FISCAL 2002 ABATEMENTS
AND EXEMPTIONS
WILL BE ENUMERATED IN NOVEMBER
Property tax bills for cooperative corporations and condominium unit
owners in New York City due July 1, 2001 contained no provision for
the property tax abatements because extender legislation had not yet
been enacted (see page 3). State legislation has been passed to extend
through June 30, 2004 abatements at 25% for buildings where the average
assessment per unit is $15,000 or less and 17.5% for cooperative and
condominium units of higher assessed values. At the writing of this
Newsletter, this legislation awaits Governor Pataki's signature.
DISTRIBUTING ABATEMENTS
Once the extender legislation becomes law, there will be an opportunity
for those not already registered for property tax abatements to submit
requisite information. Adjustments to reflect the abatements and exemptions
will appear on January and April tax bills. Condominium unit owners
receive individual bills, where they will each clearly see their abatements
and exemptions. But shareholders in cooperatives do not receive individual
tax bills, instead, their exemptions and abatements reduce the property
tax on the building. The cooperative must distribute the abatements
and exemptions to qualifying shareholders. In November, the Department
of Finance (DOF) provided every participating cooperative with listings
of the dollar amount due to each shareholder for all exemptions and
abatements for which they qualify, including property tax abatements,
the State's STAR (school tax relief) Program, and other programs for
which veterans and seniors have qualified. The cooperative must credit
shareholders appropriately by June 30, 2002, but it has the option of
when and how this distribution is made.
DOF SEEKS ALL THOSE ELIGIBLE
FOR STAR
Every New York homeowner is entitled to participate in the State School
Tax Relief (STAR) program for their primary residence. Individuals must
apply for STAR by filing DOF forms which permanently qualify the homeowner
for Star.
Senior citizens with a family income of $60,000 or less can qualify
for enhanced STAR benefits; to do so they must provide copies of their
tax returns when applying and must reconfirm income on forms which the
Department of Finance sends to them every two years. Because STAR applies
only to one's primary residence, homeowners in cooperatives and condominiums
who own more than one apartment can still only receive one STAR benefit.
When the STAR program was inaugurated four years ago, the Department
of Finance was able to quickly contact a great number of the homeowners
in New York City cooperatives and condominiums because it had developed
an extensive database in the course of implementing the co-op/condo
property tax abatement program. But a surprisingly small percentage
of these homeowners returned the STAR forms. DOF continues to actively
reach out to provide these benefits to all qualifying homeowners. By
referring to the summary list received last November, you can see which
shareholders in your cooperative are not currently receiving STAR. They
can request application forms from Taxpayer Assistance at (718) 935-9500
or via the DOF website at www.nyc.gov/ contact finance. Expedite the
process by providing the block and lot number for your building.
CITY RESOLVES "RS
FEE" PROBLEMS
The owners of rent regulated apartments are required to pay an annual
Rent Stabilization Fee of $10 to the City. When cooperatives and condominiums
actually own occupied units, they are responsible for this fee; however,
in most cases, sponsors or investors are responsible for the "RS
Fee."
Last March, as the Department of Finance was updating and automating
its records, suddenly delinquent "RS Fees" allegedly incurred
from 1984 to 1998 appeared on property tax bills, where compound interest
brought some bills to astronomical levels. CNYC immediately alerted
its members, suggesting that they investigate these fees before paying
them, since it was likely that sponsors, not the cooperative or condominium,
were responsible for payment. CNYC also entered into discussion with
the Department of Finance, which quickly confirmed that cooperatives
would be pursued only when they were the actual owners of the rental
units.
Reacting to the complaints from owners' groups and from CNYC and other
co-op/condo advocates, the City Council took action. On June 18, 2001,
Mayor Giuliani signed into a law a new bill eliminating interest due
if payment is promptly made (by mid-September) on delinquent RS Fees
due from 1984 through 1998. Furthermore, when an owner has made all
required payments from 1993 through 1998, the city will waive all payments
and interest that it was claiming due prior to 1993.
Soon the city will send bills for delinquent RS fees for 1999 and 2000.
No retroactive interest will appear on these bills.
U.C.C. 9 UPDATE CLARIFIES
CO-OP LIENS
On July 29, 2001 Governor Pataki signed into law extensive amendments
to Article 9 of the Uniform Commercial Code. With the passage of this
legislation, New York became the first state to establish standard procedures
for perfecting liens on cooperative apartments when share loans are
made. The amendments also reinforce prior legislation which make it
unnecessary for lenders to take possession of the proprietary lease
and stock certificate when a loan is made.
