Published: Winter 1998
PROPERTY TAX ABATEMENTS RECEIVED;
LONG-TERM PLAN EXPECTED;
ADDITIONAL EXEMPTIONS ANTICIPATED
PROPERTY TAX ABATEMENTS
As detailed in the autumn issue of this Newsletter,
property tax abatements for fiscal 1997 and fiscal 1998 were
credited against property tax bills for qualifying condominium
units and cooperative apartment buildings beginning in July
1997. This marked the culmination of many years of advocacy
by the Action Committee for Reasonable Real Estate Taxes,
in-depth investigations of the tax structure by two City administrations,
"home rule" messages from the City and the City
Council, and a strong legislative push in Albany. All of which
was followed by monumental data-gathering and number-crunching
by the Department of Finance, which required that cooperative
and condominium buildings -- or their property managers --
provide the DOF with data on every apartment and its owner.
For condominium owners -- who each receive their own individual property
tax bill -- the benefits were immediately evident. In cooperatives, where
the abatement is credited against the property tax burden of the building,
it took a little longer before qualifying apartment owners received their
abatements, but the DOF provided complete information to facilitate this
distribution. In September 1997, as soon as precise rate information was
available, the DOF sent each cooperative a list of all its qualifying
units and the precise dollar amounts to be credited to each one.
Chapter 273 of the Laws of 1996 authorizes the DOF to impose significant
fines on cooperative boards if they do not promptly distribute the abatement.
This law links the abatement to the apartment unit (even if ownership
changed between the filing of the forms and the receipt of the abatement);
thus, recent purchasers may experience a small windfall or they many have
made their own arrangements to share the reduction with the prior owner.
The cooperative itself has no responsibilities in this area.
Most cooperatives have credited the abatement on the maintenance bills
of qualifying apartments -- sometimes in one lump sum, more often in installments
divided over several months. To comply with the terms of Chapter 273,
your cooperative must distribute the entire abatement for fiscal 1998
by the end of June.
Cooperatives in which all units qualify for the tax abatement have consulted
CNYC about incorporating the abatement into building funds, rather than
being subjected to the complications of distribution. While this is not
possible under the current law, it is a reasonable possibility to consider
in the creation of the long-term plan. If implemented, this would enable
such a building to create an annual budget that deals directly with the
net amount of property taxes for which the cooperative would be responsible.
On the other hand, cooperatives that have concerns about the 80/20 rule
might question whether the gross (unabated) property tax responsibility
can be maintained as the basis for calculating the level of non-member
income the cooperative may earn. A request has been made to the IRS to
cast light on this issue; it is anticipated that a response will be forthcoming
in time for buildings on the cusp of 80/20 to impose shareholder assessments,
if necessary, to ensure compliance.
The third year of the property tax abatement is for fiscal 1999. It provides
a very significant abatement of 25% of the property taxes on buildings
where the assessment averages $15,000 per apartment or less and 17.5%
for cooperatives with per-unit assessments in excess of $15,000. To qualify,
cooperatives and condominiums must file appropriate forms with the Department
of Finance by April 1, 1998. The DOF has sent to the designated contact
persons (often the managing agent) of buildings that qualified for the
prior years' abatements a computer form showing all of the data requested
for each unit. To qualify for the third year of the abatement, these buildings
must provide any missing descriptive data where there are blanks on the
form. These buildings must also provide full information on new owners
of any apartments that changed ownership between January 5, 1997, and
January 5, 1998. In addition, the DOF requires sales price information
on every new sale. Buildings that did not qualify for the first two years
of abatements must provide full information on every unit as of January
5, 1998, in order to qualify for the fiscal 1999 abatement. This will
be credited on July 1999 tax bills.
Chapter 273 required that the City develop a long-range plan to continue
progress toward tax fairness for homeowners in cooperatives and condominiums.
The City administration and the City Council are firmly committed to this
project, which has taken far more time to develop than was originally
expected. CNYC has received repeated assurances that serious work is progressing
on the development of a long-term plan. It is important that all eventualities
be carefully checked to ensure that the program will deal equitably with
cooperatives and condominiums, that it will be affordable to the City
and that it will not adversely impact on other property tax payers. No
sector of City government is prepared to allow this important tax abatement
program to sunset, and DOF representatives have pointed out that the Mayor's
financial plan does make provision for continuing funds for property tax
relief for cooperatives and condominiums at roughly the same 25% and 17.5%
levels as is mandated for fiscal 1999. CNYC and the Action Committee for
Reasonable Real Estate Taxes continue to monitor the progress of the long-term
plan and will keep members informed of developments.
MANY QUALIFY FOR TAX EXEMPTIONS
In addition to the property tax abatements, there are several exemption
programs currently in place or scheduled to commence shortly that will
affect the property tax bills of New York housing cooperatives. They are
listed below. Note that in all cases these exemptions accrue to the specific
individuals and apply during the specific periods of time that they own
their apartments, unlike the property tax abatement which travels with
the unit once it qualifies on the January 5th record date of each year.
