The City of Los Angeles argued for the dismissal from federal court of a constitutional challenge to the real estate transfer tax known as Measure ULA. The measure 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. (see Los Angeles Approves Real Estate Transfer Tax.)
In January, a group of property owners challenged the constitutionality of the tax in federal court, arguing that it violates their equal protection rights under the 14th Amendment of the U.S. Constitution and the equal protection clause of the California Constitution. (see Property Owners Challenge Constitutionality of Los Angeles Real Estate Tax.)
The city, in a motion to dismiss filed on March 15, 2023, argued that the Tax Injunction Act and comity principles prohibit challenges to state and local taxes in federal court unless the state courts do not provide an adequate forum.
The city argued that the Los Angeles County Superior Court obtained jurisdiction over the parties and the subject matter in February in a separate suite filed by the Howard Jarvis Taxpayers Association. (see Legal Challenge Filed against Los Angeles Real Estate Tax.) The city argued that Superior Court provides a “more-than-adequate forum – indeed, the only proper forum – for the challengers to seek to litigate their claims.” The fact that the case involved a constitutional challenge was “immaterial,” as California courts “regularly decide cases in which plaintiffs allege equal protection, due process, and takings challenges to taxes and other charges.”
The city also argued that, under the Colorado River doctrine, the plaintiffs “may not invoke this Court’s jurisdiction to litigate claims for which the Superior Court already has jurisdiction.”