L.A. Law Has Creative Community In Uproar
It's funny how there are at least two sides to every issue.
Here we have the City Council of Los Angeles, scrambling desperately to increase the city's income, and therefore finding merit in a new law designed to legalize the activities of thousands (or tens of thousands) of people operating businesses out of their homes. The trade-off? The city wants these entrepreneurs to register, pay a licensing fee, and then pay taxes on the gross annual income from home-based business operations.
But hold on a second, say outspoken members of the city's rather large creative community. You can't license artists and writers, any more than you can license clergy. It's downright unfair, unjust, and prejudicial. What's more, it's unconstitutional.
The result has been to convert a simple, long-awaited city ordinance that would legalize home-based businesses from a routine matter to a major fracas. Initially, it appeared the law was a genuine attempt to reflect the realities of telecommuting and other modern, decentralized ways of working. But the ultimate outcome may simply be to drive creative and energetic entrepreneurs outside the city limits of Los Angeles.
Part of the reason the new Home Occupation Ordinance is generating so much press attention is that some of the larger writers' organizations got involved in the protest. These organizations have the inclination, the know-how, and the budgets not only to call attention to an issue, but to very literally make a federal case out of what the Los Angeles City Council hoped would remain a local matter.
On September 8th, for example, the Writer's Guild of America filed a lawsuit asking for a restraining order against enforcement of the Home Occupation Ordinance. If the local courts won't grant a restraining order, the WGA has vowed to appeal the case to the federal level, and perhaps beyond, in a dogged attempt to get a favorable verdict.
But who can blame them? It's difficult to deny that Los Angeles' attempt to put a licensing requirement on writers appears to violate the First Amendment of the US Constitution, which guarantees freedom of expression, and freedom of the press.
As written, the law says writers are business people and must annually obtain a $25 permit and be taxed on gross income. But according to Marvin Wolf, president of the writers' organization called Independent Writers of Southern California, the ambiguity of the ordinance's wording creates the real possibility that city bureaucrats could deny a license to a writer who doesn't satisfy some unspecified criteria. The effective result would be that individual writers could be found guilty of writing without a license, and fined or even jailed by the city for doing so.
There are many practical problems with Los Angeles' Home Occupation Ordinance (see sidebar below), but most writers agree that the biggest issue is the city's right--or lack of a right--to license creative professionals, whether they are working out of their homes, or out of an office or storefront.
According to the Writers Guild of America, the new law creates constitutional problems at least five ways:
Creative expression is a constitutionally protected activity, they argue, and no level of government may be allowed to force those practicing it to obtain a license. This restriction may prove to be tough luck for the city, but Los Angeles' need for extra revenue isn't a compelling enough reason to warrant a breach of the fundamental document of these United States.
The Los Angeles Home Occupation Ordinance comes out of a mid-'80s realization by the city fathers that revenues were falling far short of expenses. There began a continuing search for new sources of revenue--user fees, permits, business licenses, and other subtle forms of city taxation.
From the beginning, home-based businesses were considered a very good target for new taxes. Something akin to the Home Occupation Ordinance was first introduced early on, but nothing along these lines was actually passed until March of 1987. Until then, anyone operating a business out of their home or apartment could be shut down if and when neighbors complained. But the city received very few complaints, and the city's home-based entrepreneurs slept soundly, without fear of law enforcement action against their technically illegal sources of livelihood.
The new Home Occupation Ordinance was trumpeted as a way to legalize home-based businesses. But the hidden agenda of the City Council was to create a basis for Los Angeles to license, regulate, and tax these Mom-and-Pop operations. The Ordinance initially required newly licensed home-based business owners to pay three years' worth of retroactive license fees and gross-income taxes. When that proposal didn't fly, the city declared a six-month amnesty period during which owners of home-based businesses could register without having to pay any back taxes at all. But that same re-write of the ordinance somehow created the new requirement that writers be included, a provision that now appears to have sunk the whole revenue-generating ploy.
In theory, there's no reason why writers should be exempt from an income tax on gross proceeds, just like other businesses now licensed in the city of Los Angeles. But the practical fact of the matter is that the Home Occupation Ordinance is so poorly written it creates additional hardships on just the kind of businesses--those with sporadic income and high expenses--that writers are likely to be running.
Not that the previous law was any more logical or fair-minded. For example, collection agencies and advertising agencies pay different license fees and tax rates, although nobody can say precisely why.
