‘Why us?’: Housing nonprofits are paying millions in ‘mansion tax’

Because the “mansion tax” took impact final April, a bevy of teams have aired their grievances.

Builders declare the tax eats into their revenue margins, stifling new housing tasks. Industrial property house owners say their gross sales of warehouses and retail areas shouldn’t be topic to one thing that was billed as a “mansion tax.”

Now, a brand new voice is becoming a member of the refrain of complaints: nonprofit housing organizations.

Within the final yr, a pair of nonprofits coughed up a mixed $6.1 million in mansion tax charges. Their leaders say the tax has hampered their capacity to perform one among Measure ULA’s main objectives: present reasonably priced housing.

Handed in 2022, Measure ULA introduced a 4% switch tax to all L.A. property gross sales above $5 million and a 5.5% tax to gross sales above $10 million. To this point, it has raised greater than $439 million for reasonably priced housing and homelessness prevention initiatives.

Bob Beitcher, chief govt of the Movement Image & Tv Fund charity group, was happy when voters accepted ULA, saying that the town advantages when millionaires and billionaires pay their fair proportion.

However when the group offered off $30 million price of land, it needed to pay $1.65 million in “mansion tax” cash.

Since MPTF’s mission appeared to align with Measure ULA’s mission of combating L.A.’s housing disaster, Beitcher assumed the sale could be eligible for an exemption.

“Why us? We by no means thought we’d be paying this tax,” Beitcher mentioned. “Whenever you hear mansion tax, you suppose millionaires and billionaires. We’re not promoting a mansion, we’re a nonprofit.”

MPTF helps individuals within the film and TV industries with housing, monetary help and healthcare. It homes about 250 individuals on its 40-acre campus in Woodland Hills, subsidizing dwelling prices for about 70 of them.

These subsidies — which embody lease, medical bills and transportation to docs’ workplaces — value about $3 million per yr. And for the previous couple of years, the group has been struggling to maintain up with prices.

In consequence, the group offered a bit of its campus — roughly 19 acres of undeveloped land — to boost cash. It accomplished the deal in December 2023, promoting the land to California Industrial Funding Group, which is creating the location right into a 300-unit luxurious senior dwelling group.

Exemptions can be found to property house owners who promote to reasonably priced housing builders. However since MPTF offered the property to a luxurious developer, it didn’t qualify.

An aerial view of MPTF’s 40-acre campus, which the nonprofit offered roughly 19 acres of final yr for $30 million.

(MPTF)

MPTF nonetheless walked away with $28.35 million — a large chunk that may assist it proceed its mission. However the tax nonetheless got here as a shock.

Beitcher requested round about an exemption for the $1.65-million tax invoice however was shut down resulting from an odd wrinkle within the provision.

Below Measure ULA, exemptions could be granted for nonprofits with a historical past of reasonably priced housing growth, however provided that the nonprofit is the customer within the transaction. If the nonprofit is the vendor — even when it’s a company whose work aligns with the objectives of Measure ULA — it’s on the hook for the tax.

“It doesn’t make sense {that a} struggling nonprofit offering housing could be paying the tax,” Beitcher mentioned. “The tax was supposed to maintain individuals housed, fed and secure off the streets. That’s precisely what we’ve been doing for 83 years, so why are you taking cash out of our pockets?”

Sometimes, nonprofits aren’t promoting tens of tens of millions of {dollars} price of land, so the state of affairs is considerably uncommon. However Beitcher mentioned uncommon or not, there needs to be a greater answer.

“Nobody imagined this situation when the regulation was constructed. And we’re paying the value for it,” Beitcher mentioned.

Joe Donlin, who serves as director of United to Home L.A., the group behind Measure ULA, mentioned the exemption guidelines have been designed to incentivize gross sales to nonprofit reasonably priced housing builders as one other avenue to construct much-needed items. Each vendor has that possibility, but when they select to promote to another person, they gained’t qualify for an exemption.

Exemptions are dealt with by two departments, relying on the sort: the Workplace of Finance and the Housing Division.

To this point, the 2 have been doling out ULA exemptions to those that qualify. The Workplace of Finance has granted 35 exemptions, and the Housing Division has granted 14. There have been 670 gross sales taxed below ULA and 49 complete exemptions, so roughly 7% of “mansion tax” sellers have been granted exemptions.

“We’re delicate to these unusual conditions, nevertheless it’s additionally essential to acknowledge that just about 60% of voters accepted Measure ULA, and we’re implementing it,” mentioned Greg Good, director of strategic engagement and coverage for the Housing Division.

Final month, a nonprofit racked up a good larger tax invoice than MPTF.

In October, Los Angeles Jewish Well being, a senior healthcare nonprofit, offered a senior dwelling advanced in Playa Vista for $81 million. It discovered a purchaser in late 2020, however the sale course of took so lengthy that Measure ULA was proposed, handed and carried out earlier than the deal closed.

In consequence, the nonprofit, which gives look after 4,000 seniors, was blindsided with a $4.455-million tax below Measure ULA.

The group supposed to make use of a bit of the proceeds to develop reasonably priced housing, noting the plan within the escrow directions of the $81-million sale. However now, that’s in jeopardy.

“It’s a disgrace as a result of that’s cash we might have used for reasonably priced housing,” mentioned CEO Dale Surowitz. “Now that plan is in danger.”

Surowitz mentioned he’s been working with Metropolis Councilmember Bob Blumenfield to get the $4.455 million again, both via an exemption or by having it reinvested within the nonprofit, however mentioned there aren’t clear avenues for that to occur.

“I don’t suppose they deliberate for this,” Surowitz mentioned. “I can’t think about them wanting a nonprofit concerned with caring for individuals who don’t have monetary assets to pay the tax, as a result of that was the intention of ULA.”