Amendment of Rules Relating to Request for Review Process and Clerical Error Administrative Review Process

Online comments: 5

• Jeremy Friedman

  Honorable Office of the Mayor, City Council Members, and Department of Finance Officers:

  Erroneous and unlawful property tax assessments impose unjust and unbearable burdens on property owners, tenants, families, employees, and other stakeholders. As we write this letter opposing the New York City Department of Finance’s (“DOF”) unlawful attempt to diminish property owners’ rights to correct property tax assessment errors, property owners throughout the City are facing defaults, foreclosures, and downgrades at the highest rates in recent history. The DOF should prioritize proposals that enhance assessment accuracy and transparency; however, the current “Proposed Amendment” undermines these goals.
  DOF’s Proposed Amendment introduces a series of pitfalls, mines, and traps designed to disqualify virtually all property owners from exercising their statutorily provided rights under New York City Administrative Code (“NYC Admin. Code”) § 11-206. The DOF is charged with the dual mandate of assessing accurately, and raising property tax revenue. The author of this proposal shows a complete disregard for the former while prioritizing the latter. NYC Admin. Code § 11-206 provides for a simple—and what should be a universally supported—proposition: that if a property owner pays an excessive amount of tax due to a DOF error, that property owner should be made whole.
  Our law office, in conjunction with the Condemnation & Tax Certiorari Committee of the New York City Bar Association, unequivocally opposes the Proposed Amendment. We further contend that the scalding harm that would befall property owners from this contemplated rule change should raise alarm within the Office of the Mayor and City Council concerning the status and trajectory of property tax administration in New York City. We therefore request a meeting between the Office of the Mayor, the City Council, and the Bar Association to discuss those issues that are ailing property owners, and changes that should be made to bring about more accurate and fair property tax assessment.
  THE NEW YORK CITY DEPARTMENT OF FINANCE

  DOF is charged with the dual mandate of raising tax revenue and valuing properties fairly for taxation. The conflict of interest here is evident and it is brought about due to DOF’s competing goals.
  In 2002, the New York State Assembly recognized this conflict of interest within DOF and recommended the creation of a new independent agency apart from DOF to administer the annual reassessment of properties within the City, but DOF rejected this proposition (See Preliminary Report of the Joint Task Force Charged with Eliminating Corruption in the Real Property Assessment Unit of the New York City Department of Finance, annexed hereto as Exhibit A; see page 6). The report states that fiscal constraints within the City complicates matters because “…it causes assessors to think of themselves as revenue generators instead of as public servants responsible for setting an accurate value for properties.” (Id. at page 26)
  This conflict of interest undermines the principles of impartiality and fairness. If DOF were as concerned about valuing properties fairly as it is with raising tax revenue, then the Proposed Amendment would not be before us.

  LEGAL REQUIREMENT TO VALUE BASED ON USE AND CONDITION
  AS OF THE TAX STATUS DATE

  The law commands that all parcels in the City of New York be valued annually based upon their use and condition as of the January 5th tax status date. See New York Real Property Tax Law (“RPTL”) § 302(1). The NYC Admin. Code § 11-207 mandates that the City’s assessors “shall revalue, reassess, or update the assessment… during each assessment cycle, irrespective of whether such parcel was personally examined during each assessment cycle” (emphasis added). NYC Charter § 1506 defines “assessment” as “a determination by the assessors of (a) the taxable status of real property as of the taxable status date” (emphasis added). The courts have held that not valuing a property based on its condition and use on the taxable status day is “counter to the statutory proscription that assessments be made according to the condition and ownership of the property as it presently exists” (emphases added). (Estate of Goldman v Commr. of Fin., 203 AD2d 20, 21 [1st Dept 1994]).

  ERRONEOUS ASSESSMENT DATA RENDERS TAX COMMISSION REVIEW MOOT

  Responsibility for maintaining accurate descriptive information upon which assessments are made falls upon DOF, and only DOF. This fact appears to have escaped the author of the Proposed Amendment. When reviewing a property tax assessment, the Tax Commission of the City of New York (“Tax Commission”) relies exclusively on the data maintained by DOF. This fact is irrefutable and clearly stated on the Tax Commission webpage, whereupon it reads “If any of the above information listed on the Notice of Property Value is incorrect, you must contact Finance (not the Tax Commission) and request that the information be corrected” (emphasis added, annexed hereto as Exhibit B). This webpage specifically reads (emphasis added):

  The Notice of Property Value issued by the NYC Department of Finance includes:
  1. A description of your property including:
  a. the size of any improvements in square feet,
  b. the size of the land in square feet,
  c. the number of residential units (e.g. apartments), the number of nonresidential units (e.g. stores, offices or other commercial space), and the number of floors.
  2. The name of the property owner.
  3. The street address.
  4. The estimated market value of the property.

