Wilbur Ross Sues New York Over Pied-à-Terre Tax

Wilbur Ross, his wife Hilary Geary Ross, and casino developer Steve Wynn sued the State of New York on Monday in Suffolk County Supreme Court, arguing the city's pied-à-terre tax on luxury second homes violates both the state and U.S. constitutions.

According to the complaint, New York City's Department of Finance billed the Rosses $83,531.52 on their co-op and Wynn $183,094.69. All three plaintiffs are Florida residents who own Manhattan apartments.

The suit adds Ross to a growing list of plaintiffs challenging either the city or the state over the surcharge. It has been a rough week for the tax's proponents. On Tuesday, a judge ordered the city to roll back the notices it sent to property owners and essentially start over, following a hectic rollout marked by threats that the young mayor's video announcing the tax outside billionaire Ken Griffin's house would drive high-price assets out of the city. Those threats never materialized. The lawsuits did.

In an interview with Fortune, Ross said the tax targets the one group of owners who cannot vote against it.

"They don't want voter retribution for taxes at the ballot box, so they impose these taxes on people who have no way to defend themselves," Ross said. "That's what this is all about."

Three legal arguments

The suit, led by Pillsbury Winthrop Shaw Pittman partner James Catterson, rests on three claims. First, the "surcharge" is really a property tax: it is based on property value, billed through the city's property tax system, and becomes a lien on the home if unpaid. The state constitution caps how much the city can raise through real-estate taxes, but the new law says surcharge revenue does not count toward that cap.

"The state, by fiat, cannot change the constitutional reality of what it is," Ross said. "Surcharge on what?"

Second, the complaint argues that taxing owners based on where they live discriminates against out-of-state residents, violating the U.S. Constitution's Privileges and Immunities and Commerce clauses, along with equal protection guarantees in the federal and state constitutions.

"By their theory, there's no limit to what they could do to non-residents," Ross said. "We'll put 100% tax every year on the property. 200%."

Ross rejected officials' claims that part-time owners do not pay their share. He said owners subject to the tax use none of the city's spending on education or health and welfare, and less policing, fire protection, and trash pickup, because they spend less than half the year in the city.

"How can you possibly consume more in less than six months than other people do in a whole year?" he said.

He noted that nonresidents already pay more because their homes are worth more, and because nonresident co-op and condo owners do not receive the tax abatement given to primary residents.

"If my next-door neighbor in the building is a resident and he has the same size apartment I have, I pay more than he does," he said.

When Fortune reiterated New York Governor Kathy Hochul's framing that the tax closes a gap on owners who "do not live in the City or pay City income tax," Ross responded: "There is no gap. This is an imaginary gap."

He does not object to higher taxes on the wealthy when the rate applies to everyone in a bracket. "I don't think it's a good idea, but it's legal," he said.

The state pushes back

Forbes put Ross's net worth at around $600 million in 2019, after controversy over allegations he had inflated his wealth to between $2.7 billion and $3.7 billion. Wynn's net worth stands at $4.3 billion, per Forbes. Hochul's office said the two billionaires are proving the need for the tax.

"When Steve Wynn and Wilbur Ross try to cast themselves as sympathetic figures in a fight over paying their fair share on multimillion-dollar second homes, they're making the case for the pied-à-terre tax as well as anyone could," Jen Goodman, Hochul's director of rapid response, told Fortune in a statement.

"Governor Hochul believes some of the wealthiest people in the world, and the powerful interest groups fighting on their behalf, can afford to help pay for the police officers, trash pickup and snow removal that keep New York City running," she continued. "The Governor was proud to sign this legislation, and the state will defend it in court."

Ross called the statement "silly" and said it did not address the legal question. "It either is constitutional or it isn't," he said. "Unconstitutional is unconstitutional."

Matt Rauschenbach, a spokesperson for New York City Mayor Zohran Mamdani, told Fortune in a statement that "the pied-a-terre surcharge demands that the wealthiest people who own second homes in NYC but don't live in them pay their fair share towards funding safer streets, cleaner parks, and better schools."

"The City is moving to intervene in these suits and will stand with our partners in Albany to defend the surcharge," he continued. "And while the legal process moves forward, we will continue administering the surcharge fairly, efficiently, and in full compliance with the law, as we have done from day one."

Ross argued the statements do nothing to resolve the constitutional question—and that he does spend money in the city even when rarely present.

"We aren't here that much, so we have to ration what we do," he said. "We eat out all the time. We shop here. We use Ubers and cars and things like that. So we do spend money here, and we help some of the cultural institutions."

That spending supports workers who pay city income tax, he said. Owners subject to the tax "hire more maids, use more drivers, use more Ubers, use more taxis, buy more things in the stores, support the charities more," he said. "You can't just look at it the other way. You've got to take everything into account."

With the city forced to restart its notice process, multiple lawsuits pending, and the state committed to defending the law in court, the pied-à-terre tax's fate now rests with the judiciary rather than City Hall.