Measure ULA gets another day in court

Ninth Circuit judges will hear arguments of whether it qualifies as a “tax” or “special fund”

US Court of Appeals Agrees to Review Measure ULA
Mayor Karen Bass (Getty)

A group fighting Measure ULA has another chance to strike down the City of Los Angeles’ real estate transfer tax, after a court agreed to review a case challenging the measure. 

The U.S. Court of Appeals for the Ninth Circuit will hear arguments over the legality of Measure ULA, which adds a 4 percent tax on commercial and residential sales over $5 million and 5.5 percent tax on sales over $10 million, according to a court notice last week.

The Court of Appeals is expected to hear the arguments in October. 

In April, Newcastle Courtyards, which has fought the measure legally over the last year, asked the appellate court to overturn a lower court ruling dismissing the case. The court that dismissed Newcastle’s case ruled that because ULA was a tax, it did not have the power to rule on it. Under law, lower federal courts cannot rule on state tax measures.

In its appeal, Newcastle Courtyards argued ULA was misrepresented to voters as a “mansion tax” that only real estate “millionaires and billionaires” would have to pay.

“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 group said in its brief. 

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Newcastle argued Measure ULA is not a tax that goes towards the city’s general fund, but is rather a “special fund for a special program.” 

In its own brief with the appellate court, the City of Los Angeles said ULA is a tax enacted by the electorate to “pay for governmental programs that will serve the public good.” 

Revenues raised through ULA are funneled into a special fund for affordable housing development and other revenue for tenant assistance and services, according to city data. 

The city has raised $252.9 million through Measure ULA, according to data from the city controller, just over a third of what it expected to reel in during the 2023 fiscal year. 

If the Court of Appeals reverses the dismissal keeping ULA in effect, the city could ask the U.S. Supreme Court to review the case. 

It’s not the only way ULA could be struck down. The California Business Properties Association has proposed a statewide ballot measure that would kill Measure ULA, along with a number of other special taxes. 

That proposal, known as the Taxpayer Protection and Government Accountability Act, is currently in the hands of the California Supreme Court. The court reviewed arguments on whether the proposal could head to the November ballot last month, but has not yet handed down a decision.