There's a whole article specifically about tax-commission assessment reductions here on this site.

Go to http://www.habitatmag.com/publication_content/2009_january/web_exclusive_adaptations/tax_appeals_for_condos_specifically

I read this article (& the related pieces in this month’s Habitat) before posting my question. If there are answers here, I can’t find them.

The closest thing to relevant advice is in the Editor’s Note, where a Board is cautioned to “insulate itself from any controversy between current and former owners” & to “consult with your attorney about how to deal with this.” I had pointed out this potential problem...but it’s a peripheral concern.

The basic question is how to properly allocate a Board-negotiated, building-wide cash refund of property taxes. I believe a straightforward answer exists, but have not seen the question addressed in any of numerous publications about the tax certiorari process.

I do not think this is a matter which should require legal consultation, 1 property at a time.

It sounds as though your question IS a straightforward one: how to allocate a refund of taxes paid, by the corporation on behalf of all Shareholders, on an equitable basis. Since payment of taxes is done by the corporation, and could be allocated on a per-share basis to begin with, it would seem that refunding them on a per-share basis would be the fairest way.

For example, if you have 27,000 shares and your refund is $27,000, $1 per share would be allocated; a Shareholder having 600 shares would receive a $600 share of the refund.

While I agree that legal counsel (and its fees) isn't needed here, the Board might like to rethink the refund... that $27,000 would go a long way toward ameliorating the cost of a needed elevator upgrade, for example, or could earn substantial income if deposited with reserves.

Hope this was helpful.

Thanks, RLM, but as you'll note in my response to Harvey, payment of taxes in condos is NOT done by the corporation, but by the individual apartment owners. The owners do, however, typically grant the Board [via the By-Laws] the power to hire counsel & pursue tax certiorari appeals on behalf of the collective owners.

While it may, indeed, be tempting for an Association to apply refunds toward capital projects, doing so would amount to an allocation by ownership shares...which probably won't be in proportion to the way the taxes were paid.

I misread this as a co-op....

While I am in a coop and each unit has an allocation of shares representing both the unit and the common areas, I am ignorant as to how condos allocate common charges. Perhaps, any tax rebate should be allocated or pro rated in the same manner, e.g.: the percentages used to apportion common charges.

We are working towards converting from coop to condo and I know we plan to retain the shares per unit as the medium for allocating common charges.

This article gives us some food for thought.

Thanks all.

Thanks, Harvey, but condos are fundamentally different in that each apartment is a taxable piece of real property. The building doesn't pay tax on the residential units--it's paid by the individual owner-occupants [or investors].

Allocation by ownership shares would not return tax monies in proportion to the way they were originally paid.

Have you consulted with the condo accountant as to the way it should be distributed?

I think you have the right idea when you state the following:

In refunding directly to owners, the substantial headache of determining actual taxes paid on each unit--so that direct disbursement or credit is correctly allocated--should not be discounted. Will this process be reliably accurate? Should it be transparent, with results published or available to all owners?

However, more than taxes paid which may be abated by any of the programs, you should ook into the assessed value of each unit so that you may come up with the right amounts per unit.

AdC

This is not 1 building, but many. There are accountants in each camp; some must be wrong.

As for assessed value: let's say you & your neighbor have identical apartments. Your neighbor is elderly, disabled, & a permanent resident, meaning he receives STAR & other tax breaks. It's your 2nd home, & you're young & healthy...you have no abatements.

The condo negotiates a tax refund which works out to $1,000 for your unit. Adjusted proportionally for the lower taxes your neighbor actually paid, he would get $650. Do you think it's fair, then, for him to get the full $1,000, based on assessment alone?

What if your neighbor is a diplomat, or if the unit is owned by a nonprofit to house staff or guests...or as an office? They've paid no taxes--should they get a refund?

Multiply by, in some cases, hundreds of units in a building, & it can get complicated. Plus, some of the disparities can be quite sizable.

It would be nice to see a knowledgeable atty or accountant weigh in on this one.

It seems that you argue that those who get STAR, and other exemptions are not entitled to obtain their portion of the tax certiorari. Unfortunately, I disagree; if the unit were to change hands and all of those exemptions were gone, the assessed value of the units would remain the same. Your arguments seem to say that, because some people had no exemptions, you are in the obligation to compensate them for their lack of exemption by giving more to them through the tax certiorari refund. You seem to forget that a tax certiorari takes into account the overall assessed value of the property by compared to other property situated in your area.

Well, those who got STAR declared on their IRS forms the money advanced to them in the case of a shareholder. I guess in a condo as well as in a house, the owner only declared their discounted portion to the IRS as their tax burden. Consequently, those with less exemptions or none, delcared their larger payments of taxes as part of their IRS form.

Non-profits pay taxes for property, properties owned by a diplomat as a private citizen of a foreign country may pay taxes; however, the person may not pay income taxes and as a diplomat may enjoy inmunities of several nature. Now, property owned by a foreign country for the purpose of establishing an embassy may be another question. I don't think a residential building has to worry of an embassy in their apartments.

Consequently, consult the tax accountant and get guidelines that are unbiased when distributing the gelt.

AdC

I agree with much of your analysis, AdC: assessed value does not change, whether or not abatements are in place. When rate reductions are negotiated, all units benefit going forward from proportionately lower assessments...whether or not their taxes are paid fully, or reduced.

Refunds, however, are intended to return a portion of taxes paid to those who actually paid them. That's why a multi-year tax refund raises interesting practical & ethical questions for an owner who purchased mid-term; as discussed earlier, the issue of whether to share with the seller is best left to the individual owner, his attorney, & his conscience. Where abatements are concerned, however, the questions are much broader, more complex, & must be made building-wide by the Board.

Tax cert attorneys negotiate a lump-sum settlement for a building, based on what the unit owners collectively paid for the period in question. When the Board slices this pie, an equal portion given to owners who paid reduced tax for that period amounts to a WINDFALL, & it comes at the expense of their neighbors. Most owners I know, in most buildings I see, would not consider this fair.

You’re correct that all owners must declare to the IRS taxes refunded…just as they originally deducted taxes paid; this is true regardless of the absolute amount or proportional allocation. And you’re right that tax certiorari considers overall assessed value by comparing to like properties…but that comparison presumes a predictable mix of abatements in other buildings; at the macro level, there’s no discrepancy or problem. It’s when considering individual apartments--which a Board allocating refund monies must do--that inequities arise.

I maintain that Boards which decide to dump refunds into their capital reserves are delivering a windfall to some owners at the expense of others…& that allocating refunds fairly, apartment-by-apartment, is a thorny & difficult task. I remind you that I’ve seen diametrically opposed opinions from tax accountants for buildings in similar circumstances. They can’t all be right.

Depending on the size of the tax refund that you got under the tax certiari, the work seems to call for tons of recalculations that might not provide the expected rewards or great difference in refunds between those with abatements and the have nots. You may wish to investigate with one apartment with many abatements and find out how much such an apartment would differ from one with no abatements. If the jobs is worth it, then roll up your sleeves and prepare to work for several nights. This will get you the perfect distribution.

AdC

1--In one building I'm looking at, the refund is 6 figures...not small change, even when split among many apartments.

2--No question, it would take a lot of work to get this right.

3--As to whether it's "worth it," how could you or I--or any elected Board member--legitimately make that call for individual unit owners, all of whom have the right to be treated equitably?

This is why it's such a thorny question.