Mamdani hits road bumps with rollout of NYC’s pied-à-terre tax

A Staten Island judge found New York City mishandled the tax’s rollout — just as two lawsuits were filed claiming the tax discriminates against those who don't live in the city.MANHATTAN (CN) — New York City Mayor Zohran Mamdani was handed a loss in court Tuesday as his administration tries to get a first-of-its-kind tax against second homes off the ground.A Staten Island judge found the city mishandled its rollout of the so-called pied-à-terre tax, which imposes an additional charge on high-value residential properties in New York City that don’t serve as the owner’s main residence.New York Supreme Court Justice Wayne Ozzi criticized the city’s finance department for sending out letters to possible subjects of the tax and forcing them to prove why they shouldn’t have to pay it — a process the homeowners who brought the case against the city claimed was backwards.In their initial lawsuit, the plaintiffs complained they had received a letter despite being full-time New York City residents. They didn’t sue to block the tax altogether, just to find the rollout process unlawful.“Homeowners are being substantially harmed and penalized needlessly by DOF’s method of implementing the tax law,” Ozzi wrote in a 22-page ruling. “By requiring homeowners to seek an ‘exemption,’ the mailed notices irresponsibly and unnecessarily caused homeowners to expend time and money, lacked any real guidance as to the proof required, risked a 50% penalty for any submissions deemed ‘negligent’, and risked revelation of confidential matters (i.e. tax returns).”Additionally, the judge took issue with the city requiring homeowners to seek an “exemption” from the tax. It’s not really an exemption at all, he wrote, as many of the people who received the warning letters were city residents who would not have been properly subjected to the tax in the first place. Ozzi agreed with the plaintiff homeowners that such provisions amounted to “unlawful burden shifting” that violated their due process rights.Now, it’s back to the drawing board for the city. The judge ruled it must send out new mailed notices — only after the city properly assesses who should actually receive one, rather than forcing homeowners to prove their residence retroactively.Ozzi’s ruling came on the heels of two fresh lawsuits that challenged the lawfulness of the pied-à-terre tax itself.One complaint was brought by billionaire casino magnate Steve Wynn and former Secretary of Commerce Wilbur Ross. In their lawsuit, filed Monday in Suffolk County Supreme Court, they claim the policy is unconstitutional since it unfairly targets property owners who don’t claim New York City as their primary residence.“State lawmakers have made no secret that singling out nonresidents for disparate treatment was precisely the point of the PAT Tax,” Wynn and Ross claim in their complaint. “Through the enacting legislation and countless public statements, the state has consistently reaffirmed that the purpose of the PAT Tax is to force nonresidents to bear more of New York City’s expenditure for municipal services provided predominately for the benefit of full-time New York City residents, without adding to the tax burden of those residents.”Wynn and Ross say this is unfair since these nonresidents “already pay significant sums to the city in property taxes” despite using fewer municipal services than full-time residents do. Additionally, many of these nonresidents “make major contributions to the city’s charitable and cultural institutions,” they claim.The tax is especially egregious, according to the pair of businessmen, since it was hawked by city officials like Mamdani, who they can’t even vote against since they don’t primarily live in New York City.“Lawmakers have heralded the PAT Tax as a supposed solution to the city’s longstanding budget problems that will generate substantial funds from “outsiders” without asking full-time New York City residents — that is, those who vote in New York state and city elections — to pay more,” they say.Wynn and Ross’ concerns were echoed in a second lawsuit, filed Tuesday in New York County Supreme Court, where the plaintiffs similarly claimed the pied-à-terre tax was “conceived in discrimination, enacted in haste and rolled out in chaos.”The plaintiffs in that lawsuit include two couples residing in Florida with apartments in Manhattan, the owner of a Lenox Hill co-op and the owner of a Little Italy co-op who moved out of the city during the Covid-19 pandemic. They claim the new tax “substantially increased their tax burden, without any advance notice.”In a statement to Courthouse News, Jen Goodman, a spokesperson for New York Governor Kathy Hochul, said the governor was proud of the legislation and will defend it in court.“When Steve Wynn and Wilbur Ross try to cast themselves as sympathetic figures in a fight over paying their fair share on multimillion-dollar second homes, they’re making the case for the pied-à-terre tax as well as anyone could,” Goodman said. “Governor Hochul believes some of the wealthiest people in the world, and the powerful interest groups fighting on their behalf, can afford to help pay for the police officers, trash pickup and snow removal that keep New York City running.”A spokesperson for Mamdani’s office didn’t immediately respond to requests for comment.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads