Tax

Subscribe to Tax

In Farmland Dairies, Inc. v. Borough of Wallington, N.J. Super. App. Div. (per curiam) (unpublished decision) (35-2-7909), the Appellate Division upheld the decision of the Tax Court in denying an unrelated neighboring property owner’s efforts at intervening in a pending local property tax appeal between the property owner and the Borough.  The court concluded that the intervention application of the putative intervenor was out of time and barred by the statute of limitations.  Although all residents of municipalities have standing and maintain the right to pursue tax appeals as “aggrieved” parties under the statute, including those related to their neighbor’s properties, any such contests must nonetheless comply with the statutory filing deadline.

The New Jersey Supreme Court has consistently recognized the necessity of complying with filing deadlines in the area of taxation.  The statutory scheme establishing the court’s jurisdiction in this area is “one with which continuing strict and unerring compliance must be observed.” See McMahon v. City of Newark, 195 N.J. 526, 546 (2008).  Indeed, our Supreme Court has declared that the “failure to file a timely appeal is a fatal jurisdictional defect.”  F.M.C. Stores v. Borough of Morris Plains, 100 N.J. 418, 425 (1985).  The Supreme Court has also explained that strict adherence to statutory filing deadlines is of particular concern in tax matters, given “the exigencies of taxation and the administration of local government.”  F.M.C. Stores, 100 N.J. at 424.  The Legislature “has attempted to set out a well-organized time-table for the purpose of enabling a municipality to ascertain the amount of taxable ratables within the jurisdiction in order that it might adopt a responsible and fairly accurate budget.”  Id. at 425.  “By incorporating a strict deadline in [the statute], the Legislature intended to ensure that municipalities receive timely notice that a particular property’s valuation is subject to challenge.”  Prime Accounting Dept. v. Township of Carney’s Point, 2013 N.J. Lexis at *31.

After previously remanding the matter to the Tax Court for further proceedings concerning the timeliness and propriety of the putative intervenor’s application for permissive intervention, the Appellate Division made it plain, mindful of the above-referenced well-settled jurisprudence, that any effort to intervene must, in the first instance, be timely pursued and that the annual tax appeal filing deadline will effectively wait for no one.

Although as demonstrated above, the inviolate nature of this statutory deadline is plain, the court’s decision here may have been made easier by the attendant distasteful nature of a case involving an unrelated party’s efforts at meddling with pending litigation between the real parties in interest (the actual owner of the property in question and the municipality).

In a market where economic indicators continue to show encouraging signs (e.g., decreasing vacancy conditions across market segments, improved employment numbers and rental rates, and continuing low levels of inflation), the prospect for property value appreciation exists.  Because of questionable municipal assessment practices, often blindly motivated by the objective of maximizing tax ratables, careful scrutiny of assessments, especially in changing market conditions, is warranted.  Consequently, it behooves commercial property owners to review their property tax assessments with their professionals now to ensure that their assessments are in line with present values and to verify that they are not paying more than their fair share of taxes.  At the same time the potential exists that a successful appeal can work to lock in assessments at current property values, even in the face of possible increasing values.

Because New Jersey law provides for a “Freezing” of assessments for a period of two additional years, beyond any successful year appealed, the tax appeal vehicle has positive effects reaching into the future as well.  In fact, because assessments are generally not modified until a town-wide revaluation or reassessment program is implemented (usually every 5-10 years), there is a real prospect that a lower assessment achieved as a result of a successful appeal could actually remain in place for well beyond the statutorily guaranteed two year “Freeze” period.

As a result, we believe that there continues to be substantial opportunities for property owners to realize significant tax savings and lock in current values for the foreseeable future. We therefore encourage commercial property owners (whether owners of office, industrial, manufacturing, hotel, multi-family and/or other special purpose properties) to discuss options for a tax appeal with counsel having expertise in this specialized practice area.  In addition, those property owners who may benefit from statutory tax exemptions relating to non-profit, institutional or religious organization owner/users should similarly be reviewing with counsel whether all benefits available to them are being realized.

Because the 2019 tax appeal filing deadline is rapidly approaching (April 1, 2019, or May 1, 2019 in the case of a town-wide reassessment or revaluation) now is the appropriate time to take action.

Please click here for a copy of our confidential 2019 tax appeal information sheet.

In today’s tax dollar hungry environment, municipalities are consistently searching for ways to increase their ratable base and in this regard are viewing tax exemption claims even more critically.  Real property tax exemptions are a creature of statute and run against the Constitutional mandate that all property is to be taxed uniformly, with all property owners required to shoulder their fair share of the local property tax burden.  As such, these exemptions are to be strictly construed and it is the burden of the applicant to prove entitlement to the exemption.  Abunda Life Church of Body, Mind & Spirit v. Asbury Park City, 18 N.J. Tax 483, 485 (1999) and Teaneck v. Lutheran Bible Inst., 20 N.J. 86, 90 (1955).

