Legal Challenges Mount Against New York's Pied-à-Terre Tax

New York City faces escalating legal battles over its controversial pied-à-terre tax, a levy targeting nonresidents who own high-value properties. A recent ruling by a state judge has put a temporary halt to certain rollout procedures, while new lawsuits challenge the fundamental legality of the tax itself.

The recent court decision focused on the city's requirement for homeowners to prove they did not owe the tax, a burden the judge found problematic. The tax applies to nonresidents owning co-ops and condos valued at $1 million or more, or one- to three-family homes worth $5 million or more. City Hall had notified approximately 17,000 New Yorkers of potential liability and had publicly listed 900,000 city properties as potentially subject to the tax, a move the judge ordered to be removed.

Despite the city's intention to appeal the ruling, at least two new lawsuits have been filed. Among the plaintiffs are prominent figures like Wilbur Ross and Steve Wynn, who argue that the tax unconstitutionally discriminates against nonresidents by imposing a tax on those who cannot vote for the lawmakers who enacted it. They also contend that the tax violates the state's real estate tax cap.

A separate, potentially more impactful lawsuit has been brought forth by a group of everyday residents with personal grievances. One plaintiff, Robert Friedman, faces a near doubling of his annual property taxes from $103,084 to $190,891 on his $2.2 million Upper East Side co-op, which he maintains in a trust for his children. Another plaintiff, Kent Barwick, who has owned his property for 50 years, is facing a four-fold increase in his tax bill after moving upstate. A couple, Scott Golden and Stephanie Cohen, who sold their apartment in July, were retroactively billed nearly $48,900, a substantial increase from less than $2,000, because the tax is retroactive to January 5.

A co-op building is also a plaintiff, tasked with covering the tax for shareholders who split their time outside the city. Their attorney, former Deputy Mayor Randy Mastro, asserts that the tax violates multiple constitutional provisions, including the Privileges and Immunities Clause, Dormant Commerce Clause, Due Process Clause, Equal Protection clauses, and Contracts Clauses.

The tax was reportedly conceived as a measure to generate revenue amid the city's extensive spending plans, with Governor Kathy Hochul involved in its development. Legal observers note that while New York's state courts might uphold the tax, federal courts could become involved if the state courts do not address the constitutional concerns.