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Tax abatement distributionJan 23, 2023

Hi
Must a coop board allocate and distribute all proceeds from property tax abatement to unit owners who qualify or can they be allocated to all residents equally. We have a number of residents who don’t qualify and therefore are charged an assessment while qualifying residents receive the credit. Their rationale is that by not distributing the proceeds equally to all, the board is not meeting its fiduciary duty to treat all residents equally and that non-qualifying residents are shouldering the financial burden to pay to qualifying residents. Has anyone seen a different approach to allocation/distribution of the abatement?

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Tax abatement distribution - Steven424 Jan 24, 2023

The first requirement is that the abatements be distributed according to the list you received from the Dept of Finance. How the DoF calculates how much each *eligible* unit (apartment) will receive is a mystery of the universe.

The second requirement is that all co-op assessments be made equally on a *per-share* basis.

The board is fulfilling its fiduciary responsibility by treating each *share* equally and not each *unit*. This cannot be changed, not even by amending the Proprietary Lease.

Non-qualifying shareholders (usually those whose unit is not their primary residence) are out of luck and there is no recourse. The City has chosen to give primary residents a perk in the form of a tax abatement *per unit* and the board is required to base and collect any assessment on a *per share* basis.

This abatement/assessment wash *never* works out for any unit, and the assessment is equal to the abatement. Some shareholders have a net gain and some have a net loss.

I've been a treasurer for 15 years and I've received this identical question each of those 15 years. I try to preempt it by including a basic description of the different ways the abatement and assessment are determined in the email I send to all shareholders. I still get a couple of calls each year

I hope this helps,
--- Steve

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> Join the conversation Comments (2)
Tax abatement distribution - Carl Tait Jan 24, 2023

Excellent explanation, Steven. We also get the same questions year after year in our coop.

Just one point to add: the tax abatement is "vapor money." It's not that the coop receives a big pile of cash to hand around to those who were eligible. Instead, the building's property tax bill is reduced by the total amount of the abatement. The coop never actually sees the money, except in the form of lower tax payments.

So there's not any received money to distribute. Instead, most buildings - including ours - follow exactly the process you describe: impose a one-time per-share assessment that (roughly) flattens the abatement for those who receive it, and requires real-money payments from those not eligible for the abatement.

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Tax Abatement vs. Assessment - mr.gardenz Jan 31, 2023

1. New Shareholder purchases from an individual owner prior to February 1:
a) will that Shareholder be eligible for NYC DOF Tax Abatement forwarded via a credit to maintenance charges in June or July of that year?
b) is that Shareholder responsible for any Assessment intended to re-capture the Abatement?

2. New Shareholder purchases prior to February 1 from a Sponsor or Owner ineligible for the Tax Abatement :
a) when does the New Shareholder become eligible for the Tax Abatement?
b) is the New Shareholder responsible for any Assessment until eligible?

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Tax abatement distribution - Ed Jan 25, 2023

Steve and Carl, thanks for the responses. Very helpful and good to know it is not only us receiving this type of question. I am not sure if math has been done to compare the value of the abatement vs the cost to the non-qualifying shareholders but I have to expect they would ultimately be paying more in fees without the reduction in taxes. - Ed

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