Webinar Transcript: NYC Pied-à-Terre Surcharge: What Advisors Need to Know
ParkBridge Wealth Management Fall Webinar Series | September 10, 2026
Host: Jonathan I. Shenkman, President & Chief Investment Officer, ParkBridge Wealth Management (jonathan@parkbridgewealth.com)
Speaker: K. Eli Akhavan, Partner, Grant, Herrmann, Schwartz & Klinger LLP (eakhavan@ghsklaw.com)
[00:00] Jonathan Shenkman: Good morning, I hope everyone had a great summer, and welcome to the ParkBridge Wealth Management Fall Webinar Series. This program is entitled "New York City Pied-à-Terre Surcharge: What Advisors Need to Know." My name is Jonathan Shenkman. I'm President and Chief Investment Officer of ParkBridge Wealth Management, where I serve in a fiduciary capacity to help my clients achieve their financial objectives. The goal of my programs is to bring professionals together to help them better serve their clients, by educating attendees on the latest topics in wealth planning and by encouraging collaboration between a client's attorney, CPA, and financial advisor where appropriate.
I focus on working with high-net-worth families, businesses, and not-for-profits. I manage individual investment portfolios, trust accounts, corporate retirement plans, and endowments to help my clients achieve their financial goals. In addition to the twenty or so events I run every year, I also do a fair amount of writing on investing and financial planning. You can read my work in a variety of periodicals, including Barron's, CNBC, Forbes, Kiplinger, The Wall Street Journal, and Trusts & Estates magazine, among others. You can see all of my work at ParkBridgeWealth.com/articles, or by following me on social media at Jonathan on Money. I also have a weekly podcast, also called Jonathan on Money, available on Apple, Spotify, or wherever you get your podcasts. Finally, I published my first book, Dive for Diversification: The ABCs of Personal Finance, which you can now purchase on Amazon or at JonathanOnMoney.com. Purchasing it is also a great way to support these programs.
Today we're privileged to hear from K. Eli Akhavan of Grant, Herrmann, Schwartz & Klinger, based in New York City. Eli is a partner at the firm and a leading advisor in domestic and international tax and estate planning for high-net-worth individuals and families. He counsels clients on sophisticated U.S. and cross-border planning, including dynasty trusts, foreign trusts, and pre-immigration and expatriation strategies, as well as structuring investments in U.S. real estate and financial assets.
Eli is highly experienced in global reporting regimes such as FATCA, CRS, and the Corporate Transparency Act, and frequently assists clients in forming private trust companies to enhance wealth management and privacy. His practice includes preparing complex wills and trusts, designing domestic and offshore asset protection structures, and integrating private placement life insurance into advanced planning. He also advises on Puerto Rico Act 60 relocation benefits and guides clients pursuing alternative residencies and citizenship as part of investment migration and safe-haven planning. His clients include Fortune 500 executives, real estate developers, hedge fund and private equity principals, entrepreneurs, physicians, celebrities, athletes, and international families.
A recognized thought leader, Eli teaches international taxation at St. John's University School of Law, lectures globally, writes extensively, and serves as co-chair of the ABA International Tax Planning Committee. Today he'll be speaking on the New York City Pied-à-Terre Surcharge. With that introduction, I'll turn the program over to Eli.
[03:07] K. Eli Akhavan: Thank you, Jonathan, for that introduction, and thank you for providing a platform for advisors, attorneys, CPAs, and financial advisors to present ideas, collaborate, and share knowledge as a public service on the current topics of the day.
Good morning, everybody, and thank you for joining us today. The New York City Pied-à-Terre tax, or more technically the New York City Pied-à-Terre Surcharge, has been taking up a great deal of attorneys' time here in New York City since it was introduced and enacted over the summer. There has been a chaotic rollout of this surcharge, as I'm sure you've seen in the press. Today we're going to discuss the basic law itself, the potential exemptions, and what can be done to structure for the future.
