Thousands of Long Islanders could be subject to Mayor Mamdani's pied-à-terre tax, Newsday analysis says

Thousands of Long Island taxpayers are connected to some of New York City’s priciest homes subject to a new annual tax, under Mayor Zohran Mamdani, aimed at any city home that is a non-primary residence known as a pied-à-terre, a Newsday analysis has found.

A wave of confusion, kvetching and lawyering up on Long Island and beyond by those hoping to avoid paying up was triggered after 17,000 warning letters went out to property owners potentially subject to the tax, along with a tax roll of the city's priciest homes — which included Long Island taxpayers — and was published simultaneously.

Most of the houses and apartments on that roll won’t face that extra tax, which New York State enacted earlier this year, with Mamdani’s nudging, to cover condos and co-ops valued at least $1 million and one-, two- and three-family houses at least $5 million.

The issue has inflamed owners, including one taxpayer who lives in the White House and could be on the hook: ex-New Yorker and President Donald Trump, now a Florida resident who has a second home — the Trump Tower penthouse — is among those with a pied-à-terre.

"This doesn’t work in America, and must be stopped, NOW!" Trump posted Tuesday on his Truth Social network.

Applying for exemptions

In the weeks since the letters were mailed, about 2,000 applications for exemptions have already been filed, out of 4,800 who have at least begun the process of applying, the city has said.

The tax roll of nearly 1 million properties potentially subject to the tax was published in a database posted online, pursuant to state law, adding to the consternation of New York's wealthiest.

On Monday, a Staten Island judge temporarily blocked enforcement of the tax, although within hours his ruling was put on hold once the city said it would appeal, which was affirmed on Thursday when an appellate judge ruled that the Staten Island judge's ruling was stayed until the outcome of the appeal.

As the authorities decide who owes the tax, the state is using the opportunity to scrutinize the tax rolls for potential fraud, such as those who have cars illegally registered out of state or claim to live outside the city and actually live in it full-time.

"Hard-working New Yorkers pay taxes that fund our schools, roads, transit, and public safety. The pied-à-terre tax was designed to ensure people who can afford luxury second homes, but don’t pay New York income taxes, are still contributing to the city they benefit from," said Jen Goodman, a spokesperson for Gov. Kathy Hochul. "If you’ve been falsely claiming to be a non-resident in order to cheat the system, it’s time to come clean — or our Department of Tax and Finance will take action to ensure you pay your fair share."

A senior fellow at the Niskanen Center think tank, Alex Armlovich, noted how "Surely some folks with family on Long Island are tempted to leave their cars and legal residency registered 'back home.'" The state's finance agency, "who are already infamous in the high-net-worth community," he said, "are going to get a fresh batch of material to work with."

Taxing the rich

The pied-à-terre tax was passed earlier this year, the culmination of Mamdani’s pledge to tax the rich, a plank of his democratic socialist mayoral campaign to fund social programs and, he said once in office, to keep the city fiscally afloat. It's estimated to raise about $500 million a year.

Under the tax, one-, two-, and three-family houses worth between $5 million and less than $15 million will be taxed annually an additional 0.8% of market value, and the tax tops out at 1.3% for houses worth $25 million or more. 

For condo and co-op units, the tax starts at 4% for a unit worth between $1 million and less than $3 million, and tops out at 6.5% for those worth $5 million or more.

The deadline to challenge being subject to the pied-à-terre tax has been pushed a month, to September. With it looming, clients current and prospective are seeking legal help from Long Island and beyond, tax lawyers told Newsday. 

Some are trying to avoid having to pay by proving their city residency, arguing that the ho

me in question is not a pied-à-terre, a French term for a small home, typically in a city, that is used only parttime. Others are asking their lawyers to challenge the property value as assessed by the city Department of Finance, to prove the value renders the property below liability for the tax, or at least that it should qualify for a lower tax amount.

"I have clients who have a house in the Hamptons, a house in Florida, and an apartment in the city," said Benjamin M. Williams, a lawyer with the firm Rosenberg & Estis who has gotten the calls.

He added: "Let’s say that they file their income tax return at the Hamptons house as their residence and their driver’s license and voter registration is at the Hamptons house, but they spend most of their nights at the apartment on Park Avenue, technically they are primary residents of New York City.

"But you can’t prove that with documentation," he added, "because all of the documentation points to your primary residence, so then you may have trouble wiggling out of the pied-à-terre in that situation."

Proving residency

One of the calls Williams recalled getting recently was from a full-time New York City resident who has a home on Long Island. Despite income tax returns, a driver's license and other paperwork listing his city address, the city suggested he isn't a city resident and said he may owe the new tax.

Cosimo A. Zavaglia, a tax lawyer with Morgan, Lewis & Bockius, said, "There are a lot of open questions and issues that a lot of taxpayers are weeding through." 

The city’s Department of Finance, which is in charge of property taxes, publishes an annual roll including who owns each house or unit and how much it’s worth. To identify those with Long Island connections, Newsday compared the names on the city’s roll listing the properties that would qualify for the pied-à-terre tax with political donations in city races and tax roll records published by Nassau County and each of Suffolk’s 10 towns. The comparison is imperfect, as two unconnected property owners could happen to share a common name, or the rolls could contain errors. 

Of nearly 1 million houses and apartments in the city that could be subject to the new tax, tens of thousands of distinct individuals, owning tens of thousands more homes, are connected to someone who pays property taxes on Long Island.

Those totals are almost certainly higher, as some are owned by a single-purpose legal entity, such as an LLC, set up solely to hold the property and mask the true owner.

Bruce Blakeman, Hochul's Republican challenger for governor, has promised to get the tax repealed if elected, and a group of homeowners earlier this month sued the city over the rollout, resulting in the Staten Island judge's ruling.

Those who might need to pay the tax are not happy, notably in wealthy pockets of Long Island.

The prospect of having to pay even more in taxes, coupled with the notices from the city putting the onus on the homeowner to prove residency, is discouraging Long Islanders from buying second homes in the city, said Carol Finocchio, a real estate broker in Bridgehampton and a lawyer.

She’s one of those discouraged Long Islanders.

"Honestly, I’m holding off because the whole thing upsets me," said Finocchio, who lives in Water Mill and sold her condo in Battery Park City in the aftermath of the pandemic. "It doesn’t make sense to buy there now."