Legal Challenge Filed against Los Angeles Real Estate Tax
The Howard Jarvis Taxpayers Association (HJTA) and the Apartment Association of Greater Los Angeles have filed a lawsuit to prevent implementation of Measure ULA , a Los Angeles ballot measure that imposes a 4% tax on multimillion-dollar real estate transactions to provide funding for affordable housing. The lawsuit, filed on December 21, 2022 in Los Angeles County Superior Court, contends that the measure violates the state constitution and the city charter.
Measure ULA increases the city’s transfer tax from 0.45% on all property sales to 4% on sales of property between $5 million and $10 million and 5.5% on sales of property of $10 million or more. The measure was certified as passed after receiving 58% of the vote. (see Los Angeles Approves Real Estate Transfer Tax.)
Lawsuit
The lawsuit contends that the tax is unconstitutional. The groups argue that Article XIII A, section 4 of the California Constitution, which was implemented by Proposition 13, generally prohibits transfer taxes. The complaint notes that case law has permitted charter cities, which have greater authority in their own governance, to impose transfer taxes that are undedicated “general taxes,” but transfer taxes that are “special taxes” are “prohibited for all local governments, including charter cities.” (Cohn v. City of Oakland (1990) 223 Cal.App.3d 261; Fielder v. City of Los Angeles (1993) 14 Cal.App.4th 137; Fisher v. County of Alameda (1993) 20 Cal.App.4th 120.)
The California Supreme Court has defined term “special taxes” refers to taxes that are “levied for a specific purpose rather than … a levy placed in the general fund to be utilized for general governmental purposes.” The complaint argues that the tax increase would be a “special tax” rather than a “general tax,” as the funds raised by the tax would be dedicated to housing and homeless services.
The complaint states that if the “Measure ULA tax increase is imposed as scheduled on April 1, 2023, great and irreparable harm will result to plaintiffs, and to all Los Angeles property owners in being required to pay unconstitutionally imposed taxes. Similar harm will occur to all Los Angeles residents in the form of increased rent and consumer prices resulting from the tax increase on all property sold (or value transferred) above $5 million.”