For the vast majority of lawyers, interaction with Appellate Judges is quite limited and generally reserved for tension-filled, highly formalized, brief appearances before a stern and imposing panel that literally sits on high and fires vexing questions rapid-fire before saying “please sit down”. And the appellate decision-making process is often a murky one in which it’s unclear who is actually behind the scenes, writing the decision, and whether the decision was drafted before the lawyer stood up to present oral argument.
Justices of the Appellate Division, Second Department
Over the past couple of months I had a decidedly different dialogue with the Justices of New York State’s Appellate Division. In a rare career experience, I was invited to present a private Continuing Legal Education program on the subject of property taxation to the Court Attorneys of the Appellate Division’s Second Department, and then present again to Appellate Justices from the First, Second, Third, and Fourth Departments, thus covering all of New York State.
In March I was welcomed at the Appellate Division, Second Department, at the Brooklyn Courthouse, by Continue Reading
Many of our clients and colleagues have asked in recent weeks whether property damage caused by Superstorm Sandy may present any opportunities for local tax relief. Sandy affected roughly 81,000 properties and caused some $35 billion in property damage in New York alone, according to CoreLogic.
Natural disasters, which now occur with some regularity in various parts of the country including the Northeast, can often present challenging valuation issues for appraisers and assessors; because property taxes in New York are generally based on market value, there is potentially a direct relationship between disasters and your taxes.
One report suggests that these catastrophes may have a negative effect on the market in some areas. According to the report, “the effect that natural disasters can have on housing markets are certainly localized, but in those areas, they can have a chilling and immediate influence on home buyer confidence and stall mortgage operations, hurting home sales and having even more dire consequences when combined with other economic factors.”
Many assessors will look at the cost to repair or replace the damaged property as a proxy for the value loss, although with income producing properties the measure of value may focus more on whether net operating income was reduced on a stabilized basis.
It is also important to bear in mind that valuation for assessment purposes occurs as of a specific date each year, which will be unique for every local municipality. For instance, if the valuation date in your town or city is July 1, then the assessor will only be concerned with the property market as of that date and not what may have occurred afterward (until dealing with the next assessment roll). Likewise, many assessors will also need to work with yet another date, usually referred to as “taxable status”, which takes into account the physical condition of the property at another point in time. The two dates are often quite different—a confusing element of New York tax law that we will leave for another day’s discussion—but suffice to say that it is not as simple as presenting the assessor with a list of your damages and receiving a tax reduction.
Interestingly, in some cases of significant property destruction, be forewarned that an assessor might decide that your property’s value has increased. This might occur, for example, where the existing use of the property rendered the raw land more valuable than it was as improved. In short, give careful consideration prior to making any application for relief.
New York City homeowners may enjoy some specifically-targeted tax breaks in the wake of Sandy. Under a proposal from the office of Mayor Bloomberg that remains subject to legislative approval, the City would extend property tax payment deadlines, interest free, and might also provide refunds on property taxes that were already assessed for structures that were badly damaged by the storm. This latter measure would apply to more than 900 properties, which would receive reimbursements averaging about $800.
Everything is bigger in New York City. Some one million property owners paid $17 billion in real estate taxes last year. Of those owners, 184,000 thought they were unfairly assessed and appealed the City’s valuation, resulting in about $500 million in tax refunds granted at the administrative level alone. But, the City’s property tax system is largely the product of a self-reporting scheme, and now a report by the Manhattan District Attorney, following investigation, indicates that many owners may be evading taxes by omitting taxable real estate on their returns or filing false documents and information.
The report recommended seven systemic changes that it said were “desperately needed” and came on the heels of prosecutions of several owners for the failure to report income received from renting billboards in Times Square, among other things, thus evading payment of tens of thousands of dollars in taxes. According to the report, civil sanctions and harsher penalties, as well as increased assessments, among other things, should be levied upon landlords who attempt to fraudulently deprive the City’s coffers of revenue. Other examples cited include the reporting of vacancies or owner-occupation where space was in fact rented.
Interviewed exclusively for New York Property Tax Monitor, Glenn Newman, President of the New York City Tax Commission, told me, “the majority of property owners file complete and accurate income and expense statements. However, when owners fail to report income or overstate expenses in order to ‘game’ the system and obtain a lower assessment everyone else’s taxes are higher than they need to be. Accurate filings will lead to better assessments and help establish a fair and equitable tax roll.”
Mandatory income and expense reports for 2011 were required to be filed as of today. Since the news broke, many high profile owners, fearful of discovering that they may have unintentionally underreported assets and income, are seeking the assistance of tax consultants and law firms to internally audit their own filings to ensure proper compliance.
