The list of homeowners who may owe New York City’s new pied-à-terre tax has shrunk, partly because New York State provided tax information six months early.
New court filings show a second wave of letters is going out to thousands of owners who may be required to pay the tax, which the city calls a surcharge. Plaintiffs in a lawsuit challenging the tax rollout say the latest filings prove the city moved too quickly.
Mayor Zohran Mamdani stood by the surcharge at a press conference this week. He said the city still expects it to raise significant revenue.
“We continue to be confident in that assessment of what the annual revenue will look like,” the mayor said.
The legal tussle that began earlier this month centers on homeowners who argue that the city’s initial notice mailing was too broad. Their lawsuit contends that the city unduly forced owners to prove residency, rather than requiring the city to determine eligibility.
At issue is a surcharge on high-value properties not used as primary residences. It applies to properties worth at least $5 million, or $1 million for some property types.
New round of letters
The New York Department of Finance is sending letters to a new wave of roughly 12,000 owners. According to the latest filings, about 1,210 of them are being cleared entirely. They no longer need to take any action.
Those reversals stem from an early batch of state tax data. New York State sent DOF preliminary 2025 income-tax records on August 12, months ahead of the usual February timeline.
Of those reversals, DOF cleared 630 owners because their 2025 returns listed the property as their home address. It cleared another 580 using a mix of 2025 extension filings and 2024 returns. Neither group needs to submit anything further.
Plaintiffs’ lawyers take these exceptions as an acknowledgment that the city’s first pass swept up properties that should never have been treated as potential targets for the surcharge.
“That is not a minor correction,” Benjamin Williams of Rosenberg & Estis and attorney for the plaintiffs, said in a statement to HousingWire TBD. “It supports the plaintiffs’ argument that the original process was overinclusive and placed the burden on owners before DOF had reviewed the most current tax information.”
An additional 4,400 owners will learn that their original determination still stands and must still prove primary residence to avoid the charge.
Digging deeper on ownership structure
A third group, about 6,400 owners, own property through trusts or entities such as Limited Liability Corporations. Those owners now need additional paperwork.
“The Department of Finance does not have sufficient information on the primary residence holder,” Mamdani said at the press conference.
The issue with LLCs and trusts is a complicating factor but not necessarily the city’s doing.
“We are finding a real disconnect between the policy the legislature articulated for this surcharge and how it is actually applying,” Nicholas Montorio and Gary Bingel, partners at tax advisory firm EisnerAmper, said in a statement to HousingWire TBD. “The Department of Finance has some discretion, but it cannot disregard clear statutory language.”
They added that it’s up to the New York legislature to make meaningful change to the surcharge structure.
“The stated policy goals of the surcharge describe owners of second homes who draw on the city’s economy and its services without contributing to the cost of them,” they said. “Most of our clients receiving these notices do not look like that. They are New York City tax residents, or the property is somebody’s actual primary residence, and in most of these cases the disconnect turns on nothing more than how title happens to be held.”
They said owners with good-faith challenges should still appeal, whether to the department or the Tax Commission, even without a clean fit under a statutory exemption.
Deadline extension
To give owners more time, the city has extended its filing deadline once again. Owners now have until Oct. 6 to submit documents. The city had already extended that deadline once before, to Sept. 18.
Still, the city is warning owners not to be complacent. A new letter does not mean the October deadline no longer applies. Some letters clear owners outright; others still require a response.
The city’s filing notes that the seven property owners who sued the city over the surcharge are among those cleared. It argued their claims are now moot and the lawsuit should be dismissed.
“Correcting their notices does not necessarily resolve the broader questions raised by the rollout,” Williams said.
DOF says more than 5,500 owners have already submitted proof of residency. Nearly 2,900 of those submissions have already been approved.
“Owners should read the new notice carefully, gather any required documentation and respond by October 6,” Williams said. “The court will decide what happens to the lawsuit, but property owners should not wait for that decision before acting.”