New York City’s new pied-à-terre tax is meant to collect hundreds of millions of dollars from luxury vacation homes and other valuable properties whose owners live outside the five boroughs. But a spokesperson for Gov. Kathy Hochul says the state will also wield the second-home surcharge to identify cheats who live in the five boroughs but pay taxes elsewhere.

Hochul’s spokesperson Jen Goodman said the state’s Department of Taxation and Finance is using New York City’s list of properties that are potentially subject to the annual surcharge to help ferret out the fraud.

“The pied-à-terre tax was designed to ensure people who can afford luxury second homes, but don’t pay New York income taxes, are still contributing to the city they benefit from,” Goodman said in a written statement. “If you’ve been falsely claiming to be a nonresident 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.”

New York law requires residents to pay state income tax if they reside in the state for at least 184 days a year.

The crackdown could compel some New York City homeowners to either pay the pied-à-terre tax or claim New York residency and forfeit lower income tax rates in other states where they own property, like Florida, Pennsylvania or North Carolina. It could also lead to steep penalties against homeowners who live in New York City and meet the half-year residency standard, but file their taxes in other states, receive a driver’s license elsewhere, or register their vehicles outside New York and line streets and driveways with out-of-state plates.

Goodman declined to describe how the tax agency will use the tax rolls to identify fraud. But tax and real estate experts warn New Yorkers who claim residency in other states with lower tax rates that they may be subject to intensive audits that include toll records, cellphone data and credit card transactions that show someone was actually in New York.

The state’s focus on tax fraud in the pied-à-terre process was previously reported by Fortune and The City Reporter.

State lawmakers enacted the pied-à-terre tax as part of the most recent state budget, following more than a decade of aborted attempts to impose a surcharge on empty second homes as a way to generate more revenue for New York City. The new tax was a concession to Mamdani and the left-leaning wing of the Democratic Party that had called for a higher state income tax rate on the wealthiest New Yorkers. Hochul estimated the tax could raise $500 million for the city. But the state left the implementation of the new rule to the city’s Department of Finance.

Last month, the department began issuing letters to roughly 17,000 property owners potentially subject to the surcharge in a rollout that also swept up longtime New York City residents. The process spurred confusion and anger among homeowners who say they are now forced to prove that they do indeed live in their longtime homes, as well as criticisms that the city botched the introduction of the new tax.

Mamdani and the city’s Department of Finance have extended the deadline for property owners to apply for an exemption until Sept. 18.

In a written statement, City Hall spokesperson Matthew Rauschenbach said the Mamdani administration is “committed to ensuring that every New Yorker who owes a pied-à-terre tax pays it — and helping those who don’t file an exemption.”

The new tax applies to empty one-, two- and three-family homes valued at $5 million or more, and empty condos and coops valued at over $1 million.

Rauschenbach said Mamdani also shares the “governor’s goal of ensuring that everyone claiming a tax benefit or exemption is actually supposed to be receiving it” if they live in New York City.

But some tax experts are critical of the state’s new effort to ferret out forms of tax fraud — and the pied-à-terre levy itself.

Veteran real estate and tax attorney Jeffrey Golkin said the state was now using the new tax to “justify doing a dragnet.”

He said the state and city finance departments need to implement systemic reforms and hire more staff to properly assess property values and collect more revenue without singling out a specific subset of valuable homes.

“Everyone who owns a property has an obligation to pay taxes,” he said. “The pied-à-terre tax shouldn’t be used as a vehicle for these purposes. They should be generally finding tax cheats.”