What’s Actually Stuck

Each extender keeps the lights on for a few more days while negotiators work the open items. Each one also costs taxpayers roughly $100,000 in administrative cost. The substantive disagreements driving the delay break into four buckets:

• High-earner income tax surcharge. A proposed temporary surcharge on top earners. The version on the table targets income above thresholds in the low millions and runs for several years.
• Pied-a-terre tax. A new surcharge on NYC residential property valued above $5M when the owner’s primary residence is outside NYC. Hochul’s version reaches roughly 13,000 NYC properties and projects ~$500M/year in revenue.
• NYC PTET credit cut. The proposal to cut the city Pass-Through Entity Tax credit from 100% to 75% — covered separately in our NYC PTET Credit Cut piece.
• Tier 6 pension reform and climate-law adjustments. Not directly tax items but driving the negotiation timeline.

None of these is fully cooked. All of them could land, none of them could land, or some compromise version could emerge. The firm’s working assumption is that at least one of the high-earner surcharge, pied-a-terre tax, or PTET cut survives in some form.

Pied-a-Terre — Who Actually Pays

The pied-a-terre tax is the most novel of the items because it is structured around residency status rather than income. The mechanic: if you own a NYC 1-3 family home, condo, or co-op valued at more than $5M, and your primary residence is outside NYC, an annual surcharge applies. Hochul’s framing is that this is the “out-of-towner” tax — paid by Greenwich and Hamptons residents who keep a Manhattan apartment.

Reality is messier. The 13,000 NYC properties projected to hit the threshold include a meaningful number of NYC residents who maintain a second NYC unit (a child’s apartment, a parent’s apartment, a pied-a-terre kept in a different building). The “primary residence outside NYC” definition will determine how many of those owners actually pay. Expect the regulations to be fought over almost as hard as the underlying statute.

If You Own NYC Real Estate Held Through Trusts or LLCs

The application of the surcharge to property held through trusts, LLCs, or family entities is the part of the proposal that is most likely to generate planning opportunities — and the most likely to be misused. The firm’s position is to wait until enacted text and regulations are available before making structural moves. Restructuring property ownership in advance of a tax that may or may not exist, in a form that may or may not be the final version, is how you create new problems instead of solving the announced one.

The High-Earner Surcharge

Versions of a temporary high-earner surcharge have come up in nearly every NY budget cycle since 2009. Most years the proposal dies; a few years it survives in a watered-down form. The current proposal is closer to the watered-down form — temporary, targeted at very high earners, with a sunset provision.

For NYC residents, the federal SALT cap interaction means that a NYS surcharge does not reduce federal taxes one-for-one. The OBBBA-era $40,000 SALT cap (with phase-down for high earners) means that for taxpayers with significant state and local tax exposure, additional NYS tax is largely sticking after federal credit. That is the most important fact for planning around the surcharge if it passes.

What This Means for Reedcorp Clients

For HNW clients with NYC residential exposure: model the pied-a-terre tax against your portfolio. If you have multiple NYC properties or a non-NYC primary residence and a NYC apartment, the math could be meaningful.

For high-income earners: assume the high-earner surcharge could land. Model your 2026 estimates with the assumption it does, then pull back if it doesn’t.

For pass-through business owners: see the firm’s separate NYC PTET Credit Cut piece.

For everyone else: this round of Albany is mostly noise for you. Watch the headlines but do not change your filing posture. Most NYC filers and small businesses are not directly exposed to any of the items in dispute.

Coordination across the firm runs through our HNW, real estate, and business-owner teams, with our New York tax strategy practice picking up the structural questions and our individual tax team handling the resident-side compliance.

Common Questions

When will Albany actually pass a budget?

Each extender has been week-to-week. A real budget could land any day, or could slip into mid-May. The firm will update clients when there is something definitive.

Does the pied-a-terre tax apply to co-op shares?

The proposal as written reaches condos, co-ops, and 1-3 family homes. Co-op shares are included.

What if I move my primary residence to NYC just to avoid the pied-a-terre tax?

Then you become a NYC resident for income tax purposes, which is a substantially worse outcome for most HNW clients than paying the pied-a-terre surcharge. Do not let the tail wag the dog.

Is the high-earner surcharge retroactive?

Past versions of NY income tax surcharges have applied to the year of enactment, sometimes from January 1 of that year. If passed mid-year for 2026, it could apply retroactively to the start of 2026.

Could the budget end up with no new tax items at all?

It is possible. If Hochul and the Legislature cannot agree, the simplest path forward is a clean extender of existing tax law with no new revenue items. That outcome is real but probably not the most likely one.

How does the firm handle uncertainty like this in client planning?

We model two or three scenarios for affected clients: status quo, Hochul-as-proposed, and a compromise. We update as facts change. This is the third year in a row Albany has been late, so the rhythm is familiar.

Source

Coverage of the seventh budget extender and ongoing tax negotiations: NY State of Politics — Lawmakers Pass Seventh State Budget Extender (April 27, 2026). Background on existing NY tax rules at the NYS Department of Taxation and Finance.