In “Recent Measures Establish Unprecedented Tax Increases on Real Property in California Cities,” Craig A. Becker, Breann E. Robowski, Rachel B. Horsch and David W. Wright examine the array of local measures approved by California voters in the 2022 midterms, which includes an increase in city-level transfer taxes and the addition of new taxes on property in LA and Bay Area cities.
Articles Posted in Tax
Real Estate & Construction News Round-Up (06/22/22)
Rising inflation rates impact the Bipartisan Infrastructure Law, the new “Bring Chicago Home” proposal could triple the transfer tax rate on city properties, a downtrend in homebuying emerges, and more.
Real Estate & Construction News Round-Up (06/01/22)
Cybersecurity becomes an increasing concern when buying digital land, a significant property tax break in New York is set to expire, climate disclosure mandates in commercial real estate are on the horizon, and more.
Superfund Chemical Taxes Reinstated
Section 80201 of the Infrastructure Investment and Jobs Act of 2021, Public Law 117-58, reinstates the long-expired federal excise taxes that are imposed on specified chemical substances used in common industrial applications pursuant to Sections 4661 and 4671 of the Internal Revenue Code. The effective date of this reinstatement is July 1, 2022, and these taxes expire on December 31, 2031. The Act “decoupled” these reinstated chemical taxes from the now-expired Superfund petroleum excise tax that also funded the Superfund Hazardous Substance Response Trust Fund, which was created when Superfund (formally known as the Comprehensive Environmental Response Compensation and Liability Act, or CERCLA) was enacted in 1980. The Secretary of the Treasury was directed to publish an initial list of taxable chemicals by January 1, 2022, and this initial list was set forth in IRS Notice 2021-66. The list contains not only the 50 taxable chemical substances listed in Section 4672 (a)(3) of the Internal Revenue Code but also the 101 taxable chemicals listed in this Notice. In addition, Section 80201 of the Act also modified the existing tax rates by raising them.
Build Back Better Includes Historic Expansion of the Low-Income Housing Tax Credit Program
On November 19, 2021, the U.S. House of Representatives passed the Build Back Better Act (H.R. 5376), a bill that represents a large portion of the Biden-Harris Administration’s agenda. Among other spending and tax measures, the bill includes an unprecedented expansion of the Low-Income Housing Tax Credit (LIHTC) program. Four proposals are headlining this expansion:
Proposed Bill Provides a New Federal Tax Credit for the Conversion of Office Buildings
At the end of July 2021, a bill was introduced in the House and Senate, which, if enacted, would create a federal tax credit to fund the conversion of unused office buildings into residential, commercial, or mixed-use properties. The Revitalizing Downtowns Act (S. 2511), which is modeled after the federal historic rehabilitation tax credit, would provide a federal tax credit equal to 20 percent of “qualified conversion expenditures” with respect to a “qualified converted building.”
California’s Proposition 15 Is Failing While San Francisco Accepts a Bevy of Local Tax Measures
California voters say “No” to split roll, and San Francisco voters say “Yes” to higher gross receipts taxes and real estate transfer taxes. In “California’s Proposition 15 Is Failing While San Francisco Accepts a Bevy of Local Tax Measures“, colleagues Craig A. Becker, Breann E. Robowski, William L. Bennett discuss that California and San Francisco voters were asked to decide several tax‑related referenda with major implications across all business industries. Although it is too early to state with certainty, voters appear to have rejected Proposition 15, a measure that would introduce a so-called “split roll” property tax system. On the same day, voters in San Francisco overwhelmingly approved a battery of tax-related measures: Proposition F, which overhauls San Francisco’s business taxes; Proposition I, which doubles the real estate transfer tax on transactions exceeding $10 million; Proposition L, which institutes an aggressive new “Overpaid Executive Gross Receipts Tax;” and Proposition J, which repeals and replaces an annual parcel tax.
The Split-Roll Initiative Looms for California’s Property Tax System
This November, California voters will decide whether commercial and industrial properties will lose their Proposition 13 protection against property tax reassessment. In “The Split-Roll Initiative is Posted to Rock California’s Property Tax System“, colleagues Craig A. Becker, Richard E. Nielsen and Breann E. Robowski explain.
To Purchase of Realty Encumbered by Long-Term Leasehold, California Court of Appeal Concludes Transfer Tax Not Applicable
In 731 Market Street Owner LLC v. City and County of San Francisco (June 18, 2020), California appellate court affirms that local realty transfer tax does not apply when leasehold has a remaining term of 35 years or more. In “California Court of Appeal Concludes Transfer Tax Not Applicable to Purchase of Realty Encumbered by Long-Term Leasehold,” colleagues Craig A. Becker, Breann E. Robowski, Richard E. Nielsen, and Robert P. Merten III discuss an overview of a recent ruling.
A Summary of California Tax Legislation AB 85
On June 15, 2020, the California Legislature passed Governor Newsom’s proposed tax legislation to raise additional income tax revenue to assist in balancing the California budget. (AB 85). The Senate and Assembly each achieved the two-thirds majority vote required for California tax increases (27-11 in the Senate and 56-20 in the Assembly), with Gov. Newsom expected to sign the legislation later this week. In “California Legislature Passes Governor Newsom’s Proposal to Suspend California Net Operating Loss Deductions and Limit Tax Credits during 2020 – 2022,” colleagues Jeffrey M. Vesely, Craig A. Becker, Carley Roberts and Breann E. Robowski discuss the tax legislation’s two principal components.