Under the new law, a writer must pay the business license fee and the tax on gross proceeds even if he or she has earned that money doing some or all of the necessary research and writing "on location" away from the city.
Here's the actual schedule of taxes within the Ordinance for various categories of writers:
It may not seem like a lot of money, until you notice that you must pay the minimum amount even when you earn only $1 in that category of writing!
Other cities in California, including Long Beach and Santa Monica, have laws on their books that are very similar to the Los Angeles Home Occupation Ordinance. But they make no effort to enforce them, and even hope that no one notices they have such laws. West Hollywood, at the other end of the spectrum, has a law that specifically exempts creative professionals from any kind of city-based licensing or taxation ordinances.
"I hope Los Angeles doesn't spend money to defend the Home Occupation Ordinance in court," IWOSC's president, Marvin Wolf says, "because it's a constitutional issue and they cannot possibly win. It's criminal for Los Angeles--which claims to be desperate for funds--to fight this battle. The money would be better spent teaching the people who run City Hall to read the Constitution."
A better-written law for the city would probably eliminate any licensing requirement for the traditional constitutionally protected occupations--writers, artists, and clergy--and would also replace an unfair tax on the gross revenues of home-based businesses with a more fair-minded income tax on everyone living or doing business in the city, not just people who happen to work at home.
While the argument rages, Los Angeles City Attorney James K. Hahn may have already taken steps to resolve the issue to everyone's satisfaction, however. On September 12th, he penned a memo stating his official opinion that home-based businesses with zero impact on their neighborhoods--in terms of signage, advertising, package deliveries, customer visits, employees, unwanted smells or sounds, trash and sewer outflow, and the like--are not required to obey the Home Occupation Ordinance. Technically, his memo calls this category of home business an "accessory use" of the premises and not a separate "land use" requiring a permit.
If this opinion is accepted by the City Council in a vote scheduled for early October, Los Angeles will voluntarily refrain from enforcing the Home Occupation Ordinance not only against writers and other creative professionals operating out of their homes, but also against accountants, data-entry clerks, and others who can operate successfully using little in the way of city services.
But this change of heart--or at least of interpretation--may not stop the Writers Guild's lawsuit. The problem, Guild attorney Barry Bostwick says, is that "nobody" knows where to draw the line between an accessory use and a separate use requiring a city license.
For the latest information about the status of the Ordinance, you can call the Writers Guild Hot Line at (213)782-4560, or check their Web site at http://www.wga.org .
Copyright © 1997 by Robert Moskowitz. All rights reserved.
There are several other impractical aspects to the Home Occupation Ordinance, as currently written.
For example, the law states that a writer needs a separate license for each business he or she is in--with a maximum of two business licenses permitted. That wouldn't be so bad, except that the law also states that selling a written manuscript to a company puts you in the same business as that company.
Think for a minute about the unfairness of this approach. If a hardware store sells materials to a contractor building a house, and also to a plumber repairing existing installations, no one thinks the store is in two different businesses. It's clearly in the one and only business of selling hardware. But if you're a writer selling articles to magazines, books to publishers, and scripts to TV or the movies, the Los Angeles Home Occupation Ordinance says you're in three different businesses, and since you can only be licensed for two, you must give up one of your occupations.
Since most people trying to make a living at home as a wordsmith tend to write for many different clients, often providing written materials for several different "businesses," the new ordinance effectively limits a Los Angeles-based writer's ability to survive. It's like telling Picasso he could paint, or draw, or sculpt, or make pottery, but not all four--at least not in Los Angeles.
What's more, IWOSC's Wolf points out, the city's assertion of the right to issue a license automatically gives it the right to send an inspector to a writer's home. The inspector is technically empowered to come in and check not only that you're complying with the Home Occupation Ordinance, but with all other applicable laws, city building codes, and so forth. City officials have denied any interest in sending inspectors out to home-based businesses, but this is cold comfort to most writers, who enthusiastically invoke the specter of Big Brother whenever the subject of licensing writers comes up.
As a practical matter, Wolf asserts, a writer who irritates a big-wig down at City Hall runs the risk under the new law of suffering serious harassment in his or her own home, and may even be put out of business as a writer.
Finally, many writers believe that their individual creativity and expertise form the real foundation on which the highly successful movie and television industries rely, and on which the Southern California economy thrives. So they resent being asked to pay new taxes on gross income while DreamWorks and the other megabucks studios receive millions in tax deductions, tax holidays, and other forms of tax relief.
--Robert Moskowitz