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SALT TALK: Keeping Your Feet on the Ground in New York City May Become More Taxing

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Mar 26, 2019 9:40:42 AM
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Former Governor and now Senator from Florida, Rick Scott, wrote a scorching editorial in last week’s Wall Street Journal directing New Yorkers to stop whining about high taxes and fix the problem ourselves. Whether or not you agree with Senator Scott’s political views, one point he made is simply undisputable. “America is a marketplace where states are competing with each other, and New York is losing.” Senator Scott even points out that “[t]here’s a reason Rep. Alexandria Ocasio-Cortez’s mom left New York for Florida.”

This all stems from New Yorker’s continuing to blame the sag in the luxury real estate market on the limit set of $10,000 for the deduction of state and local taxes. While the Senator did not say as much, I can almost hear the utterance that if New York and its high tax state brethren spent as much time trying to cut state taxes as they have to find ways around the cap, the problem would almost take care of itself.

Yet the latest iterations of New York State’s Budget Bill, at least the Senate version, have stated the following:

The Senate supports the imposition of an additional surcharge on certain high-value non-primary residences in New York City, with revenues derived from such surcharge being dedicated to critical needs such as preventing homelessness and (funding) mass transit.

The Senate advances language to add a surcharge for high-end non-primary residences sold in New York City.

What are our lawmakers thinking? Having handled many high-stakes residency audits revolving around New York City, I recognize that some well-meaning legislatures — who understand the complexities and vagaries of determining whether one is a New York City resident or not — may simply want to enact an easily enforceable tax to shore up revenue. Well maybe that would work if they also had a companion proposal to eliminate statutory residency as a basis to impose New York City Personal Income Tax. But, if you are going to have a new tax on high value residences, then get rid of the statutory residence test (over 183 days and a permanent place of abode making you a resident.) Or, if you are not getting rid of the statutory residency concept, then have either the surcharge or the residency test apply, but not both. 

We will just have to wait and see what happens. I caution you, if you are thinking of reaching out to Representative Ocasio-Cortez’s mom, I have first dibs on her extra room. If I have raised questions, contact me at WBerkowitz@BerdonLLP.com or your Berdon advisor.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.

Topics: SALT TALK

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