  If any of the above information listed on the Notice of Property Value is incorrect, you must contact Finance (not the Tax Commission) and request that the information be corrected.
  (https://www.nyc.gov/site/taxcommission/about/challenging-notice-of-property-value.page)

   
  THE PROPOSED AMENDMENT WOULD DISQUALIFY PROPERTY OWNERS
  THAT NYC ADMIN. CODE § 11-206 IS INTENDED TO HELP

  An inaccurate DOF description of a parcel, whether it is of the floor area, the use, the number of units, or the physical condition (to name a few categories), will result in either a confirmation or an inadequate offer, as enumerated in the Rules of the City of New York (“RCNY”), Title 21, § 4-01(a)(2), § 4-01(a)(3), or § 4-01(a)(4).
  Suppose a Tax Commission applicant disagrees with DOF inventory data or physical attributes. In that case, the Tax Commission hearing officers will advise the applicant that DOF is the proper agency for the correction of this type of error. The applicant will then receive a determination as described in 21 RCNY § 4-01(a)(2), § 4-01(a)(3), or § 4-01(a)(4).
  The Proposed Amendment to 19 RCNY § 53-5 (found on pages 7 and 8 of the Notice of Public Hearing) would put the property owner in a Catch-22 situation whereby erroneous DOF data leads to a negative determination as described in 21 RCNY § 4-01(a)(2), § 4-01(a)(3), or § 4-01(a)(4), and a negative determination as described in 21 RCNY § 4-01(a)(2), § 4-01(a)(3), or § 4-01(a)(4) then leads to a denial of NYC Admin. Code § 11-206 jurisdiction, under the Proposed Amendment’s new 19 RCNY § 53-5.
  The author of the proposed new 19 RCNY § 53-5 seems to think that the Tax Commission performs its own independent research and inspection into the descriptive data maintained by DOF, but this is incorrect.
  The Proposed Amendment would make an applicant’s rights under NYC Admin. Code § 11-206 dependent upon the actions (or inactions) of the Tax Commission—an agency which is separate and apart from DOF. The New York State Court of Appeals has already found that it is unlawful for a local government agency (DOF in this case) to supplement the statutory conditions for maintaining a legislatively provided proceeding, and that doing so violates the home rule provision in the State Constitution (Fifth Ave. Off. Ctr. Co. v City of Mount Vernon, 89 NY2d 735, 743 [1997]; see also 749 Broadway Realty Corp. v Boyland, 3 NY2d 737 [1957]).

