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3. Real Residential Or Commercial Property Transfer Tax And Measure ULA FAQ
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Real Residential Or Commercial Property Transfer Tax and Measure ULA FAQ
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Tax Due
Effective for transactions closing after June 30, 2025, the new limits for ULA will be $5,300,000 and $10,600,000. Transactions above $5,300,000 but under $10,600,000 will be evaluated a 4% tax and transactions $10,600,000 and up will be assessed a 5.5% tax.
- Link to United to House LA (ULA) Dashboard (Los Angeles Housing Department).
- Link to Source Data
How often is the City's real residential or commercial property transfer tax used?
The City's genuine residential or commercial property transfer tax applies on all documents that communicate genuine residential or commercial property within the City, unlike residential or commercial property taxes which occur each year. The real residential or commercial property transfer tax is an excise tax on the benefit of offering a real residential or commercial property interest, not a tax on the residential or commercial property itself, and is determined on the factor to consider or worth of the real residential or commercial property interest communicated.
Does the City impose a real residential or commercial property transfer tax aside from the unique tax imposed under Measure ULA?
Yes, the City imposes a genuine residential or commercial property transfer tax on all files that convey real residential or commercial property within the City. The present tax (" Base Tax") is computed based upon the factor to consider or worth of the genuine residential or commercial property interest conveyed at a rate of 0.45%. The special tax under Measure ULA (" ULA Tax") imposes an additional tax on top of the Base Tax.
What is Measure ULA and how does it work?
Measure ULA developed the ULA Tax to fund affordable housing jobs and provide resources to tenants at threat of homelessness. The ULA Tax is imposed on all files that communicate real residential or commercial property within the City of Los Angeles when the factor to consider or value of the real residential or commercial property interest communicated goes beyond a limit of 5 million dollars, or is 10 million dollars or higher, respectively.
What are the rate parts of the Base Tax and the ULA Tax under the City's real residential or commercial property transfer tax?
The rate parts are as follows:
- The Base Tax rate of $2.25 per $500 or part thereof (" Base Rate").
- The ULA Tax rates of, 1) 4% for residential or commercial properties conveyed over $5,150,000, however under $10,300,000 and 2) 5.5% for residential or commercial properties communicated at $10,300,000 or more (" ULA Rates").
- The specific language for the brand-new rates can be discovered here: https://clkrep.lacity.org/onlinedocs/2022/22-1100-S2_ord_187692_1-1-23.pdf.
- The chart below is summary of the rates:.
- Note: the City's Base Rate is $2.25 for every single $500 or fractional part thereof. A transfer in which the value of the residential or commercial property conveyed is not divisible by $500 will be assembled to the closest $500 for the computation of the Base Tax. This does not apply to the ULA Rate calculations, which are percentage-based.
When did the ULA Tax go into impact?
The ULA Tax applies to certified conveyances of real residential or commercial property interests that happen on or after April 1, 2023.
How will the City use the April 1 reliable date of the ULA Tax?
The City's treatment for applying the ULA Tax is designed on the ownership modification rules under California Board of Equalization residential or commercial property tax rule 462.260 for all files subject to the City's genuine residential or commercial property transfer tax. If a modification of ownership happened before April 1 but is gotten by the county for taping on or after April 1, 2023, the taxpayer will require to offer proof of the real transaction date to show that it actually took place before the April 1, 2023 efficient date of the ULA Tax.
Will the value thresholds under the ULA Tax be changed yearly?
Consistent with the Measure ULA, the worth limits of when to apply the ULA Tax and its matching rates are adjusted yearly based on the Bureau of Labor Statistics Chained Consumer Price Index.
How will the City's genuine residential or commercial property transfer tax be applied to residential or commercial properties that are located partly within the limits of the City?
The real residential or commercial property transfer tax will be used in percentage to the value of the genuine residential or commercial property interest that was moved within the boundaries of the City. If a valuation of the real residential or commercial property interest isn't available, the real residential or commercial property transfer tax need to be used based on the square footage of the residential or commercial property within the boundaries of the City, as a percentage of the overall factor to consider or worth of the real residential or commercial property interest conveyed.
How will the City manage over payments or under payments of the real residential or commercial property transfer tax?
