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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 transactions closing after June 30, 2025, the 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 evaluated 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 often is the City's real residential or commercial property transfer tax used?
The City's real residential or commercial property transfer tax applies on all documents that convey genuine residential or commercial property within the City, unlike residential or commercial property taxes which occur yearly. The genuine residential or commercial property transfer tax is an excise tax on the benefit of selling a genuine residential or commercial property interest, not a tax on the residential or commercial property itself, and is determined on the factor to consider or worth of the real residential or commercial property interest communicated.
Does the City impose a genuine residential or commercial property transfer tax aside from the unique tax enforced under Measure ULA?
Yes, the City enforces a genuine residential or commercial property transfer tax on all documents that convey real residential or commercial property within the City. Today tax (" Base Tax") is calculated based upon the factor to consider 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 money inexpensive housing tasks and offer resources to renters at threat of homelessness. The ULA Tax is enforced on all files that communicate genuine residential or commercial property within the City of Los Angeles when the consideration or value of the genuine residential or commercial property interest communicated surpasses a threshold of 5 million dollars, or is ten million dollars or greater, 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 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, 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 assembled to the nearest $500 for the estimation 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 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 procedure for applying the ULA Tax is modeled 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 change of ownership happened before April 1 but is gotten by the county for tape-recording on or after April 1, 2023, the taxpayer will need to supply evidence of the real deal date to show that it actually happened before the April 1, 2023 reliable date of the ULA Tax.
Will the worth limits 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 matching rates are changed each year based on the Bureau of Labor Statistics Chained Consumer Price Index.
How will the City's real residential or commercial property transfer tax be applied to residential or commercial properties that are located partially within the borders of the City?
The genuine residential or commercial property transfer tax will be used in percentage to the value of the real residential or commercial property interest that was transferred within the boundaries of the City. If an assessment of the genuine residential or commercial property interest isn't readily available, the genuine residential or commercial property transfer tax need to be used based on the square footage of the residential or commercial property within the borders of the City, as a percentage of the overall factor to consider or value of the genuine residential or commercial property interest conveyed.
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 procedure, determines a possible over payment or under payment, the City will inform the celebrations to the deal of the prospective overpayment or underpayment. In cases of overpayment, taxpayers will require 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 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 be suitable on files that communicate genuine residential or commercial property within the City of Los Angeles if the transferee is described under freshly added 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 inexpensive housing development and/or affordable 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 cost effective housing residential or commercial property management experience.
- A limited partnership or restricted liability company wherein an acknowledged 501( c)( 3) not-for-profit corporation, community land trust, or limited-equity housing cooperative is a basic partner or managing member and such 501( c)( 3) nonprofit corporation, community land trust, or limited-equity housing cooperative has a history of inexpensive housing development and/or inexpensive 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 advancement 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 neighborhood land trust or limited-equity housing cooperative that does not demonstrate a history of cost effective housing advancement and/ or cost effective 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
- A recognized 501( c)( 3) entity which got its initial IRS determination letter classification letter a minimum of ten years prior to the transaction 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 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 deals 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 requests for ULA tax exemptions under LAMC Section 21.9.15. To request a determination of an entity's exemption from the ULA under 21.9.15( a), please submit the following documents and details to finance.ula@lacity.org.
- Power of Attorney.
- Legal name.
- Mailing address.
- IRS 501 (c)( 3) decision letter revealing the effective date of the exemption status.
- Latest Form 990 or most current audited monetary statements.
Once the appropriate paperwork has been supplied and a determination of exemption has been made, the Office of Finance will offer a letter certifying 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 deal has currently occurred and the tax was paid, but the buyer consequently believes it receives an exemption, they will need to submit a refund claim utilizing the kind noted above.
Is the same step utilized 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 (special of the value of any lien or encumbrance staying thereon at the time of sale.) For the ULA Tax, it is determined based on gross value (consisting of the value of any lien or encumbrance staying thereon at the time of sale.)
If the purchaser is assuming 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 determined based upon net worth (unique of the assumed loan amount.) For the ULA Tax, it is computed based on gross value (including the assumed loan amount.)
If you have any concerns regarding the ULA Tax, please contact finance.ula@lacity.org or (213) 635-7277.
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