Rhode Island has become the latest battleground in the ongoing fight between states and cities that want to tax high-value second homes and the owners who are stuck paying for it. On August 19, more than 50 plaintiffs—individual homeowners, trusts, and LLCs holding property in Newport, Westerly, Narragansett, Portsmouth, South Kingstown, Middletown, Charlestown, Jamestown, and other coastal communities—filed a complaint in Newport County Superior Court challenging Rhode Island’s new “Non-Owner Occupied Property Tax Act,” codified at R.I. Gen. Laws § 44-72-1 et seq.
The tax, quickly dubbed the “Taylor Swift Tax” after the state’s most famous part-time Watch Hill resident (who, notably, is not a party to the suit), imposes an additional charge of $2.50 for every $500 of assessed value above $1 million on residential properties that are not occupied by the owner as a primary residence for at least 183 days a year. Importantly, the tax applies to any qualifying second home—including those owned by Rhode Island residents who happen to own a second property in the state.
So what’s the fuss about? For starters, the plaintiffs say the legislative history reads like a confession. During hearings on the bill, its primary sponsor, a longtime member of the House first elected in 1992, candidly explained why targeting these owners was so politically appealing: because many of them are nonresidents, “none of these people can vote against me,” so “we need to find some money somewhere.” The complaint leans hard on that quote, framing the tax as a textbook violation of the old “no taxation without representation” principle—and, more formally, as a law that runs headlong into several constitutional guardrails.
The Complaint
The heart of the complaint is built on two related theories:
- First, the plaintiffs argue the tax violates the dormant Commerce Clause because it discriminates against interstate commerce by singling out property ownership in a way that predictably and disproportionately burdens nonresidents, most of whom hail from Connecticut, Massachusetts, New York, Florida, and elsewhere.
- Second, they argue the tax violates the Equal Protection Clauses of both the U.S. and Rhode Island Constitutions because there’s no rational basis for treating this narrow class of owners differently. The state has offered a handful of justifications—that these owners consume more municipal services, let their homes fall into disrepair, degrade neighborhood values, and contribute to a housing shortage—and the complaint methodically knocks each one down. The most pointed argument: schools eat up 58% of municipal budgets in Rhode Island, and these second-home owners, by definition, don’t send children to the local schools since they’re not around for more than half the year. If anything, the complaint says, that math points toward these owners deserving a rebate, not a surcharge.
Rounding out the complaint are claims under the Privileges and Immunities Clause of Article IV, the Takings Clauses of both the Fifth Amendment and the Rhode Island Constitution, and a separate claim under the Fair Distribution Clause of Article 1, Section 2 of the Rhode Island Constitution—which requires that “the burdens of the State ought to be fairly distributed among its citizens.” These claims add useful reinforcement: the Privileges and Immunities argument dovetails with the residency-based discrimination theory, the Fair Distribution claim attacks the selective nature of the tax under Rhode Island’s own constitution, and the takings arguments frame the surcharge as an uncompensated appropriation of value from a targeted class of property owners. Layer all of that together, and the plaintiffs have built a complaint that attacks the statute from just about every constitutional angle available—seven counts in total.
What this could mean for New York City’s Pied-à-terre Surcharge
We have written about the surcharge extensively in recent postings. While there is recent litigation surrounding the imposition of the surcharge, in O’Brien v. New York City, we have yet to see any constitutional challenges. This is, in part, due to the timing of the surcharge and the fact that appeals of the NYC Department of Finance’s initial determinations aren’t due until October 6. But a constitutional challenge is very likely coming as well.
So here’s where the Rhode Island lawsuit becomes more than just an interesting read for New York practitioners. The legislative findings behind Part HH sound strikingly similar to the justifications Rhode Island offered for its own tax: the surcharge is aimed at owners of “the city’s most valuable homes,” held as second homes, who “reap considerable benefits from the city’s broader economy, from city services, and from a vibrant real estate market” without (the theory goes) paying their fair share to “maintain important city services.” If that reasoning sounds familiar, it’s because it’s essentially the same rationale the Rhode Island plaintiffs are now attacking as pretextual and irrational.
That’s not to say a challenge to the NYC surcharge would play out identically. But the structural parallels are striking. Like New York’s law, the Rhode Island statute is not purely residency-based on its face—a Rhode Island resident who owns a second home in the state is just as subject to the tax as an out-of-state owner, and indeed several of the plaintiffs in this very suit are Rhode Island residents. Still, the complaint argues—and the legislative history supports—that the tax was designed with nonresidents squarely in mind. The sponsor’s own words tied the tax explicitly to the fact that many targeted owners are nonresidents who “can’t register to vote here.” A Commerce Clause or Privileges and Immunities challenge to the NYC surcharge would need to grapple with a similar dynamic, since discriminatory intent and effect (not just incidental impact) tend to drive those claims. Given that most pieds-à-terre subject to the surcharge are, as a practical matter, owned by non-New York City (and often non-New York State) residents, an enterprising litigant could try to draw the same lines Rhode Island’s plaintiffs have drawn: arguing that the surcharge’s design and legislative history reveal a similar intent to tax a class of owners who have little say in City or State elections.
An Equal Protection challenge may have more traction to watch here, particularly given the sheer complexity of the primary-residence determination process the Department of Finance has now built out—complete with audits, bad-faith penalties of up to 50% (or 300% of the underpayment in some cases), and administrative appeals to the Tax Commission or the Department itself. If the rational-basis justifications for the surcharge get picked apart the way the Rhode Island plaintiffs are picking apart their state’s justifications, taxpayers challenging their own surcharge determinations may find some useful ammunition in how this Newport County litigation develops.
For now, this is a case worth watching for reasons well beyond Rhode Island beach real estate. If the Superior Court (or, more likely, an appellate court down the line) has something meaningful to say about the constitutionality of selectively taxing non-primary-residence owners, that reasoning may find its way into arguments raised against New York City’s own pied-à-terre surcharge sooner rather than later.
