Pied-à-terre tax challenged as city judge rules it wasn't properly rolled out, 2 more lawsuits filed

New York City’s pied-à-terre tax took a triple blow this week as a Staten Island judge ruled that the city had botched its rollout of the tax, and two State Supreme Court lawsuits in Suffolk County — one from casino mogul Steve Wynn — asked for the tax to be declared unlawful.

The city appealed the judge's decision Tuesday night, however, invoking an automatic stay a city official said put the lower court’s order on pause and allowed for continued implementation of the tax.

Earlier, Justice Wayne M. Ozzi, ruling in State Supreme Court in Richmond County on a case brought by Staten Island homeowners, did not address the legal and administrative basis for the tax. But he ruled that any tax notices the city already sent had to be canceled, and imposed rules for any new ones the city may send.

The extra tax was aimed at some of the most expensive nonprimary homes in one of the country's most expensive real estate markets, with charges starting at 4% for condo and co-op units worth $1 million to $3 million, escalating to 6.5% for those worth $5 million or more. Town houses were taxed on a different schedule, with a charge topping out at 1.3% for houses worth $25 million or more.

The tax had been expected to raise about $500 million a year.

The city mailed 17,000 notices from a list of 900,000 pied-à-terre addresses, Ozzi wrote.

New notices, Ozzi wrote, must "specifically" identify the residence to be taxed, and can be sent only after an "individualized" determination of eligibility. The city must disclose the records used to determine eligibility, he wrote. It also must advise homeowners of their right to challenge and the 50% penalty they may face if they’re found to have submitted false documentation to avoid the tax.

The Suffolk lawsuits named New York State as a defendant. A filing Monday from Wynn and former U.S. Commerce Secretary Wilbur Ross, who has homes in Southampton, Manhattan and Florida, argued that New York City’s tax discriminated against nonresidents "who already pay significant sums to the city in property taxes."

A separate suit was filed Tuesday on behalf of parties including a Dune Road, Quogue, homeowner, Robert Friedman, who also keeps a Park Avenue co-op in trust for the benefit of his children but will soon establish primary residence in Palm Beach Gardens, Florida. The ownership corporation of an Upper East Side luxury co-op building also is listed as a plaintiff. That suit alleged, among other arguments, that the tax was "discriminatory" against non-New Yorkers and was unconstitutional.

Friedman, according to the suit, faces a second-home tax of $86,418.44 in addition to a property tax liability of $104,473 for his Park Avenue apartment, and is "now considering selling the property" because of the taxes.

The Wynn-Ross suit argued that the state improperly treated revenue from the tax as separate from general property tax revenue and not counting toward the tax limit laid out in the state constitution.

The suit noted that over the summer, Ross was assessed a bill of $83,531.52 under the new tax; Wynn, with homes in Florida and Manhattan, got a bill for $183,094.69.

In an email, Matt Rauschenbach, a spokesman for Mayor Zohran Mamdani, called Ozzi’s decision "wrong ... With a stay, we will continue implementing the surcharge fairly, efficiently and in full compliance with the law, as we have since day one."

Rauschenbach repeated an argument both Mamdani and Gov. Kathy Hochul have made in recent months, calling the pied-à-terre "surcharge" a matter of fairness. "If you can afford a luxury second home in New York City, you can afford to pay your fair share for the schools, streets and parks that make this city work."

Jen Goodman, a spokesperson for Hochul, wrote in an email that Wynn and Ross were "making the case for the pied-à-terre tax as well as anyone could. Governor Hochul believes some of the wealthiest people in the world, and the powerful interest groups fighting on their behalf, can afford to help pay for the police officers, trash pickup and snow removal that keep New York City running. The Governor was proud to sign this legislation, and the state will defend it in court."

Hochul's office did not immediately comment on the other pied-à-terre lawsuit filed in Suffolk. The attorney on that lawsuit was Randy Mastro, former deputy mayor under Eric Adams and Rudy Giuliani. Mastro also filed the lawsuit that led to Ozzi's ruling. He represented Staten Island residents Rachel O'Brien and Carmine Morano, relatives of Staten Island Councilman Frank Morano, and a third plaintiff.

By Nicholas Spangler

nicholas.spangler@newsday.comspanglernewsday

Nicholas Spangler is a general assignment reporter and has worked at Newsday since 2010.