A Staten Island judge has ordered the city’s Department of Finance to cancel tax notices related to the pied-à-terre surcharge and restart the process of identifying who owes the tax. The decision came in a lawsuit brought by former Deputy Mayor Randy Mastro, who represented homeowners who believed they had been wrongly included on the list. The initial list published by the Department of Finance included more than 900,000 property owners and addresses that met a value threshold for the surcharge.
The judge ordered New York City to redo its pied-à-terre tax rollout after finding that officials improperly shifted the burden of proving residency to homeowners. The city appealed the ruling and triggered a stay that allows enforcement to continue during the appeal.
The tax applies to homes worth more than $5 million or condos and co-ops valued at over $1 million when they are not the owner’s primary residence, according to Fortune. The judge found that the Mamdani administration did not do enough to verify whether properties were actually second homes before sending out notices, according to a report from therealdeal.com. Justice Wayne Ozzi ruled that the city must review all available information before determining if a property is subject to the surcharge.
The suit did not challenge whether the tax itself was legal, but focused on how it was implemented. Mastro’s lawsuit made three main claims about the city’s process, including that state law required individual property reviews before sending notices. The city had sent out notices to about 17,000 homeowners in July, but later admitted it didn’t check income tax records before mailing
A Staten Island judge has ordered the city’s Department of Finance to cancel tax notices related to the pied-à-terre surcharge and restart the process of identifying who owes the tax. The decision came in a lawsuit brought by former Deputy Mayor Randy Mastro — who represented homeowners who believed they had been wrongly included in the rollout. The supplemental roll published by the Department of Finance included more than 900,000 properties but inclusion on the roll did not mean a property was subject to the surcharge.
The tax applies to one- to three-family homes worth more than $5 million or condos and co-ops valued at at least $1 million when they are not a primary residence. The judge found that the Mamdani administration did not do enough to verify whether properties were actually second homes before sending out notices. Justice Wayne Ozzi ruled that the city must review all available information before determining if a property is subject to the surcharge.
The suit did not challenge whether the tax itself was legal but focused on how it was implemented. Mastro’s lawsuit made three main claims about the city’s process — including that state law required individual property reviews before sending notices. The city had sent out notices to about 17,000 homeowners in July but later admitted it did not check income tax records before mailing them.
After reviewing tax filings thousands of the flagged properties were found to be primary residences. Mastro said he received one of the notices himself despite living in Manhattan for many years. Mastro has filed several lawsuits involving New York City governments during his legal career.
Mastro said the city must now review each owner individually before demanding payment. The city’s rollout of the tax was expected to bring in at least $500 million a year. Reuters reported that the city appealed the ruling and triggered a stay that allows it to continue enforcement while the appeal is pending.
Mastro also represents plaintiffs in a separate constitutional challenge to the tax itself that was filed on September 29. That lawsuit alleges several constitutional violations including discrimination against out-of-state property owners. Former Commerce Secretary Wilbur Ross and others have also filed their own legal challenge to the tax.
Ross’s lawsuit targets the tax itself rather than just how it was rolled out. New York State lawmakers enacted the pied-à-terre tax as part of the state budget in May with the Department of Finance responsible for enforcement. The city’s Department of Finance had already issued notices to roughly 17,000 addresses in July.
The judge’s order requires the city to issue new notices after determining which owners may actually owe the surcharge. A spokesperson for Mayor Mamdani said the city is fighting to support working New Yorkers and that the ultra-wealthy are fighting in court to avoid paying their fair share. The city’s position is that the tax is a fair way to ensure owners of luxury second homes contribute more toward public services.
The ruling does not determine whether the tax itself is constitutional — only how it was applied. Mastro’s suit also criticized the city for publishing a supplemental database containing more than 900,000 properties online. His lawsuit argued that the publication of the database was not authorized by the law governing the surcharge.
The ruling requires the Mamdani administration to redo major parts of the tax rollout. Mastro said he has sued city administrations before under mayors including Michael Bloomberg and Bill de Blasio. The city’s approach to the tax has been under scrutiny since its implementation on July 1.
The case is one of several legal challenges to the tax with more litigation already underway. The city has said it will continue implementing the surcharge in compliance with the law as it works through the court process.
The underlying pied-à-terre surcharge remains in effect while separate lawsuits challenge whether the tax itself is constitutional.
IMAGE: New York State Assemblymember Zohran Mamdani photographed in Assembly District 36, photographed by Kara McCurdy. Photo: Karamccurdy / Wikimedia, taken 2024-02-10, CC BY-SA 4.0