Property tax fairness has been a top priority of CNYC for more than
a decade. Legislation signed August 9, 1999, is another important milestone
on the journey towards fair and equitable taxes for homeowners in cooperatives
and condominiums in the City of New York. It extends for two more years
the property tax abatements of 25% for cooperatives and condominiums
which the average tax assessment per unit is $15,000 or less, and 17.5%
abatements for those with higher assessments. Adjustments will be made
to tax bills for January 2000 to reflect the abatement retroactive to
July 1999, when the fiscal year began.
CNYC formed the Action Committee for Reasonable Real Estate Taxes in
February of 1990 to try to curtail ever-increasing property taxes. Martin
Karp became chairman of the Action Committee and quickly mastered the
history and the intricacies of New York City's property tax system.
Under his leadership, the Action Committee strove to make government
aware of inequities in the present system and to ensure that taxes would
not continue to rise precipitously each year.
CITY ACKNOWLEDGES TAX INEQUITIES
In 1993, a blue ribbon commission named by Mayor Dinkins confirmed that
the City's property tax structure did not deal equitably with all taxpayers
and, specifically, that cooperatives and condominiums paid far more
than their fair share of property taxes.
It took three more years before action was taken to correct these inequities.
In 1996, as requested by Mayor Giuliani and the City Council in a Home
Rule Message, a State law was enacted creating an escalating three year
abatement program to begin progress towards tax fairness. The law also
mandated the development of a long-term plan to continue the process.
But implementation of the abatement program proved a monumental task;
the Department of Finance (DOF) developed forms to capture detailed
information from the cooperatives and condominiums that sought to qualify
for the abatement. It designed computer databases to organize these
statistics and to calculate the abatements. Soon the 1999 fiscal year
drew to a close with no long-term plan in place and the abatement program
to sunset on June 30, 1999.
The Mayor and the City Council sought to rescue the abatement, including
in the June 4, 1999, City Budget a two-year extender of the abatements
at their current rates. But State legislation was required to effectuate
the extension. As Albany wrangled with its own budget issues, there
was no opportunity for the abatement to be considered and passed before
the City issued tax bills for fiscal 2000. Thus, cooperatives and condominiums
received larger than anticipated bills, devoid of the mitigating effects
of the property tax abatement.
CNYC and the Action Committee for Reasonable Real Estate Taxes pressed
relentlessly for the extender legislation. Assemblyman Pete Grannis
was the prime architect of this legislation; he and Senator Roy Goodman
had also introduced the 1996 bill that initiated the program. Assembly
Speaker Silver and Senate Majority Leader Bruno recognized the importance
of the abatement program throughout the difficult negotiations over
the State budget, and made it a significant priority. Finally, the extender
was included in an omnibus bill covering many tax issues statewide passed
on August 4th and signed by the Governor on August 9th. The bill also
contained another provision requested by the City capping increases
in class shares of New York city property tax at 2.5%.
QUALIFYING FOR THE ABATEMENT
Cooperatives that have participated in the abatement program in the
past have nothing further to do to receive the abatement for this fiscal
year. They have already provided full information to the Department
of Finance. DOF has sent renewal applications to the condominiums that
participated in the program in the past. These should be updated and
returned as quickly as possible, but no later than November 8th. Other
New York City cooperatives and condo-miniums that have not previously
participated should have received building-wide applications from the
Department of Finance, but if not, they can obtain these forms by calling
(212)669-3212. These must be completed and returned to the Department
of Finance no later than November 8, 1999. Buildings whose forms are
received after September 15th but before the final deadline may not
see the abatement reflected in their January bills, but they will received
adjusted bills thereafter.
DETERMINING TAX OBLIGATIONS
Every year the City Council distributes the tax burden among the four
classes of property tax payers by fixing different tax rates for each
class. To protect the owners of one, two and three family homes from
the full 5% increase in their share of taxes which was prescribed by
law, the Mayor and the City Council had together asked for necessary
State legislation to cap the increase for any class of taxpayer at 2.5%.
