US Court of Appeals Asked to Strike Down Measure ULA
Suit alleges voters were misled to think measure was tax on mansions.
A group that filed a federal case seeking to abolish the Measure ULA property transfer tax in Los Angeles has asked the US Court of Appeals for the Ninth Circuit to review and overturn a federal judge’s decision to dismiss the case.
Newcastle Courtyards, which has waged a legal battle against Measure ULA at the state and federal level, in a legal brief branded the ULA Initiative that was on the ballot in November 2022 “a paradigmatic case of class warfare.”
According to Newcastle, the proponents of Measure ULA, misled voters into believing it was a “mansion tax” instead of an across-the-board tax on large real estate transactions. The brief said Measure ULA disregards the financial circumstances of the property seller, who may lack enough equity to pay the new transfer tax.
Measure ULA imposes a 4% tax on all residential and commercial sales over $5M and a 5.5% tax on sales over $10M. The new taxes were added to an existing transfer tax of 0.45% in Los Angeles.
Los Angeles voters approved the new tax by a lopsided 58% to 42% in a statewide referendum after proponents of the transfer tax projected that it would generate up to $900M for a new city housing fund.
In March 2023, the Los Angeles City Administrative Officer projected that Measure ULA would generate $672M in its first fiscal year. The year-end total for revenue generated by Measure ULA in 2023 was a little more than $181M.
In September, a federal judge ruled that federal court is not the proper venue to mount a legal challenge against Measure ULA.
Judge John Kronstadt dismissed a federal lawsuit Newcastle Courtyards filed against the City of Los Angeles claiming that the new transfer tax violates the equal protection clause of the US Constitution.
“Federal Courts are courts of limited jurisdiction. Accordingly, when a federal court finds that it lacks subject matter jurisdiction, it must dismiss the case in its entirety,” Kronstadt wrote, in his ruling.
In dismissing the case, Kronstadt also rejected the plaintiff’s argument that Measure ULA can’t be defined as a tax, but rather is a charge on a specific group of people. The judge noted that Measure ULA was approved by city voters in a citizen-sponsored initiative.
“[When] the electorate exercises its initiative power, it is acting in a legislative capacity,” the judge ruled.