A state court has ruled that New York City’s rollout of its new pied-à-terre tax was arbitrary, capricious, and unlawful. By publishing an overinclusive list of properties potentially subject to the tax, the Department of Finance improperly shifted the burden of proof to homeowners, according to the ruling. (O’Brien v. City of New York, 85217/2026, 9/29/2026)
City’s rollout challenged
The decision follows a legal challenge to the city’s implementation of the new non-primary residence property surcharge, or pied-à-terre tax. The surcharge applies to one- to three-family homes valued at $5 million or more, as well as condominiums and co-ops valued at $1 million or more, when the owner maintains a separate primary residence.
In July, the Department of Finance (DOF) published a “supplemental roll” of over 900,000 properties and sent notices to about 17,000 owners it identified as potentially subject to the tax. The actions prompted several property owners to challenge the surcharge’s rollout.
Amid the litigation, the city revised its process. It twice extended an exemption application deadline, ultimately to October 6. And while the DOF originally based its list on 2024 taxpayer data, it sent out new rounds of letters beginning in late August to reflect 2025 personal income tax data.
Overall, the DOF sent revised notices to 1,210 property owners clearing them of liability and sent “updated letters” to another approximately 10,800 owners indicating that their tax data did not establish their property as a primary residence.
Court finds ‘Supplemental Roll’ publication arbitrary
Now, in a September 29 decision, Judge Wayne M. Ozzi of the Supreme Court of the State of New York for Richmond County found that the DOF’s publication of the 900,000-property list was unlawful. Judge Ozzi agreed with the plaintiffs that “a much more narrowly tailored list was contemplated, and indeed required, by the Legislature” when the pied-à-terre tax was passed into law.
Meanwhile, the DOF published a massive list where “98-99% of the data is irrelevant,” reads the decision. Judge Ozzi said this action was “capricious and without legal support,” adding that the DOF took “the lazy route” by simply relabeling the regular real estate tax roll.
Judge Ozzi also found that the city’s “refusal to use the tax data that was ‘sufficiently available’ to DOF unfairly shifted the burden to thousands of homeowners to prove their basic residency.”
The decision criticized the DOF for failing to use available 2024 tax returns to determine residency. By requiring homeowners to file for an “exemption,” the city “irresponsibly and unnecessarily caused homeowners to expend time and money,” said Judge Ozzi.
The court also found those seeking an exemption “lacked any real guidance as to the proof required” and risked penalties for “negligent” submissions.
Ruling orders new process, city immediately appeals
Judge Ozzi ordered the city to cancel all previously mailed notices and remove the current supplemental roll from its website. It directed the DOF to conduct an “individualized initial determination” using all available tax information before sending any new notices. The new notices must specify the factors used, disclose the documents supporting the determination, and advise owners of their right to challenge the decision.
However, the same day the decision was issued, the city filed a notice of appeal to the Appellate Division of the Supreme Court, Second Department.
“We’re gratified that the court has recognized we were right all along,” said the plaintiffs’ attorney Randy Mastro, a partner at Dechert. “The fact is that this administration failed to follow state law when it burdened New York City homeowners with proving they live in their own homes or be on the hook for paying a new surcharge.”
Mastro explained that given the court’s ruling, the city now must “use all the information at its disposal to make an individualized ‘initial determination’ about who truly owes this surcharge before demanding that they pay it.”
According to Moritt Hock & Hamroff attorney William McCracken, “there’s no question that the Court’s directed form of notice will provide significantly more useful information to taxpayers, including what factors and information were considered, and disclosing records or documents used to make the initial determinations.”
However, he said to “expect another few days of uncertainty” given the City’s appeal of the decision.
“It’s important to understand that the new law itself is not, and never was, at risk of being invalidated by this proceeding,” McCracken added.
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