This is one outlet's own report from Business Insider — the article as it was filed.
AIPROPX ReportBusiness Insider · 57m ago
Rich New Yorkers trying to dodge the new tax on second homes slam into a harsh reality
Pacific Press/Getty; Getty Images; Tyler Le/BI
Among New York City's wealthiest homeowners, the stages of grief over the city's hotly contested " pied-à-terre tax " go something like this: First, anger at the chaotic rollout . Then denial, as they pepper lawyers and tax advisors with various versions of "How can they do this?" Bargaining follows, as they hunt for loopholes or long-forgotten documents to plead their cases.
Some can afford to jump straight to the final stage: acceptance . The uber-elite may brush off the new tax, levied on second homes worth at least $5 million, as merely another line item tacked onto their vast portfolios. For most others, however, coming to terms with Mayor Zohran Mamdani's new policy will be more of a journey.
"People do not like hearing the word 'tax,'" Steven Cohen, a longtime luxury real estate agent, tells me.
Those hoping to sidestep the extra bill are running into a big problem: The new tax leaves little daylight for the kinds of workarounds that rich, absentee property owners are floating to their trusted advisors.
"People are trying to get a little creative," says David Fitzhenry, a local real estate attorney who advises high-net-worth clients. "But the way the statute is written, there's not a lot of room for creativity."
Add in the fact that New York City bureaucrats are famously aggressive in chasing down residents whose travel schedules could expose them to the city's steep income tax, and you're looking at a bunch of crestfallen millionaires and billionaires.
"I have one client who said, 'Well, they don't know that I live in Florida,'" recalls Fitzhenry. "I said, 'Where do you file your tax returns?' He says, 'In Florida.'"
Fitzhenry chuckles. "That's a tough sell."
Attorneys and accountants have been fielding concerned calls from wealthy homeowners since mid-April, when Mamdani strode in front of the ultra-luxe condo tower at 220 Central Park South — the site of a $238 million penthouse owned by hedge fund tycoon (and noted Miami resident) Ken Griffin — and reiterated his pledge to "tax the rich." Wringing more dollars from the cushy, largely empty crash pads that dot the five boroughs has long been a point of fascination among those who believe the wealthy should contribute a few more coins to the city's coffers. Previous stabs at a second-home tax, most notably in 2019, gained some traction but ultimately fizzled. This time, though, Mamdani and Gov. Kathy Hochul had the juice: In May, the state legislature passed an annual "pied-à-terre tax" on pricey New York City properties whose owners don't use them as their primary residence.
Citadel CEO Ken Griffin paid a record $238 million for the penthouse at 220 Central Park South. Marcin Golba/NurPhoto via Getty Images
For the first couple of years, the tax will apply to one-, two-, and three-family homes worth more than $5 million , as well as condos and co-ops valued by the city at more than $1 million. One important detail: The city has a formula for valuing condos and co-ops that estimates how much income they could generate as rentals and then uses that number to calculate a total dollar figure. These wonky city valuations typically amount to a fraction of the true market value, meaning that a condo valued by the city at $1 million could very well fetch five times that amount in a sale.
For such high-dollar domiciles, even a modest tax can yield a hefty haul. Griffin, for instance, could shell out an extra $1.3 million to $1.4 million next year for his three New York City holdings, my Business Insider colleagues calculated . The mayor's office has said it expects the tax to bring in about $500 million annually.
The rollout this summer spurred another round of angst and recrimination. First, the city began sending ominous letters to thousands of homeowners, warning that they may be subject to the additional bill. Then came an easily searchable list of more than 900,000 New York City properties, along with their owners and valuations. Though the list merely cobbled together already publicly available data, it did make it easier for anyone to ogle their neighbors' homes, and it stoked plenty of outrage among those caught up in its swirl — including many New York residents who won't actually be on the hook for the tax.
"They're really angry," Andrew Jagoda, a real estate attorney, says of some of his clients. "Less sometimes about the tax, though there's certainly that, but about how the city went about doing it and how embarrassed they are."
A lawsuit filed in early August by three New York City homeowners briefly halted the process , but the city quickly appealed, and the rollout continues as the case works its way through the courts (a formal hearing is scheduled for later this month). Notably, the lawsuit doesn't challenge the underlying statute, and the dozen advisors I spoke with say they're telling clients to proceed as if the city will eventually collect its due. "Clients should be prepared for the worst here," Fitzhenry tells me.
The private-jet-setting crowd is used to playing a game of cat and mouse with cities and states eager to claim their fair share of income. The rich meticulously track their time spent in various locations to make sure they don't hit the number of days that could put them on the hook for, say, New York taxes, while on the other side, government employees pore over cellphone records and credit card statements to see if they can make a case to the contrary. This battle can lead globetrotters to embrace some goofy yet indispensable tricks of the trade: installing phone apps that warn when they're approaching resident status, for example, or strategically planning trips so they spend as little time as possible physically present in New York to stay under the 184-day threshold. "Every day counts," says Marisa Friedrich, a New York-based tax advisor. "Even if you're arriving super late on a Monday, you fly in at 11 p.m. — you just created a day f...
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