Legal Insights
New York’s proposed pied-à-terre tax is aimed at ultra-wealthy, high-value, second homes, but its practical impact may depend less on the property itself, and more on how the property is owned. For LLC-owned residences, the proposed legislation raises questions regarding beneficial ownership, residency, primary use, entity structuring, transfer planning and diligence in luxury residential transactions.
Overview of the Proposed Pied-à-Terre Tax
New York Governor Kathy Hochul has proposed a tax on second homes for the ultra-wealthy, specifically for certain non-primary residences.[1] The pied-à-terre tax is not a new concept in New York, and similar proposals have appeared in prior legislative sessions. Similar to the prior Senate Bill S44B, the current Assembly Bill, A1044, would impose an additional tax on certain non-primary residence properties in New York City.[2] Hochul’s proposal is expected to generate over $500 million annually and would tax second homes valued over $5 million.[3] While limited public details have been released regarding the proposed tax, early reports estimated the tax would apply to 13,000 second homes, though recent reports suggest the number may be closer to 10,000 second homes.[4] With key mechanics not yet publicly released regarding the tax, many question the potential implications, as well as potential exclusions that may arise.
The proposed legislation comes after a real estate boom in New York City, where median prices increased 9% year-over-year to $1.28 million, with price per square foot rising 4% to $1,972.[5] Notably, transactions above $3 million were up 10% year over year.[6]
Why Entity-Owned Residences Raise Harder Questions
While the legislation has not yet been enacted, the proposal appears to be designed to reach high-value residential properties used as secondary homes rather than as primary residences.[7] That distinction may be relatively straightforward when an individual owns and occupies a unit directly. However, it becomes much more complicated when the record owner is an LLC, a trust, or another entity.
For LLC-owned properties, the relevant questions may include who ultimately controls the entity, who uses the property, whether any beneficial owner treats the property as a primary residence, whether the property is rented to a full-time resident and how the city would verify these facts. A statute that looks simple at the property level may require a much more nuanced ownership and use analysis at the entity level.
The proposed pied-à-terre tax should also be viewed against a broader transparency backdrop. New York and federal regulators have increasingly focused on entity-owned residential real estate, particularly where ownership structures may obscure the individuals who ultimately control or benefit from the property. Even if the tax is enacted as a property tax surcharge rather than a beneficial ownership statute, enforcement may depend on identifying who owns, occupies, or benefits from the property. If enacted, the legislation could become a diligence item in purchase, sales, financings, and restructurings involving high-value New York City residential property.
LLC Ownership and the Taxation Analysis
The proposed legislation targets New York City’s luxury second homes valued at $5 million or more that are not occupied and are not a primary residence.[8] If the current proposal follows the framework of the prior Senate Bill S44B, then the tax would not apply if the property were the primary residence of at least one owner, rented to a primary resident, or occupied by the parent or child of at least one owner.[9] These exclusions may be straightforward when the record owner is an individual, but become much more complicated when the record owner is an LLC. For example, for an individual owner, the analysis would ask: Does this individual own this $8 million condo? and Is this $8 million condo the individual’s primary residence? For an LLC, the analysis is more complex. The analysis would change to Who owns or controls this LLC?; Who actually uses this condominium?; Is any beneficial owner treating it as a primary residence?; and, Would an exemption still apply if LLC-owned property is occupied by the parent or child of the LLC’s owner?
Transactional Considerations
Counsel may need to confirm whether the property could be subject to the surcharge, whether the ownership structure creates disclosure or reporting obligations, and whether purchase agreements should include specific representations, covenants, prorations, or indemnities relating to pied-à-terre tax exposure. Transaction documents may need to address whether the property has been used as a primary residence, whether it has been rented to a primary resident, whether the seller has received notices or assessments and whether any unpaid surcharge should be treated like a real property tax lien or closing adjustment.
