The last few months have been a fraught time for a number of privacy-loving and estate-planning New Yorkers who looked likely to lose a significant tax break because they bought their co-ops and condos in trusts or LLCs.
The practice of buying a home in a trust or an LLC has, over the years, blossomed in popularity alongside with the online availability of property records and the proliferating numbers of snoops who use Google to search out the details of their friends’, colleagues’, acquaintances’ and enemies’ personal lives. Which is unsurprising given that until this year there was no penalty for shielding one’s identity from prying eyes via a hastily-incorporated LLC.
But when the State Legislature voted to extend a long-standing tax abatement early this year, it decided to limit the benefit to primary residences. The move caused something of an uproar given that the law has given nearly all co-op and condo owners a not-inconsiderable 17.5 percent abatement since 1996. Then, just after pied-a-terre owners had finally recovered from the shock of having to pay full property taxes, the city’s Department of Finance clarified that neither properties owned by trusts nor those owned by LLCs could be considered primary residences. In March, the city’s Department of Finance told The Observer that it was looking into the issue, although at the time, such benefits could not be extended to such trust- and LLC-held units.
Now, however, the State Legislature has amended the law to include both revocable and irrevocable trusts—provided that the apartment is the primary residence of one of the designated trustees or benefit holders. In other words, if there is a way to verify that the trust beneficiary is living in the apartment full-time.
The Department of Finance’s new fact sheet on the abatement now says that co-ops and condos owned by trusts are eligible, and the abatement should appear on residents’ July tax bills. As of this spring, there were 2,201 units in the city owned by trusts and approximately 5,500 owned by LLCs.
As for LLCs, the Department of Finance explains that “units owned by sponsors, corporations, partnerships, or by persons who own more than three dwelling units in the development are ineligible.” There will, in other words, be a high cost to keeping one’s identity truly under wraps via an LLC. Neither celebrity nor its concealment come cheap.
The law, which has seen five extensions since it passed in 1996, is meant to equalize the tax burden on co-ops and condos, which are taxed at a much higher rate than single-family houses. The measure has repeatedly been passed in lieu of a more comprehensive tax reform to address many of the problems with the existing system. However, such problems are not limited to co-ops and condos—as numerous studies have shown, the population most in need of property tax relief are renters, who bear the burden of their apartment’s buildings’ incongruously high taxes.