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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
Sales Price Calculate tax
Tax Due
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 evaluated 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 often is the City's genuine residential or commercial property transfer tax used?
The City's real residential or commercial property transfer tax is appropriate on all files that communicate genuine residential or commercial property within the City, unlike residential or commercial property taxes which occur each year. The real residential or commercial property transfer tax is an excise tax on the advantage 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 enforce a genuine residential or commercial property transfer tax aside from the special tax enforced under Measure ULA?
Yes, the City enforces a genuine residential or commercial property transfer tax on all documents that convey genuine residential or commercial property within the City. Today tax (" Base Tax") is computed based on the consideration or value of the real 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 established the ULA Tax to money affordable housing tasks and provide resources to tenants at risk of homelessness. The ULA Tax is imposed on all documents that communicate 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 surpasses a threshold of five 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 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 communicated 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 worth of the residential or commercial property conveyed is not divisible by $500 will be assembled to the closest $500 for the estimation of the Base Tax. This does not apply to the ULA Rate computations, which are percentage-based.
When did the ULA Tax go into result?
The ULA Tax is applicable 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 efficient date of the ULA Tax?
The City's procedure for using the ULA Tax is designed on the ownership change rules under California Board of Equalization residential or commercial property tax guideline 462.260 for all documents subject to 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 tape-recording on or after April 1, 2023, the taxpayer will need to supply proof of the real transaction date to show that it actually happened before the April 1, 2023 reliable date of the ULA Tax.
Will the value thresholds under the ULA Tax be changed every year?
Consistent with the Measure ULA, the value thresholds of when to use the ULA Tax and its corresponding rates are adjusted annually based upon the Bureau of Labor Statistics Chained Consumer Price Index.
How will the City's real residential or commercial property transfer tax be used to residential or commercial properties that are located partly within the boundaries 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 limits of the City. If an appraisal of the real residential or commercial property interest isn't readily available, the genuine residential or commercial property transfer tax ought to be used based on the square video of the residential or commercial property within the limits of the City, as a percentage of the total factor to consider or value of the genuine residential or commercial property interest communicated.
How will the City manage over payments or under payments of the real residential or commercial property transfer tax?
If the City, through its compliance process, recognizes a prospective over payment or under payment, the City will inform the celebrations to the deal 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 get a billing for the unsettled balance.
Are there any exemptions for the ULA Tax?
Yes, Measure ULA does offer exemptions for the ULA Tax. The ULA Tax will be not be applicable on files that convey 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 affordable housing residential or commercial property management experience.
- A Community Land Trust, or Limited-Equity Housing Cooperative that has a history of cost effective housing development and/or budget-friendly housing residential or commercial property management experience.
- A limited partnership or limited liability company where 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, community land trust, or limited-equity housing cooperative has a history of cost effective housing development and/or economical housing residential or commercial property management experience, or such restricted partnership or restricted liability company 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 an experienced non-profit company.
- A community land trust or limited-equity housing cooperative that does not show a history of budget-friendly housing advancement and/ or budget friendly housing residential or commercial property management experience which tapes 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 demands 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 received its initial IRS determination 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 company or instrumentality thereof, any state or area, or political neighborhood thereof, or any other federal, state or regional 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 transactions which are exempt from the base Real Residential or commercial property Transfer Tax per local, state, or federal laws and regulations.
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 showing the effective date of the exemption status.
- Latest Form 990 or newest audited financial statements.
Once the suitable paperwork has actually been supplied and a decision of exemption has actually been made, the Office of Finance will provide a letter accrediting that deals where the entity is the buyer/transferee are exempt from the tax. The letter is great for one year from the date of the letter.
If a transaction has already taken place and the tax was paid, but the buyer consequently thinks it certifies for an exemption, they will require to submit a refund claim using the form noted above.
Is the very same step used to determine the Base Tax and the ULA Tax?
For the Base Tax, it is determined based upon net value of the residential or commercial property conveyed (special of the worth of any lien or encumbrance staying thereon at the time of sale.) For the ULA Tax, it is determined based on gross worth (consisting of the value of any lien or encumbrance staying thereon at the time of sale.)
If the buyer is presuming the seller's loan, is the assumed loan amount excluded from the value of the residential or commercial property communicated?
For the Base Tax, it is computed based upon net worth (special of the assumed loan quantity.) For the ULA Tax, it is calculated based on gross value (including the assumed 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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