Understanding New York City’s Property Tax Assessment Process

By:
Michael A. Benison, CPA, MST
Published Date:
Apr 7, 2015

The Big Apple’s real estate market is booming—as evidenceNYC skylined by the pace at the New York City Tax Commission, which reviews property tax assessments set by the city’s Department of Finance. Last year, the commission received 52,221 claims in connection with some 193,305 tax lots citywide, and it’s poised to receive between 50,000 and 53,000 applications for property tax assessments this year. In fact, according to Tax Commission President Glenn Newman, most of the city’s major players are filing applications through the commission’s office these days. I recently sat down with Newman to discuss how CPAs and their clients could ensure a smoother tax assessment process. Here are the key takeaways from the conversation. 

1. Understand the differences between the New York City Department of Finance and the New York City Tax Commission. The Department of Finance calculates the initial property assessment based on data that are collected and available; the Tax Commission can review and reduce the property assessment but cannot increase the assessment or decrease an exemption. “The Tax Commission has no control over the Department of Finance’s descriptive information,” Newman explained. “Any issues concerning descriptive information should be addressed to the Department of Finance.”

2. Remember, the most important factor in an assessment is the application. “Taxpayers need to pay attention to all of the details listed in the application and complete a true and accurate income and expense statement of the assessed property,” Newman said. It should be noted by law that almost all commercial property in the city must be valued using the income and expense approach.

3. Documentation pertaining to what the property is and its correct usage is essential in order to get an appropriate assessed value.  “If some discrepancies exist with the Department of Finance, applicants should state the accurate amount,” Newman advised.  For example, if the Department of Finance says a property is 50,000 square feet, but the property is actually only 35,000 square feet, the applicant should state the correct amount in the Tax Commission’s application and inform the Department of Finance about the updated figure.

4. You must let the Tax Commission know how outdoor space is being utilized. A new, explicit item being listed on assessment documents is the use of outdoor space, which is becoming more popular as high-tech industries—with their reliance on cell towers, telecom equipment, signage and generators—continue to grow. “The Tax Commission needs to be informed that there is outdoor space usage and how the property is utilized,” Newman said—important information if owners want an accurately assessed value. 

5. The Tax Commission office also works on construction and not-for-profit exemption cases. While construction exemptions are fairly straightforward, Newman explained that there has been an uptick in non-for-profit exemptions. The not-for-profit entities often own real estate and may have underutilized properties, which they can rent out. But if they rent out this space to other not-for-profit entities, it can have an impact on the exemption. For instance, there’s a limit on how much rent a not-for-profit organization can receive. While it can recover its costs of operation (including mortgage interest and depreciation), any profit from renting can significantly impact an exemption.

“It’s extremely important for practitioners to inform their not-for-profit clients to check their assessments and renewal notices annually,” Newman warned. In many instances, not-for-profit organizations may not pay attention to property valuation details, and this can result in a loss of their full exemption. The result can be a drastic increase in the property valuation, which can affect a future sale of the property and partial exemptions. “They may be exempt from tax now, but they should think about future concerns as well.”

Michael A. Benison, CPA, MST, is a senior tax accountant at EisnerAmper LLP.


DID YOU KNOW?
New York City Tax Commission Form TC309, Accountant’s Certification, was recently modified to be compliant with generally accepted auditing standards (GAAS) following a two-year push by the NYSSCPA’s Real Estate Committee.


 


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