes of this Article 21, gross receipts from the lease of Commercial Space shall not include receipts from business activities if, and only so long as and to the extent that, the City is prohibited from taxing such receipts under the Constitution or laws of the United States or under the Constitution or laws of the State of California.
(d) For only so long as and to the extent that the City is prohibited from imposing the Early Care and Education Commercial Rents 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 Early Care and Education Commercial Rents Tax shall be exempt from the Early Care and Education Commercial Rents Tax.
(e) For purposes of this Article 21, gross receipts from the lease of Commercial Space shall not include rent that is subject to the tax imposed under Articles 7 or 9 of the Business and Tax Regulations Code and shall not include rent that would be subject to the tax imposed under Article 7 or Article 9 but for the exemptions from that tax under Section 506 of Article 7 or Section 606 of Article 9.
(Added by Proposition C, 6/5/2018, Eff. 7/20/2018, Oper. 1/1/2019; amended by Ord. 317-18, File No. 181082, App. 12/21/2018, Eff. 1/21/2019, Retro. 1/1/2019)
(a) For tax years ending on or before December 31, 2024, notwithstanding any other provision of this Article 21, a person or combined group exempt from payment of the gross receipts tax under Section 954.1 of Article 12-A-1, as amended from time to time, shall also be exempt from payment of the Early Care and Education Commercial Rents Tax.
(b) For tax years beginning on or after January 1, 2025, notwithstanding any other provision of this Article 21, a “small business enterprise” shall be exempt from payment of the Early Care and Education Commercial Rents Tax. For purposes of this subsection (b), the term “small business enterprise” shall mean any person or combined group whose gross receipts within the City, determined under Article 12-A-1, did not exceed $2,325,000, adjusted annually in accordance with the increase in the Consumer Price Index: All Urban Consumers for the San Francisco/Oakland/Hayward Area for All Items as reported by the United States Bureau of Labor Statistics, or any successor to that index, as of December 31 of the calendar year two years prior to the tax year, beginning with tax year 2026, and rounded to the nearest $10,000. This subsection (b) shall not apply to a person or combined group subject to a tax on administrative office business activities in Section 953.8 of Article 12-A-1.
(Added by Proposition C, 6/5/2018, Eff. 7/20/2018, Oper. 1/1/2019; amended by Proposition M, 11/5/2024, Eff. 12/20/2024)
(a) Any person subject to the Early Care and Education Commercial Rents Tax imposed under this Article 21 that leases or provides Commercial Space in a property in the City for a Qualifying Child Care Facility that operates for more than six months in a tax year shall be allowed a credit against the Early Care and Education Commercial Rents Tax for that tax year. If a person entitled to the credit under this Section 2106.1 is required to file an Early Care and Education Commercial Rents Tax return on a combined basis under Section 2107, the credit may be claimed against the Early Care and Education Commercial Rents Tax liability required to be reflected on the combined return for that tax year. In no event shall the credit allowed under this Section 2106.1 reduce a person or combined group’s Early Care and Education Commercial Rents Tax liability for any tax year to less than zero, and no credit shall be allowed as a carryforward to a subsequent tax year.
(b) For purposes of this Section 2106.1, the credit for a tax year shall be based on the total number of Infants, Toddlers, and Preschool-Age Children for which the Qualifying Child Care Facility is licensed by the California Department of Social Services to provide care and shall be in the amount prescribed in the table below.
Number of Infants, Toddlers, and Preschool-Age Children | Amount of Credit |
1 to 49 | $7,200 |
50 to 99 | $16,000 |
100 or more | $36,000 |
(c) The following definitions shall apply for purposes of this Section 2106.1.
(1) “Qualifying Child Care Facility” means a facility that is licensed by the California Department of Social Services, or any successor agency, to provide non-medical care to Infants, Toddlers, Preschool-Age Children, or any combination thereof in need of personal services, supervision, or assistance essential for sustaining the activities of daily living or for the protection of the individual on less than a 24-hour basis in a group setting.
(2) “Infants” means children under two years of age.
(3) “Toddlers” means children between the ages of 18 months and 30 months.
(4) “Preschool-Age Children” means children who are enrolled in a child day care center licensed by the California Department of Social Services, or any successor agency, and who are not enrolled in a child care center or part of a child care center where less than 24-hour per day non-medical care and supervision are provided to Infants or School-Age Children.
(5) “School-Age Child” means a child who has entered the first grade or above or who is in a child care program providing care and supervision exclusively to children enrolled in kindergarten and above.
(d) To be eligible for the credit authorized under this Section 2106.1, persons wishing to claim the credit must:
(1) Maintain a reasonable method of documentation that can be reviewed or verified objectively that demonstrates that the person is eligible for the credit provided for in this Section 2106.1, and provide such documentation to the Tax Collector upon request; and
(2) File a timely annual Early Care and Education Commercial Rents Tax return regardless of the amount of liability, if any, shown on the return after claiming the credit provided for in this Section 2106.1.
(e) The Tax Collector shall verify that any credit claimed pursuant to this Section 2106.1 is correct. The Office of Early Care and Education, or any successor agency, shall provide to the Tax Collector upon request such information that the Tax Collector may require to verify that a Qualifying Child Care Facility for which the credit is claimed meets the eligibility requirements of this Section 2106.1, and the Tax Collector may share taxpayer information with the Office of Early Care and Education, or any successor agency, for this purpose. To the extent permitted by law, the Office of Early Care and Education, or any successor agency, shall maintain the confidentiality of any such information that the Tax Collector provides, and shall be subject to Section 6.22-1 of Article 6 of the Business and Tax Regulations Code with respect to such information.
(f) The Tax Collector shall submit an annual report to the Board of Supervisors for each year for which the credit authorized under this Section 2106.1 is available, that sets forth aggregate information on the dollar value of the credits taken each year and the number of persons taking the credit.
(g) The Controller, not later than four years after the effective date of the ordinance in Board of Supervisors File No. 181082 establishing this Section 2106.1, shall perform an assessment and review of the effect of the credit provided by this Section 2106.1. Based on such assessment and review the Controller shall prepare and submit an analysis to the Board of Supervisors. The analysis shall be based on factors that the Controller deems relevant, and may include, but shall not be limited to, data contained in the annual reports to the Board of Supervisors as required by subsection (f) of this Section 2106.1.
(h) The credit provided by this Section 2106.1 shall be allowable in tax years ending after December 31, 2018, and shall expire by operation of law on December 31, 2023 2028. No person may use or claim the credit provided for under this Section 2106.1 after the expiration date of this Section.
(a) Persons subject to the Early Care and Education Commercial Rents Tax shall file returns at the same time and in the same manner as returns filed for the gross receipts tax (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 Early Care and Education Commercial Rents Tax but is not required to file a gross receipts tax return, such person or combined group’s Early Care and Education Commercial Rents 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.
(c) For purposes of this Article 21, 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 2107. 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.
(Added by Proposition C, 6/5/2018, Eff. 7/20/2018, Oper. 1/1/2019)
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