Mamdani’s pied-à-terre gambit forges ahead, despite backlash

Mayor Zohran Mamdani’s administration is seeing the light at the end of its chaotic rollout of a pied-à-terre tax.

After weathering rebukes from lawmakers and a legal challenge from homeowners represented by former Deputy Mayor Randy Mastro, an appeals court greenlit implementation of the levy to continue apace until oral arguments take place on Aug. 31.

Despite all the noise and pushback the administration has faced over its first stab at taxing the rich, most recently getting flack for its no-show at a Council oversight hearing this week, the underlying policy remains intact.

The central issue for lawsuit plaintiffs, homeowners and lawmakers who have spoken out is the more than 900,000 addresses published online by the Department of Finance as potential targets of the new tax. The information on that list is published annually as part of the public assessment roll, but added to backlash over the administration’s early promotion of the tax. That included a video wherein Mamdani pointed to Citadel founder Ken Griffin’s $238 million penthouse at 220 Central Park South as an example of the high-end properties the tax would target.

Peeling back the onion-like layers of the pied-à-terre tax rollout has left many teary-eyed. It would likely take a constitutional challenge to truly dislodge the policy’s implementation, but once the supplemental roll is whittled down from its initial pool to contain mostly eligible non-primary residents, the end result may seem quite modest by comparison.

Delayed, not derailed

The Mamdani administration has already delayed the deadline to apply for exemptions, shifting nearly a month from Aug. 21 until Sept. 18, but lawyers and tax experts are urging clients to take that date seriously despite any hopes they may hold that a legal challenge may delay implementation further.

A temporary restraining order by Judge Wayne M. Ozzi would have required the city to take down the list, halt further actions collecting the tax based on the notices mailed to 17,000 homeowners and bar enforcement of the deadlines to apply for exemptions. The administration’s appeal of that triggered a stay of that order, allowing the DOF to proceed with implementation after receiving an appellate judge’s swift approval.

When asked what power the Council had to assist homeowners with the rollout of the tax, Council member Gale Brewer, a supporter of the tax, answered that the oversight committee’s function is to ask questions about implementation.

“It is a shame that the City can’t own up to its own mistakes and admit that it has badly botched the rollout of this surcharge,” Mastro said in a statement. “Instead, the administration is doubling down, going to court to ensure that it can continue harassing and threatening New York City homeowners who clearly are permanent residents – something the City would know if it would only do its homework.”

Even the Mastro-led suit does little to undermine the policy itself, instead arguing plaintiffs were wrongly named in the initial tranche of properties, according to Geoffrey Weinstein, a member of Cole Schotz P.C.’s tax, trusts and estates department.

“Presumably, that relief is for New York City to go back and pare down the list, maybe rescind the initial notices and reissue to those who are either subject to the tax,” Weinstein said. “The court would have to weigh the harm of casting this wide net, versus what would likely be a prolonged delay in collecting receipts, which [New York] is counting on for the budget.”

As of Aug. 18, homeowners had started 9,884 applications for exemptions and completed 5,001, with the city approving 2,318 exemptions.

“One thing about implementing these wealth taxes for a very specific group, say half a percent of the one percent, is that these people have resources, they can hire the best tax lawyers, best accountants, and they’re prepared to allocate these resources to fight any inequities,” Weinstein said. “What you’re going to see is a lot of challenges to value, and then the question is going to be, does the city have the resources to hire its own appraisers?”

Next steps

Lawyers for the administration and homeowner plaintiffs will square off on Aug. 31 for a hearing on the temporary restraining order. But that appeal process may extend beyond Sept. 18, and anyone awaiting the appellate court’s ruling may miss a key deadline.

Even then, homeowners would still have the option to formally appeal any DOF residency determination or challenge market value with the Tax Commission until March 1 for class two and March 15 for class one properties.

“It almost makes the whole point of the lawsuit silly if September 18th comes and goes and everyone has to file their appeals on time,” said Timothy Noonan, partner at Hodgson Russ. “The whole point was to put a pause on that.”

DOF Commissioner Richard Lee noted in written testimony that he would be prepared to testify after the Aug. 31 court date, citing pending litigation as the justification for not sending anyone to address the Council committee.

“The Administration’s focus remains on ensuring this surcharge can do what is intended to do: generate the revenue our city needs to serve New Yorkers across the five boroughs,” Matt Rauschenbach, spokesperson for the mayor, said in a statement.

The administration had requested a postponed oversight hearing date that would allow DOF to field questions directly, which the Council declined, according to Lee’s testimony. Instead, the committee sent DOF an 11-page laundry list to answer.

“I could see taxpayers challenging the applicability, the constitutionality or some aspect of the law,” Noonan said. “I think we will definitely see more litigation on it.”

Additional plaintiffs, including Kenneth Fishel of Legacy Real Estate, joined in on the existing legal challenge to the tax rollout this week. Meanwhile, homeowners are contemplating a broader challenge aimed at the foundations of the tax itself, including President Donald Trump.

“There’s going to be a lot of controversy,” Weinstein said. “This litigation is just sort of the appetizer, but it’s sort of saying this rollout could have been done better and this is why. Ultimately, we haven’t seen the entrée.”