Authorized by this legislation, the City Council set the tax rates for
fiscal 2000 at its September 29, 1999, meeting. The rate increased slightly
for Class 2 properties, which include most cooperatives and condominiums,
from 10.739% in fiscal 1999 to 10.851% for the current fiscal year.
Since July bills were calculated by applying last year's rates to this
year's assessments, a slight upward adjustment will occur on January
tax bills. This will be all but imperceptible, since the January bills
will also reflect the newly reinstated abatements which could not be
included in the July bills, as they were not then authorized.
RECEIVING THE ABATEMENT
Condominium unit owners receive individual tax bills where an adjustment
for the abatement will appear on bills for payment in January 2000.
In addition to adjusting the January tax bill,cooperatives, where the
corporation pays property tax for the entire property, the Department
of Finance will calculate all appropriate exemptions and abatements
for each apartment. In November, the Department of Finance will send
the designated contact (often the managing agent) for each participating
cooperative a detailed chart, showing the precise dollar amounts of
exemptions and abatements due to each qualifying apartment. In addition
to the property tax abatement, certain homeowners in cooperatives and
condominiums qualify for one or more tax exemption programs. These were
included in the July tax bills and will be part of the explanation and
chart. They include the state School Tax Relief Program (STAR) which
became effective for all New York State residents in fiscal 2000. If
your cooperative or condominium is your primary residence, and if you
filed the appropriate forms with the Department of Finance, you are
now benefiting from the first of three years of escalating School Tax
Relief exemptions. Senior citizens with family income of $60,000 or
less already received enhanced STAR exemptions beginning last year.
Property tax bills also include exemptions for veterans and the Senior
Citizens Homeowner Exemption (SCHE), which requires an income of less
CREDITING ABATEMENTS AND
Cooperatives must pass on abatements and exemptions to qualifying shareholders
in the course of the fiscal year (no later than June 30, 2000). One
way to do this is to divide the abatement by six and credit the maintenance
bills for January through June of the year 2000. It is important to
note that both the property tax abatement and the STAR exemption program
are for the full year and go to the apartment based on its qualifying
on the record date of January 5, 1999. However, the SCHE and Veterans'
benefits go with the individual; if the senior or the veteran leaves
the apartment before the end of the fiscal year, the remaining dollars
revert to the City. For this reason, cooperatives should be careful
not to distribute the full exemption benefits too quickly.
ACCOUNTING FOR THE ABATEMENT
Because no abatements for the 1999/2000 tax year will be reflected on
tax bills covering the second half of calendar year 1999, some CNYC
member cooperatives have asked whether they may properly omit the July
through December 1999 abatement from consideration in determining how
much each shareholder make take as a federal tax deduction under Section
216 of the Internal Revenue Code. Can we, they ask, use the full amount
billed for the second half of calendar 1999 rather than this amount
minus the abatement that we now know will appear on a later bill?
Most experts advise against this, since it is known that the full abatements
will be credited as adjustments to the tax bills for the second half
of the tax year. They say that, if a cooperative which is an accrual
basis taxpayer as virtually all cooperatives are, makes a payment knowing
that it will get a credit for it later on, the payment cannot be deducted
by the corporation and therefore cannot be the basis for a shareholder
deduction under Section 216.
LONG-TERM PLAN IS STILL
The 1996 legislation and the current extender both call upon the City
to develop a long-term plan to bring fairness to the taxation of homeowners
in cooperatives and condominiums. CNYC and the Action Committee for
Reasonable Real Estate Taxes continue to press for the establishment
and implementation of such a plan. We have had assurances from the City
that experts are working on the plan and that a report will be presented
before year's end.
FINANCE DEPARTMENT AT CNYC
Representatives of the Department of Finance will answer questions about
tax abatement and exemption pro-grams at CNYC's 19th Annual Housing
Conference on Sunday, November 14th at Hunter College. DOF will have
a table in the Exhibit Area to distribute forms and answer your questions,
and Deputy Commissioner James Rheingrover will provide news from the
Department of Finance in a midday seminar.