New York City’s attempt to identify properties subject to its new pied-à-terre tax has triggered a lawsuit and temporary court block, with homeowners arguing that the city is incorrectly targeting properties held through trusts and limited liability companies.
The Wall Street Journal reported Monday that several homeowners who received tax notices share a common feature: Their homes are held through trusts. A trust or LLC is simply a legal structure that can hold a property instead of the individual owning it directly. The arrangement can be used for estate planning, inheritance or privacy, but it can also make it harder for the city to determine who actually lives in the property.
Why Trusts and LLCs Are Under Scrutiny
The tax applies to non-primary homes worth $5 million or more and certain co-ops and condos worth $1 million or more. Trust- and LLC-owned properties may qualify for exemptions. The city sent 17,000 notices, with about 3,800 exemption applications started within a week.
“Part of the point of this outreach from the Department of Finance is to ascertain whether or not that reflects a primary residence or not,” Mayor Zohran Mamdani said at a news conference last month, referring to homes owned by trusts and LLCs. “One of the reasons that this is being done now is to ensure that New Yorkers have requisite time before the implementation of the surcharge.”
The Wall Street Journal reported that one Brooklyn couple, who had lived in their home for 42 years, received a notice after transferring the property into revocable trusts. “Our records indicate the property above may be subject to the new surcharge,” the city’s letter stated. “Based on your property’s fiscal year 2027 market value of $5,479,000, the surcharge would be $43,832 unless you are granted an exemption.”
The issue comes after the city began notifying owners of luxury second homes in July as it prepared to implement the tax, which is expected to generate about $500 million for public services. The rollout also drew criticism after the city published a searchable property database covering roughly 960,000 properties, while officials said the database was not a targeted list of taxpayers.
The tax has also become part of a broader fight over New York’s approach to wealthy property owners. Critics including Nassau County Executive Bruce Blakeman have warned that higher taxes could put additional pressure on families, while Citadel founder Ken Griffin has criticized New York’s tax burden and business climate.
Court Challenge Puts Rollout on Hold
A New York judge temporarily blocked the tax rollout Monday while reviewing a lawsuit brought by homeowners who say the city improperly identified properties that could be subject to the surcharge. The ruling requires the city to remove its 960,000-property tax roll and pause enforcement tied to the 17,000 notices.
The lawsuit does not challenge the legality of the pied-à-terre tax itself. Instead, the homeowners argue that the city improperly shifted the burden onto them to prove that their properties should be exempt.
The city has defended the outreach, saying it needs more information to determine which properties are actually primary residences. The next court hearing is scheduled for Aug. 31.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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