New York Gov. Kathy Hochul’s office is warning that New York City’s new pied-à-terre tax could expose residents who falsely claimed to live outside the state to avoid paying New York taxes.

According to comments obtained by Fortune and published Thursday, Jen Goodman, director of rapid response at the governor’s office, said the state’s Department of Tax and Finance would pursue individuals who falsely claimed nonresident status. The report also cited sources familiar with the matter who said the governor’s office is looking into potential residency fraud that could surface through the exemption process for the new tax.

“Hard-working New Yorkers pay taxes that fund our schools, roads, transit, and public safety,” Goodman said.

“If you’ve been falsely claiming to be a non-resident in order to cheat the system, it’s time to come clean, or our Department of Tax and Finance will take action to ensure you pay your fair share.”

Exemption Process Draws Scrutiny

Property owners seeking an exemption must demonstrate that a qualifying New York City property is their primary residence. The exemption process could also reveal individuals who claimed nonresident status while actually living in the city.

A spokesperson for New York City Mayor Zohran Mamdani’s office welcomed the state’s efforts to ensure the tax is properly enforced.

“Mayor Mamdani worked alongside Governor Hochul and partners in Albany to pass the pied-à-terre tax so that we can fund cleaner parks, safer streets, and other critical investments across the five boroughs,” spokesperson Matt Rauschenbach said.

“We are committed to ensuring that every New Yorker who owes the pied-à-terre tax pays it and helping those who don’t file for an exemption. We share the Governor’s goal of ensuring that everyone claiming a tax benefit or exemption is actually supposed to be receiving it.”

Tax Rollout Continues

The latest development comes weeks after New York City began notifying owners of qualifying luxury second homes worth more than $5 million that the pied-à-terre tax was “coming soon.” The measure is expected to generate about $500 million annually to fund public services, including parks, libraries and schools.

The rollout later drew criticism after the city published a searchable database listing roughly 960,000 properties that could potentially be subject to the tax. Mamdani defended the database, saying it was the city’s complete property roll required under state law rather than a list targeting taxpayers.

Tax Debate Continues

The policy has also drawn criticism from business leaders, including Citadel founder Ken Griffin, who has argued higher taxes could discourage investment and job creation in New York. Despite those concerns, Citadel’s planned 350 Park Avenue headquarters continues to move forward, with demolition now underway after months of uncertainty surrounding the project.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.