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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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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 however under $10,600,000 will be assessed a 4% tax and deals $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 typically is the City's genuine residential or commercial property transfer tax used?
The City's real residential or commercial property transfer tax is suitable on all documents that communicate real residential or commercial property within the City, unlike residential or commercial property taxes which happen annually. The real residential or commercial property transfer tax is an excise tax on the privilege of offering a genuine residential or commercial property interest, not a tax on the residential or commercial property itself, and is determined on the consideration or value of the real residential or commercial property interest communicated.
Does the City enforce a real residential or commercial property transfer tax other than 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 calculated based on the consideration or value of the genuine residential or commercial property interest communicated at a rate of 0.45%. The unique tax under Measure ULA (" ULA Tax") imposes 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 economical housing jobs and provide resources to tenants at danger of homelessness. The ULA Tax is troubled all files that convey genuine 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 exceeds a threshold of five million dollars, or is 10 million dollars or higher, 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 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 communicated 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 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 rounded up to the nearby $500 for the estimation of the Base Tax. This does not apply to the ULA Rate calculations, which are percentage-based.
When did the ULA Tax enter into result?
The ULA Tax is relevant to qualified 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 reliable date of the ULA Tax?
The City's treatment for using the ULA Tax is modeled on the ownership modification rules under California Board of Equalization residential or commercial property tax rule 462.260 for all documents based on the City's real residential or commercial property transfer tax. If a modification of ownership occurred before April 1 but is received by the county for taping on or after April 1, 2023, the taxpayer will require to supply proof of the actual deal date to show that it actually took place before the April 1, 2023 efficient date of the ULA Tax.
Will the worth limits under the ULA Tax be adjusted each year?
Consistent with the Measure ULA, the value limits of when to use the ULA Tax and its matching 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 used to residential or commercial properties that are located partially within the limits of the City?
The real residential or commercial property transfer tax will be used in proportion to the value of the real residential or commercial property interest that was transferred within the borders of the City. If a valuation of the genuine residential or commercial property interest isn't readily available, the genuine residential or commercial property transfer tax should be applied based upon the square video footage of the residential or commercial property within the limits of the City, as a proportion of the total 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 genuine residential or commercial property transfer tax?
If the City, through its compliance procedure, recognizes a potential over payment or under payment, the City will inform the parties to the transaction of the possible overpayment or underpayment. In cases of overpayment, taxpayers will need to submit an ask 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 receive a billing for the overdue balance.
Exist any exemptions for the ULA Tax?
Yes, Measure ULA does offer exemptions for the ULA Tax. The ULA Tax will be not be relevant on documents that convey genuine 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 cost effective housing development and/or affordable housing residential or commercial property management experience.
- A Community Land Trust, or Limited-Equity Housing Cooperative that has a history of economical housing development and/or economical housing residential or commercial property management experience.
- A restricted partnership or limited liability company wherein a recognized 501( c)( 3) not-for-profit corporation, neighborhood land trust, or limited-equity housing cooperative is a general partner or handling member and such 501( c)( 3) nonprofit corporation, community land trust, or limited-equity housing cooperative has a history of economical housing advancement and/or cost effective housing residential or commercial property management experience, or such restricted collaboration or restricted liability business includes a partner or member, respectively, that has a history of affordable housing development and/or inexpensive housing residential or commercial property management experience.
- A neighborhood 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 demonstrate a history of economical housing development and/ or economical housing residential or commercial property management experience which tapes a price covenant, constant with area 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
- A recognized 501( c)( 3) entity which got its initial IRS decision letter classification letter a minimum of 10 years prior to the transaction and has possessions of less than $1 billion.
- The United States or any company or instrumentality thereof, any state or territory, or political subdivision thereof, or any other federal, state or regional public company or public entity.
- Any entity or company 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 regional, state, or federal laws and regulations.
The Office of Finance administers requests 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 documents and information to finance.ula@lacity.org.
- Power of Attorney.
- Legal name.
- Mailing address.
- IRS 501 (c)( 3) decision letter revealing the efficient date of the exemption status.
- Most current Form 990 or most current audited monetary declarations.
Once the suitable documentation has actually been provided and a determination of exemption has actually been made, the Office of Finance will provide a letter certifying 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 occurred and the tax was paid, but the purchaser subsequently believes it gets approved for an exemption, they will need to file a refund claim utilizing the form noted above.
Is the same measure used to identify the Base Tax and the ULA Tax?
For the Base Tax, it is computed based on net value of the residential or commercial property conveyed (exclusive of the value of any lien or encumbrance remaining thereon at the time of sale.) For the ULA Tax, it is calculated based upon gross worth (consisting of the worth 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 quantity left out from the worth of the residential or commercial property communicated?
For the Base Tax, it is calculated based upon net worth (unique of the presumed loan quantity.) For the ULA Tax, it is determined based on gross value (consisting of the assumed loan amount.)
If you have any questions relating to the ULA Tax, please contact finance.ula@lacity.org or (213) 635-7277.
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