Over half of NYC luxury second properties may be exempt from pied-à-terre tax

Opaque ownership laws surrounding LLCs are complicating Mayor Zohran Mandami’s pied-à-terre tax rollout. New York City officials are struggling to determine who — if anyone — has primary residence in many of the city’s luxury second homes, and thus, which properties actually qualify for Mandami’s tax. 

On April 19, New York Mayor Zohran Mamdani and Governor Kathy Hochul announced a new "pied-à-terre tax" on one-, two-, and three family homes worth more than $5 million, and condominium and cooperative units worth more than $1 million, if not the owner’s primary residence. Last month, the city issued notices to 17,000 addresses, informing the owners they may be subject to the surcharge.

Michael Smilowitz, the New York City Department of Finance's general counsel, said “over half of the properties” that received the notices “are owned by trusts or entities such as partnerships, corporations and LLCs, rather than natural persons,” David Brand reports for Gothamist. If the occupant of a building holds a “majority interest” in the LLC listed in property records, the building is exempt from Mandami’s tax. 

However, it can be difficult for city officials to access the records to determine which buildings qualify for exemption. The Gothamist reports:

The Department of Finance “lacks sufficient information about the structure and composition of such trusts and entities to determine whether a residential property owned by a trust or entity serves as the primary residence” of the actual person behind the corporation, Smilowitz wrote.

In Manhattan, roughly 37% of properties are owned by LLCs. While Mandami and New York Governor Kathy Hochul estimated that the tax could bring in $500 million annually for the city, the actual revenue could be lower if qualifying LLC owners elude the tax.