On September 29, a New York State Supreme Court judge ruled that the implementation of the “pied-à-terre Tax” program by the New York City government had flaws. The court stated that the need to determine the property owners who are required to pay taxes must be reassessed, and the current tax notifications are to be revoked. The city government has indicated its intention to appeal the decision.
According to Fortune magazine citing the ruling by Judge Wayne M. Ozzi of the New York State Supreme Court on Staten Island, the Department of Finance (DOF) of the city needs to reevaluate the way this new tax is being implemented. However, the judge did not overturn the tax law itself, but rather addressed the execution process by the city government.
The additional tax, authorized on May 28 this year, specifically targets high-value properties in New York City that are owned but not used as the primary residence by their owners. The scope of application includes one to three-family homes, as well as cooperative apartments (co-ops) and condominiums. The city government estimated that this measure would generate approximately $500 million in revenue annually.
In July of this year, the Department of Finance sent notifications to about 17,000 property owners informing them that their properties might be affected by the additional tax and requesting certain owners to provide documentation to prove that their property is their primary residence. Additionally, the city government released a supplementary property valuation list involving nearly 960,000 housing units, with some long-term New York residents finding their names and property information listed.
Attorney Randy Mastro, a former deputy mayor, represented three property owners in a lawsuit challenging the tax. He raised three accusations: firstly, state law requires the tax department to individually assess each property before sending notifications, a step that was skipped in this case. Secondly, the city government did not complete this work itself and instead made property owners prove they did not owe taxes. Thirdly, there is no provision in the law allowing the city government to publish an online database containing over 900,000 properties and their owners’ names and addresses.
In the ruling, Judge Ozzi found that the Department of Finance unnecessarily shifted the burden of proof onto numerous property owners, requiring them to spend time and money proving their residency status. The court therefore demanded that the city government remove the broad property list that had been made public and identify properties truly subject to the additional tax in a more precise manner. The previously sent notifications must also be retracted and reissued.
The city government previously stated that publishing the supplemental valuation list was a required procedure by law and that the list did not imply that all properties listed were required to pay taxes. The Department of Finance website also clarified that only properties that are deemed potentially subject to the additional tax would directly receive notifications, with most of the properties listed in the public database not receiving notifications.
According to sources familiar with the city government, the city is expected to file an appeal as early as Tuesday night.