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New York City Property Tax Fight Centers on Who Should Solve It

Oct. 16, 2019, 11:28 PM

Arguments in a lawsuit challenging New York City’s property tax system are focused on whether courts are the right place for the dispute.

Lawyers for New York City, the state of New York, and Tax Equity Now New York LLC (TENNY)—a coalition of real estate, civil rights, and policy interests—made their cases at the Appellate Division of the state Supreme Court, First Judicial Department on how the lawsuit should proceed. If successful, the challenge could upend a system that collects nearly $30 billion a year—almost half the city’s revenue.

The case focuses on whether the New York City property tax regime—which taxes properties with similar market values at different rates—is discriminatory and unlawful. But that core issue was largely peripheral to arguments at the appeals court on Oct. 16.

That’s because officials are continuing their fight to get the case thrown out at the gateway based on arguments that TENNY doesn’t have the right to be heard and, if it did, courts don’t have the right to rule on its core arguments. The Supreme Court for New York County, which is a lower court in the state, rejected a request from the city and the state to have the lawsuit thrown out.

If the appeals court upholds the lower court, the case will return there for further proceedings.

Role of Lawmakers

Change must come through the Legislature, not through the courts, said Joshua Sivens, a lawyer for the city.

When James Brandt, a lawyer for TENNY, said the city and state have admitted the system is broken and unfair, Associate Justice Judith J. Gische wondered if his comment suggested the Legislature should take the reins on reform efforts.

“So this is not something that should go to the state Legislature?” she asked.

“Someday it has to,” Brandt said. But the courts can step in when a constitutional violation occurs, he added.

Attorney for New York state Seth Rokosky argued that the state should be kept out of the fight between TENNY and the city, even if the lawsuit is allowed to continue. He suggested the legality of state law and of the city’s application of that law are separate issues.

Even as the judges consider whether courts should be involved, New York state legislators are looking at reform proposals to the city’s property tax system that would reduce criticized disparities—a crucial step because a number of proposed reforms would require changes to state law.

The case is Tax Equity Now LLC v. New York City, N.Y. App. Div., 1st Dep’t, No. 2019-3610, oral arguments held 10/16/19.

To contact the reporter on this story: Aysha Bagchi in Washington at abagchi@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com