NYC Comptroller’s Audit Finds Co-op/Condo Tax Abatement Program Largely Effective

by | Oct 24, 2024 | NYC Property Tax

A recent audit released by New York City Comptroller Brad Lander affirms that the Department of Finance (DOF) has been largely effective in administering the Co-op/Condo Tax Abatement program, with only a minor fraction of improper abatements identified since 2019. The audit discovered that out of over 310,000 units benefiting from the program, 720 units received abatements despite being ineligible—representing less than 0.23% of all units.

“While the vast majority of condo and co-op owners complied with the law, this audit revealed serious holes in DOF’s management of the program,” Comptroller Lander stated. He emphasized the importance of ensuring that tax benefits reach eligible New York homeowners, not entities that do not qualify.

Background on the Co-op/Condo Tax Abatement Program

Established in 1996 under New York State Real Property Tax Law Section 467-a, the Co-op/Condo Tax Abatement program was designed to address disparities in the property tax system that placed a heavier burden on owners of co-op and condo units compared to owners of similarly valued one-, two-, and three-family homes. The abatement provides eligible co-op and condo owners with a partial reduction in their annual property taxes, ranging from 17.5% to 28.1%, depending on the assessed value of their units.

Audit Findings Indicate Strong Compliance

The audit focused on abatements granted in Fiscal Year (FY) 2023 and found that the DOF generally ensured compliance with eligibility requirements. Out of the 310,123 units that received abatements totaling $659 million in FY2023, only 720 units were found to be ineligible—a testament to the effectiveness of the DOF’s oversight.

Putting the Findings in Perspective

These figures illustrate that the improper abatements are minimal compared to the overall scale of the program, underscoring the DOF’s diligence in administering the abatement effectively.

Breakdown of Ineligibility Types

The ineligible units fell into several categories, as summarized in the table below:

Summary of Ineligible Abatements

Majority of Improper Abatements Granted to Condos Owned by Businesses

A significant portion of the improper abatements—approximately 75% of the total dollar amount—was granted to condos owned by businesses. Specifically, over the six-year period from FY2019 to FY2024, condos owned by businesses received $4,868,274 in improper abatements out of the total $6,465,892 identified. Addressing this issue represents a substantial opportunity to improve the program’s integrity with relatively straightforward corrective measures.

Challenges Faced by Property Owners and Managers

While the DOF continues to refine its processes, some of the challenges we have seen property owners and managers encountered with the program include:

  1. Prevailing Wage Affidavit Issues: Properties that filed the prevailing wage affidavit late or incorrectly faced strict penalties, with the DOF granting no leniency. This resulted in homeowners being denied substantial benefits due to minor oversights.
  2. Overassessment Complications: Some properties met the minimum assessed value (AV) threshold requiring a prevailing wage affidavit because of overassessment by the DOF. Even after the assessments were subsequently reduced below the threshold, properties that did not file the affidavit were denied benefits.
  3. Transition from 421-a Exemption: Condos exiting the 421-a exemption program needed to file a “first-time” application for the Co-op/Condo Tax Abatement. Technical issues with the DOF’s system forced these condos to submit manual applications, some of which were lost by the DOF, causing delays and missed benefits.
  4. Implementation Delays Due to Understaffing: Some condo abatements were implemented one or two years late because of understaffing in the DOF’s condo abatement group, leading to financial strain for affected homeowners.

These issues highlight the importance of clear communication and efficient processes between property owners, managing agents, and the DOF to ensure that eligible homeowners timely receive their rightful benefits without undue hardship.

A Call for Diligence from Property Owners and Managers

While the DOF works on improving its systems, it’s crucial for condo and co-op boards, along with their managing agents, to be diligent in reviewing their property tax assessments annually. Staying proactive can help keep assessed values and taxes reasonable, ensuring that owners are not overpaying and that they remain compliant with eligibility requirements for programs like the Co-op/Condo Tax Abatement.

Conclusion

The audit highlights that the Co-op/Condo Tax Abatement program is functioning effectively, with an overwhelming majority of abatements properly granted. The minimal number of improper abatements demonstrates the DOF’s diligence in administering the program and its commitment to continuous improvement.

By addressing the issues identified—especially the significant portion related to condos owned by businesses—the DOF aims to enhance the program further, ensuring that it continues to serve its purpose of reducing the property tax burden on owners of co-op and condo units compared to owners of comparably valued one-, two-, and three-family homes.

For more information and to read the full audit report, please visit the Comptroller’s website at: Audit Report on the New York City Department of Finance’s Administration of the Cooperative and Condominium Tax Abatement Program : Office of the New York City Comptroller Brad Lander

Learn more about the program at DOF’s website: Cooperative and Condominium Tax Abatement