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Judge Dismisses Lawsuit Challenging Los Angeles Transfer Tax

Lead Plaintiff Howard Jarvis Taxpayers Association Vows Appeal

Los Angeles Transfer Tax

The lawsuit challenging Measure ULA, a transfer tax on properties sold in Los Angeles, has been dismissed. (CoStar)

By Jack Witthaus CoStar News October 25, 2023 | 7:27 AM

A group challenging a new transfer tax on properties sold in Los Angeles is looking ahead to its next court challenge after a judge dismissed the case Tuesday.

Los Angeles County Superior Court Judge Barbara Scheper rejected a lawsuit challenging the legality of Measure ULA, also called the mansion tax, according to court documents. Scheper said that the plaintiffs — led by the Howard Jarvis Taxpayers Association, which advocates against raising taxes in California — failed "to state facts sufficient to support any claim against any defendant," which included the city of Los Angeles. The transfer tax, and its legal fight, are being watched closely nationally as other cities look to pursue similar mechanisms for increasing revenue.

Los Angeles voters last year approved Measure ULA to fund more affordable housing and combat homelessness. Since April, a 4% tax has been levied on nearly all commercial and residential property sales or ownership transfers above $5 million in Los Angeles, while a 5.5% levy has been charged on properties selling or transferring above $10 million. Before April, each of those taxes was 0.45%.

Laura Dougherty, director of legal affairs with Howard Jarvis, said the organization is prepared to appeal Judge Scheper’s decision.

"We can expect more careful review" in the Second District Court of Appeal, Dougherty said in an email to CoStar News. Howard Jarvis’ original lawsuit was filed in December 2022.

Champions of the transfer tax applauded Tuesday's decision in their favor. Eli Lipmen — executive director of the nonprofit Move LA, which helped write Measure ULA — said the result likely will help accelerate Measure ULA's implementation. He expects an appeal.

"We anticipated a lawsuit if and when we passed the measure," Lipmen said in an interview. "We were careful to ensure that what we wrote would stand up in court."

The lawsuit is one of two challenges to Measure ULA, a tax that Los Angeles real estate professionals largely have opposed. The other is the Taxpayer Protection and Government Accountability Act, which is being voted on statewide in November 2024. If passed, the law would end Measure ULA.

The final decision on Measure ULA's lawsuit has implications on funds Los Angeles is dispersing from the transfer tax. The city for now is only spending the first $150 million it collects — money that will be paid back to taxpayers if it loses the lawsuit. The transfer tax collected $82 million through 144 transactions as of August, Los Angeles Public Information Officer Sharon Sandow said in an email.

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