Appeals Court: NYC Property Tax System Violates Federal Law

(Angela Weiss/Getty Images)

The New York State Court of Appeals ruled Tuesday that New York City’s property tax system violates federal housing discrimination law and state law.

The court’s 4-3 ruling sided with plaintiff Tax Equity Now NY (TENNY), which sued the city and state for a tax system it said subjected minorities to higher property taxes compared to properties in majority-white districts. That is, multi-million-dollar properties are taxed at similar or lower rates than less valuable properties and that real property in majority-people-of-color districts are overassessed, the complaint alleged.

“According to the complaint, the result is staggering inequities and a regressive tax system that hurts those who can least afford to pay heavy taxes,” TENNY said in its complaint.

After hearing oral arguments in early January, the appeals court agreed.

TENNY’s appeal came after a trial court in 2020 dismissed due process claims in the complaint. The Appellate Division dismissed the complaint in its entirety for failure to state any claim.

“That was [the] error,” the Court of Appeals said in its majority opinion Tuesday.

“We conclude that, although TENNY’s complaint failed to state claims against the State defendants, the complaint exceeds our pleading standard and sufficiently alleges causes of action against the City defendants … on the general basis that the system is unfair, inequitable, and has a discriminatory disparate impact on certain protected classes of New York City property owners,” the majority wrote.

“The City and State do not dispute that the system results in disparities,” the ruling continued.

“The complaint recounts acknowledgements from City officials that these rampant disparities lead to inequality among similarly situated property owners. While these officials bemoan the situation, the City fails to act.

“According to the complaint, the numbers tell the story of a taxation scheme that requires lower-income property owners and renters in majority-minority New York City neighborhoods to pay more than their fair share of the tax burden in violation of the law,” the majority concluded.