SELL SELL SELL YOUR LA REAL ESTATE BEFORE YOU’RE TAXED MORE

SELL SELL SELL YOUR LA REAL ESTATE BEFORE YOU’RE TAXED MORE

APRIL 1, 2023…April Fools Day.  Don’t wait until then to close on your transactions.  Los Angeles Measure ULA is commonly known as the “mansion tax.”[1] It will impose a new “Homelessness and Housing Solutions Tax” on transfers of residential and commercial real property in the city of Los Angeles valued in excess of $5 million. Mansion Tax revenue is projected to be $600 million to $1.1 billion annually, which is slated to fund affordable housing.

Once in effect (which seems to be on tract to occur soon), sales of real property (both residential and commercial) valued at over $5 million to $10 million will have an additional tax burden of 4%.  Sales of $10m an over have an additional tax burden of 5.5%.[2]  The $5 mil applies to the sales price and liens or amount of equity does not matter.

Nothing in the ULA changes the documentary transfer tax of .56% imposed on property sales in the city of Los Angeles.  Unlike transfer tax that calculates the tax based on gross sales price less liens remaining on the property at closing, the ULA is based on the gross sale price.  The ULA applies regardless of whether you are transferring title in the property or in an entity that owns the property.  There is some good news:  there are certain exemptions for non-profits, community land trusts and limited-equity housing coops for affordable housing development or management.  There are also exemptions similar to the transfer tax exemptions for mere changes in identity, form or place of organization (like changing title from an individual to a living trust).

This is not insignificant.  Here at Epps & Coulson, LLP, our transactional department is keeping on top of this and is ready to help you plan strategic investments and grow.  Please feel free to contact Dawn at: dcoulson@eppscoulson.com for any questions.

Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.  It is likely considered advertising.  Epps & Coulson, LLP encourages you to call to discuss these matters as they apply to you or your business.

EPPS & COULSON, LLP
Attorneys admitted to practice in California, New York, Colorado, Texas, and Oregon
www.eppscoulson.com
www.companiescounsel.com

[1]   https://clkrep.lacity.org/election/Initiative_Ordinance_ULA.pdf

[2] The $5m and $10m thresholds will be adjusted each year for inflation.