Mansions such as these in Pacific Palisades have seen sales slip after UAL was implemented on April 1.
The “Mansion Tax,” Measure ULA, passed in November 2022, with 58 percent of voters approving, and 42 against.
The measure added to the Los Angeles Municipal Code a 4 percent tax on transfers of real property with a gross value between $5 million and $10 million, and a 5.5% tax on transfers of property with a gross value exceeding $10 million.
That tax rate was applied regardless of if the property was sold at a gain or a loss.
A July 28 Wall Street Journal story (“The Latest Luxe Letdown: Sales at the high continue to decline, as homeowners pull back on listing properties and would-be buyers grapple with high interest rates and recessions fears.”) detailed Rodney Dangerfield’s widow Joan and her attempts to sell her mega mansion located in the “Bird Streets” above L.A.’s Sunset Strip.
Dangerfield purchased the home, in this desirable location, in the early 2000s for $6.25 million.
In February, Dangerfield, 70, listed the property for $17.8 million. The story notes that she has had several full-price offers, but they came with contingencies, such as providing seller financing.
Dangerfield said, “We were flooded with shoppers in March. Then, things just came to a screeching halt. It was such a change in the amount of people coming to view the home that it felt like it wasn’t even on the market.” The UAL, “Mansion Tax” became effective April 1, 2023.
In the story Dangerfield said she didn’t foresee how detrimental the mansion tax would be.
CTN contacted Amalfi Founder Anthony Marguleas about the “mansion tax.” He said in a July 28 email, “Yes, sales are down substantially, and it is mainly due to the tax.”
When the tax was initially passed, the Howard Jarvis Taxpayers Association said UAL violated the California Constitution and the Los Angeles City Charter. A lawsuit was filed.
Voters were told that the revenue from the tax would be dedicated to housing and homeless services, which makes it a “special” tax, not a “general” tax.
Transfer taxes were prohibited by Proposition 13 (Article XIII A, section 4 of the California Constitution), but in charter cities such as Los Angeles, transfer taxes have been permitted under case law since 1990, if they are for a general purpose.
“The Constitution prohibits all local governments from imposing special transfer taxes,” said HJTA Director of Legal Affairs Laura Dougherty.
Susan Shelly, the VP Communications of the Howard Jarvis Taxpayers Association had spoken about the Mansion Tax at a Palisades meeting.
CTN reached out to her to ask the status of the lawsuit. She replied July 28, “The lawsuit challenging Measure ULA is moving forward. There’s a hearing on the merits scheduled for September 26. We hope for a favorable decision at that time, but we anticipate that the decision will be appealed, so the issue won’t be settled for a while.
“Anyone who pays this tax should file a claim for a refund to be paid if Measure ULA is ultimately declared invalid,” Shelly said. “Details on how to do that are available at click here. As long as the claim is filed within a year of paying the tax, the taxpayer’s rights are protected no matter how long it takes to get a resolution.”
A friend of Marguleas, Jim Breslo, is working with attorney Keith Fromm, who is also working to overturn ULA. “Fromm has filed a very significant challenge to the tax in state and federal court,” Breslo told CTN by email. “There is a good chance the tax will be held to be illegal and/or unconstitutional.”
That lawsuit has now been consolidated with the Howard Jarvis case. The County and City have since answered the complaint and filed motions for judgment on the pleadings. The motions are set to be heard in September. “The motions provide numerous substantive objections to our claims which we are vigorously opposing,” Fromm said.
Regarding the Federal Case, Fromm wrote, “The City and the proponents of the ULA have filed motions to dismiss the case. We have filed oppositions. The parties conducted oral argument on these motions on May 1, 2023, whereupon the Court asked for supplemental briefing which was completed on May 9, 2023. We are awaiting a ruling on the motions. click here.