Appeals court tosses the suit over the pied-à-terre tax rollout. Two challenges remain, and the $500 million estimate is still in question

A state appeals court on Wednesday threw out a lawsuit over how the city rolled out its new surcharge on luxury second homes, clearing the way for the city to keep collecting it. A four-judge panel of the Appellate Division, Second Department, unanimously reversed a Staten Island judge's order that would have forced the city to redo its rollout, Fortune reported, citing The Associated Press.

Why it matters to residents: the city's budget counts on the so-called pied-à-terre tax to raise $500 million a year. If that money doesn't come in, the gap has to be filled somewhere else in the budget. Two other lawsuits that challenge the tax itself are still pending.

This is a follow-up to our Oct. 31 story on the mayor's revenue estimate and exemptions.

What the court decided

The suit was brought by homeowners who said the city wrongly flagged their primary homes as possibly owing the surcharge. The appeals court found they lacked standing to sue because they had not shown a concrete injury, Gothamist reported. Getting a notice, or appearing on a public list of properties that might owe the tax, was not enough, the judges said. You can read the decision on the state court system's site.

The ruling did not decide whether the city followed every procedure correctly, Gothamist noted. The Staten Island order had required the city to scrap the supplemental roll that listed about 900,000 properties and to cancel the notices it mailed, Fortune reported.

The surcharge applies to homes worth more than $5 million that are not the owner's primary residence. It does not apply if the home is rented out or a relative lives there most of the time, CNN reported. The state created it in this year's budget, and the city carries it out.

What officials said

Mayor Zohran Mamdani said the surcharge "asks those who can afford luxury second homes to contribute toward the safer streets, cleaner parks and essential public services that every New Yorker deserves," according to Gothamist. He said the city would keep defending it against other challenges, including ones in Suffolk County, CNN reported.

Randy Mastro, a former deputy mayor who represents the homeowners, did not dispute the tax's legality in this case. He told CNN that "the ultimate day of reckoning" for the surcharge will come next month, when a separate challenge to its constitutionality is due in court. That suit claims the tax discriminates against owners from out of state, Fortune reported.

What our records add

The administration skipped the Council's oversight hearing, citing this kind of litigation. On Aug. 18, the Governmental Operations and Finance committees held a joint hearing on the rollout. Finance Chair Linda Lee said for the record that the administration would not testify because the tax was being challenged in court (7:06). Chair Gale A. Brewer opened by noting that the Finance Department's first list of about 900,000 properties dwarfed the comptroller's estimate of fewer than 14,000 that would owe (1:56). Our records show both oversight items, T2026-2332 and T2026-2333, were filed the same day, with no follow-up hearing since.

Finance told the Council in June it was "confident." At the Finance Committee's June 9 budget hearing, a Finance Department official said the department was confident it would meet the $500 million revenue target in the executive budget.

The estimates still don't match. Gothamist reported that Finance has granted more than 8,800 exemption requests. Comptroller Mark Levine estimated in April that the surcharge would bring in up to $380 million from about 11,200 properties. The mayor has said he is confident in the $500 million figure.

The Council has no bill on it. We found no pending Council bill or resolution on the pied-à-terre surcharge. Because the tax is set in state law, changes would have to come from Albany.

What's next

• The constitutional challenge is set for December, according to Fortune and CNN.
• The homeowners' lawyer has said the fight is not over, CNN reported. We found no report of a further appeal yet.
• The Council's next look at the revenue will likely come with the mayor's November financial plan update and the preliminary budget hearings early next year. The Finance Committee meets Nov. 12.