What happens when a property sits in the wrong tax class?

What do the four classes cover?

• Class 1: one- to three-unit residential properties.
• Class 2: residential properties with more than three units, including co-ops, condos and apartment buildings.
• Classes 3 and 4: mostly utility and commercial properties.

Why does the class change the bill?

Finance's own description of the arithmetic: it determines the market value, and how it does that varies by tax class. The assessed value is then a percentage of the market value, and that process varies with the type of property. Exemptions come off the assessed value to give a taxable value, the taxable value is multiplied by the current tax rate for the property class, and abatements come off the result. The class is present at three of those four steps.

There is a fourth effect that a single year's notice hides. Finance notes that state law limits how much some assessments can change each year, and that it is common for an assessment to take a few years to catch up to the market value. The class decides which limit applies, and whether one applies at all.

How is a classification corrected?

At the Tax Commission, on Form TC106, the form for claims relating to tax classification and to nonprofit and commercial exemptions such as J-51 and 421-a. The Tax Commission describes itself as authorised to correct the tax class, assessed value, or exemption of a property, and Finance agrees that it can change the tax class. One condition travels with the form: a TC106 filing must include all valuation claims on the same form.

Where does a classification case come from?

Usually from something that changed and was never recorded: units combined or subdivided, a commercial space converted, a building that finished a conversion the record still shows as it was. That is why a classification claim and a record correction so often travel together, one to the Tax Commission on TC106 and one to Finance on a Request for Review. The filing mechanics for the first are on the Tax Commission page, and the dates for both are on the deadlines page.