I predict that the TC309 threshold will increase to between $5.4 and $5.6 million for the 2025/26 tax year. This adjustment is pursuant to Local Law 42 of 2019 and marks the first increase since this new law was enacted. From 2019 to 2024, the TC309 threshold stood at $5 million, up from the previous $1 million threshold. The new threshold for 2025/26 will be based on the percentage change in final assessed values for tax classes 2 and 4 from the 2019/20 to the 2024/25 tax years. We now await the New York City Tax Commission to provide the official new threshold.
What is the TC309 Form and When is it Required?
The TC309 form provides a certified statement of income and expenses for certain properties seeking a reduction in their tax assessments in New York City. It is required when the TC201 income and expense form is also required, specifically for rental properties with gross income exceeding $100,000. The TC309 form must be certified by a CPA, adding credibility to the reported financials by providing an independent audit opinion on the income and expense schedule (Form TC201).
The CPA certifies that the information on Form TC201 fairly represents the property’s operations in all material respects, following the requirements of the Tax Commission of the City of New York. The audit is conducted in accordance with auditing standards generally accepted in the United States (GAAS), which require the auditor to plan and perform procedures to obtain reasonable assurance that the financial information is free from material misstatement, whether due to fraud or error. The CPA assesses risks, reviews internal controls, evaluates accounting policies, and verifies the accuracy of the financial data presented. While the audit does not guarantee the detection of all material misstatements, it provides a high level of assurance that the information is reliable for tax assessment reductions.
Understanding the Predicted $5.5 Million Threshold
A $5.5 million assessed value (AV) represents a significant tax burden for property owners. For a tax class 2 apartment building, an assessed value of $5.5 million equates to property taxes of approximately $680,000. For a tax class 4 commercial property, taxes would be around $590,000. Based on our internal analysis, there are 1,027 properties in New York City with assessed values between $5.0 million and $5.5 million for the 2024/25 tax year. In Manhattan, the median size of a building with an AV between $5.0 million and $5.5 million is 40,000 square feet. These properties could particularly benefit from the increased threshold next year. Note that there are 12,662 tax lots with assessed values of at least $5 million in the 2024/25 tax year.
The 2019 Law Change: Background and Context
The 2019 increase in the TC309 threshold was intended to modernize property tax requirements in New York City. Before 2019, the threshold for CPA certification of income and expense forms was set at $1 million, a level established in 1973. As property values grew, this threshold became outdated. By the 2000s, even smaller properties surpassed the $1 million mark, resulting in significant compliance costs for owners.
The New York City Bar Association played a significant role in advocating for this change, emphasizing that the outdated $1 million threshold was unfair to smaller property owners. During hearings in 2018 and 2019, the Bar Association and other stakeholders testified that CPA certification costs often exceeded $10,000, which was an undue burden for many property owners. The City Council ultimately agreed, raising the threshold to $5 million and instituting a mechanism for automatic adjustments every five years to keep pace with market changes. Next year is the first adjustment year.
Why a Five-Year Adjustment is Beneficial
The mechanism to adjust the TC309 threshold every five years is a crucial aspect of the 2019 law. It ensures that the assessed value threshold remains relevant as property values fluctuate, preventing smaller properties from inadvertently falling under requirements meant for larger properties. Regular adjustments help keep compliance costs manageable for smaller property owners and ensure that the regulatory burden does not grow disproportionately over time. This approach provides predictability and fairness, helping taxpayers plan and budget effectively.
We know of many property owners who want to protest their assessments, but don’t have a CPA who is willing to sign a TC309. Often, only larger properties with sophisticated owners have CPAs already engaged who can prepare TC309 forms on short notice. TC309s are due by March 24th every year, and they certify the income and expenses of the most recent year, typically the calendar year ending December 31st, just three months prior.
Conclusion
The anticipated adjustment to the TC309 threshold for the 2025/26 tax year is a significant development for property owners in New York City. Increasing the threshold to between $5.4 and $5.6 million, which is my prediction, will alleviate unnecessary compliance costs for many owners and help the Tax Commission allocate its resources more efficiently. With approximately 1,000 properties potentially benefiting from this change, the impact could be substantial.
Owners of properties valued near the $5 million mark should stay informed as these adjustments take place, as they may no longer need to file a TC309 form, leading to potential savings. For guidance on navigating these changes, feel free to reach out for assistance.