   
  DOF IS PUSHING THEIR RESPONSIBILITIES ONTO AN OVERWHELMED
  LAW DEPARTMENT TAX AND BANKRUPTCY DIVISION

  As previously stated, the DOF is responsible for assessing parcels based on their use and condition as of the tax status date, January 5 of each tax year. When the DOF fails in this responsibility, property owners must seek an administrative appeal with the Tax Commission. When a clerical or descriptive error by the DOF renders an assessment uncorrectable by the Tax Commission, property owners are relegated to administrative appeals under NYC Admin. Code § 11-206 or adversarial litigation involving the Law Department’s Tax and Bankruptcy Division (“Law Department”) and the Courts. All of this arises from the DOF’s failure to perform its responsibilities correctly in the first place.
  The term “windfall benefits” (as written in the Notice of Hearing, page 4) is a mischaracterization and a misrepresentation of the facts. Property owners never receive more than they are entitled to. Title 19 of the RCNY §§ 53-01 and 53-02 (as it currently stands) enables property owners to recover only six years of erroneous assessments; the DOF retains the remainder of its unwarranted gains. Very often, property owners only notice DOF’s errors long after they occur. These errors may impact abatements or exemptions relied on by trusting purchasers. Cutting off corrections as of the date of purchase, as indicated in the Proposed Amendment to 19 RCNY § 53-3, would crystalize DOF errors and permanently harm new buyers. Property owners do not receive a “windfall” of punitive damages for suffering through DOF over-assessment. However, now that the DOF has raised the issue, perhaps they should.
  Even though the Law Department’s client in a RPTL Article 7 proceeding is the DOF, which is charged with the dual mandate of assessing accurately and raising property tax revenue, the Law Department focuses solely on the latter, with little regard for the former. It is well known that DOF’s current assessments have failed to account for post-COVID changes in the real estate market (office and retail assessments are back to their pre-COVID highs, while properties are selling at discounts of 30% to 70% of their pre-COVID values). The Tax Commission cannot resolve all issues, they specialize in situations that fit neatly into their rubric, therefore, more cases have been piled onto the Law Department.
  RPTL § 700(3) provides for expedited assessment review proceedings for property owners, but this statute has become little more than the punchline of a joke. At court conferences, members of the City’s Law Department constantly express that they are understaffed and unable to manage the current caseload. They state that petitioners should “wait in line” behind other property owners with cases dating back many years. If the author of the Proposed Amendment seeks to assign even more responsibility for assessment correction and additional cases to the Law Department, the City must simultaneously arrange for increased staffing, additional judges, and reduced durations for the resolution of RPTL Article 7 proceedings. Furthermore, for RPTL Article 7 proceedings to be fair and meaningful to property owners, DOF must remeasure the Tax Class 2 and Tax Class 4 Class Ratios based upon market values—something they are required to do annually, but have not done since 1985.

  DOF’S PROPOSED AMENDMENT CONSTITUTES AN ULTRA VIRES ACT

  The precursor statute to NYC Admin. Code § 11-206 is derived from Chapter 592 of the Laws of New York, 1915, which was passed by the 138th New York State legislative session.
  NYC Admin. Code § 11-206 and the subsequently passed 19 RCNY §§ 53-01 and 53-02 are derived from RPTL Article 5, which applies to jurisdictions outside of New York City (annexed hereto as Exhibit C). The 2016 Notice of Rule Making (annexed hereto as Exhibit D) sets forth § 53-02, which reads (emphasis added):
  “Clerical errors and Errors in Description
  (a) Clerical Errors. The Commissioner of Finance may correct any assessment or tax that is erroneous due to a clerical error as defined in subdivision 2 of section 550 of the Real Property Tax Law. Clerical error will include but not be limited to the following…”

  In the case of Matter of Better World Real Estate Group v NY City Dept. of Fin., a decision which holds that RPTL Article 7 is not the exclusive means by which a taxpayer may challenge an assessment that is erroneous due to a clerical error, the court looked to Title 3 of RPTL Article 5 for illustrative purposes in order to determine what a “clerical error” or “error of description” actually is. (122 AD3d 27, at 37-38 [2d Dept 2014]). In that matter, the court found “acceptance of the respondents’ view that RPTL article 7 is the sole vehicle for challenging a real property tax assessment would render Administrative Code § 11-206 superfluous and meaningless.” (Emphasis added).
  While the author of the Proposed Amendment tries to present NYC Administrative Code § 11-206 as if it is an archaic relic of the past, this legislative enactment and its 2016 rules merely provide NYC property owners with protections equivalent to property owners outside of NYC. If the Mayor is adopting a “City of Yes” policy, why is its largest and most influential administrative agency proposing a “City of No” amendment that would curtail the rights of property owners?

  CONCLUSION

  The Proposed Amendment would undoubtedly be found unlawful in court on account of the above-referenced reasons. Amid challenging times for property owners, it is disconcerting that DOF seeks additional means to extract tax revenue while restricting property owners’ ability to secure fair and accurate assessments. Property owners in the City of New York need increased access to the courts and administrative agencies to ensure accurate assessment; not decreased access. As written in McCulloch v. Maryland, 4 Wheat. 316, 431 (1819), “The power to tax involves the power to destroy.” In 2016, DOF took some steps forward concerning implementing transparency and accountability into DOF’s assessment process by enacting Title 19 of the RCNY §§ 53-01 and 53-02. These rules helped property owners correct errors made by DOF, and progressed the City towards a more fair and reliable assessment system. The Proposed Amendment is a complete about-face. Instead of increasing DOF staffing, assessment accuracy, and assessor accountability, DOF is skirting responsibility and burdening property owners with the permanence of DOF errors. The Proposed Amendment helps no one but the tax collector and damages property owners, tenants, families, employees, and other stakeholders.

