Dive Brief:
- New York City can move ahead with its rollout of a luxury second home tax, an appeals court ruled Wednesday, reversing a lower court’s September order that the initiative must start from scratch.
- The appeals court found that plaintiffs, who challenged the city’s procedural rollout of the surcharge, failed to demonstrate any actual harm or injury incurred.
- The high-end second home tax, also known as the pied-à-terre tax, was unveiled in April and is expected to generate $500 million for the city in fiscal year 2027, the city comptroller said.
Dive Insight:
The pied-à-terre tax is expected to impact around 13,000 secondary homes, including one-, two- and three-family homes valued at $5 million or more and condos and co-ops valued at $1 million or more.
New York City’s rollout of the new surcharge included 17,000 mailed notices and the publication of 900,000 residences on the city’s Department of Finance website that it called a "supplemental roll” of properties.
Plaintiffs — which included a handful of homeowners — argued the city’s letters of notice placed the burden of proof on them to determine whether their properties qualified for the new tax.
“The mere receipt of the initial determination notices by [plaintiffs] does not qualify as an injury, in and of itself, as the notice instead serves an informational purpose,” the court of appeals wrote.
Plaintiffs also challenged the publication of residences in the city’s “supplemental roll.” However, the petitioners “did not allege that any confidential material has been misused by the DOF as to cause a concrete harm,” the appeals court wrote. “Rather, the petitioners who submit proof of residency categorize their harm as a risk of inadvertent public disclosure of confidential information at a future time, which is too tenuous and conjectural to qualify as a concrete injury.”
Petitioners also argued the rollout of the tax has created “mass confusion,” but “confusion has been held to be too generalized, tenuous, and ephemeral to constitute” an injury, the court said.
Two other legal challenges to the tax itself are still pending, CNN reported.
Other states, including Montana and Rhode Island, are also moving forward with taxes on high-end, non-primary residences.
