No, it's not considered bad planning to budget for the total tax (including the abatement) and then give back the extra money as a cash refund to shareholders who qualify. Many well-run buildings use that approach, and it's fine. The main disadvantage is that it makes your maintenance higher, which is a downside for potential buyers.

Although it's counterintuitive, the assessment technique still works fine under the new scheme, without adjusting for sponsor units or other non-primary residences. The only difference is that the assessment becomes real money for shareholders who don't get the abatement. Here's an example.

Suppose there are 10 units in the building and each has 10 shares. Under the old scheme, if each unit was due a vapor-rebate of $100, you would impose an assessment of $10 per share. No one pays any real money, the books balance, and your maintenance charges reflect actual expenses. (By the way, this is the approach we use in our building.)

Now suppose there are two sponsor units among the 10. The total rebate is now only $800 instead of $1000. But you STILL assess at $10 per share. Each of the units due a $100 refund breaks even, and the two sponsor units owe $100 each, in real money. This works out exactly right if your budgeted RE tax reflects a flat abatement of 17.5% for the whole building, as if everyone were going to get the refund. Those who don't qualify will pay the extra amount they owe via this assessment, and you will end up with exactly the right amount to pay the tax collector.

This is quite complicated to explain to shareholders - especially the retroactive clawback to mid-2012 for rebates already paid. In my opinion, the whole "primary residence" requirement is a poorly considered adjustment to a bad tax law that was only intended to be a Band-Aid in the first place. None of this abatement stuff was meant to be permanent; our legislators were supposed to come up with a tax scheme that was fair to co-op and condo owners without adjustments.

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A follow-up question for any accountants or experienced treasurers on Board Talk: if you're planning to continue with the abatement/assessment model, how are you going to reflect that in your budget? The idea is:

[Unadjusted tax minus full 17.5% abatement] + [Net real-cash assessment] = [Actual tax bill]

But if you do it like that, then the assessment gives the impression that it's not per-share, even though it is. Suggestions?

Ironically, this is one argument for budgeting the full tax amount and then inflating maintenance in order to have real cash to give back to the shareholders who receive the abatement. It will certainly be clearer in the budget under the new model.

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With the new rules how you reflect the numbers in the budget stay the same as before. The only change is that some people will have a real assessment to pay once a year. In our building about 15% of the shareholders will have their abatements phased out. For the other 85%, they will have a monthly maintenance that is the same amount every month, except for the small variation in the month when our building applies the abatement/assessment charges. The 15% will have to budget their own finances to handle the assessment without the abatement.

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Thanks, Burt - I see what you're getting at. If you budget three separate line items - taxes minus full abatement (payable), partial abatement (payable), and full assessment (receivable) - then things will balance out as they have before, regardless of how many shareholders pay actual money for the assessment. We had moved to a simplified model of listing only the actual tax bill and footnoting the abatement/assessment, but may well go back to the three-line model this coming year.

Also, with respect to shareholders who have to pay the assessment with real money, we'll almost certainly allow them several months to do so. That's what we've done with the retroactive clawback to mid-2012. The affected shareholders have four months to pay the extra taxes. If they sell during that period, they must pay the full balance at closing.

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What about people who were assigned shares in May of June of this year?

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At year end, our mgmt. co. prorates the share of property taxes paid and mortgage interest paid for the year and issues 2 1098's, one to the current owner ands one to the previous owner. The owner at the time of the tax credits/assessment will be billed for the full assessment and receive the full credit. It's up to the attorneys to take that into account at closing, just as one might adjust the value for 200 gallons of oil in a heating oil tank in a home sale.

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