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3. Real Residential Or Commercial Property Transfer Tax And Measure ULA FAQ
Real Residential Or Commercial Property Transfer Tax and Measure ULA FAQ
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Effective for deals 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 examined 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 frequently is the City's real residential or commercial property transfer tax used?
The City's real residential or commercial property transfer tax is applicable on all files that convey genuine residential or commercial property within the City, unlike residential or commercial property taxes which occur every year. The real residential or commercial property transfer tax is an excise tax on the opportunity of offering a real residential or commercial property interest, not a tax on the residential or commercial property itself, and is calculated on the factor to consider or value of the genuine residential or commercial property interest conveyed.
Does the City enforce a genuine residential or commercial property transfer tax besides the special tax imposed under Measure ULA?
Yes, the City imposes a real residential or commercial property transfer tax on all documents that communicate genuine residential or commercial property within the City. The present tax (" Base Tax") is computed based on the consideration or worth of the real residential or commercial property interest conveyed at a rate of 0.45%. The special tax under Measure ULA (" ULA Tax") enforces an extra tax on top of the Base Tax.
What is Measure ULA and how does it work?
Measure ULA developed the ULA Tax to fund budget friendly housing projects and offer resources to tenants at threat of homelessness. The ULA Tax is enforced on all documents that communicate genuine residential or commercial property within the City of Los Angeles when the factor to consider or worth of the genuine residential or commercial property interest communicated surpasses 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 genuine residential or commercial property transfer tax?
The rate elements 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, but 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 new rates can be found 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 rounded up 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 enter into impact?
The ULA Tax is suitable to certified conveyances of genuine residential or commercial property interests that take place on or after April 1, 2023.
How will the City apply the April 1 efficient date of the ULA Tax?
The City's treatment for using the ULA Tax is designed on the ownership modification guidelines under California Board of Equalization residential or commercial property tax guideline 462.260 for all documents subject to the City's genuine residential or commercial property transfer tax. If a change of ownership occurred before April 1 but is gotten by the county for taping on or after April 1, 2023, the taxpayer will require to offer evidence of the actual transaction date to reveal that it actually happened 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 use the ULA Tax and its matching rates are adjusted annually based on the Bureau of Labor Statistics Chained Consumer Price Index.
How will the City's real residential or commercial property transfer tax be applied to residential or commercial properties that are situated partially within the limits of the City?
The real residential or commercial property transfer tax will be used in percentage to the worth of the real residential or commercial property interest that was transferred within the boundaries of the City. If an appraisal of the real residential or commercial property interest isn't offered, the genuine residential or commercial property transfer tax must be applied based upon the square video footage of the residential or commercial property within the borders of the City, as a percentage of the total factor to consider or value of the genuine residential or commercial property interest conveyed.
How will the City manage over payments or under payments of the genuine residential or commercial property transfer tax?
If the City, through its compliance process, recognizes a prospective over payment or under payment, the City will notify the celebrations to the deal of the prospective overpayment or underpayment. In cases of overpayment, taxpayers will require to submit an ask for refund from the Office of Finance. The Claim for Refund Application can be found here:
https://finance.lacity.gov/sites/g/files/wph1721/files/2021-04/refundclaim%20%281%29.pdf
In case of underpayment, the taxpayer will receive an invoice for the overdue balance.
Are there any exemptions for the ULA Tax?
Yes, Measure ULA does provide exemptions for the ULA Tax. The ULA Tax will be not apply on documents that communicate real residential or commercial property within the City of Los Angeles if the transferee is described under recently included 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 area 501( c)( 3) with a history of economical housing advancement 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 economical housing residential or commercial property management experience.
- A limited partnership or limited liability company in which an acknowledged 501( c)( 3) not-for-profit corporation, neighborhood 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 economical housing development 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 advancement and/or inexpensive housing residential or commercial property management experience.
- A neighborhood land trust or limited-equity housing cooperative partnering with a skilled non-profit organization.
- A neighborhood land trust or limited-equity housing cooperative that does not show a history of cost effective housing advancement and/ or affordable housing residential or commercial property management experience which tape-records a price 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 requests 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 received 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 territory, 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 taxation power under the California or U.S. Constitutions.
- All other transactions which are exempt from the base Real Residential or commercial property Transfer Tax per local, state, or federal laws and guidelines.
The Office of Finance administers ask for ULA tax exemptions under LAMC Section 21.9.15. To ask for a decision of an entity's exemption from the ULA under 21.9.15( a), please submit the following files and information to finance.ula@lacity.org.
- Power of Attorney.
- Legal name.
- Mailing address.
- IRS 501 (c)( 3) determination letter showing the reliable date of the exemption status.
- Most current Form 990 or newest audited financial declarations.
Once the proper paperwork has been provided and a decision of exemption has 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 already taken place and the tax was paid, but the purchaser subsequently believes it receives an exemption, they will require to submit a refund claim utilizing the form noted above.
Is the exact same measure utilized to identify the Base Tax and the ULA Tax?
For the Base Tax, it is determined based on net value of the residential or commercial property conveyed (special of the value of any lien or encumbrance staying thereon at the time of sale.) For the ULA Tax, it is computed based upon gross value (including the worth of any lien or encumbrance staying thereon at the time of sale.)
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If the buyer is presuming the seller's loan, is the assumed loan quantity excluded from the worth of the residential or commercial property communicated?
For the Base Tax, it is calculated based upon net worth (special of the assumed loan amount.) For the ULA Tax, it is computed based on gross value (consisting of the assumed loan quantity.)
If you have any questions concerning the ULA Tax, please contact finance.ula@lacity.org or (213) 635-7277.
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