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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 deals 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 often is the City's real residential or commercial property transfer tax applied?
The City's real 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 happen every year. The real residential or commercial property transfer tax is an excise tax on the privilege of selling a genuine residential or commercial property interest, not a tax on the residential or commercial property itself, and is computed 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 besides the unique tax enforced 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. Today tax (" Base Tax") is computed based upon 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 additional tax on top of the Base Tax.
What is Measure ULA and how does it work?
Measure ULA established the ULA Tax to fund affordable housing jobs and offer resources to renters at threat of homelessness. The ULA Tax is imposed on all documents that convey real residential or commercial property within the City of Los Angeles when the consideration or worth of the genuine residential or commercial property interest conveyed goes beyond a limit of five 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 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 specific language for the brand-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 each $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 assembled to the nearby $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 go into impact?
The ULA Tax applies to qualified conveyances of genuine 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 guidelines under California Board of Equalization residential or commercial property tax guideline 462.260 for all files based on the City's real residential or commercial property transfer tax. If a modification of ownership occurred before April 1 however is gotten by the county for recording on or after April 1, 2023, the taxpayer will need to offer proof of the real deal date to reveal that it actually occurred before the April 1, 2023 effective date of the ULA Tax.
Will the value limits under the ULA Tax be adjusted each year?
Consistent with the Measure ULA, the value thresholds of when to use the ULA Tax and its matching rates are changed 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 located partly within the borders of the City?
The real residential or commercial property transfer tax will be applied in percentage to the worth of the genuine residential or commercial property interest that was transferred within the boundaries of the City. If an evaluation of the genuine residential or commercial property interest isn't offered, the real residential or commercial property transfer tax must be used based upon the square video footage of the residential or commercial property within the boundaries of the City, as a percentage of the overall consideration or worth of the real residential or commercial property interest communicated.
How will the City deal with over payments or under payments of the real residential or commercial property transfer tax?
If the City, through its compliance procedure, determines a prospective over payment or under payment, the City will notify the celebrations to the deal of the possible 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 get a billing for the unsettled balance.
Are there any exemptions for the ULA Tax?
Yes, Measure ULA does supply exemptions for the ULA Tax. The ULA Tax will be not apply on files that communicate real residential or commercial property within the City of Los Angeles if the transferee is explained under newly included 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 budget friendly housing development and/or cost effective 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 housing residential or commercial property management experience.
- A minimal collaboration or restricted liability company wherein 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 development and/or budget friendly housing residential or commercial property management experience, or such limited collaboration or limited liability business consists of a partner or member, respectively, that has a history of inexpensive housing advancement and/or budget-friendly housing residential or commercial property management experience.
- A neighborhood land trust or limited-equity housing cooperative partnering with a knowledgeable non-profit company.
- A neighborhood land trust or limited-equity housing cooperative that does not show a history of budget-friendly housing development and/ or budget friendly housing residential or commercial property management experience which records a cost 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 designation letter a minimum of 10 years prior to the deal and has possessions of less than $1 billion.
- The United States or any agency 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 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 local, state, or federal laws and guidelines.
The Office of Finance administers demands 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 information to finance.ula@lacity.org.
- Power of Attorney.
- Legal name.
- Mailing address.
- IRS 501 (c)( 3) decision letter showing the effective date of the exemption status.
- Latest Form 990 or most current audited financial statements.
Once the appropriate paperwork has been provided and a decision of exemption has been made, the Office of Finance will supply a letter certifying that deals where the entity is the buyer/transferee are exempt from the tax. The letter is excellent for one year from the date of the letter.
If a transaction has already occurred and the tax was paid, however the buyer consequently thinks it qualifies for an exemption, they will need to file a refund claim using the form kept in mind above.
Is the exact same measure used to determine 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 (exclusive of the worth of any lien or encumbrance remaining 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 remaining thereon at the time of sale.)
If the buyer is presuming the seller's loan, is the assumed loan quantity excluded from the value of the residential or commercial property conveyed?
For the Base Tax, it is calculated based on net worth (unique of the presumed loan quantity.) For the ULA Tax, it is calculated based upon gross worth (including the assumed loan quantity.)
If you have any concerns regarding the ULA Tax, please contact finance.ula@lacity.org or (213) 635-7277.
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