New York City Department of Finance (“NYC DOF”) recently began notifying property owners by mail that they may be subject to the City’s new Non-Primary Residence Surcharge, which will be imposed annually on certain high-value residential properties that are not used as primary residences.[i] Although the surcharge is commonly referred to as the “Pied-à-Terre Tax,” it applies to a broader range of non-primary residences. Receipt of a notice does not necessarily mean that the surcharge applies. Rather, it reflects the NYC DOF’s preliminary determination that the property may be subject to the surcharge unless the owner establishes that an exemption applies. Property owners who qualify for an exemption must timely submit the required application and supporting documentation. For the initial 2026 notices, the exemption application deadline is: (a) August 21, 2026 for residential homes and condominiums, and (b) August 24, 2026 for cooperative apartments. In addition to mailing notices, the NYC DOF has published a supplemental market value roll identifying properties that may be subject to the surcharge.  As with the initial notices, inclusion on the supplemental market value roll does not necessarily mean that a property is subject to the surcharge or that an exemption is unavailable. The supplemental market value roll is available here. Which Properties Are Subject to the Surcharge? The surcharge generally applies to the following properties, provided that an exemption does not apply: Tax Class 1: One-, two-, and three-family homes with a market value of at least $5 million; and Tax Class 2: Condominium units and cooperative apartments with a market value of at least $1 million. The amount of the surcharge depends on the property’s market value as determined annually by the NYC DOF. The surcharge will be added to the property’s statement of account (i.e., the property tax bill) and will be due and payable in the same manner as property taxes.[ii] How Is Market Value Determined? During so-called “Phase 1” of the tax (July 1, 2026 through June 30, 2028), there is a different method for determining market value depending on the tax class.  For Tax Class 1, the NYC DOF generally estimates market value by analyzing the sale prices of similar properties.  For Tax Class 2, New York law requires the NYC DOF to value the property as though it were a rental apartment building, using the income and expenses of comparable rental properties.[iii]  Following June 30, 2028, “Phase 2” begins, and the valuation methodology and the applicable market value thresholds for condominium units and cooperative apartments will change to align with the Tax Class 1 approach.[iv] How Much Is The Surcharge? The applicable rate depends on the property’s tax class and market value.[v] Tax Class NYC DOF Market Value Surcharge Tax Class 1 (one-, two-, and three-family homes) $5 million to less than $15 million 0.8% $15 million to less than $25 million 1.05% $25 million or more 1.3% Tax Class 2 (condominiums and cooperative apartments) $1 million to less than $3 million 4.0% $3 million to less than $5 million 5.25% $5 million or more 6.5% During Phase 1, the Tax Class 2 surcharge is five times as much as the Tax Class 1 surcharge.  This seems to reflect the view that the market value for condominiums and cooperative apartments under the current methodology are a fraction of their potential sale value. Once Phase 2 begins and the market values for Tax Class 2 properties are determined in a manner similar to the Tax Class 1 properties, the perceived undervaluation will be addressed and the Tax Class 1 rates will apply to all properties subject to the surcharge. Common Exemptions Many property owners who receive a notice will nevertheless qualify for an exemption. Common examples include: the property is the owner’s primary residence; the property is occupied as the primary residence of a qualifying tenant under a bona fide lease; the property is occupied as the primary residence of a qualifying immediate family member; the property is owned by a limited liability company and occupied as the primary residence of a majority owner; or the property is held in trust and occupied as the primary residence of a qualifying beneficiary or trustee, as provided in the NYC DOF’s rules.[vi] The availability of an exemption depends on the specific facts and ownership structure. How Does the NYC DOF Determine Whether a Property Is a Primary Residence? The NYC DOF makes an initial determination each year based on the available information. In determining whether a property is a primary residence, the NYC DOF considers certain factors, including whether the owner occupied the property for a majority of the days during the calendar year.  If the NYC DOF’s initial determination is that the property may not qualify as the owner’s primary residence, it will issue the notice described herein. The owner then has an opportunity to submit an exemption application and supporting documentation before the NYC DOF makes a final determination.[vii] What Should I Do If I Receive a Notice? If you receive a notice from the NYC DOF: review the notice carefully; determine whether an exemption applies; gather the required supporting documentation; timely submit your exemption application and supporting documentation (you can access the application here); if your initial exemption application is denied, you may submit one additional exemption application with additional supporting information or documentation before the applicable deadline; and retain copies of all materials submitted to the NYC DOF for your records. If you do not receive a notice but believe that your property might be subject to the surcharge, you should review the supplemental market value roll published by the NYC DOF (here). For More Information Sullivan & Worcester LLP advises clients on a broad range of private client, estate planning, trust and estate administration, tax, and real property matters. Questions regarding the Non-Primary Residence Surcharge, its application to a particular property or ownership structure, exemption eligibility, valuation issues, or related compliance matters may be directed to your regular Sullivan & Worcester attorney or any member of our Private Client Group. This Client Alert has been prepared by Carole M. Bass, Esq., a Partner, Douglas P. Schneidman, a Partner, Steven M. Cunningham, a Partner, and Molly E. Depew, an Associate, in the Private Clients/Trusts & Estates practice group of the international law firm of Sullivan & Worcester LLP. For more information, Ms. Bass may be reached in our New York Office by calling +1 (212) 660-3047 or by email at cbass@sullivanlaw.com; Mr. Schneidman may be reached in our New York Office by calling +1 (212) 660-3086 or by email at dschneidman@sullivanlaw.com; Mr. Cunningham may be reached at our Boston Office by calling +1 (617) 338-2432 or by email at scunningham@sullivanlaw.com; Ms. Depew may be reached at our New York Office by calling +1 (212) 660-3091 or by email at mdepew@sullivanlaw.com. This Client Alert is provided for general informational purposes only and does not constitute legal advice.  [i] See N.Y. Tax Law art. 30-C; N.Y.C. Admin. Code §§ 11-3202–11-3205; N.Y.C. Dep’t of Fin., Non-Primary Residence Surcharge, available at https://www.nyc.gov/site/finance/property/non-primary-residence-surcharge.page   [ii] Id.   [iii] N.Y. Real Prop. Tax Law § 581, available at https://www.nysenate.gov/legislation/laws/RPT/581   [iv] N.Y. Tax Law § 1350, available at https://www.nysenate.gov/legislation/laws/TAX/1350   [v] Id.   [vi] See N.Y.C. Dep’t of Fin., Non-Primary Residence Surcharge, supra note i.   [vii] N.Y. Tax Law § 1352, available at https://www.nysenate.gov/legislation/laws/TAX/1352

Carole Bass participated in a podcast, "When Parents Get Involved: Ethical Risks in Estate Planning and Divorce Prep," published in February 2026 (Episode 367) by The ACTEC (American College of Trust and Estate Counsel) Foundation. The episode addresses the ethical risks that arise when parents become involved in their adult children’s prenups or divorce planning and offers practical guidance on protecting attorney-client privilege, managing conflicts and maintaining clear client boundaries.