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Since the “condominium tax” went into effect in April last year, many organizations have expressed their dissatisfaction.
Developers claim the tax is squeezing profit margins and inhibiting new housing projects. Commercial property owners argue that sales of warehouse and retail space should not be subject to a tax billed as a “condominium tax.”
Now, a new voice is joining the chorus of complaints: nonprofit housing organizations.
Last year, the two nonprofits collected a total of $6.1 million in mansion taxes. Their leaders argue that the tax prevents them from providing affordable housing, one of Major ULA’s main goals.
The ULA Act, passed in 2022, imposed a 4% transfer tax on all LA real estate sales over $5 million and a 5.5% tax on sales over $10 million. To date, we have raised more than $439 million for affordable housing and homelessness prevention efforts.
Bob Beicher, chief executive of the philanthropic Motion Picture and Television Fund, said he was pleased that voters approved the ULA and said the city would benefit if millionaires and billionaires paid their fair share.
But when the organization sold $30 million worth of land, it had to pay $1.65 million in “mansion taxes.”
Because MPTF’s mission seemed to align with Measure ULA’s mission to combat L.A.’s housing crisis, Beitcher thought the sale would qualify for an exemption.
“Why us? I never thought we’d be paying this tax,” Beecher said. “When you think of mansion taxes, you think of millionaires and billionaires. We’re not selling mansions, we’re a nonprofit organization.”
MPTF supports people in the film and television industry with housing, financial assistance, and health care. The 40-acre campus in Woodland Hills is home to about 250 people, and the school subsidizes living expenses for about 70 of them.
These subsidies, which cover rent, medical expenses and transportation to clinics, cost about $3 million a year. And in recent years, organizations have struggled to keep costs down.
As a result, the organization sold a portion of its campus (approximately 19 acres of undeveloped land) to raise funds. The company completed the transaction in December 2023, selling the land to California Commercial Investment Group, which is developing the site as a 300-unit luxury senior housing community.
An exemption applies to property owners who sell to affordable housing developers. However, MPTF could not qualify because it sold the property to a luxury developer.
Aerial view of MPTF’s 40-acre campus. The nonprofit sold about 19 acres last year for $30 million.
(MPTF)
The MPTF still received $28.35 million, a huge amount that will help it continue its mission. However, taxes were still a surprise.
Mr. Beecher asked about a $1.65 million tax exemption, but it was cut short because of a strange wrinkle in the clause.
The ULA measure grants exemptions to nonprofit organizations with a track record of developing affordable housing, but only if the nonprofit is the buyer of the transaction. If your seller is a nonprofit organization, you will be subject to taxes, even if your organization aligns with the goals of Measure ULA.
“It doesn’t make sense for a struggling nonprofit that provides housing to pay taxes,” Beicher said. “This tax was meant to help keep people housed, fed, and safely off the streets. That’s exactly what we’ve been doing for 83 years, so why should we? Are you going to take money out of your pocket?”
This situation is somewhat unusual, as nonprofits typically don’t sell tens of millions of dollars worth of land. But Beitcher said there must be a better solution, unusual or not.
“No one envisioned this scenario when the law was enacted, and we’re paying the price for it,” Beecher said.
Joe Donlin, director of United to House LA, the organization behind Major ULA, said the exemption provisions are intended to be used by nonprofit affordable housing companies as another means to build much-needed units. said it was designed to encourage sales to housing developers. All sellers have that option, but if you choose to sell to someone else, you are not eligible for the exemption.
Depending on the type, exemptions are processed by two departments: the Department of Finance and the Department of Housing.
So far, both companies have granted ULA exemptions to people who qualify. The Treasury Department granted 35 exemptions and the Housing Authority granted 14 exemptions. There were 670 sales taxed under the ULA, and a total of 49 exemptions were granted, meaning approximately 7% of “condominium tax” sellers were granted exemptions.
“While we are sensitive to these unusual circumstances, it is also important to recognize that nearly 60% of voters approved the ULA measure and we are implementing it,” Housing Authority Strategic said Greg Good, director of engagement and policy.
Last month, a nonprofit collected even more in taxes than the MPTF.
In October, senior health care nonprofit Los Angeles Jewish Health sold a senior housing complex in Playa Vista for $81 million. Although a buyer was found in late 2020, the sale process took a very long time and ULA measures were proposed, passed, and implemented before the transaction was completed.
As a result, the nonprofit, which provides care to 4,000 seniors, was blindsided by a $4.455 billion tax liability under the ULA measure.
The organization listed its plans in the escrow instructions for the $81 million sale, with a portion of the proceeds to be used for affordable housing development. But now it is at stake.
“It’s disappointing because it’s money that could have been spent on affordable housing,” CEO Dale Slowitz said. “Now that plan is in jeopardy.”
Slowitz said he is working with City Councilman Bob Blumenfield to get the $4.455 million back through forgiveness or reinvestment into nonprofit organizations, but there is no clear path to doing so.
“I don’t think they planned this,” Slowitz said. “I can’t imagine they want a nonprofit that cares for people who can’t afford to pay their taxes, because that was the intent of ULA.”
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