In June 1996 the New York State legislature addressed the long-acknowledged inequity in real estate taxation between co-ops
and condos and single-family homes when it passed a bill authorizing tax abatements for eligible New York City owners of three or fewer co-op and condo apartments. Signed by Governor Pataki in July 1996, with the support of Mayor Giuliani and the City Council, this three-year abatement was to become permanent with the development of a long-term plan by the City Council and the Department of Finance. At present, the final plan is still being formulated, but many co-op and condo owners have taken advantage of the abatement to save a considerable amount on their real estate taxes.
Filing Deadlines
In implementing the abatement, which provides tax relief ranging from two percent to 25 percent, depending on the value of the apartment, the Department of Finance has been responsible for disseminating information and administering the program. Application forms were mailed to all co-ops and condos in New York City with instructions for filing. The paperwork must be completed by a co-op or condo board officer or managing agent, not by individual residents. The abatement schedule is aligned with the City's real estate tax year, which runs from July 1 to June 30. The deadline for filing for fiscal 1996/97 was in October, 1996. The deadline for filing for fiscal 1997/98 was in April, 1997. Because of the learning curve involved in the first filing, the Department of Finance extended the 1996/97 deadline to April 1997. As a result, in mid-1997, after establishment of the 1997/98 New York City tax rates, the Department of Finance notified some 269,000 eligible co-op and condo apartment owners that they would be receiving abatements for both the fiscal l996/97 and 1997/98 tax years.
In September the Department of Finance distributed these abatements to the buildings as a credit on their tax bills. The procedure from that point varied from building to building depending upon what the board had voted to do. In some cases the managing agent issued a check to each eligible shareholder or unit owner. In other buildings eligible residents received a credit on their monthly maintenance bill or a series of credits spread out over six months.
The next filing deadlinefor abatements distributed beginning July 1998will be in April 1998. The Department of Finance will again mail one form to each building. The applications will continue to require information not only to determine eligibility, but also to provide data that would facilitate development and evaluation of any proposed long-term plan. Some of the information requested is building-wide to be completed on the form. Other information is for individual units and should be attached. Three key pieces of information that must be includedand that in some cases have slowed down the information-gathering processare the social security numbers of all shareholders, number of rooms and square footage in each unit and most recent sales price.
A Plan for the Future
The current three-year program was intended to provide initial and partial relief of the recognized tax inequity as well as time to develop a plan to fully resolve the problem. The current legislation does not distribute the partial relief in an equitable manner; in fact, the legis ffb lation contains a provision that the City of New York shall present a plan to the legislatureno later than December 31, 1996containing recommendations to address the disparity in real property taxation between residential real property in Class One and residential real property in Class Two held in the cooperative or condominium form of ownership. The long-term plan was to be developed by the Department of Finance and the City Council Finance Division. The Mayor and City Council would have to endorse any recommendation forwarded to the state legislature.
However, the City of New York did not present a plan to the legislature on December 31, 1996. In late December the Action Committee for Reasonable Real Estate Taxes, an educational and lobby group that since 1990 has championed a series of proposals to cut the real property tax for co-ops and condos, along with representatives of the Council of New York Cooperatives and the Federation of New York Housing Cooperatives met with both the City Council Finance Division and the Department of Finance. At that time the Action Committee presented some preliminary proposals for the required plan. While the City Council Finance Division continued to support this tax reform, the Department of Finance stated that it could not yet discuss the various proposals but that it was meeting with all interested groups. In a report to the state legislature on December 31, 1996, the Department of Finance confirmed this position and noted that the need for a new databaseas well as the complexities of establishing the abatement programhad delayed plan development. The Department of Finance, however, confirmed its commitment to developing a comprehensive effective long-term plan and providing progress updates on a regular basis.
In September, the City Council Finance Division and the Department of Finance agreed that the basic elements of the tax disparity that the Action Committee plan addressed were valid. It was also agreed that any plan would have to be feasible to administer, would have to yield equitable treatment of Class Two co-ops and condos and would insulate other tax classes from the change. The Department of Finance stated that it would make every effort to be prepared to discuss the various views on plan options by December of this year.
Legislation for the long-term plan must be submitted and enacted in the 1998 session of the New York State legislature if the tax reform is to be continued and extended. The Action Committee and organizations representing a substantial majority of the 488,000 co-op and condo apartment owners in New York City will continue to press for an equitable and effective resolution of the problem. For current information, and to be placed on the Action Committee mailing list call (212) 496-1306.
Mr. Karp is chairman of the Action Committee for Reasonable Real Estate Taxes.
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