  Very truly yours,

  Law Offices of Lawrence J. Berger, P.C.

  Comment attachment
  LJBPC-Opposition-to-unlawful-amendment-to-19-RCNY-Ch.-53.pdf

  Comment added November 21, 2024 2:32pm

• Tener Consulting Services

  Please see attached.

  Comment attachment
  TCS-Comments-to-Proposed-Rule-Change-11.21.24.pdf

  Comment added November 21, 2024 3:20pm

• Robert M. Pollack

  REAL ESTATE TAX REVIEW BAR ASSOCIATION

  Robert Pollack, President

  November 21, 2024

  Re: 2024 RG 098

  New York City Department of Finance

  On behalf of The Real Estate Tax Review Bar Association, I write to you in response to the request for comments on the proposed rule changes put forward by the New York City Department of Finance regarding taxpayer-initiated requests for review and the requests for corrections of errors.

  Our Bar Association objects to the section of the proposed rules that would preclude taxpayers who have filed Tax Commission applications pursuant to Section 163 of the New York City Charter from asking the Department of Finance to correct errors. Section 5 of the proposed rule change states that Subdivision (a) of Section 53-01 of Title 19 of the Rules of the City of New York will be amended to read that

  “the Department of Finance will not correct an error for which an owner or other qualified filer:
  (A) Filed an application for correction of an assessment with the Tax Commission pursuant to Section 163 of the Charter in connection with such property and received a determination described in 21 RCNY § 4-0l(a)(3) or (4) or determination described in 21 RCNY § 4-0l(a)(2) where such determination was based on a substantive defect; or
  (B) Sought judicial review of the assessment or taxation of such property and received a decision on the merits or entered into a settlement agreement.”

  The plain language of this section would preclude a taxpayer from taking a Tax Commission hearing as any determination made by a Tax Commission hearing officer (even one confirming the current assessment) would result in the Department of Finance declining to correct a prior error. The taxpayer’ s right to the review of their assessment is enshrined throughout New York law. Since 1938, the New York State Constitution has affirmed that “the legislature shall provide for the supervision, review and equalization of assessments for the purposes of taxation.” NY State Constitution, Article XVI, §2. The legislature has codified this Constitutional right within the Real Property Tax Law as well as the relevant Chapters of the New York City Charter. This Bar Association opposes any attempt to curtail or chill a taxpayer’s right to seek assessment review by means of an administrative rule change.

  Very truly yours,
  Robert M. Pollack,
  President, Real Estate Tax Review Bar Assn.

  Comment attachment
  Real-Estate-Tax-Review-Bar-Assn-Letter.pdf

  Comment added November 21, 2024 3:50pm

• Benjamin Williams

  See the attached PDF file containing my comments.

  We represent hundreds of New York City taxpayers, including residents and voters, in helping to keep their property taxes fair and equitable, especially in the face of overassessment and overtaxation.

  First and foremost, I appreciate the DOF’s efforts to enhance the efficiency and integrity of the property tax assessment system. I understand the Department’s concerns about ensuring finality in taxation matters and preventing the potential misuse of the correction process. However, I respectfully disagree that the proposed amendments adequately address these issues without unduly disadvantaging taxpayers who may have been adversely affected by errors.

  While I recognize the DOF’s intention to streamline the correction process and prevent its misuse, it is crucial to ensure that taxpayers’ rights to fair and accurate assessments are preserved. Making the correction process more restrictive may inadvertently harm taxpayers who have been subjected to errors through no fault of their own.

  I respectfully urge the Department to reconsider the proposed amendments and explore alternative solutions that address administrative concerns without compromising taxpayer fairness. Enhancing, rather than constraining, the correction mechanisms would promote equity and trust in the property tax system.

  Thank you for considering my comments. I am available to discuss these suggestions further and contribute to a solution that serves both the interests of the Department and the taxpayers of New York City.

  Comment attachment
  Rosenberg_Estis-Comment-re-proposed-rule-11-22-2024.pdf

  Comment added November 22, 2024 10:42am

• Scott Goldberg

  Please see the attached letter.

  Comment attachment
  Goldberg-and-Bokor-Statement-Re-DOF-Rule-11-22-24.pdf

  Comment added November 22, 2024 12:51pm