The new law clearly acknowledges for the cooperative an automatic first
lien on all shareholder apartments (provided, of course, that the proprietary
lease and bylaws of the corporation grant such a lien). It further eliminates
a provision of the old law which required that the co-op's lien be noted
on the stock certificate.
The revised U.C.C.9 took effect July 1, 2001. It is anticipated that
the New York co-op provisions will serve as a model for amendment of
U.C.C. 9 in other states where cooperatives exist.
COURT RULING ON MORTGAGE
RECORDING TAX
The New York Law Journal of July 18, 2001 reports a Court of Appeals
decision confirming that refinancings are subject to the mortgage recording
tax only to the extent that indebtedness is increased. The City of New
York had appealed a lower court ruling that to the extend that refinancings
did not increase indebtedness, they were not subject to the mortgage
recording tax. The Court of Appeals considered the City's argument that
subordination agreements amounted to new second mortgages, but determined
that they did not. The Court ordered New York City to refund to four
buildings tax it had collected, primarily for refinancing wraparound
mortgages without increasing overall indebtedness.
ONLY CITY SALES TAX DUE
ON FUEL & ELECTRICITY
In New York State, the purchases of fuel and electricity for residential
use are wholly exempt from State sales tax.. However, these items are
often taxed by the local government. New York City, for example, continues
to impose a 4% tax on such purchases.
Where a single meter measures both residential and nonresidential use,
all of the charges are exempt from that state sales tax so long as at
least 75% of the use, based on square footage is residential. Because
most cooperatives and condominiums satisfy the 75% test, few have been
paying any State sales tax on such purchases. However if an organization
has paid tax that it did not have to pay, it can apply to the State
Tax Department for a refund. Such an application ordinarily must be
made within three years. A cooperative or condominium seeking a refund
must be sure that it is the State tax that was paid, as opposed to the
New York City tax or some other local tax. Note that all sales taxes
including those imposed locally are collected by the State Tax Department,
so that the fact of payment to the State does not establish that it
was the State tax that was paid.
Where the 75% test is not satisfied, a cooperative or condominium can
certify the percentages of residential and non-residential use and pay
the State sales tax on only the nonresidential portion of the total,
rounded to the nearest 10%. Certification forms can be obtained from
the supplier, from any State Tax Department office, on the Department's
website (www.tax.state.ny.us) or from the Taxpayer Assistance Bureau,
Department of Taxation and Finance, W.A. Harriman Campus, Albany, NY
12227. Newly certifying organizations as well as organizations that
previously certified should be aware that last August the State Tax
Department issued an advisory opinion (TSB-A-oo(31)S) liberalizing the
rules concerning what portions of a condominium's areas and facilities
may be treated as residential. Again, organizations that overpaid can
apply for a refund.
COMPARATIVE STUDY OF 2000 OPERATING COSTS
The Comparative Study of 1999 Operating Costs has been published and
a copy has been sent to every CNYC member cooperative and condominium
and to all professional subscribers. Thanks to the cooperation of CNYC
members and of many accountants, data from 782 cooperatives and condominiums
is included in this Study. This annual analysis provides a framework
to help you decide if your own building is operating economically and
efficiently, by studying the various costs of operating a building.
Code numbers are used to identify the participants, while preserving
their anonymity. When the Study is sent to members whose financial data
is included, they are advised of their code numbers so that they can
find their own statistic.
The Comparative Study analyzes all data on a per-room basis, beginning
with the current assessment and mortgage figures for participating buildings
and the amounts paid as maintenance charges. It then lists amounts spent
per room on wages, fuel, utilities, repairs and maintenance, insurance,
management costs, administrative costs, water & sewer fees, property
tax, and debt service. When possible, elevator maintenance and legal
and accounting costs are each listed separately. The Study also presents
summary statistics, calculating the averages and medians for each item,
and the average portion of total operating budget devoted to each.
The Comparative Study of 1999 Operating Costs can be purchased from
CNYC for $5. Send your check to CNYC at 250 West 57th Street, NYC
10023-2142, being sure to specify the address to which to send the Comparative
Study.
CNYC is compiling data for the Comparative Study of 2000 Operating
Costs. To ensure its success, we need financial statements from as many
New York cooperatives and condominiums as possible. It has been suggested
that CNYC add to the Study the number of units in each participating
building. This will be attempted for the year 2000. Please send CNYC
your financial statement for the year 2000 by mid-September, so that
your information can be included in the Comparative Study.