By way of background: the law was enacted May 28th as part of Part HH of the fiscal 2027 state budget. On July 14th, the Department of Finance's final rules were published and took effect immediately. There was initially a filing deadline for exemptions in August, which moved to September, and is now in October. This reflects, I believe, a recognition by the Mamdani administration that the rollout was not as smooth as intended and that a lot of people were caught up in the confusion. For now, the exemption application deadline is October 6th, and January 5th, 2027 is the new status date for next year.
To be clear on timing: the residences that received notices had their status measured as of January 5th, 2026. So even though the law wasn't enacted until this summer, the relevant status date was retroactive to January 5th, 2026. For the next fiscal year, status will be measured as of January 5th, 2027.
One important point: this is not structured as a transfer tax or real property transfer tax. It's an annual surcharge on top of the regular property tax. There are no abatement credits or exemption amounts you can apply against it. If a residence is considered a non-primary residence, the surcharge applies, full stop.
Here's what we'll cover today: the tax itself, including what's covered, the thresholds, and the rates. Then, probably the most important part, the primary residence exclusion, the three statutory tests, the January 5th status date, and the proof required to establish that a residence is indeed a primary residence. After that, we'll discuss entity structures, since a great deal of New York City real estate is acquired by non-residents and foreign buyers through various entities, for both tax and non-tax reasons. A home or residence owned by an entity has special rules under the surcharge. We'll also cover notices, deadlines, appeals, and some current litigation, and finish with planning strategies. We won't have time for questions today, but my contact information is included in the slides, so please feel free to reach out.
The Tax Itself
As mentioned, the deadline to submit an exemption application is October 6th. That may sound like a while off, but it's only a few weeks away, and clients need to have all their information and supporting proof assembled ahead of time to avoid last-minute problems.
For the attorneys on the call: the statutory framework sits under the New York City Administrative Code. The New York City Department of Finance administers the tax. Even though it was introduced into state law, it's the Department of Finance that is administering and rolling it out.
What's Covered
This is one of the most important sections. Class 1 residential property is covered, including one-, two-, and three-family homes, other than vacant land. Class 2 covers residential condo units. Co-op buildings are covered where at least one apartment meets the threshold and is not the shareholder's primary residence.
What's excluded: property lacking a required certificate of occupancy, vacant land, and new-development condo or co-op units, with some exceptions. The big catch-all exclusion is any property that qualifies as a primary residence for a New York City resident under one of three tests.
A common misconception we see is that someone assumes living in New York State, or even New York City generally, automatically qualifies them for the exemption. That is not so. We have clients who own two homes within New York City, either in the same borough or in two different boroughs, and one of those homes is not considered a primary residence. You can only have one primary residence. It doesn't matter whether the individual is a New York City or New York State resident; the exemption goes by the home, and that specific property has to be used as the primary residence.
As an aside, this has been described in the press as a "billionaire tax" targeting the ultra-wealthy, but you'll see even a $1 million Department of Finance valuation on a condo or co-op, which sits far below actual sales prices. That puts a lot of ordinary Manhattan, Brownstone Brooklyn, or Midwood apartments in play and subject to the tax, and we've seen this happen.
Rates
For condos and co-ops, if the Department of Finance value is between $1 million and $3 million, the annual rate is 4% of that value. Between $3 million and $5 million, it rises to 5.25%. Over $5 million, it's 6.5%.
For one-, two-, and three-family homes, the value bands are different, as are the rates: $5 million to $15 million is taxed at 0.8%, over $15 million to $25 million at just over 1%, and over $25 million at 1.3%. There's a notable mismatch between the value thresholds and rates for these two property types, and there's a reason for that. In Phase 1, condo and co-op valuations are based on the Department of Finance's existing methodology, which values them based on hypothetical rental income. Those figures, as we all know from client assessments, are typically far below what the property would actually command on the open market, which is why you see lower thresholds paired with higher rates for condos and co-ops. Single-family and small multi-family homes, by contrast, are valued closer to actual fair market value.
