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 deals closing after June 30, 2025, the brand-new thresholds for ULA will be $5,300,000 and $10,600,000. Transactions above $5,300,000 but under $10,600,000 will be assessed a 4% tax and deals $10,600,000 and up will be evaluated 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 real residential or commercial property transfer tax is applicable on all documents that convey real residential or commercial property within the City, unlike residential or commercial property taxes which take place every year. The real residential or commercial property transfer tax is an excise tax on the benefit of selling a real residential or commercial property interest, not a tax on the residential or commercial property itself, and is calculated on the consideration or worth of the genuine residential or commercial property interest conveyed.

Does the City impose a real residential or commercial property transfer tax aside from the special tax imposed under Measure ULA?

Yes, the City imposes a genuine residential or commercial property transfer tax on all files that convey 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 special 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 money economical housing projects 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 genuine residential or commercial property interest communicated goes beyond a limit of 5 million dollars, or is 10 million dollars or greater, respectively.

What are the rate components of the Base Tax and the ULA Tax under the City's real residential or commercial property transfer tax?

The rate components 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 conveyed at $10,300,000 or more (" ULA Rates").
- The particular 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 $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 computation of the Base Tax. This does not use to the ULA Rate calculations, which are percentage-based.

When did the ULA Tax go into effect?

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

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

The City's procedure for applying the ULA Tax is modeled on the ownership change rules under California Board of Equalization residential or commercial property tax guideline 462.260 for all files subject to the City's real residential or commercial property transfer tax. If a change of ownership happened before April 1 but is gotten by the county for recording on or after April 1, 2023, the taxpayer will need to provide proof of the actual deal date to show 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 each year?

Consistent with the Measure ULA, the value limits of when to use 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 used to residential or commercial properties that are positioned partly within the limits of the City?

The genuine residential or commercial property transfer tax will be used in proportion to the worth of the real residential or commercial property interest that was moved within the boundaries of the City. If an evaluation of the genuine residential or commercial property interest isn't readily available, the real residential or commercial property transfer tax should be used based upon the square video of the residential or commercial property within the boundaries of the City, as a proportion of the total factor to consider or worth of the genuine residential or commercial property interest communicated.

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 alert the celebrations to the transaction of the potential overpayment or underpayment. In cases of overpayment, taxpayers will need to submit a demand for refund from the Office of . 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 get 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 genuine residential or commercial property within the City of Los Angeles if the transferee is explained under newly added areas 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 inexpensive housing development and/or economical housing residential or commercial property management experience.
- A Neighborhood Land Trust, or Limited-Equity Housing Cooperative that has a history of inexpensive housing development and/or cost effective housing residential or commercial property management experience.
- A minimal collaboration or restricted liability company where a recognized 501( c)( 3) not-for-profit 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 budget-friendly housing advancement and/or budget friendly housing residential or commercial property management experience, or such minimal partnership or restricted liability business consists of 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 skilled non-profit organization.
- A community land trust or limited-equity housing cooperative that does not show a history of budget friendly housing development and/ or affordable housing residential or commercial property management experience which tapes an affordability 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 received its preliminary IRS decision letter classification letter at least ten years prior to the transaction and has properties 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 company or public entity.
- Any entity or company 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 ask for ULA tax exemptions under LAMC Section 21.9.15. To request a decision of an entity's exemption from the ULA under 21.9.15( a), please send the following files and details to finance.ula@lacity.org.

- Power of Attorney.
- Legal name.
- Mailing address.
- IRS 501 (c)( 3) decision 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 actually been made, the Office of Finance will provide a letter licensing 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 deal has actually already occurred and the tax was paid, but the buyer consequently believes it receives an exemption, they will require to submit a refund claim utilizing the type noted above.

Is the exact same procedure 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 communicated (special 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 assuming the seller's loan, is the assumed loan amount excluded from the worth of the residential or commercial property conveyed?

For the Base Tax, it is computed based on net worth (unique of the assumed loan amount.) For the ULA Tax, it is determined based upon gross value (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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