NYC pied-à-terre tax appeal lets rollout continue pending Aug. 31 hearing

New York City may continue implementing its non-primary-residence surcharge during the NYC pied-à-terre tax appeal, after a state appellate judge left an earlier restraining order without immediate effect. The interim decision allows the rollout to proceed until an Aug. 31 hearing before Staten Island Supreme Court Judge Wayne Ozzi, according to CNBC and amNewYork.

Ozzi issued a temporary restraining order on Aug. 10 after three homeowners sued the city over how it identified and notified potential taxpayers. The city sought permission to appeal, a step that stayed the lower-court order, CNBC and ABC7 reported. Associate Justice Philip Hom then confirmed that the city could continue the rollout while the dispute is considered, amNewYork reported.

What does the NYC pied-à-terre tax appeal mean for the surcharge?

The court action has not determined whether the surcharge is lawful. The homeowners are contesting the administration of the program, including a publicly released property roll and notices sent to owners, rather than the underlying tax, according to CNN and CNBC.

Had Ozzi's restraining order taken effect, it would have required the city to remove the public roll and prevented it from sending further notices while the case continued, CNN reported. The appellate ruling addresses that temporary restraint only; it does not resolve the plaintiffs' claims or provide a final judgment on the tax.

Who may be subject to the surcharge?

The measure applies to qualifying New York City properties that are not an owner's primary residence. CNN reported that the threshold is $5 million for non-primary residences and $1 million for condominiums and co-operatives. amNewYork reported that the $5 million threshold applies to qualifying one-, two- and three-family homes, with rates of 0.8% to 1.3%; qualifying condos and co-ops may face rates from 4% to 6.5%.

The Department of Finance began mailing notices on July 23 to owners who might be covered by the surcharge, the mayor's office said. About 17,000 owners received letters, according to CNN, CNBC and ABC7. The Department of Finance has said that most properties listed on the public roll are not subject to the surcharge, CNN reported.

What happens next?

The plaintiffs contend that the city improperly identified some primary homes as potential second residences and required owners to establish their eligibility for an exemption. The city has said it disagrees with the restraining order and is confident it can administer the surcharge fairly and effectively, according to ABC7.

Owners who believe they received a notice in error have until Sept. 18 to tell the city they should not owe the surcharge, amNewYork reported. The Aug. 31 proceeding is expected to consider whether the rollout should remain in place while the lawsuit proceeds.

This story draws on original reporting from CNBC.