The group filed a brief with the U.S. Court of Appeals for the Ninth Circuit asking the court to overturn its lawsuit seeking to end transfer taxes on sales of properties priced at $5 million or more.
Attend Inman Connect in Las Vegas July 30-August 1! Seize the moment and take control of the next era of real estate. Through immersive experiences, innovative formats and an unparalleled lineup of speakers, this gathering becomes more than just a conference, it becomes a collaborative force shaping the future of our industry. Hurry and grab your tickets!
Newcastle Courtyards LLC, which has been fighting the ULA measure since it took effect about a year ago, has breathed new life into its cause by appealing a federal court ruling that dismissed the measure. They filed a lawsuit seeking to end property sales pricing transfer taxes of $5 million and above.
Last week, the group filed a brief with the U.S. Court of Appeals for the Ninth Circuit asking the court to overturn the dismissal, claiming voters were misled by supporters of the ULA measure.
“On November 8, 2022, in a classic case of class warfare and the tyranny of the majority over the minority, the voters of the ULA initiative were misled by its sponsors,” the brief filed by Newcastle Yards states. The ‘tax’ is levied on the gross sales price (rather than net profit), implicitly targeting all types of real estate – not just ‘luxury homes’ – including ‘mom and pop’ apartment buildings, small businesses near shops and even parking lots.”
The tax, which has been misleadingly nicknamed the “mansion tax,” imposes an additional 4% tax on sellers of commercial or residential properties with a sales price of $5 million or more, and an additional 4% tax on commercial or residential properties with a sales price of $10 million or more. Sellers of residential properties are charged an additional 5.5% tax. more.
“This tax ignores the financial status of sellers, whether they are not billionaires or even millionaires, are financially strapped, are selling in distress, selling at a loss, and/or lack sufficient assets to even pay the exorbitant price. ULA tax,” the brief continued.
Many Los Angeles real estate industry players have expressed dissatisfaction with the tax, arguing that it has led to a slowdown in luxury sales and discouraged investment in the city.
Both Newcastle Yards and the Howard Jarvis Taxpayers Association sued the city of Los Angeles shortly after the tax took effect last April.
Newcastle’s case was brought to the Federal Court and dismissed, with Judge John Kronstadt ruling that because the measure in question was a tax, the court had no jurisdiction to rule on the case. Under federal law, lower federal courts cannot rule on state tax measures.
Newcastle Court Solicitors Keith Fromm said He believes federal court is the right venue to hear the case because he believes the ULA measure violates the Equal Protection Clause of the U.S. Constitution.
The city of Los Angeles originally expected the tax to generate $900 million annually for a dedicated affordable housing fund and other support funds for tenants. A year later, however, the city had received only $181.6 million in revenue from the ULA measure.
Get Inman’s Luxury Lenses Newsletter Delivered directly to your inbox. Every Friday is an in-depth look at the biggest news in high-end real estate. Click here to subscribe.
Email Lillian Dixon
