NY Appeals Court Clears Path for City Pied-à-Terre Tax Rollout

A four-judge panel of the New York Supreme Court Appellate Division, Second Department, on Wednesday reversed a Staten Island trial order and dismissed a lawsuit challenging New York City’s rollout of its pied-à-terre surcharge on luxury second homes, Courthouse News Service and Gothamist reported.

The panel — Justices Phillip Hom, Deborah Dowling, Francesca Connolly and Mark Dillon — held that the homeowners who sued lacked standing because receiving an initial determination notice, or appearing on a public list of properties that may be subject to the surcharge, was not an injury in fact. The court compared the notices to debt-collection letters that, standing alone, do not create a lawsuit.

What the trial judge had ordered

Richmond County Supreme Court Justice Wayne Ozzi ruled in September that the city had “substantially harmed and penalized needlessly” owners by sending notices that said they “may be subject” to the surcharge and shifting the burden onto them to prove their homes were primary residences, according to Courthouse News. Ozzi ordered the city to redo that process.

The Appellate Division disagreed. “All taxpayers incur time, effort and costs in determining and complying with their various tax obligations,” the panel wrote, as quoted by Courthouse News. The judges also said the plaintiffs did not allege that publication of a supplemental roll led to crime, harassment or defined public ridicule.

Inman, citing the decision, said the city had sent notices to about 17,000 property owners. Five of the seven homeowners named in the case who received notices were later exempted from the surcharge after the suit was filed; the other two did not claim to have received a notice, Inman reported. The appeal did not challenge the state statute that created the tax.

The surcharge and the politics

Gov. Kathy Hochul signed the citywide surcharge into law in late May as part of the state budget, Courthouse News reported. It applies to second homes valued at at least $5 million and to second condominiums and co-ops valued at more than $1 million. Mayor Zohran Mamdani has said the measure should raise about $500 million a year for city services; Gothamist noted that City Comptroller Mark Levine earlier estimated up to about $380 million from roughly 11,200 properties, and that the Department of Finance had already granted more than 8,800 exemption requests.

Mamdani said Wednesday he was “heartened” that the appeals court “rejected an attempt by the ultrawealthy to avoid paying their fair share,” according to statements carried by Courthouse News and Gothamist. Randy Mastro, who represents the homeowners, said the court took a “procedural off-ramp of standing” and called the rollout “unconscionable,” while saying the constitutional fights still ahead would be the “ultimate day of reckoning.”

Developing: Two separate lawsuits that attack the surcharge itself as discriminatory, including one involving Steve Wynn and former Commerce Secretary Wilbur Ross, remain pending; Mastro said those constitutional claims are set for decision next month.

Sources: Courthouse News Service, Gothamist, Inman.