NY STATE SENATE BILL NUMBER: S6628-A
Reprinted from the New York
State Senate Web site.
SUMMARY OF SPECIFIC PROVISIONS:
This bill grants a partial abatement of real property taxes to certain
homeowners of cooperative or condominium units in multi-family residential
properties classified as class two pursuant to the Real Property Tax Law.
The abatement is intended to partially reduce the disparate tax treatment
in New York City between cooperative and condominium homeowners in class
two and homeowners in class one.
Under the bill residential condominium owners and tenant-shareholders
in cooperative apartment buildings would be eligible for an abatement
of property taxes levied for FY 1997, 1998 and 1999. The NYC financial
Plan provides up to $8.5 million in FY 1997 and $70 million and $120 million,
respectively, for this purpose in FY 1998 and 1999.
To determine the amount of the abatement, the bill provides specific
abatement percentages to be applied in each year of the program. The percentage
will be applied to the tax liability for the proportion of the building
that is eligible for the abatement. The abatement percentages fall into
two categories depending upon the average tax assessment per residential
unit. For cooperative and condominium units in which the average tax assessment
per unit is less than or equal to $15,000, the abatement rates will be
4% for FY 1997, 16% for FY 1998 and 25% for FY 1999. All other class two
cooperative and condominium units will be granted reductions of 2.75%,
10.75% and 17.5%, respectively, for the same fiscal years.
The property tax abatement will be reflected on the tax bills of eligible
condominium units. For cooperatives the legislation requires that the
abatement be passed through from the buildings's tax bill to eligible
dwelling units. The bill also imposes a penalty if the board of directors
of a cooperative willfully fails to fully credit any tax abatement granted
pursuant to this program.
The bill contains specific provisions for cooperatives and condominiums
in other tax benefit programs. Those under the J-51 abatement (not the
exemption) program are qualified to participate in this program. The abatement
is also available to owners receiving benefits under the veterans' exemptions
or the senior citizen homeowner exemption programs.
To qualify for abatement under this program, an application must be filed
with the Commissioner of Finance by September 15, 1996 to receive the
FY 1997 abatement. The deadline for filing for abatements for FY 1998
and FY 1999 is April 1, 1997 and 1998, respectively. The Commissioner
of Finance, however, is authorized to defer the credit of the FY 1997
abatement until FY 1998.
The information required in the application includes, but is not limited
to physical information, such as the number of stories; the number of
dwelling and non-dwelling units; the common interest or number of shares
allocated to each unit; and the total number of shares in a property held
in cooperative form of ownership. The application also requires the names,
social security or tax identification numbers of all owners of units and
the names and addresses of those designated by the board of directors
or board of managers for receipt of notices issued under this program.
The proposed bill also requires NYC to prepare and present a plan to
the state legislature containing recommendations by December 31, 1996
to address problems of disparate tax treatment between class one residential
properties and class two cooperative and condominium properties. The bill
provides that the program shall take effect immediately.
JUSTIFICATION: A 1993 study by the New York City Real Property Tax Reform
Commission found that the average effective tax rate -- as measured by
the ratio of tax liability to market value -- of cooperatives and condominiums
in class two was more than three times greater than the effective tax
rate of class one homeowners. The disparity in effective tax rates can
be attributed to differences in valuation methods and the effect of statutory
limitations on assessment increases.
One-, two-, and three- family homes are valued using sales prices of
comparable properties and the assessed value is equivalent to eight percent
of the estimated market value. The Real Property Tax Law limits the amount
the assessed value can increase due to growth in market values to six
percent annually and 20 percent over any five-year period.
In comparison, cooperatives and condominiums in class two are valued
as income-producing rental properties and are assessed at 45 percent of
the estimated market value. Unlike class one's limitations, state law
provides for a five-year phase in of assessment changes that are the result
of market value increases.
The differences in the methods of determining assessed value combined
with extraordinary growth in market values which occurred during the 1980's
have created a situation in which the effective tax rate of co-op and
condo homeowners in class two are, on average, three times higher than
of homeowners in class one. The proposed abatement represents the first
step on addressing this long-standing problem. In its Financial Plan,
the City has allocated $70 million and $120 million in fiscal years 1998
and 1999 for tax reductions under this program. Based upon the Department
of Finance estimates, more than 200,000 owners of cooperative and condominium
apartments residing in over 6,800 buildings or developments will be eligible
for an abatement.
The average annual abatement per apartment will vary depending on the
current tax liability of the building excluding non-residential units
and spaces. For a typical unit, the yearly abatement per apartment will
start at less than $100 in the first year of the program and will increase
to several hundred dollars in the third year. For example, a cooperative
apartment with a current annual tax liability of $2,000 will receive an
estimate abatement of $200 for FY 1998 and $350 for FY 1999. The bill
provides a higher abatement percentage for units with an average assessed
value of $15,000 or less because this group was found to have higher effective
rates than the units above $15,000.
The eligibility provisions of the bill are intended to benefit owners
of cooperatives and condominiums. However, the abatement is not available
to the sponsors of the building and block investors who hold more than
The bill's provisions to exclude buildings receiving J-51 or 421-A tax
exemptions or other property tax incentives or subsidies recognizes that
the effective tax rates in these buildings are comparable to, or less
than, those of small homes. These limitations do not apply to buildings
which receive only J-51 abatements or units eligible for the Veteran's
and/or Senior Citizens Homeowner Exemptions.
The legislation also includes a provision for the City to prepare recommendations
that will provide equivalent tax treatment of homeowners, whether the
home is a one-family house, for example, or a cooperative studio apartment.