(a) Definitions. For purposes of this Section 1108.7, the following terms have the following meanings:
“Converted Residential Property” has the meaning set forth in subsection (b) of this Section 1108.7.
“Development Application” means any application for a building permit, site permit, conditional use authorization, variance, or for any other authorization of a conversion of a property or portion thereof from a Nonresidential Property to a Residential Property required to be approved by the Planning Department, Zoning Administrator, Planning Commission, or Historic Preservation Commission.
“Exemption Certificate” means a certificate issued by the Planning Department showing:
(1) the square feet of gross floor area being transferred that is a First Transfer of Converted Residential Property that falls within the 5,000,000 square foot limitation in subsection (c) of this Section 1108.7; and
(2) the total square feet of gross floor area being transferred.
“Final Approval” means:
(1) approval of a conversion’s first Development Application, unless such approval is appealed;
(2) if subsection (1) does not apply and a conversion only requires a site or building permit, issuance of the first site or building permit, unless such permit is appealed; or
(3) if the first Development Application or first site or building permit is appealed, then the final decision upholding the Development Application, or first site or building permit, on the appeal by the relevant City board or commission.
“First Certificate of Occupancy” means the earlier of a certificate of final completion and occupancy, or a temporary certificate of occupancy, as those terms are used in Section 109A of the Building Code, as may be amended from time to time.
“First Construction Document” means the first building permit, building permit addendum, or other document that authorizes construction of the conversion, not including permits or addenda for demolition, grading, shoring, pile driving, or site preparation work.
“First Transfer” means the first transfer of a Converted Residential Property following issuance of its First Certificate of Occupancy if such transfer would have been subject to the tax imposed under this Article 12-C absent the exemption in this Section 1108.7. For Converted Residential Properties transferred in part, the first taxable transfer of each portion of a Converted Residential Property following issuance of its First Certificate of Occupancy constitutes a “First Transfer,” but subsequent transfers of the same portion do not constitute “First Transfers.” Notwithstanding the prior sentence, a “First Transfer” does not include any transfer of all or a portion of a Converted Residential Property after a transfer subject to the exemption in this Section 1108.7 where the tax on such transfer would have been imposed on the fair market value of the entire Converted Residential Property absent the exemption in this Section 1108.7.
“Nonresidential Property” means any property or portion of a property, other than a Residential Property and other than a property that contains no buildings or other structures.
“Qualifying Certificate” means a certificate issued by the Planning Department showing the square feet of gross floor area that is proposed to qualify as Converted Residential Property within the 5,000,000 square foot limitation in subsection (c) of this Section 1108.7.
“Residential Property” means a property or portion of a property with a structure or structures or portion thereof that may only be used for housing individuals, excluding travelers, vacationers, or other similarly transient individuals, for greater than 30 consecutive days (including permitted incidental uses). It includes, but is not limited to, dwelling units, student housing, group housing, residential hotels, senior housing, nursing homes, homeless shelters, and residential care facilities, regardless of how such uses would be considered under the Planning Code. “Residential Property” includes 100% of the gross floor area of a live/work unit. In properties with mixed residential and non-residential uses, “Residential Property” includes mechanical space and common areas including but not limited to circulation, lobbies, storage rooms, balconies, roof terraces, laundry rooms, and other resident amenity spaces, and including parking spaces or garages, in the proportion that such areas serve the residential uses to the total square feet of gross floor area served by such areas.
(b) Converted Residential Property.
(1) For purposes of this Section 1108.7, “Converted Residential Property” means a property or portion thereof that has received a First Certificate of Occupancy following conversion from a Nonresidential Property to a Residential Property, including conversions involving the demolition of Nonresidential Property to construct new Residential Property, and that meets all of the following requirements for such conversion:
(A) received a Final Approval before January 1, 2030;
(B) a Qualifying Certificate was requested with respect to the property or portion thereof on or after the effective date of this Section 1108.7, but before January 1, 2030;
(C) within three years of the later of receiving Final Approval or the effective date of this Section 1108.7, but not before the effective date of this Section, received a First Construction Document; and
(D) at the time of the transfer for which the exemption in this Section 1108.7 is claimed, the square feet of gross floor area of the improvements on the property divided by the lot area of that property is at least one.