Because of all the information that is now necessary to file with the
DOF about the owners of each apartment, cooperatives and condominiums
will help new owners and ease the burden on management if they include
appropriate forms as part of their closing procedures.
SCHOOL TAX RELIEF
In 1997, the State legislature passed Governor Pataki's STAR program providing
school tax exemptions statewide on homes -- including cooperatives and
condominiums -- that are the primary residences of at least one of their
owners. An Enhanced STAR program was established to enable senior citizens
with family incomes of $60,000 or less to begin to benefit from this program
starting in July 1998. All other homeowners who file forms confirming
primary residency will receive their exemption on tax bills beginning
in July 1999.
ENHANCED STAR BENEFITS ACCELERATED
For fiscal 1998, Governor Pataki has proposed to accelerate the STAR exemption
for seniors with family incomes of $60,000 or less. This would bring them
an exemption on $50,000 of full value in the determination of school taxes
as of July 1998, rather than phasing in the exemption over a four-year
period, as was originally planned. This enhancement for seniors will take
just a small portion of the budget surplus that New York now enjoys.
Each state locality has developed its own means of collecting data to
implement the STAR program. Nowhere is this task as complex as in New
York City, where the preponderance of homeownership in cooperatives creates
special challenges. Fortunately, the massive database which the Department
of Finance has had to amass for the property tax abatement program was
very helpful. In December 1997, the DOF sent personalized forms to each
person listed as the shareowner of a cooperative unit that qualified for
the property tax abatements. If the information these forms contained
was correct, the owner simply needed to indicate whether their cooperative
unit was their primary residence and then return the form to DOF.
If cooperatives did not participate in the abatement program, the DOF
does not have names of individual owners. To capture the STAR data it
needs for these buildings, DOF has sent forms to the board or manager,
asking that full information on the building and all its shareowners be
compiled and forwarded to DOF. For those units that had changed ownership
since the January 5, 1997, information date, CNYC joined DOF in trying
to collect timely information on the new owners.
The deadline for receipt of this information for seniors qualifying for
the enhanced benefit is March 2, 1998. Those eligible for next year have
until January 5, 1999, to file, but it is in your interest to get all
information to the DOF as soon as possible so that questions that may
arise can be resolved. The DOF has agreed to continue to accept STAR forms.
As it did for the property tax abatement, DOF plans to contact buildings
for verification of the data it has before providing STAR exemptions for
all primary residences. This exemption is currently scheduled to begin
in July 1999 and to phase in over a three-year period.
Like the property tax abatement described above, the STAR exemptions
will be calculated against a cooperative's property tax bill; the DOF
will provide a list of the names of qualifying recipients and the amount
attributable to each one, and the cooperative will be required to distribute
the exemption to the shareholder in a timely manner. In condominiums,
where each unit owner receives a separate property tax bill, the STAR
exemption will simply be calculated on that bill.
VETERANS' EXEMPTION IN COOPERATIVES
The long-overdue recognition of veterans who are homeowners in housing
cooperatives, who deserved benefits parallel to those of their colleagues
in private homes, came last spring. As of July 1998, veterans in housing
cooperatives who have filed appropriate forms will find their tax responsibilities
greatly reduced. Veterans who served in time of war qualify for these
benefits (as do their surviving spouses), with additional levels of benefits
for those who served in combat or are disabled. Forms were distributed
by the Department of Finance and must be filed by the individual veteran
by March 15, 1998.
Like the property tax abatement, the veterans' exemptions will be calculated
against a cooperative's property tax bill; the DOF will provide a list
of the names of qualifying recipients and the amount attributable to each
one, and the cooperative will be required to distribute the exemption
to the shareholder in a timely manner. Veterans living in condominiums
have always been eligible for tax exemptions.
SCHE & SCRIE EXEMPTIONS
Finally, to complete the picture of all tax abatements and exemptions
currently available to CNYC members, we add a word about the SCHE and
The Senior Citizen Homeowner Exemption program gives tax exemptions to
senior citizens with family incomes of $26,900 or less. It was expanded
in 1996 to include seniors in housing cooperatives, and has significantly
enhanced the quality of life of these seniors. SCHE abatements are credited
against the property tax for the cooperative building and must be appropriately
distributed to the qualifying individuals. Seniors in condominiums have
long qualified for homeowner exemptions, which reduce their individual
tax bills. Because SCHE seniors qualify by definition for the enhanced
STAR program, the Department of Finance has included them immediately
without troubling them for any additional forms.
Buildings that are the homes of rent-regulated, low-income seniors and
certain cooperatives have tax exemptions through the Senior
Citizen Rent Abatement Program. The Department of Finance
now credits SCRIE against the property tax on a cooperative
building. As the cooperative distributes the appropriate amount
to the owner of the unit where the qualifying senior lives,
that owner is made whole for the rent increase that would
have been applicable if the senior were not exempted from
it. Owners of condominium units receiving the SCRIE credit
are similarly made whole for the rent that would otherwise
have been due from their rent-regulated tenants.