DOF Publishes FY 2023 Tentative Assessment Roll

On Jan. 18, the NYC Department of Finance (DOF) announced the publication of the tentative property assessment roll for fiscal year (FY) 2023, which shows the total market value of all NYC properties for the upcoming year at about $1.398 trillion, an increase of 8.2 percent from the 2022 fiscal year. The data can be viewed at https://www1.nyc.gov/site/finance/taxes/property-assessments.page. According to the DOF, citywide taxable billable assessed value, the portion of market value to which tax rates are applied, increased by 8.1 percent to $277.4 billion.

The property values for FY23 reflect real estate activity between Jan. 6, 2021, and Jan. 5, 2022, the taxable status date. The DOF finds that FY23 values increased from last year but remain below FY21 values for many properties, because the city's economy is still feeling the impact of the pandemic.

At this time, the DOF sends each owner a Notice of Property Value estimating their anticipated tax responsibility. The release of the tentative assessment roll marks the beginning of the time period in which property owners can examine and challenge their property values before the roll is finalized in May. The assessed values in the final roll, along with the tax rates and any exemptions or abatements, are used to calculate property taxes for the fiscal year that starts on July 1, 2022.

Values for Class 2 Properties

The total market value of Class 2 properties, which include rental apartment buildings, rose to $346.9 billion in FY23, increasing by $27.8 billion, or 8.7 percent from FY22. However, the total class 2 market value remained slightly below its FY21 level, down 0.22 percent.

The total assessed value for Class 2 properties increased 7.2 percent, to $108.5 billion. Manhattan experienced the lowest market value percent increase for Class 2, at 6.3 percent; Brooklyn experienced the highest taxable billable assessed value percent increase at 11.7 percent.

Class 2 rentals saw a market value increase of 11.7 percent. The total assessed value increased by 8.6 percent for Class 2 rental apartments. Manhattan had the least market value increase at 8.2 percent and Queens had the highest taxable billable assessed value at 13.5 percent for rental apartments.

Values for Class 4 Properties

The total market value for Class 4 commercial properties increased by 11.7 percent citywide to $300.8 billion. Manhattan had the smallest percent increase in market value, at 10.3 percent. Class 4 market value remains 7.7 percent below its FY21 level, down $25.2 billion. And total assessed values increased by 10.0 percent, to $125.6 billion. Commercial properties in Manhattan saw the smallest increase in assessed value, at 8.7 percent.

Permitted Valuation Approach

Most NYC commercial property is comprised of Tax Class 2 properties and Class 4 properties. Class 2 consists of buildings with more than three residential units, and Class 4 properties include nonresidential commercial property other than utility buildings. For tax assessment purposes, the market value of each commercial property is determined using the income capitalization approach.

For income-producing commercial properties, the actual income and expenses reported by the owner are used to determine the property’s net operating income. For mixed-use property, each category of income must be separately stated—for example, gross residential income must be separated from gross office income. All income derived from the property must be disclosed.

Similarly, in determining net revenue, expenses directly related to the operation of the property that are to be deducted from the gross revenue must be separately stated. Non-operational expenses, such as mortgage interest, depreciation, and corporate income tax, are not considered. Although the entire cost of a capital improvement can’t be deducted in the year of expenditure, a reasonable reserve may be treated as a deduction for one or more years.

After determining net operating income, a capitalization rate (often called the cap rate) is applied. In simple terms, the cap rate is the annual rate of return expected by an investor in the property. The cap rate varies based on the use, condition, and location of a particular commercial property. Arithmetically, the cap rate is the net operating income divided by the market value of a property expressed as a percentage. In many cases, the success of an appeal hinges on the cap rate applicable to the property.

Key Dates and Info for Property Owners

The NYC real property tax assessment and appeal procedure is calendar driven. With the release of the tentative assessment roll, property owners will now have an opportunity to examine and challenge these values before the assessment roll is finalized in May.

Owners who believe that the DOF has incorrect property information, such as the wrong number of units or square footage, may file a Request to Update with the DOF. These forms are posted at https://www1.nyc.gov/site/finance/taxes/property-forms/property-forms-assessments-and-valuations.page. Filing a Request to Update with the DOF, however, isn’t a substitute for challenging the assessed value with the Tax Commission.

All properties are valued by law according to the property’s condition on the taxable status date of Jan. 5. Owners who want to challenge their properties’ Assessed Values can do so with the NYC Tax Commission, an independent city agency. Information about challenging your notice of property value can be found at https://www1.nyc.gov/site/taxcommission/about/challenging-notice-of-property-value.page. This year, the absolute deadline for filing a challenge to a property’s assessment with the NYC Tax Commission for Class 2 and Class 4 properties is 5 p.m., Monday, March 1, 2022.

To challenge your site's assessed value, you can file in person or by mail to Tax Commission Office at One Centre St., Room 2400, in Manhattan or DOF Business Centers in each borough:

• Bronx: 3030 Third Ave. (East 156th St.): Business Centre 2nd Fl. 
• Manhattan: 66 John St. (William St.): Business Center 2nd Fl.
• Brooklyn: 210 Joralemon St. Business Center
• Queens: 144-06 94th Ave. (Sutphin Blvd.): Business Center 1st Fl.
• Staten Island: 350 St. Marks Place (Hyatt St.): Business Center 1st Fl.

The final assessment roll will include any changes based on the decisions made by the NYC Tax Commission, as well as new information the DOF gathers about abatements, exemptions, and other adjustments. In June, the DOF will use the final roll to generate property tax bills for FY 2023.

NYC Tax Commission Hearings

Between March and October, the NYC Tax Commission conducts hearings with property owners who have challenged their Tentative Assessments or their representatives to consider whether an assessment should be reduced. At such hearings, information and documentation supporting a property owner’s appeal may be presented. Hearing Officers typically render decisions within weeks of a hearing.

If the property owner accepts a NYC Tax Commission offer to reduce the assessment, the appeals process is concluded, the reduction is effective as of July 1, and the property owner may apply for a refund of any tax overpayment.

If the NYC Tax Commission doesn’t extend an offer to reduce the assessment, or if an owner doesn’t accept the offer and believes that a greater reduction is warranted, the tax appeal for the current year may be continued by filing an Article 7 petition in New York Supreme Court on or before Oct. 24 within the tax year to which the assessment applies.