The NJ Tax Blog

The New Jersey Department of Taxation released the Winter 2008 Quarterly Newsletter this morning. This publication provides a general overview of recent legislation, case law, and administrative policies pertaining to property tax appeals, gross income taxes, sales taxes and the corporate business tax.

Of particular note to readers of this blog, are the changes that were enacted on December 18, 2008 to the Property Tax Reimbursement Program (“PTRB”). The recent change to the PTRB raises the maximum income for eligibility for the program t0 $70,000 or less for the 2008 tax year. Previously, the maximum income was $60,000.

Also of note are two specific instructions for the Homestead Rebate Program.

According to the Newsletter:

Tenants who meet the eligibility requirements for the Homestead Rebate Program should "use the application in the New Jersey income tax booklet, Form TR-1040, to apply for the homestead rebate for tenants."

On the other hand, Homeowners who meet the eligibility requirements for the Homestead Rebate Program should "not use the application in the income tax booklet. Applications for the homeowner rebate are expected to be mailed at the end of April, and homeowners will apply either online or by phone."

The full Newsletter may be accessed by clicking the words Property Tax Appeals, NJ.

The Tax Court of New Jersey recently issued a published opinion, Thirty Mazel et al v. City of East Orange, in which it reconciled the Appellate Division opinion Alfred Conhagen, Inc. v. Borough of South Plainfield, 16 N.J. Tax 470 (1997), with the recent Appellate Division opinion H.J. Bailey Co. v. Township of Neptune, 399 N.J. Super 381 (App. Div. 2008).

Both of these Appellate Division opinions concerned N.J.S.A. 54:4-34, which is commonly known as "Chapter 91," and the application of this statute's sanction limiting a taxpayer's right to appeal a tax assessment for failure to respond to a tax assessor's inquiry for income and expense information.

Previously, in Conhagen, the Appellate Division held that Chapter 91's appeal-preclusion provision applied when a taxpayer failed to respond to an assessor's request for income and expense information, even though the subject property was not producing income at the time of the request.

Last year, however, the Appellate Division in H.J. Bailey, held that non-income-producing property is not subject to Chapter 91's appeal limitation provision, even if the assessor's request for income and expense information pursuant to the statute went unanswered by the taxpayer.

At issue in the recently published Tax Court case Thirty Mazel, was a property owner who did not respond to a tax assessor’s request for income and expense information who owned several apartment buildings that were formerly income-producing, but during the tax year at issue received no income, as the properties were undergoing substantial renovations.

In the published opinion, the Tax Court stated:

The gap in rent collection was occasioned not by a change in the use of the property or by owner occupancy, but because the living units had been vacated while a major renovation, presumably to enhance the future earning potential of the buildings, was undertaken. The court finds that plaintiffs never intended to abandon the income-producing nature of the properties and instead committed resources to enhancing the revenue generating potential of the properties.

As a result of the above, the Tax Court reasoned that the property owner who owned the apartments was barred by Chapter 91 from filing a tax appeal.

This reasoning in Thirty Mazel underscores the importance of responding to a tax assessor's request for income and expense information, for even if a property does not produce any income during a relevant year, a tax appeal on such property may be barred by Chapter 91 if the tax assessor’s request is not timely answered.

Reversing the Tax Court of New Jersey, the Appellate Division on Wednesday adopted the New Jersey Industrial Site Recovery Act (“ISRA”) as the cornerstone in determining whether a tax assessor should value a property by taking into account environmental cleanup costs. As stated by the Appellate Division in Pan Chemical Corp. v. Hawthorne Borough: “The degree to which a property is ‘in use’ or ‘closed down’ cannot be left to subjective standards resulting in inconsistent determinations. ISRA provides a rational, objective standard by which one can determine whether property is in use for tax purposes, as well as for determining whether the obligation to remediate has been triggered.”

The Appellate Division stated that the reason that the ISRA standard should be adopted is due to the fear that a taxpayer, such as the plaintiff here, will keep a bare minimum of continued operations and employees working at a property in order to avoid a “closed operations” status and, thus, avoid triggering the cleanup mandates of ISRA. According to the Appellate Division: “It therefore appears that [the plaintiff] would have it both ways. It wanted the property to be deemed ‘in use’ during the years on appeal for the sole purpose of avoiding the costly cleanup mandated by ISRA. Now, [the plaintiff] wants the property to be deemed ‘not in use’ over the same period of time in order to claim a reduced tax liability.”

However, isn’t the whole point of allowing a reserve deduction to allow a consistent annual deduction for large expenses that a property will have to undergo at some unknown point in the future?

To read the full opinion please click the words New Jersey Property Tax Appeals.

"When Barack Obama makes his New Year's resolutions, at the top of his list ought to be the following: 'I will not allow America to become New Jersey.' Think of it as our [New Jersey's] gift to the nation." These are the words spoken in an editorial in today's Wall Street Journal in an article titled "New Jersey is the Perfect Bad Example, Obama should look here to see what high taxes do." As stated by the author, New Jersey, according to the Tax Foundation, has the most hostile business environment in the country. Moreover, as realized by the author, "Over the long run, the only way to have a healthy and growing economy is to do exactly what New Jersey has not: Trust the people with their own money, and create an environment where initiative and enterprise are rewarded rather than penalized. Absent a thorough-going revolution in Trenton, New Jersey may be lost for some time to come. But if Mr. Obama can learn from our bad example and do the opposite, New Jersey's loss might yet be America's gain." I fully agree with the author and can only pray that the New Jersey Legislature will one day realize the wisdom that resonates from the author’s words.

To read the full article by the Wall Street Journal click the words Property Tax.