A California appeals court poured cold water on the biggest challenge yet to the so-called mansion tax in Los Angeles, ruling that the Measure ULA ballot measure that created a tax on high-priced real estate is legitimate.

The Howard Jarvis Taxpayers Foundation and others asked the court to reverse the ruling that established Measure ULA because of potential conflicts with the city’s charter.

If passed, the amendment would have effectively dismantled the tax, which places a 4% levy, up from 0.45%, on property sales topping $5.15 million and a 5.5% charge on deals exceeding $10.3 million. It would also have limited the ability of any California city to impose similar levies.

The tax measure passed with 58% approval of LA voters in November 2022. It took effect in April 2023.

“The passage of Measure ULA pursuant to a majority vote of the city’s electorate was a valid exercise of the people’s initiative power,” wrote Justice Armen Tamzarian in an opinion published Monday on behalf of the California Court of Appeal, Second Appellate District. “Under the California Constitution, the people retain the power to enact special real property transaction taxes by local initiative.”

The tax has limited investment interest in Los Angeles when compared with cities without such a property levy, according to researchers at the UCLA Lewis Center. The group said the measure cost the city $25 million per year in taxes in the first two years of its implementation because the volume of transactions dropped.