What's at Stake
Let's run through some numbers. A condo with a Department of Finance assessed value of $1.2 million would carry an annual surcharge of roughly $48,000, on top of existing taxes and expenses. A condo assessed at $2.5 million would see that roughly double, to about $100,000 a year in surcharge alone. The numbers for family homes follow a similar pattern and are quite onerous. Many clients, while affluent, are not necessarily cash-rich enough to absorb an extra $100,000 a year to maintain a residence they're not using as a primary home. As a result, this surcharge is pushing some clients either to sell the property or to rent it out to a New York City resident using it as their primary residence, since, as we'll discuss, a qualifying rental is one of the exemptions.
There's also a real threshold-cliff effect here: crossing a valuation threshold by even a small amount can trigger a jump of tens of thousands of dollars in tax. The additional slides go into more detail on the amounts at stake, which you're welcome to review at your convenience.
Phase 1 and Phase 2
Phase 1 runs from July 1st, 2026 to June 30th, 2028. During this period, valuations use the Department of Finance's existing methodology, with condo and co-op values based on rental comparisons that typically fall well below actual fair market value. In Phase 1, the threshold for condos and co-ops is $1 million, with rates from 4% to 6.5%; for one-, two-, and three-family homes, the threshold is $5 million, with rates from 0.8% to 1.3%.
Starting July 1st, 2028, a different model takes effect. The Department of Finance is required to build and roll out a comparable-sales valuation model, which would base condo and co-op valuations on actual fair market value rather than rental comparisons. This will be a significantly different system. Worth noting: the city has tried to build a system like this for over thirty years without success, so this effectively gives them two years to make it happen, and we'll have to see whether it does. Phase 2 runs through June 30th, 2031, because the law is currently set to sunset in 2031 unless extended.
The Primary Residence Exclusion
Now let's turn to how you actually get out of the tax, because there are really only three ways. Unlike broader tax or estate planning, where there's more room for creative strategies, this is fairly cut and dried.
The first path is covered-owner occupancy: if the property is the primary residence of at least one covered owner, the property is exempt. A covered owner must be a natural person, a qualifying trust beneficiary, or, for an entity, a majority entity owner.
The second path is family occupancy: the primary residence of an immediate family member of a natural-person covered owner, covering spouses, children, siblings, parents, grandparents, and grandchildren. We see this often with parents buying a second home for a child, or parents based in another state or country who maintain a pied-à-terre used by a child attending college in New York City. It can also apply where someone purchases a residence for their parents. This can be a legitimate planning opportunity when an immediate family member is genuinely using the property as their primary residence.
The third path is a qualifying lease: the property must be leased at fair market rent, on fair market terms, to an individual using it as their primary residence. New York City is clearly aware that some owners will attempt sweetheart leases to avoid the tax, and they will not accept that. A lease agreement has to be in place, and the Department of Finance will ask for proof of lease payments and the lease itself. If they determine the lease isn't at fair market value, the exemption is denied.
Documentation
The Department of Finance can request a range of supporting documents. Most commonly requested is the most recently filed state or federal tax return showing the property as the permanent home of a covered owner or an immediate family member of a covered owner. Other accepted proof includes a DMV license, voter registration, or STAR exemption or credit. For the lease route, they may ask for the unexpired arm's-length lease itself, additional rental documentation, utility bills, renter's insurance, proof of rent paid, and even bank or other financial statements. For family-member claims, they may ask for marriage certificates or affidavits. For trust-owned property, they'll ask for specific trust documentation, which we'll get into. In short, the Department of Finance is not treating this lightly; they expect substantive documentation, not routine paperwork.
For those of you familiar with New York State and City residency audits, there's real overlap here. The substantive question is the same: where does this person actually live, and is there a New York City-based individual using this property as their primary residence? If that can be proven, the exemption will apply.
Entity and Trust Structures
A great deal of New York City residential property is held through entities for estate planning, business succession, heirship succession, or other non-tax reasons.
