Client Alert: Pied-À-Terre Tax Law

If the news has not already made its way to you, on May 28, 2026, Gov. Hochul signed into law what is called the Pied-à-Terre Tax Law (“PAT Tax Law”) as part of the 2026-2027 New York State Budget, which law, made effective as of July 1, 2026, imposes an annual surcharge (“PAT Tax”) assessed on residential properties located in New York City which are not utilized as the owner’s primary residence and are identified as “luxury second homes.” The legislation, requiring eligible property owners to file for exemptions or pay the applicable PAT Tax, was passed in an effort to generate a predicted $500,000,000 in annual revenue with the intent of its application to reduce New York City’s $5,400,000,000 budget deficit.

Sadly, the cooperative shares appurtenant to units in cooperative corporation-owned buildings within New York City are included as real property under the PAT Tax Law, therefore, the New York City Department of Finance (“NYCDOF”) has sent notices to some cooperative corporations identifying shareholders who may have PAT Tax Law filing obligations and who may qualify for exemptions. If you have received such a notice pertaining to the cooperative unit associated with your shares, you have likely noticed that it requires that a filing must be made to either pay the tax or claim an exemption by Sept. 18, 2026, however, on Aug. 10, 2026 Staten Island Supreme Court Judge Wayne Ozzi temporarily halted the roll out of the PAT Tax as a result of a suit brought by three (3) New York City property owners whose primary residences were incorrectly identified as subject to the surcharge. The primary offense claimed by the suit was in the NYCDOF’s release of the tax roll which included owners, addresses, and property values of 900,000 plus residential properties, not in the institution of the PAT Tax itself, therefore, though so long as the temporary restraining order is in place, no further notices will be issued in addition to the 17,000 or so already released, it is anticipated that once the public tax roll is removed and the NYCDOF otherwise complies with what is required by the court, the suspension may eventually be lifted, perhaps even as soon as the next hearing scheduled for Aug. 31, 2026, if the NYCDOF is able to get its act together by then.

Therefore, despite the provisional pause, which in no way is to be interpreted as a repeal of the law, it remains important for you to be aware that, generally, holders of cooperative shares related to units in properties located within New York City who:

• own two or more residences, including one located outside of New York City,
• own a New York City residence with a market value exceeding $5,000,000 and
• do not occupy the New York City residence for more than 183 days during the tax year

are subject to the filing requirements pertaining to the PAT Tax, as to some degree, are cooperative boards and managing agents.

The NYCDOF determines the value of the cooperative shares associated with a particular unit with a calculation based on the unit’s share ratio (the number of shares allocated to the unit divided by the total shares issued by the cooperative corporation) multiplied by the building's overall assessed value. Unfortunately, since the notices released so far do not explain how the NYCDOF arrives at its valuations or provide enough information for shareholders to independently verify the calculations, shareholders will likely need information from their cooperative corporation or its managing agent, including the total number of issued shares (including any shares allocated to common areas, roof rights, etc.) to confirm the NYCDOF’s math. Though it is hoped that the suit causing the temporary suspension will be a catalyst for clarity as to what data the NYCDOF is using and whether it will provide additional valuation details before tax bills are issued, which is expected to be on or before Jan. 1, 2027, questions are certain to remain but those and the pause on the PAT Tax Law are no reason to put off preparing yourself.

Those questions which may be answered and the preparation needed would best be handled with the advice of counsel informed on the PAT Tax Law and updates thereto, so, upon your receipt of such notice or if you suspect your ownership may be subject to the PAT Tax Law filing requirement, rather than ignoring the potential liability or handling it unassisted, it would be prudent to immediately contact your attorney before responding to the NYCDOF, equipped with documentation such as proof of residency, ownership records, occupancy information and any other documents supporting an exemption or challenge, in order to evaluate your options, preserve your rights and provide guidance with (and the resulting peace of mind of) determining the proper procedure for compliance with the PAT Law.

If you have questions about the Pied-à-Terre Tax and whether you’re exempt, you should consult a qualified  NY Real Estate Cooperative and Condo attorney such as  Dean M. Roberts, Esq. who may be reached directly at dmroberts@norris-law.com or Michael T. Reilly, Esq. who may be reached directly at mtreilly@norris-law.com or either at the main line for Norris McLaughlin P.A. (212) 808-0700.