New chapter in the debated story of the pied-à-terre tax in New York City. In recent days a court decision has made a lot of noise and, as often happens when talking about taxes and real estate in New York, has also created some confusion.
We start from the most important thing: the tax has not been cancelled. However, a judge has established that the municipality has not properly followed the procedure used to identify properties potentially subject to the new tax. The contested point concerns in particular the Department of Finance, which had sent about 17,000 communications asking the owners to prove that the property was their main residence.
According to the judge, the procedure should have worked on the contrary: it would be the first to determine which property was actually subject to the tax, instead of transferring the burden on the individual owners to prove not to be. The court then ordered the administration to cancel the communications already sent and to proceed with individual evaluations before issue new ones.
But it doesn’t end here. The city has appealed and this has, at least temporarily, suspended the effects of the court’s order. So is the pied-à-terre tax still in effect? That’s where you have to be careful.
The recent decision did not declare illegal pied-à-terre tax and did not abolish it. The court ruled on the manner in which the municipality sought to apply it, not on the validity of the tax itself. At the same time, other legal actions are still underway that challenge more substantial aspects of the legislation, including its legitimacy and constitutionality. The situation, therefore, remains evolving.
And it is a distinction far from theoretical. Among the thousands of owners who received the communications of the administration there are also people who live permanently in the apartment of their own property and who, understandably, wondered why they had been involved in a tax designed for non-primary residences.
For those who own an apartment in New York, especially if used as a second home or pied-à-terre, the advice at this time is not to draw fast conclusions. The legislation exists, but its application is still at the centre of several disputes.
To determine whether a single owner will actually be subject to the tax you will need to assess the specific case, preferably with your lawyer or tax advisor. As often happens in the real estate of New York, a sentence can change the path without necessarily changing the destination. On this fee, the story is not yet over.
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