If the City, through its compliance procedure, recognizes a possible over payment or under payment, the City will alert the celebrations to the deal of the prospective overpayment or underpayment. In cases of overpayment, taxpayers will require to file a request for refund from the Office of Finance. The Claim for Refund Application can be discovered here:
https://finance.lacity.gov/sites/g/files/wph1721/files/2021-04/refundclaim%20%281%29.pdf
In case of underpayment, the taxpayer will get a billing for the unpaid balance.
Exist any exemptions for the ULA Tax?
Yes, Measure ULA does provide exemptions for the ULA Tax. The ULA Tax will be not apply on files that convey genuine residential or commercial property within the City of Los Angeles if the transferee is described under freshly added sections 21.9.14 and 21.9.15 of the Los Angeles Municipal Code (" LAMC"). The transferee descriptions are as follows:
Qualified Affordable Housing Organizations under LAMC Section 21.9.14
- A non-profit entity within Internal Revenue Code section 501( c)( 3) with a history of economical housing development and/or budget friendly housing residential or commercial property management experience.
- A Neighborhood Land Trust, or Limited-Equity Housing Cooperative that has a history of budget friendly housing advancement and/or budget friendly residential or commercial property management experience.
- A restricted partnership or restricted liability company where a recognized 501( c)( 3) nonprofit corporation, community land trust, or limited-equity housing cooperative is a general partner or managing member and such 501( c)( 3) nonprofit corporation, neighborhood land trust, or limited-equity housing cooperative has a history of cost effective housing advancement and/or budget-friendly housing residential or commercial property management experience, or such minimal partnership or restricted liability business includes a partner or member, respectively, that has a history of economical housing development and/or budget-friendly housing residential or commercial property management experience.
- A community land trust or limited-equity housing cooperative partnering with a knowledgeable non-profit company.
- A community land trust or limited-equity housing cooperative that does not show a history of inexpensive housing development and/ or economical housing residential or commercial property management experience which tape-records a cost covenant, consistent with section 22.618.3( d)( 1 )( i). b. of the Los Angeles Administrative Code, on the residential or commercial property at the time of the acquisition.
The Los Angeles Housing Department administers ask for ULA tax exemptions under LAMC Section 21.9.14.
Other Exemptions under LAMC Section 21.9.15
- An acknowledged 501( c)( 3) entity which got its preliminary IRS decision letter classification letter at least ten years prior to the deal and has possessions of less than $1 billion.
- The United States or any firm or instrumentality thereof, any state or area, or political neighborhood thereof, or any other federal, state or local public agency or public entity.
- Any entity or agency exempt from the City's tax power under the California or U.S. Constitutions.
- All other deals which are exempt from the base Real Residential or commercial property Transfer Tax per regional, state, or federal laws and policies.
The Office of Finance administers demands for ULA tax exemptions under LAMC Section 21.9.15. To ask for a determination of an entity's exemption from the ULA under 21.9.15( a), please send the following documents and information to finance.ula@lacity.org.
- Power of Attorney.
- Legal name.
- Mailing address.
- IRS 501 (c)( 3) determination letter showing the effective date of the exemption status.
- Latest Form 990 or latest audited financial declarations.
Once the appropriate documents has been supplied and a determination of exemption has actually been made, the Office of Finance will offer a letter accrediting that transactions where the entity is the buyer/transferee are exempt from the tax. The letter benefits one year from the date of the letter.
If a transaction has actually currently occurred and the tax was paid, but the purchaser consequently believes it gets approved for an exemption, they will require to submit a refund claim using the type noted above.
Is the same procedure used to determine the Base Tax and the ULA Tax?
For the Base Tax, it is determined based on net worth of the residential or commercial property communicated (exclusive of the worth of any lien or encumbrance staying thereon at the time of sale.) For the ULA Tax, it is computed based on gross value (consisting of the value of any lien or encumbrance remaining thereon at the time of sale.)
If the purchaser is presuming the seller's loan, is the assumed loan amount excluded from the value of the residential or commercial property communicated?
For the Base Tax, it is calculated based upon net worth (unique of the assumed loan quantity.) For the ULA Tax, it is calculated based upon gross worth (consisting of the presumed loan amount.)
If you have any concerns regarding the ULA Tax, please contact finance.ula@lacity.org or (213) 635-7277.
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