Berkeley, Calif., will exempt from tax $1 million in federal research grants under a new ordinance to encourage companies to start and stay in the city.

The city council June 11 approved the exemption for companies with less than $100,000 in gross receipts, excluding grants, effective July 11. The city will maintain a business license fee similar to that in other San Francisco Bay Area cities; Boulder, Colo.; and Cambridge, Mass.; Mayor Jesse Arreguin said in a memo to the...