Nassau County property owners who prepay 2018 general taxes by Sunday may gain a financial benefit this year but could create a fiscal headache for the towns next year, officials said.
The three Nassau towns must give a 1 percent discount on the second-half bills to property owners who pay the taxes in full, according to the Nassau County Administrative Code. The towns — Hempstead, North Hempstead and Oyster Bay — usually make up the money from the interest earned on the collected tax payments as well as from the penalty fees from taxes that were filed late, officials said.
But this year, as Long Islanders rush to prepay their 2018 taxes by Dec. 31 in the hopes of getting a 2017 federal tax deduction, Nassau towns are expecting more taxpayers to pay in full early, getting the discount and avoiding any late-filing penalties.
“That’s going to be a lot of money,” said Charles Berman, North Hempstead’s receiver of taxes. “There’s going to be less penalties to collect and more discounts to pay.”
Gov. Andrew M. Cuomo issued an executive order last Friday allowing payment of all or partial 2018 taxes by Dec. 31 in towns and counties that usually do not allow it, including Nassau.
Property owners are currently prepaying 2017-2018 second-half school taxes and 2018 general taxes, meaning they can only get the discount on paying their general taxes in full. Suffolk County residents have previously been able to prepay their taxes. The county does not have a law that provides a discount for full payments.
The total discounts in North Hempstead last year were about $274,000 for the 2017 general taxes and roughly $570,000 for the 2017-2018 school taxes that were paid in full by mid-November, Berman said.
“This year it’s going to be much, much more than that,” he said of the general tax discount.
Before Congress approved its sweeping overhaul of the federal tax code, which President Donald Trump signed into law last Friday, North Hempstead officials expected to collect about a million dollars in late fees and interest, Berman said. He now has no estimate of what the town may collect.
A similar situation occurred after superstorm Sandy, when Cuomo extended the school tax deadline by 21 days for some districts. Berman said the town collected fewer late penalties and awarded more discounts that year.
Oyster Bay Tax Receiver James Stefanich said it’s up to the town board to cover any gaps generated from the discount because it’s his job to follow the county code.
“My concern is following the law,” he said.
Stefanich said he couldn’t estimate how many general tax payments — mostly paid in full — have been made this week but added that on Wednesday alone, 640 second-half school tax payments were made online totaling more than $4 million.
Hempstead Town Tax Receiver Donald Clavin said he thinks it’s too early to panic about whether the late fees will be enough to cover the discount.
“I think we have to see how all the numbers come out at the end of the year” in 2018, he said.
If the interest and late fees don’t total enough to cover the discounts, Clavin said the town will seek funding from Nassau or the state.
“We’re going to ask the county to cover it and potentially the state if there’s any shortfall because of the governor’s executive order,” Clavin said.
Cuomo on Thursday repeated a threat he’s been making since early October: New York might sue the federal government over the tax code revision.
Pressed by a host on CNBC, Cuomo, a Democrat, acknowledged his staff is still researching whether there are legal grounds to sue. But said he believed the GOP-driven tax plan could violate “due process” and “equal protection” provisions in the U.S. Constitution.
The new federal tax code’s $10,000 deduction cap on state and local income, sales and property taxes won’t cover the full amount that many Long Islanders pay. In 2016, average property tax bills were $11,232 in Nassau and $9,333 in Suffolk, according to an analysis by Attom Data Solutions, a California-based company that tracks real estate data.
“There is a disproportionate application of the law,” the governor said, reiterating his claim that the tax plan generates cuts for residents of Republican-dominated “red” states while raising taxes for many in Democrat-led “blue” states.
“We’re looking at the law right now because I think there are serious legal questions,” Cuomo said on CNBC.
Berman and Clavin said the IRS’ guidelines on the deductibility of prepaid 2018 taxes were vague. Agency officials said in a statement Wednesday properties that are assessed in 2017 and the taxes on them paid by the end of the year likely will deductible, but anticipated taxes are not.
“We still don’t know what the definitive answer is,” Clavin said. “People deserve a clear answer. It’s either yes or no.”
Tax receivers across Long Island said any interest collected from early prepayments would be nominal, likely just a few thousand dollars for each town.
Riverhead Town Tax Receiver Laurie Zaneski said last year’s tax roll accrued only $3,025.98 in interest.
The town has collected more than $3 million in payments as of Dec. 27 — up from $1.2 million on the same day in 2016 — largely because property owners are paying in full rather than in two payments, she said.
School districts that receive their second-half 2017-2018 taxes early also will likely accrue only small amounts of interest.
“There is always some interest but it is never a tremendous amount of money,” said David Flatley, superintendent of the Carle Place district and president of the Nassau County Council of School Superintendents. “I don’t anticipate there will be a tremendous windfall for school districts in Nassau County.”
With Vera Chinese and Yancey Roy