Property taxes throughout New York State may be among the highest in the nation, but there is no shortage of properties that escape taxation. Legally. And in a sign of the times, exemptions, abatements and creative (and often controversial) agreements to take properties off the tax rolls are in high demand.
A recent post to this blog highlighted the adoption of the Green Buildings property tax exemption. This is only one of the most recent additions to a long list of New York State exemptions that include such standards as affordable housing, pollution control, senior citizens, agricultural, veterans, educational, religious, and charitable. More unique opportunities to save taxes include exemptions for bank branches, crime victims, greenhouses, horse racing (and the related “manure-handling“), fallout shelters, silos, and wind power systems, among many others.
Many communities throughout the state are virtually throwing exemptions and temporary incentives at owners in an effort to turn around the effects of New York’s dramatic Continue Reading
“Green buildings” — improvements constructed to meet Leadership in Energy and Environmental Design (LEED) certification standards — have received much attention in recent years, but have also presented challenges in valuation and property taxation. Not long ago, I counseled a local lodging developer who sought to create a truly “green” hotel, despite the fact that it would inevitably cost far more to build than if he used traditional materials and designs.
Unfortunately, because tax assessments for new construction are often set based roughly on cost in many localities, the municipality insisted on an assessment that was beyond true market value and that would make the project unfeasible. Ultimately, our client shopped around and found a more favorable location in which to build.
New York State, through a bill that recently passed unanimously in the Assembly and Senate and was ratified by Governor Andrew Cuomo, will encourage green commercial and residential development by providing property tax exemptions Continue Reading
New York’s highest court has recently reaffirmed that property owners may not stick their heads in the sand and claim a defense to non-payment of taxes based on lack of notice. All that is required in a tax foreclosure proceeding brought by the municipality is a proper initial notice under Article 11 of the Real Property Tax Law. After that, additional notices relating to each step in the process are not legally required to enforce the tax.
The Court of Appeals, writing in Orange County Commissioner of Finance v. Helseth, approved the taking of the owners’ property for back taxes even though the owners claimed Continue Reading
Westchester County property owners may place astronomically high property taxes on their short-list of complaints, but they also have property taxes to thank for the County’s triple-A credit rating according to one source. In comparison to neighboring, wealthy suburban counties such as Rockland, Nassau and Suffolk, all of which depend on Wall Street to fuel their economic engines, Westchester’s tax structure allows it to borrow more cheaply and enjoy more stable revenues.
The surrounding counties depend far more heavily on sales taxes than property taxes. Sales taxes are considered to be more volatile and Continue Reading
Smaller tax bills for larger homes are drawing young families well north of the traditional New York City suburbs, and extending commute times for many. Places like Dutchess County are booming with new construction, even amid the faltering economy, often offered at nearly half the acquisition and tax cost of comparable homes in Westchester County.
While the job centers remain solidly in and around New York City, more and more middle-class couples are opting to accept a longer drive to work each day in order to come home to a more spacious and newer home that they can better afford.
According to a recent article in the New York Times, the tax differential alone may be the primary factor in such decisions. The article cites one example in which a property tax bill Continue Reading
Renters in New York City’s large apartment buildings pay far more in property taxes than homeowners. They also disproportionately shoulder the total City property tax burden, according to a report recently released by The Furman Center.
How could it be, one might ask, that renters would pay property taxes at all? They don’t, at least not by means of a direct payment to the City government, but the owners from whom they rent perform no acts of charity and pass along any expense they can in the form of rents. So, whether paid to the landlord or directly to the City, higher property taxes for apartments means a significantly increased cost of living. As anyone knows or might imagine, New York City apartment rents are already among the highest in the world.
Meanwhile, paradoxically, one- to three-family homes in New York City are taxed at the lowest effective tax rate. The effective rate for big rental buildings is five times that charged for ordinary homeowners. Clearly, City legislators expressed a strong preference Continue Reading
It may be true that death and taxes are a certainty, but the notion that property taxes are limited to no more than a two-percent annual increase in New York under the new tax cap law is simply a myth. To make things worse, the complex formula municipalities and schools must use to calculate how much they can raise tax levies is a complex challenge even for finance managers, in which the 2-percent figure is just one of eight factors.
Gov. Andrew Cuomo’s much-touted tax cap legislation was passed in June 2011, promising to end skyrocketing annual property tax increases throughout the state. Yet, even before the law went into effect, many wondered by what magic local government and school services could continue to be provided at desired levels, in addition to funding various mandates pushed down from Albany, with budget growth limited to well below historic levels for many tax districts.
The greatest source of confusion among most New York State taxpayers is the suggestion that Continue Reading