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Newcastle Courtyards LLC, a group that has fought Measure ULA since it took effect about a year ago, has brought new energy to its cause with an appeal to a federal court ruling that had dismissed their lawsuit seeking to end the transfer tax on property sales priced $5 million and up.
Last week, the group filed a brief with the U.S. Court of Appeals for the Ninth Circuit, requesting that the court overturn the dismissal, alleging that voters were misled by proponents of Measure ULA.
“In a paradigmatic case of class warfare and tyranny of the majority against the minority, on November 8, 2022, voters in the ULA Initiative, were misled by its sponsors,” the brief filed by Newcastle Courtyards said. “The imposition of the ‘tax’ on gross sales prices (rather than net profits) of real properties sold within Los Angeles furtively targeted all types of real estate — not just ‘mansions’ — including ‘mom and pop’ apartment buildings, the stores of small neighborhood merchants and even parking lots.”
The tax, which gained the somewhat misleading moniker of a “mansion tax,” placed an additional 4 percent tax on sellers who sold commercial or residential properties priced at $5 million or more, and an additional 5.5 percent tax on sales priced at $10 million or more.
“This levy disregarded the financial circumstances of sellers, whether they were not billionaires or even millionaires, were financially strained, selling under distressed circumstances, selling at a loss, and/or lacked sufficient equity to even be able to pay the exorbitant ULA tax,” the brief continued.
Many LA real estate industry players have expressed their disapproval of the tax, arguing that it has led to a slowdown in luxury sales and dissuaded investment in the City of LA.
Newcastle Courtyards and Howard Jarvis Taxpayers Association both sued the City of LA shortly after the tax took effect last April.
Newcastle’s case was dismissed by the federal court to which it was brought, with Judge John Kronstadt ruling that because the measure in question is a tax, the court did not have the power to rule on the case. Lower federal courts cannot rule on state tax measures, under federal law.
Newcastle Courtyards attorney Keith Fromm has said that he believes federal court is the right place for the case because he believes Measure ULA violates the U.S. Constitution’s equal protection clause.
The City of LA first anticipated that the tax would generate $900 million annually to go toward a special fund for affordable housing and other support funds for tenants. One year later, however, the city has collected only $181.6 million in revenue from Measure ULA.
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