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

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 brand-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 examined a 5.5% tax.

- Link to United to House LA (ULA) Dashboard (Los Angeles Housing Department).
- Link to Source Data

How typically is the City's real residential or commercial property transfer tax applied?

The City's genuine residential or commercial property transfer tax applies on all documents that convey real residential or commercial property within the City, unlike residential or commercial property taxes which happen yearly. The genuine residential or commercial property transfer tax is an excise tax on the privilege of selling a real residential or commercial property interest, not a tax on the residential or commercial property itself, and is computed on the consideration or worth of the genuine residential or commercial property interest conveyed.

Does the City enforce a real residential or commercial property transfer tax other than the unique tax imposed under Measure ULA?

Yes, the City enforces 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 calculated based upon the consideration or worth of the genuine residential or commercial property interest communicated 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 money budget-friendly housing projects and provide resources to tenants at risk of homelessness. The ULA Tax is troubled all documents that convey genuine residential or commercial property within the City of Los Angeles when the factor to consider or worth of the real residential or commercial property interest conveyed exceeds a threshold of five million dollars, or is ten million dollars or greater, respectively.

What are the rate elements of the Base Tax and the ULA Tax under the City's genuine 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 conveyed 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 $500 or fractional part thereof. A transfer in which the value of the residential or commercial property communicated is not divisible by $500 will be rounded up to the closest $500 for the calculation of the Base Tax. This does not apply to the ULA Rate computations, which are percentage-based.

When did the ULA Tax enter into effect?

The ULA Tax applies to certified conveyances of real residential or commercial property interests that occur on or after April 1, 2023.

How will the City apply the April 1 effective date of the ULA Tax?

The City's treatment for using the ULA Tax is designed on the ownership change rules under California Board of Equalization residential or commercial property tax rule 462.260 for all documents subject to the City's real residential or commercial property transfer tax. If a modification of ownership happened before April 1 however is gotten by the county for tape-recording on or after April 1, 2023, the taxpayer will need to provide proof of the actual transaction date to reveal that it in fact happened before the April 1, 2023 effective date of the ULA Tax.

Will the worth limits under the ULA Tax be adjusted yearly?

Consistent with the Measure ULA, the worth limits of when to use the ULA Tax and its corresponding rates are changed yearly based upon 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 positioned partially within the limits of the City?

The genuine residential or commercial property transfer tax will be applied in percentage to the worth of the real residential or commercial property interest that was transferred within the limits of the City. If an appraisal of the real residential or commercial property interest isn't readily available, the real residential or commercial property transfer tax must be applied based upon the square footage of the residential or commercial property within the limits of the City, as a proportion of the overall factor to consider or value of the genuine residential or commercial property interest communicated.

How will the City deal with over payments or under payments of the genuine residential or commercial property transfer tax?

If the City, through its compliance procedure, determines a potential over payment or under payment, the City will notify the celebrations to the deal of the potential overpayment or underpayment. In cases of overpayment, taxpayers will need to submit a demand 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 a billing for the unpaid balance.

Exist any exemptions for the ULA Tax?

Yes, Measure ULA does supply exemptions for the ULA Tax. The ULA Tax will be not apply on documents that communicate genuine residential or commercial property within the City of Los Angeles if the transferee is described under freshly 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 section 501( c)( 3) with a history of affordable housing development and/or inexpensive housing residential or commercial property management experience.
- A Community Land Trust, or Limited-Equity Housing Cooperative that has a history of affordable housing development and/or budget-friendly housing residential or commercial property management experience.
- A minimal collaboration or company wherein an acknowledged 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) not-for-profit corporation, community 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 restricted partnership or restricted liability company consists of a partner or member, respectively, that has a history of cost effective 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 skilled non-profit company.
- A community land trust or limited-equity housing cooperative that does not demonstrate a history of affordable housing advancement and/ or economical housing residential or commercial property management experience which records a price covenant, constant 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 demands 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 initial IRS determination letter designation letter at least ten years prior to the transaction and has assets of less than $1 billion.
- The United States or any firm or instrumentality thereof, any state or area, or political subdivision thereof, or any other federal, state or local public firm or public entity.
- Any entity or firm exempt from the City's taxation 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 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 send the following files and info to finance.ula@lacity.org.

- Power of Attorney.
- Legal name.
- Mailing address.
- IRS 501 (c)( 3) determination letter revealing the reliable date of the exemption status.
- Newest Form 990 or latest audited monetary declarations.
Once the appropriate documentation has actually been provided and a decision of exemption has been made, the Office of Finance will supply a letter accrediting that deals 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 deal has actually already happened and the tax was paid, however the buyer consequently thinks it certifies for an exemption, they will require to submit a refund claim using the type kept in mind above.

Is the same procedure used to determine the Base Tax and the ULA Tax?

For the Base Tax, it is calculated based on net worth of the residential or commercial property communicated (unique of the value of any lien or encumbrance staying thereon at the time of sale.) For the ULA Tax, it is determined based upon gross value (including the value of any lien or encumbrance staying thereon at the time of sale.)

If the purchaser 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 determined based on net worth (unique of the presumed loan quantity.) For the ULA Tax, it is determined based on gross worth (including the presumed loan amount.)

If you have any questions concerning the ULA Tax, please contact finance.ula@lacity.org or (213) 635-7277.

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