Audit Report on The New York City Department of Finance’s Administration of the Cooperative Condominium Tax Abatement Program

Audit Report On The New York City Department Of Finance’s Administration Of The Cooperative Condominium Tax Abatement Program

EXECUTIVE SUMMARY

This audit of the New York City Department of Finance (DOF or Finance) concerns its administration of tax benefits granted to property owners under the New York State Cooperative and Condominium Tax Abatement Program (Co-op/Condo Abatement).  That program provides a partial tax abatement (a deduction from the taxes assessed on the property) for residential real property held in the cooperative or condominium form of ownership in New York City.  The amount of the Co-op/Condo Abatement is based on the average assessed value of the residential units in the building.  If a building units’ average assessed value is $60,001 and above, the property tax due is reduced by 17.5 percent; if it is $55,001 to $60,000, the tax due is reduced by 22.5 percent; if it is $50,001 to $55,000, the tax due is reduced by 25.2 percent; and if it is $50,000 or less, the tax bill is reduced by 28.1 percent.

Currently, to be eligible for the abatement, a cooperative or condominium (co-op/condo) unit must satisfy the following criteria:

• the unit must be the owner’s primary residence; it must be classified as a Tax Class 2 property;
• it cannot be owned by a business (such as a Limited Liability Corporation or other type of corporation);
• no more than three residential units in a single building can be owned by the same person; and one of the three units must be the owner’s primary residence.

During Fiscal Year 2015, there were 35,335 condominium units that received abatements totaling $76.46 million, and 226,284 cooperative units that received abatements totaling $322.98 million.

Audit Findings and Conclusion

DOF allowed owners of at least 1,249 properties to receive Co-op/Condo Abatements for which they were not eligible. These properties received 3,471 improperly granted abatements from Fiscal Years 2013 through 2016 that resulted in a loss of property tax revenue of at least $10,018,348.  Specifically, we found that DOF did not remove Co-op/Condo Abatements from 1,049 properties after a condominium was sold to either a corporation or an LLC.  In addition, we found that DOF improperly processed and granted new Co-op/Condo Abatements to at least 36 condominiums that were owned by a corporation or LLC subsequent to the 2013 eligibility rule change.  Finally, we found 164 properties that are not classified by DOF for residential use received Co-op/Condo Abatements as well.

With regard to these 36 properties, we could not locate in the personal exemptions online processing system any exemption and abatement applications filed on behalf of the 36 ineligible condominiums.¹  DOF provided development applications, filed by the board of managers, on behalf of 9 of the 36 ineligible condominiums. These applications incorrectly listed the condominiums as owned by individuals and not the actual owner of record, an LLC.  However, without any documentation to review, we were unable to determine what prompted DOF to grant the abatements to the remaining 27 ineligible property owners after the rule change.  DOF’s failure to enforce the eligibility requirements has resulted in the granting of improper abatements.

Audit Recommendations

The audit made 12 recommendations including that DOF should:

• Remove the abatements from properties that, according to the DOF ACRIS data base, are owned by either a corporation or LLC.