12.22.20 | Client Alert
Identical bills are currently in committee in the NYS Assembly and Senate (S. 44, A.B. 4540). These bills (hereafter, the “bill”) if enacted will raise the real property tax in New York City on residential properties that are not the owner’s primary residence. This is commonly referred to as a “pied-à-terre tax.” Whether the bill will become law, as is or with amendments, is uncertain at this time. However, some believe that a version of the bill will pass both the house and assembly with a veto-proof Democratic majority (i.e., even if Governor Cuomo would be inclined to veto the potential legislation, the state legislature could override the veto).
If the current version of the bill is enacted, the tax will become effective starting with the 2021-2022 property tax year. As proposed, the pied-à-terre tax would:
- Impose an annual property tax of 0.5% to 4% on one-, two-, or three-family residences with $5 million or higher of fair market value determined based on the five-year average market value (using a comparable sale-based valuation method as determined by the Department of Finance). The tax would apply to the fair market value above $5 million.
- Impose an annual property tax of 10% to 13.5% on residential condominium and cooperative units with assessed values of $300,000 or higher. The tax would apply to the assessed value above $300,000 as determined by the city assessor. Assessed values are typically lower than the property’s fair market value.
The proposed legislation includes exemptions that are applicable to the following circumstances:
- The property or dwelling unit is the primary residence of at least one owner;
- The property is the primary residence of the parent or child of at least one owner;
- The owner of the condominium or co-op has obtained an appraisal report certified by a state-certified real estate appraiser or authenticated by a state licensed real estate appraiser, within the prior three years, showing that the residential property or dwelling unit has an appraisal value of less than $5 million; or
- The property is rented on a full-time basis to tenant(s) who use the property as their primary residence.
The Berdon State and Local Tax Team is monitoring the legislative status of the pied-à-terre tax Bill and will provide updates accordingly.
Berdon LLP New York Accountants