For trust-owned property, the exemption applies only when the beneficial owners are the trust's sole beneficiaries, and a beneficiary must personally live in the property. The Department of Finance does not automatically extend the family-occupancy exemption to a trust beneficiary. You cannot have a broad family "pot trust" with many beneficiaries where just one child happens to live in the trust-owned apartment; the trust has to be settled specifically for the person or persons actually living there. If a trust is for two children and both live in the apartment, that works, but the trust can't be a pot trust benefiting multiple people generally.
Contingent and remainder interests, which are common in trusts, do not work against you. If a trust is for a spouse and child, for example, the fact that grandchildren hold contingent or remainder interests after them doesn't disqualify the exemption, so long as the spouse and children are the ones actually living in the home. It's also not enough to simply inform the Department of Finance of this arrangement; you need to provide a copy of the trust agreement demonstrating it, along with a trustee's affidavit. Some trust structures work for this exemption and some don't, and the details matter; there may be room to reconfigure a structure to help a client qualify.
The Tiered Structure Trap
When planning for foreign buyers of New York City real property, it's common to use layered structures, for example a foreign corporation at the top with a U.S. entity below holding legal title to the apartment. Technically, there's no look-through in a double-stacked entity. So even where the foreign owner at the top is an individual, this structure can still create a problem for claiming the exemption.
Many of the residences that received notices from the city did so because the city identified an entity, whether a trust or an LLC, as the owner, and is putting the burden on the taxpayer to prove the property isn't a non-primary residence. There are ways to address the stacked-entity issue, which are outlined in the slides.
For a single LLC, as opposed to a stacked or corporate structure, there are aggregation rules. For example, if two members each own 30% and both use the apartment as their primary residence, their combined 60% ownership clears the exemption threshold, even though the remaining 40% is held by people not using it as a primary residence.
Foreign clients are squarely in the crosshairs here, because they typically don't own property directly. They tend to hold it through tiered BVI, Cayman, or Delaware structures, which rarely produce a qualifying covered owner for the exemption. Be cautious about restructuring purely to save on the surcharge, since doing so may create unintended consequences on the estate tax side. Any restructuring should weigh all the relevant issues together.
Key Dates and Ongoing Litigation
October 6th remains the critical deadline, just a few weeks away, so please make sure exemption applications are filed by then. There is a 30-day window to appeal after a determination is transmitted, but October 6th is the date to focus on to ensure clients have done their part with the correct information.
Litigation regarding the surcharge is ongoing. As practitioners, we don't yet know whether a court will halt enforcement. Hearings were held in the last days of August, so it remains to be seen how that plays out. We're out of time today, but the remaining slides cover additional case details, including litigation out of Staten Island, along with scenarios involving clients who never received notice, enforcement issues, and the penalties associated with providing incorrect information.
With that, I'll turn it back to Jonathan. Thank you for your attendance today, and please feel free to email me with any questions.
[30:55] Jonathan Shenkman: Thank you so much, Eli. If anyone has specific questions, new business opportunities, or other issues they'd like to discuss, please feel free to reach out directly to Eli or to me, and I'll include his contact information in the follow-up email to this program.
Three quick items before we close. First, my next webinar is Thursday, September 24th at 8:30 a.m., on the topic of the most important and overlooked estate planning questions that AI does not properly address, featuring Avi Kestenbaum of Meltzer, Lippe, Goldstein & Breitstone, based on Long Island, New York. I'll send an invitation in the coming days. If you have a friend or colleague who'd be interested, they can subscribe to my webinar distribution list at ParkBridgeWealth.com/webinars.
Second, you can follow my work on X and Instagram at Jonathan on Money, and connect with me on LinkedIn. My weekly podcast, also called Jonathan on Money, is available on Apple, Spotify, or wherever you get your podcasts, and I post practical planning videos several times a week on YouTube, also under Jonathan on Money.
Third, please take thirty seconds to complete the survey at the end of this program; it helps me improve future webinars and provide timely, relevant content. Thank you in advance.
That concludes today's session. Please stay safe and healthy, and have a wonderful day, everybody.