(2) New square feet of Residential Property gross floor area in excess of the square feet of gross floor area of the original Nonresidential Property shall constitute Converted Residential Property only up to the new square feet of gross floor area that equals 10% of the square feet of gross floor area that was converted from Nonresidential Property to Residential Property.
(3) For demolitions of Nonresidential Property to construct new Residential Property, “Converted Residential Property” includes only the square feet of gross floor area of Residential Property in the new building that exceeds the square feet of gross floor area of Residential Property in the demolished building, up to a maximum square feet of gross floor area of Converted Residential Property equal to the total gross floor area of Non-Residential Property in the demolished building plus 10%.
(c) Exemption from Tax. Any deed, instrument, or writing that effects a First Transfer of Converted Residential Property, up to the first 5,000,000 square feet of gross floor area of Converted Residential Property, shall be exempt from the tax imposed under this Article 12-C, except as otherwise provided in this Section 1108.7. For purposes of this subsection (c), the “first 5,000,000 square feet of gross floor area” shall be determined in the order that the Planning Department receives each request for a Qualifying Certificate and shall be aggregated across all Qualifying Certificates issued and outstanding. If a deed, instrument, or writing effects a transfer of property only a portion of which is a First Transfer of Converted Residential Property, or only a portion of which is within the 5,000,000 square foot limitation, the tax shall apply to the proportion of the consideration or value that the square feet of gross floor area transferred that is not a First Transfer of Converted Residential Property or that is not within the 5,000,000 square foot limitation bears to the total square feet of gross floor area transferred, with the rate in Section 1102 determined based solely on that proportional consideration or value. Land associated with gross floor area qualifying for the exemption in this subsection (c) shall also be exempt in the proportion that the square feet of gross floor area transferred that is exempt under this subsection (c) bears to the total square feet of gross floor area transferred.
(d) Requirements for Exemption. Every person claiming the exemption under this Section 1108.7 must do all of the following:
(1) Request, at any time after Final Approval and in the form and manner required by the Planning Department, a Qualifying Certificate from the Planning Department. At any time after receiving a Qualifying Certificate, a request to confirm or adjust the square feet of gross floor area that is proposed to qualify as Converted Residential Property may be submitted to the Planning Department in the form and manner required by the Planning Department. Any increase in the square feet of gross floor area requested under this subsection (d)(1) that exceeds the qualifying square feet of gross floor area stated on the Qualifying Certificate or any amendment thereto shall qualify for the exemption in this Section 1108.7 only to the extent that the 5,000,000 square foot limitation in subsection (c) has not been exceeded at the time the Planning Department approves the requested increase.
(2) After receiving the First Certificate of Occupancy and in the form and manner required by the Planning Department, request an Exemption Certificate from the Planning Department for each transfer for which the person intends to claim the exemption in this Section 1108.7. Any increase in the square feet of gross floor area requested under this subsection (d)(2) that exceeds the qualifying square feet of gross floor area stated on the Qualifying Certificate or any amendment thereto shall qualify for the exemption in this Section 1108.7 only to the extent that the 5,000,000 square foot limitation in subsection (c) has not been exceeded at the time the Planning Department issues the Exemption Certificate.
(4) Failure to timely satisfy the requirements of this subsection (d) renders the transfer ineligible for the exemption in this Section 1108.7.
(e) Effect of Exemption on Other Taxes. Any tax exempted under this Section 1108.7 shall be deemed to have been paid for purposes of Section 954(d) of Article 12-A-1 of the Business and Tax Regulations Code.
(f) Regulations. The Planning Department and the County Recorder may each issue rules, regulations, and interpretations of this Section 1108.7 consistent with the provisions of this Section and Article 12-C of the Business and Tax Regulations Code as may be necessary or appropriate to carry out and enforce the exemption in this Section.
(g) Sunset Date. This Section 1108.7 shall expire by operation of law at the end of the day on December 31, 2054, and shall not apply to any deeds, instruments, or writings delivered on or after January 1, 2055.
(Added by Proposition C, 3/5/2024, Eff. 4/12/2024)