Property owners should avoid assuming that entity ownership alone determines the result. Restructuring ownership, changing membership interests, renting the property, changing residency, or transferring title could each have a tax, transfer tax, financing, estate planning and disclosure consequence. Ideally, property owners should have a coordinated review among corporate, tax, real estate and trust and estates counsel before making any decisions regarding property ownership that could subject the property to the proposed tax.
What to Watch For
Key questions remain regarding the proposed legislation, including: How will “primary residence” be tested for LLC-owned properties?; Will the test look through the entity to beneficial owners?; Will occupancy by a parent or child qualify for an exemption where the record owner is an LLC?; How will rentals affect applicability?; Will trusts, partnerships and foreign entities be treated differently?; Will the tax apply based on market value, assessed value, or a separate valuation method?; How much private, confidential information must be disclosed to qualify for the exemption?; and, How will exemptions, appeals, and annual certifications work?
Conclusion
The proposed pied-à-terre tax is not just a tax issue. For LLC-owned luxury residences, it may become a corporate governance, disclosure, diligence, and transaction-planning issue. Until the final legislation is released, owners and advisors should identify potentially affected properties, review ownership and occupancy arrangements and consider whether existing transaction documents, operating agreements and reporting practices adequately address potential exposure. While the proposal’s basic framework has been publicly announced, important details remain unresolved, including how LLC-owned residences, trusts, beneficial owners, family occupancy and exemptions will be handled. LLC owners should remain vigilant and carefully monitor the legislative developments surrounding the pied-à-terre tax, especially before making ownership, transfer, leasing and restructuring decisions that could have an impact on the property post-enactment.
[1] Press Release, Governor Kathy Hochul, Governor Hochul Announces Pied- à-Terre Tax Proposal for Luxury Second Homes Valued at $5 Million or More, Apr. 15, 2026, https://www.governor.ny.gov/news/governor-hochul-announces-pied-terre-tax-proposal-luxury-second-homes-valued-5-million-or-more.
[2] S.B. 44-B, 2019-2020, Leg., Reg. Sess. (N.Y. 2019); A. 1044, 2025-2026 Leg., Reg. Sess. (N.Y. 2025).
[3] Governor Hochul Press Release, supra note 1.
[4] Francesco Brindisi & Yaw Owusu-Ansah, The Pied- à-Terre Tax and Its Potential Revenues, New York City Comptroller, Apr. 30, 2026, https://comptroller.nyc.gov/reports/the-pied-a-terre-tax-and-its-potential-revenues/; Rebecca Picciotto, New York Governor Says Fewer Second Homes to Pay Pied- à-Terre Tax Under New Proposal, The Wall Street Journal, May. 14, 2026, https://www.wsj.com/us-news/n-y-gov-hochul-says-fewer-second-homes-to-pay-pied-a-terre-tax-under-new-proposal-a0a5c3ce.
[5] The Corcoran Group, Manhattan Real Estate Market Report: 1Q 2026, Inhabit by Corcoran, Apr. 2, 2026, https://inhabit.corcoran.com/manhattan-real-estate-market-report-1q-2026 /.
[6] Id.
[7] A. 1044, 2025-2026 Leg., Reg. Sess. (N.Y. 2025).
[8] Press Release, Governor Kathy Hochul, Governor Hochul Announces Pied- à-Terre Tax Proposal for Luxury Second Homes Valued at $5 Million or More, Apr. 15, 2026, https://www.governor.ny.gov/news/governor-hochul-announces-pied-terre-tax-proposal-luxury-second-homes-valued-5-million-or-more.
[9] S. 44-B, 2019-2020, Leg., Reg. Sess. (N.Y. 2019); Francesco Brindisi & Yaw Owusu-Ansah, The Pied- à-Terre Tax and Its Potential Revenues, New York City Comptroller, Apr. 30, 2026, https://comptroller.nyc.gov/reports/the-pied-a-terre-tax-and-its-potential-revenues/.
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