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In the City of Los Angeles, the “Homelessness and Housing Solutions Tax” (Measure ULA), commonly referred to as the “mansion tax,” went into effect on all qualifying real property transfers on April 1, 2023. Prior to Measure ULA, all real estate transfers in the City were subject to a City transfer tax of 0.45% and a County of Los Angeles transfer tax of 0.11%. Under Measure ULA, residential and commercial real property sales and transfers valued at or over $5 million, but less than $10 million, are subject to an additional tax of 4%. Sales and transfers valued at or over $10 million are subject to an additional tax of 5.5%. The Los Angeles Times noted that, based on the Multiple Listing Service, in March 2023 there were 126 homes and condominiums listed over $5 million in the City and in April, there were only two.[1] Understandably so, in anticipation of Measure ULA, owners and developers rushed to try to close escrow prior to the April 1st effective date.Continue Reading Measure ULA May Not Measure Up

Earlier this month, New York Governor Hochul’s executive budget introduced a proposal for an updated 421-a Real Estate Tax Exemption Program. Referred to as “Affordable Neighborhoods for New Yorkers” and proposed under a different section of the State’s Real Property Tax Law (485-w), the Governor’s proposal follows the existing 421-a/Affordable New York program, with a few tweaks:
Continue Reading New York Governor Releases Updated 421-a Program

Recently passed Proposition 19 will seriously limit the ability to transfer California real property to a child without causing a reassessment and higher property taxes. The new law takes effect February 16, 2021, so if you want to and are able to take steps to preserve this benefit it is important that you act immediately.
Continue Reading California Property Tax Changes to Parent-Child Exclusion

On November 3, 2020, California voters decided a number of state and local tax-related ballot measures.[1]  The most significant tax increase, the property tax “split roll” initiative, and some other local tax increases were defeated.  However, overall voters were willing to approve a number of meaningful tax increases—especially San Francisco voters.  Following is an overview of statewide and notable local tax measures and referrals decided by the voters.
Continue Reading The Results Are In – California State and Local Tax Ballot Measures

While the results are yet to be certified, it is clear, a week after Election Day, that Californians have rejected both Proposition 15 – The California Schools and Local Communities Act of 2020 (“Prop. 15”)[1] and Proposition 21 – Rental Affordability Act (“Prop. 21”).[2]  Despite this most recent response from the electorate, it is likely that real property tax “reform” and rent control will continue to be a topic of conversation during the next legislative cycle and appear on future ballots.
Continue Reading California Voters Reject Ballot Measures Related to Rent Control and Property Tax

California’s Proposition 13 prevents the assessed value of California real property from increasing by more than 2% per year, unless there is a change of ownership or completion of new construction.  On November 3, 2020, California voters will decide whether most commercial and industrial property should be removed from the protections of Proposition 13, with the result that such property would be subject to tax based on its fair market value.
Continue Reading Splitting The Roll – Commercial And Industrial Property Owners May Face Significant California Property Tax Increases Starting As Early As The 2022-2023 Fiscal Year

In a decision that could save some commercial property owners hundreds of thousands of dollars in taxes, the Court of Appeal for the First Appellate District of California held in 731 Market Street Owner, LLC v. City and County of San Francisco (Cal. Ct. App., June 18, 2020, No. A154369) that the City and County of San Francisco cannot impose a documentary transfer tax on the value of an assigned landlord-interest in a lease when the lease has a remaining term of at least 35 years.  The 35-year cutoff considers both the remaining initial term of the lease and unused extension options.
Continue Reading California Court of Appeal Decision May Result in Big Tax Savings for Some Commercial Property Owners

On April 9, 2020, the IRS issued Notice 2020-23 (the “Notice”) which expands the filing and payment deadline relief announced by the Internal Revenue Service (“IRS”) in March.  The March announcement gave taxpayers until July 15, 2020 to file their federal income tax returns and to pay federal income taxes, each of which were originally due on April 15, 2020.  The Notice extends additional key tax deadlines for individuals and businesses including certain deadlines applicable to taxpayers engaging in time-sensitive deferred like-kind exchanges.
Continue Reading Code Section 1031 Like Kind Exchange Deadlines Extended

Effective May 13, 2019, the Internal Revenue Service (IRS) changed the requirements for obtaining an employer identification number (EIN)[1]. The IRS no longer permits an entity to be named as the “responsible party” on IRS Form SS-4 (Application for Employer Identification Number). Instead, only an individual can act as a responsible party. This is particularly significant because the instructions for Form SS-4 seem to require the responsible party to provide their social security number (SSN) or individual taxpayer identification number (ITIN) on the application. A “responsible party” is generally defined as the person who owns, controls or exercises sufficient control over the entity. The responsible party is often the owner, manager, officer, or trustee of the entity. For many entities controlled by non-U.S. persons, the only individual that is capable of satisfying the criteria of a “responsible party” is a non-U.S. individual that does not have a SSN or ITIN. For non-U.S. individuals the process for obtaining a ITIN can be lengthy and onerous, requiring the applicant to produce a significant amount of documentation to verify their identity and two months or more for the IRS to process.
Continue Reading IRS Change in Application Requirements for Obtaining Employer Identification Number Could Affect Many International Investors in U.S. Real Estate

Qualified Opportunity Zone Businesses

BACKGROUND

In December 2017, as part of the Tax Cuts and Jobs Act (“TCJA”), Congress established a new tax incentive program to promote investment in certain low-income communities designated by the IRS as qualified opportunity zones. The tax incentives obtained by investing in a qualified opportunity fund (“QOF”) allow taxpayers to (i) defer paying taxes on capital gain from the sale or exchange of appreciated assets; (ii) receive a permanent exclusion from taxation of up to 15 percent of the originally deferred gain; and (iii) for taxpayers that hold their investment in the QOF for at least 10 years, a permanent exclusion from taxation for any appreciation in excess of the deferred gain.

On April 17, the Treasury Department released its second round of guidance on Opportunity Zone investments in the form of proposed regulations (the “New Proposed Regulations”). These newly proposed regulations supplement and in some cases revise the proposed regulations issued in October of 2018 (the “October Proposed Regulations”). [1]

The New Proposed Regulations provide further clarity, but leave many questions unanswered. This is Part II of our series of blog posts on the New Proposed Regulations. This post addresses key issues relating to the requirements for qualified opportunity zone businesses and qualified opportunity zone business property. For Part I of our explanation, which addresses qualified investments in qualified opportunity funds, please click on the link here.
Continue Reading Opportunity Zones Update: NEW PROPOSED TREASURY REGULATIONS (PART II)

Effective May 13, 2019, the Internal Revenue Service (IRS) changed the requirements for obtaining an employer identification number (EIN). The IRS now requires that an individual with a social security number (SSN) or individual taxpayer identification number (ITIN) be named as the “responsible party” on IRS Form SS-4 (Application for Employer Identification Number), except in the case of federal, state, local, and tribal governmental entities (See IR-2019-58). Previously, an entity that owned the requesting entity could be named as “responsible party” and provide its EIN on the form. This change is likely to affect international investors in the real estate industry who form special purpose entities to acquire real property.
Continue Reading IRS Change in Application Requirements for Obtaining Employer Identification Number Could Affect Many International Investors In U.S. Real Estate