Suit says lawmakers bypassed property tax cap by calling levy a surcharge
Former Commerce Secretary Wilbur Ross and casino mogul Steve Wynn filed suit in state court Monday seeking to overturn New York City’s pied-à-terre tax on luxury second homes, alleging the levy violates the state and federal constitutions.
The 40-page complaint, brought by retired judge and attorney James Catterson, is the first to seek to invalidate the tax on constitutional grounds, according to the plaintiffs. A separate group of New York City homeowners filed another complaint Tuesday also alleging the tax is unconstitutional. In August, a different group of homeowners sued Mayor Zohran Mamdani’s administration, alleging the Department of Finance had wrongly identified them as second-home owners despite living in the city as their primary residence for years.
The plaintiffs argue the tax, enacted by state lawmakers in May, applies to homes in New York City worth $5 million or more that are not the owner’s primary residence, with limited exemptions when an immediate family member lives in the home or it is rented out long-term. Ross owns a prewar co-op building by the East River and was notified in July that he would owe roughly $83,500. Wynn owns a residence at a Ritz-Carlton and was told he would owe about $183,000.
The complaint asserts the levy “intentionally discriminates” against nonresidents of New York City, who “by definition, cannot vote against lawmakers imposing that new tax.” Nonresidents like themselves, the plaintiffs argue, already pay property taxes and should not shoulder additional taxes to fund city resources such as public schools and transit because they inherently use less of those services than full-time New Yorkers.
“By definition, we’re here less than half the year,” Ross said. “How could I possibly use more services than my neighbor who’s here 12 months of the year? That just seems cuckoo.”
Ross, who oversaw a private-equity firm before serving in the first Trump administration, also owns property in the Hamptons, Palm Beach, London and Paris. He said he does not have “any contingency plans” for his New York City residence and is betting the lawsuit will void his pied-à-terre tax bill.
The lawsuit also targets the legal structure of the levy. New York is only allowed to raise New York City property taxes to 2.5% of the five-year average market value of the city’s taxable real estate, according to the complaint. State lawmakers excluded the new fee from that limit by referring to the pied-à-terre levy as a “surcharge” instead of a tax, the suit alleges.
The complaint cites several instances of Hochul and Mamdani publicly framing the pied-à-terre tax as a target on nonresidents, including a video of Mamdani standing outside the Manhattan tower where hedge-fund billionaire Ken Griffin has a penthouse. The plaintiffs are asking the court to overturn the tax and reimburse them for the costs of the lawsuit.
Catterson, the retired judge and attorney who filed the case, framed the constitutional challenge in broader terms. “If a locality thinks it can solve its budget problem by taxing out-of-staters, what you have is not a United States, but 50 separate states taxing each other’s residents,” he said.
The lawsuit carries implications beyond New York. Rhode Island’s so-called “Taylor Swift Tax” on second homes worth $1 million or more that sit empty for at least 183 days went into effect in July, and other jurisdictions including Montana and San Francisco are weighing their own second-home taxes, according to the complaint.
Spokespeople for Gov. Kathy Hochul and Mayor Mamdani did not immediately respond to requests for comment.