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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
Prices Calculate tax
Tax Due
Effective for deals 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 assessed a 4% tax and transactions $10,600,000 and up will be examined a 5.5% tax.
- Link to United to House LA (ULA) Dashboard (Los Angeles Housing Department).
- Link to Source Data
How frequently is the City's real residential or commercial property transfer tax used?
The City's genuine residential or commercial property transfer tax is relevant on all documents that communicate real 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 privilege of offering a genuine residential or commercial property interest, not a tax on the residential or commercial property itself, and is calculated on the consideration or value of the genuine residential or commercial property interest conveyed.
Does the City enforce a real residential or commercial property transfer tax aside from the special tax enforced under Measure ULA?
Yes, the City imposes 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 consideration or value of the real residential or commercial property interest communicated at a rate of 0.45%. The special 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 developed the ULA Tax to money economical housing tasks and supply resources to renters at threat of homelessness. The ULA Tax is troubled all documents 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 conveyed surpasses a limit of five million dollars, or is ten million dollars or greater, 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 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 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 worth of the residential or commercial property communicated is not divisible by $500 will be rounded up to the nearest $500 for the computation of the Base Tax. This does not apply to the ULA Rate estimations, which are percentage-based.
When did the ULA Tax enter into impact?
The ULA Tax is relevant to qualified conveyances of genuine residential or commercial property interests that happen 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 modification guidelines under California Board of Equalization residential or commercial property tax guideline 462.260 for all files based on the City's genuine residential or commercial property transfer tax. If a change of ownership occurred before April 1 but is received by the county for taping on or after April 1, 2023, the taxpayer will need to provide proof of the real transaction date to show that it in fact occurred before the April 1, 2023 effective date of the ULA Tax.
Will the value thresholds 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 adjusted every 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 partly within the limits of the City?
The real residential or commercial property transfer tax will be applied in proportion to the value of the genuine residential or commercial property interest that was transferred within the borders of the City. If an appraisal of the genuine residential or commercial property interest isn't offered, the real residential or commercial property transfer tax must 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 overall consideration or worth of the genuine residential or commercial property interest communicated.
How will the City deal with over payments or under payments of the genuine residential or commercial property transfer tax?
If the City, through its compliance process, identifies a possible over payment or under payment, the City will notify the parties to the deal of the prospective overpayment or underpayment. In cases of overpayment, taxpayers will require to file 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 an invoice for the overdue 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 apply on files that communicate real residential or commercial property within the City of Los Angeles if the transferee is described under freshly 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 section 501( c)( 3) with a history of affordable housing advancement and/or economical housing residential or commercial property management experience.
- A Neighborhood Land Trust, or Limited-Equity Housing Cooperative that has a history of cost effective housing advancement and/or affordable housing residential or commercial property management experience.
- A minimal collaboration or restricted liability company in which an acknowledged 501( c)( 3) nonprofit corporation, neighborhood land trust, or limited-equity housing cooperative is a basic 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 affordable housing development and/or budget-friendly housing residential or commercial property management experience, or such minimal collaboration or restricted liability company includes a partner or member, respectively, that has a history of inexpensive housing advancement and/or cost effective housing residential or commercial property management experience.
- A neighborhood 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 demonstrate a history of affordable housing development and/ or economical housing residential or commercial property management experience which tape-records an affordability 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 received its initial IRS determination letter classification letter a minimum of 10 years prior to the deal and has assets of less than $1 billion.
- The United States or any firm or instrumentality thereof, any state or territory, or political neighborhood thereof, or any other federal, state or local public company or public entity.
- Any entity or firm exempt from the City's tax 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 policies.
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 send the following documents and information to finance.ula@lacity.org.
- Power of Attorney.
- Legal name.
- Mailing address.
- IRS 501 (c)( 3) decision letter showing the efficient date of the exemption status.
- Latest Form 990 or newest audited financial statements.
Once the suitable paperwork has actually been offered and a determination of exemption has actually been made, the Office of Finance will offer a letter licensing that deals 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 happened and the tax was paid, but the purchaser consequently thinks it receives an exemption, they will need to submit a refund claim utilizing the form noted above.
Is the very same step utilized to figure out the Base Tax and the ULA Tax?
For the Base Tax, it is determined based upon net worth of the residential or commercial property communicated (exclusive of the value of any lien or encumbrance remaining thereon at the time of sale.) For the ULA Tax, it is computed based upon gross worth (including the worth of any lien or encumbrance staying thereon at the time of sale.)
If the purchaser is presuming the seller's loan, is the assumed loan amount omitted from the worth of the residential or commercial property conveyed?
For the Base Tax, it is determined based on net value (exclusive of the assumed loan quantity.) For the ULA Tax, it is computed based on gross value (including the assumed loan amount.)
If you have any concerns concerning the ULA Tax, please contact finance.ula@lacity.org or (213) 635-7277.
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