What You Need to Know About the NYC Property Tax Assessment Process

The Big Apple real estate market is booming, and in turn, the New York City Tax Commission office has been receiving between 50,000 and 53,000 applications for property tax assessments each year. EisnerAmper recently sat down with New York City Tax Commission President Glenn Newman to learn valuable information about the process.

Newman said that most of the city’s major players are filing applications through the Tax Commission’s office these days. The most important factor and starting point in reviewing a tax assessment, he noted, is an honest and accurate 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.” By way of background, it should be noted by law that all commercial property in the city must be valued using the income and expense approach solely

It’s also critical to understand the key differences between the NYC Department of Finance and the NYC Tax Commission, Newman said. The Department of Finance calculates the initial property assessment based on data that is collected and available; the Tax Commission can review and reduce the property assessment but not increase the assessment or decrease an exemption. “The Tax Commission has no control over the Department of Finance’s descriptive information,” he explained. “Any issues concerning descriptive information should be addressed to the Department of Finance.”

Documentation pertaining to what the property is and its correct usage is essential in order to get an appropriate assessed value, he said.  “If some discrepancies exist with Department of Finance, applicants should state the accurate amount,” Newman noted.  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.

A new, explicit item that is being listed on assessment documents is the use of outdoor space, which is becoming more popular as high-tech industries continue to grow. That said, the use of cell towers, telecom equipment, signage, and generators is expanding. “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. Another item recently modified: Form TC309 (an accountant’s certification attached to the income and expense statement) with the help of Newman and the NYSSCPA Real Estate Committee. The form now conforms to AICPA professional accounting standards. An auditor’s report on the income and expense statement is required if the property is assessed at $1 million or more.

The Tax Commission office also works on construction and not-for-profit exemption cases. While construction exemptions are fairly straightforward, Newman said 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 non-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 said. 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.”