Property owners can defer or pay fractions of taxes amid crisis

Gwen Everett

Crain’s NY Business

March 25, 2020

The City’s Department of Finance is offering property owners facing financial hardship the ability to defer or pay a small percentage of their property taxes.

The program, which offers three different payment plans, allows property owners to defer paying as much of 25% of the equity on a one to three family home, and 50% of the equity on a condominium, according to the Department of Finance.

It’s one of a series of public programs officials have announced in the past week to provide relief to people who fear losing their homes from the economic fallout of the Covid-19 crisis. Many of those programs have happened at the state level — New York issued a directive to waive mortgage payments for 90 days, and a freeze on foreclosures and evictions for 90 days. But this program also applies to New York City residents. 

“These are unprecedented times for New Yorkers, many of whom now find themselves struggling to make ends meet,” said Department of Finance Commissioner Jacques Jiha. “Through our programs, DOF hopes to ensure we do our part to help those who are struggling have one less burden to deal with as we work toward economic recovery.”

One payment plan for seniors allows those homeowners to partially or fully defer payments on late and future property taxes, for either a set or indefinite time period. The two other payment plans, the extenuating circumstances income-based plan and the fixed-term income-based plan, both limit property tax payments to 8% of their adjusted gross income. 

The extenuating circumstances plan lasts as long as a hardship such as death, serious illness, loss of income continues. The fixed-term plan only applies to the late payments plus payments projected to be due in the next year. 

City taxes on properties worth under $250,000 are due April 1. Taxes on properties worth more than $250,000 are due July 1.

IMPORTANT NOTE - The content of this post was emailed to NYSLTA Members on October 30, 2019.

That email included an addendum to the TP-584, which was inaccurate.  The file attached to this page is a corrected version and may be used anywhere in NY state, including NY City.

The purpose of this memo is to clarify the impact of the changes to Section 1409(a) of the New York Tax Law, which became effective September 13, 2019.

As you are aware, the new legislation requires the real property transfer tax return (the TP 584 and the TP584-NYC) relating to residential property (containing one- to four-family dwelling units) sold or purchased by a “Limited Liability Company” (LLC) to disclose information on the ownership of such company.

The legislation requires that the TP584 and the TP584-NYC MUST be accompanied by documentation that identifies the names and addresses of all members, managers and other authorized persons of the LLC.

Further, if any member of the LLC is another LLC or other business entity, all shareholders, directors, officers, members, managers, partners and authorized persons of said LLC or business entity must be listed by name and address until “full disclosure of ultimate ownership by natural persons is achieved. 

We realize that in some cases (e.g. a publicly traded corporation) this requirement will be practically impossible to comply with; we have been unofficially advised that we should submit the addendum with a statement that the entity is a publicly traded corporation and that the Clerk’s should accept the deed for recordation.

Therefore,

• If you are recording a deed; AND
• it is for residential real property containing a one- to four- family dwelling unit, AND
• a grantor or a grantee is an LLC

an addendum must be attached to the TP584 or the TP584-NYC identifying the names and addresses of all LLC members.

Although the State has not promulgated an “official” addendum to the TP forms, we attach a link to a form which has been accepted by the County Clerks.

Click the link below for a sample addendum which can be completed and submitted to fulfill the above requirements.

The Department of Taxation & Finance provides some guidance and examples here: https://www.tax.ny.gov/bus/transfer/rptidx.htm#conveyances

The NYSLTA has been actively engaged with the Dept of Taxation & Finance, the County Clerks, and the State, City and County Bar Associations regarding the foregoing.

Additionally, we have reached out to the sponsors of the legislation to provide input when an amendment is under consideration.

Further memos with guidance will be issued by NYSLTA, if and when the New York State Department of Taxation and Finance issues same.

NYSLTA had a telephone call with the Taxation & Finance Department on Tuesday April 30^th at 3:00. 

The following questions were asked by NYSLTA.

The Taxation and Finance Department’s answer follows each of the questions.

1.      If contracts made before April 1, 2019 are exempt from the new tax, what kind of proof will be required to show that the contract was actually made before April 1, 2019?  Besides the recording of the contract and/or payment of a deposit, what are the “other facts and circumstances” that the commissioner will require?

Will proof of a wire transfer be acceptable?

Does the down payment check or wire transfer need to be dated on or before April 1, 2019 for the conveyance to be exempt from the new tax?

If the contract is fully executed on or before April 1, 2019, but the contract permits the down payment to be made after April 1, 2019 (after the contract is fully executed), is the conveyance exempt from the new tax?

This question was primarily answered by Deb Lieberman. The phrase “other facts and circumstances” in the new statute came from prior transfer tax statutes. They will go back and look at earlier transfer tax cases and guidance and provide public guidance on the issue of when a contract is grandfathered. She opined that evidence of a wire transfer of a deposit will probably be acceptable evidence of the contract date.

A common theme through all of their answers was that public guidance will be provided soon, so stay tuned.

2.      If the closing occurs on or before July 1, 2019, does the deed have to be recorded on or before July 1, 2019 for the conveyance to be exempt from the new tax?  If the deed does not have to be recorded by July 1, 2019 will the date of the deed prior thereto be sufficient proof of a “conveyance” on or before July 1, 2019.

The date of conveyance is the date of “closing”, not the date of recording for purposes of paying the increased tax. If your deal closes before July 1 you do not have to try to rush to get it recorded before July 1 in order to beat the increase in the transfer tax.

3.       If a buyer purchases two condominium units, one for $1.5M and the other for $1M, is the State TT .4% for each or is it .65% because it is a “bulk” or “commercial” sale in the way that the City currently views it?  Will it make a difference if the two condominiums are purchased via one contract or via 2 separate contracts?

4.      Same concept if someone were to buy 2 units, each one for $2.5M, which aggregated is $5M.  However, the slight difference here is that the sale does not have to be considered “commercial” (although it may) because the dollar amounts in the aggregate exceed $3M, which is the threshold for the tax to increase to .65% for “residential” purchases. In other words, will aggregation be applied here? Again, will it make a difference if the two condominiums are purchased via one contract or via 2 separate contracts?

The Department did not answer questions 3 and 4 because they felt that further investigation is required on their part. They gave the impression that the same rules as currently apply for the City tax will probably be applied to bulk sales.

5.      When the rates go into effect, how will the TP-584 forms change to account for the different tax brackets?

There will be a new TP-584-NYC form. ACRIS is already on board with this. The form has a part III for the supplemental tax. This should be live at least 15 days in advance. That would be June 15.

6.      We would like the option to pay the Mansion Tax and Transfer Tax directly to the state on line prior to recording documents in the county.  This is would result in the state receiving payment prior to recording documents.

On-line payment of transfer tax is something that they would like to do, but it is not available yet. They are on board with the concept. “Maybe someday.”

7.      Once the new rates go into effect, will there be a contact person that we can speak with if we have additional questions?

They were reluctant to name a single contact person. Calls should go to the call center. If the call center cannot answer the question you should call any contact person that you are used to dealing with.

8.      Will regulations be issued for guidance to the industry?

There are no plans for a set of regulations. There will be public guidance published.

9.      What about mixed-use properties?  For instance, what if a property is sold that has commercial space on the ground floor and 2 residential apartments above?

Mixed use properties will be treated as residential for purposes of the additional transfer tax.

For the supplemental mansion tax the value of the property will be apportioned between the residential and commercial portions and the supplemental tax will only be applied to the residential portion. This is the way it is currently done.