BS BULLETIN:

• A New York judge ordered Mayor Zohran Mamdani’s administration to cancel roughly 17,000 notices sent under the city’s new pied-à-terre tax.
• Justice Wayne Ozzi ruled the rollout was “arbitrary and capricious” and violated property owners’ due process rights.
• The judge did not invalidate the tax itself, meaning Mamdani can try again — but the city has to determine who actually owes it before making homeowners prove they don’t.

Mayor Zohran Mamdani’s new tax on luxury second homes just got a court-ordered do-over.

Richmond County Supreme Court Justice Wayne Ozzi on Tuesday ordered New York City to cancel roughly 17,000 notices sent to property owners who were told they might owe the new pied-à-terre surcharge.

“All previously Mailed Notices are to be cancelled,” Ozzi ordered.

The judge found the city’s implementation “arbitrary and capricious, affected by errors of law, and in violation of the recipients’ due process rights.”

The problem was not, at least in this case, whether New York has the legal authority to impose the tax.

It was how Mamdani’s Department of Finance went about deciding who might owe it.

The city sent notices to property owners and required recipients who believed they were exempt to provide documentation proving that the home was actually a primary residence or otherwise outside the tax.

The court concluded the government needed to do more of that homework itself before putting the burden on homeowners.

In other words: figure out who owes the tax first, then send the tax notice.

The surcharge applies during its initial phase to one-, two- and three-family homes valued by the Department of Finance at $5 million or more and to condominium and cooperative units valued at $1 million or more when they are not used as a primary residence.

Rates can reach 1.3% for qualifying houses and 6.5% for qualifying co-ops and condos under the first phase of the law.

Mamdani has made the tax a major piece of his effort to raise additional revenue from wealthy property owners.

“We will tax the rich,” Mamdani declared while presenting his budget in May. “I don’t know how else to describe a tax on secondary homes of non-resident New Yorkers worth more than $5 million than as a tax on the rich,” he said.

The administration has projected the surcharge will bring in roughly $500 million annually.

When the city began sending notices in July, Mamdani acknowledged concerns about confusion surrounding the program. “We’re always going to do everything that we can to make sure we’re communicating clearly to New Yorkers,” he said at the time. He promised the city would ensure that “this tax is only levied on those who are non-primary residences that are worth more than $5 million.”

Tuesday’s ruling found that the city hadn’t gotten there yet.

The Mamdani administration maintains the underlying policy is about fairness.

“The pied-à-terre surcharge is about a basic principle of fairness,” a mayoral spokesman said after the ruling. “If you can afford a luxury second home in New York City, you can afford to pay your fair share for the schools, streets, and parks that make this city work.”

The city plans to appeal.

Meanwhile, the tax faces a separate and potentially much broader legal challenge.

Casino mogul Steve Wynn and former Trump Commerce Secretary Wilbur Ross filed suit Tuesday challenging the constitutionality of the surcharge itself. Unlike the Staten Island case, that lawsuit goes beyond how the city administered the tax and attacks the underlying policy.

So Mamdani hasn’t lost his tax.

He has lost his first attempt at collecting it.

MY QUICK TAKE

There’s actually an important little civics lesson hiding inside this mess.

Government normally has to establish that you owe it money. Mamdani’s rollout effectively told thousands of homeowners: We think you might owe us money — now send us documents proving you don’t.

That is the part the judge just blew up.

And here’s what makes the next round interesting: the city can fix its paperwork and come back. But Wynn and Ross are now asking another court a much bigger question — whether New York can impose this particular surcharge in the first place.

So Mamdani currently has two tax problems. One court told him to do his homework. Another may eventually grade the assignment.

DBS WIRE SOURCES

• Twitchy — Mamdani loses on his pied-à-terre tax
• New York City Department of Finance — Non-primary residence surcharge
• New York City Mayor’s Office — Mamdani announces pied-à-terre tax
• FOX 5 New York — Judge orders city to redo tax rollout
• Associated Press — Steve Wynn and Wilbur Ross challenge pied-à-terre tax