March 16, 2023

Bulletin 2023-02: Changes to the Peconic Bay Tax effective April 1, 2023 and Application of the New Rules to Transactions Entered into Prior to April 1, 2023.  This Bulletin supplements Bulletin 2023-01: Changes to the Peconic Bay Tax issued on January 12, 2023

The recent amendment to the Peconic Bay Tax affects the Towns of Shelter Island, East Hampton, Southampton and Southold.  The new rules do not apply to property in the Town of Riverhead.  The new rules eliminate allowances for transactions in excess of $2,000,000.00, increase the tax rate from 2% to 2.5%, increase the allowances for improved property in Shelter Island, East Hampton and Southampton from 250K to 400K and increase the allowances for property in Southold from $150,000.00 to $200,000.00.  The new rules also increase the exemption amount for first time home buyers in the towns of Shelter Island, East Hampton and Southampton.  The new rules do not apply to property in the Town of Riverhead.

However, the new rules do not apply to transactions entered into prior to April 1, 2023 PROVIDED the parties attach a fully executed copy of the sales contract dated prior to April 1, 2023 with the CPF form when recording.  Presumably, a buyer with a contract of more than $2,000,000.00 will elect to provide the contract and apply the 2% tax rate.

However, if consideration is $2,000,000.00 or less, the tax may be higher or lower under the new rules – depending on the amount of consideration: 

• Shelter Island, East Hampton and Southampton.  Transactions under $1,000,000.00 pay less tax under the new rules, while transactions over $1,000,000.00 pay more tax under the new rules.  The tax is the same for transactions of $1,000,000.00 under both the old and new rules.

• Southold. Transactions under $400,000.00 pay less tax under the new rules, while transaction over $400,000.00 pay more tax under the new rules.  The tax is the same for transactions of $400,000.00 under both the old and new rules.

• The variances above are caused by the application of the new tax rate (2.5%) to the consideration after reduction for the new allowances.

Please remember that the option to elect the old rate or the new rate is only effective for contracts entered into prior to April 1.  The new rules must be applied to all contracts entered into on or after April 1.

The Suffolk County Clerk’s Office issued a recent memo, which can be found here, summarizing many of the changes detailed herein. 

In the event you have any questions regarding the above, please contact Johnny Hall, Underwriting Counsel, at 631.591.2267 or jhall@advantagetitle.com.