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Council of New York Cooperatives & Condominiums
Article Archive
Tax Issues

Published: Autumn 1999

CO-OP/CONDO ABATEMENTS EXTENDED
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.

ACTION COMMITTEE
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.

ABATEMENT CHAMPIONS
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 than $27,900.

CREDITING ABATEMENTS AND EXEMPTIONS
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 URGENTLY NEEDED
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 CONFERENCE
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.

 
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