NYC Property Tax

12 Reasons You Might Not Get a Property Tax Reduction

12 Reasons You Might Not Get a Property Tax Reduction

Published 1/8/2025 at 9:00 AM

By: Benjamin Williams

Introduction

Here are twelve subtle (but crucial) reasons New York City property owners lose out on tax reductions.

Reason #1: Underestimating “Related Party” Disclosures

When “Related” Means More Than Family

Many owners think “related” only means blood relatives or spouses. Not so in NYC property tax protests. The Tax Commission includes common ownership, affiliated entities, and fiduciary-beneficiary relationships under “related persons.”

Why It Matters

  • If you’re leasing to any “related” entity—say, a sister LLC—disclosure on Form TC201 (or TC200 for net leases) is mandatory.
  • Failing to reveal related-party rents or management fees can lead to total denial of your review.

Bottom Line: Transparency is non-negotiable. Double-check every party connected to the property. When in doubt, disclose.

Reason #2: Leaving the “Net Lease” Question Unresolved

Net Leasing in NYC—More Complex Than It Sounds

A net lessee means you’re paying all taxes, insurance, and maintenance—essentially stepping into the owner’s shoes. But guess what? If you sublease space to anyone else, you still need to file a proper income and expense form (TC201, or a specialized form like TC208 for hotels).

Key Points

  • A net lease alone does not exempt you from providing subtenant income data.
  • The Tax Commission wants to see a complete rental picture—regardless of who’s ultimately paying the bills.

Tip: If you’re net leasing, confirm which form to file, or risk a “no offer” letter.

Reason #3: Failing to Substantiate Big Income/Expense Changes

Dramatic Swings Demand Solid Proof

Year-to-year jumps in expenses (+15%) or dips in income (−10%) trigger extra scrutiny. The Tax Commission’s guidelines highlight these as “must explain” items. Generic claims like “the market was tough” or “labor costs rose” won’t cut it.

What They’re Looking For

  • Detailed breakdowns for major repair bills, tenant improvements, or payroll changes.
  • Rent rolls or DHCR filings to justify a sudden dip in occupancy or rent.

Action Step: Keep clear supporting documents and attach them to your initial filing (or use Form TC159 if you must supplement). “Surprise” data after the hearing rarely goes over well.

Reason #4: Mixing Up Actual vs. “Straight-Lined” Rent

FAS 13 vs. Tax Commission Realities

Straight-line rent might be great for GAAP accounting, but the Tax Commission needs actual rents paid or accrued under each lease’s terms—no smoothing allowed. If your financials show an even monthly rent for a staggered lease, the Tax Commission notices and questions your entire submission.

Pro Tip

  • Report lease escalation exactly as it’s billed, not a 12-month average.
  • Disclose any free-rent periods or concessions so there’s no mismatch.

Remember: This is a big red flag. Keep your rent statements aligned with the Tax Commission’s rules.

Reason #5: Ignoring Residential Rent “Trigger Points”

It’s Not About Rent Rolls—Until It Is

You’re not always forced to provide a full rent roll…unless your property hits certain triggers: for instance, your average apartment rent falls below a specific threshold, or your total residential income doesn’t align with your monthly rent roll times 12.

Mistake: Some owners guess or do blanket math (annual rent ÷ 12) for monthly rent in Part 3 of TC201. That can activate mandatory rent roll submission. Skip it, or submit it late, and your application can be denied.

Check those thresholds before filing. If you’re near them, gather your December or January rent roll (or a DHCR report) well in advance.

Reason #6: Mishandling “Major Construction” Reporting

DOB Permits Can Make or Break Your Case

If you’ve added significant enclosed floor area or performed a gut renovation, the Tax Commission sees that as a “major alteration.” Labeling it “just routine” when DOB records say otherwise raises red flags.

Do This

  • Mark “Yes” on Form TC101 or TC109 if you have substantial work.
  • Attach Form TC200 if the construction cost is high relative to your assessment.
  • Provide any scheduling or cost breakdown that explains the impact on your property’s value.

Transparency helps you avoid contradictions between DOB filings and your tax submissions.

Reason #7: Lumping Expenses into “Miscellaneous”

The Miscellaneous Line Is No Junk Drawer

No matter how tempting, don’t toss large amounts into “Miscellaneous” (part 9 – line l on TC201/part 7) without itemizing.

Why This Matters

  • Capital improvements and lease buyouts need separate amortization.
  • “Misc.” lines over 5–10% of total expenses can be a red flag for the Tax Commission.

Solution: Provide a clear breakdown or schedule. If “Misc.” is huge, your entire expense statement can be discredited.

Reason #8: Missing the New Accountant Certification Threshold

$5,000,000 in Assessment Isn’t Small Potatoes

The Tax Commission raised the bar for requiring a CPA’s certification: If your actual assessment surpasses $5 million, you need Form TC309 with audited statements. Owners often realize too late that their building’s official assessment did cross that line.

Reminder

  • “Independent” means the CPA can’t just be your in-house accountant; they must sign in their personal capacity.
  • If you skip the certification or rely on a review/compilation, your application fails outright.

Always double-check your assessment figure before deciding how formal your financials need to be.

Reason #9: Ignoring Post-Filing Ownership Changes

Standing Must Survive Until the Hearing

Maybe you sold the building in October, or a new investor took a controlling share. If you’re no longer the legal “aggrieved” party, the Tax Commission can’t grant your reduction. The new owner must substitute in via Form TC155 plus (TC200/TC230) if needed.

Bottom Line: Always disclose ownership changes. If you’re no longer the rightful applicant, the Tax Commission won’t proceed.

Reason #10: Overlooking RPIE Non-Compliance

No RPIE, No Protest

By law, failing to file last year’s Real Property Income & Expense statement disqualifies you from this year’s challenge. The Department of Finance imposes fines, and the Tax Commission must refuse to review your case.

Tip: If you suspect an RPIE compliance issue, sort it out with Finance ASAP—before your hearing. Procrastination here kills your chances.

Reason #11: Not Reconciling TCIE vs. RPIE Data

The City Watches for Contradictions

If your RPIE says your net income last year was $1.2 million, but your new filing (TC201) claims $2 million for that same period, you’d better have a bulletproof explanation. The Tax Commission sees these mismatches as major credibility issues.

Action: Provide a line-by-line reconciliation of any differences. Blaming “new bookkeeping software” isn’t enough. Document the reason for each variance to avoid immediate denial.

Reason #12: Forgetting the Taxable Status Date

January 5 Sets the Stage

All condition-based arguments—construction, leases, vacancies—hinge on the property’s status as of January 5. Changes on January 6 or 7 might seem minor, but they don’t count for the upcoming assessment year.

Key Insight

  • If you started a demolition on January 6, it likely won’t reduce your new assessment this cycle.
  • Vacancies that started after January 5 also won’t help this year’s protest.

Focus on everything that’s in place right up to January 5. That’s the date the Department of Finance locks in your building’s reality for the next roll.

Final Thoughts

Avoiding these twelve pitfalls can make the difference between a successful tax reduction and a swift denial. Whether it’s disclosing related parties, reconciling data sources, or providing detailed documentation, the key is proactive compliance with the Tax Commission’s exacting requirements.

Questions or concerns about your own NYC property assessment? Get in touch with us at Rosenberg & Estis, P.C. We’re here to ensure your property tax protest doesn’t stumble over these common (and costly) mistakes.