In a recently decided case, the New Jersey Tax Court held that although the municipality may have been correct in rejecting an exemption on the grounds that the property did not constitute a religious parsonage, it erred in denying the exemption as the property was deemed to be essential to the religious use and actually used in conjunction with the religious operations.  Mikvah Association v. Township of Teaneck, Docket Nos 015784-2014; 012594-2105; 010909-2016; and 012807-2017.

The relevant exemption statute, N.J.S.A. 54:4-3.6, provides an exemption for:

[A]ll buildings actually used in the work of associations and corporations organized exclusively for religious purposes, including religious worship, or charitable purposes, provided that if any portion of a building used for that purpose is leased to a profit-making organization or is otherwise used for purposes which are not themselves exempt from taxation, that portion shall be subject to  taxation and the remaining portion shall be exempt from taxation … the buildings, not exceeding two, actually occupied as a parsonage by the officiating clergymen of any religious corporation of this State, together with the accessory buildings located on the same premises; the land whereon any of the buildings hereinbefore mentioned are erected, and which may be necessary for the fair enjoyment thereof, and which is devoted to the purposes above mentioned and to no other purpose and does not exceed five acres in extent ….

In Mikvah, the Tax Court rejected the availability of an exemption under the “parsonage” provision holding that the resident of the home, who was responsible for supervising the mikvah, did not qualify as an “officiating clergyperson.”  There the court found that the resident in question did not perform the expected duties of an officiating clergyperson in the context of the Jewish faith in that she did not perform such critical “officiating” tasks as teaching, leading, participating in religious services, providing sermons, or officiating at Congregation weddings, funerals and bar mitzvahs.  See City of Long Branch v. Ohel Yaacob Congregation, 20 N.J. Tax 511, 519 (2003).

Even though the court precluded exemption under the parsonage provision, it nonetheless found exemption of the residential structure to be appropriate in this instance because the resident of the property, which is located on the same street as the recognized exempt facility where religious bathing rituals are performed, was deemed to be the Ritual Director, responsible for maintenance and operation of the mikvah, and on call 24 hours a day, seven days a week.

Because the religious organization property owner required the resident of the property to be physically proximate to the mikvah and readily accessible to ritual participants, the court found her to be a necessity for the proper and efficient operation of the mikvah and not simply residing in the residence as a matter of convenience for the resident.   Consequently, the Tax Court concluded that the residential property in which the Ritual Director resided with her family, was “actually used” in the operation of the mikvah and qualified for exemption pursuant to N.J.S.A. 54:4-3.6

The Opportunity Zone program enacted as part of the 2017 federal Tax Cuts and Jobs Act is designed to spark long-term capital investment into low-income and urban communities. The 169 Opportunity Zones (or tracts) designated in New Jersey by Governor Murphy are a complete game changer and contain attractive investment incentives for developers and investors.

Via the Opportunity Zone program, developers and investors can tap into and reinvest their unrealized capital gains without paying capital gains for a period of time, if at all. For example, capital gains invested or reinvested in an Opportunity Fund will receive a step up in basis of 10 percent if held for at least five years and by an additional 5 percent if held for at least 7 years, excluding up to 15 percent of the original gain from taxation.

An even greater savings is realized if the investment in the Opportunity Fund is held for at least 10 years. The gain accrued while invested is permanently excluded from taxable income of capital gains upon the sale or exchange of the investment.

With these tax incentives in place, Senator Corey Booker (NJ) believes the barriers between communities and the capital needed to generate economic growth and opportunity will be broken down.

The Opportunity Zones were designated based on key economic indicators in certain neighborhoods and communities such as income, unemployment rate and property values but also consideration was given to accessibility to mass transit and the value of existing investments. The 169 tracts were approved by the US Department of the Treasury on April 9, 2018. You can view the interactive map of designated Opportunity Zones for New Jersey by clicking here.

The New York City Council approved a bill on Thursday, November 30, that impacts thousands of small business owners located south of 96th Street in Manhattan. The bill modifies the threshold that businesses must meet in order to be exempt from paying the 3.9 percent New York City commercial rent tax, which is imposed upon businesses located south of 96th Street in Manhattan. Businesses operating in the Bronx, Queens, Brooklyn and Staten Island are not subject to the tax and are not impacted by this legislation. Though Mayor Bill de Blasio initially opposed the bill as it is projected to remove $38.6 million in revenue in fiscal year 2019, it is expected that he will sign the bill into law. The measure also had the support of Council Speaker Melissa Mark-Viverito. Once signed, it will become effective July 1, 2018.

Prior to the bill’s passage, businesses who paid more than $250,000 a year in base rent were required to pay the tax. The bill will raise this threshold, allowing businesses who make $5 million or less in annual income and pay less than $500,000 in annual rent to be exempt from the tax. The bill also provides a partial, sliding credit for (1) businesses making $5 million or less a year and paying between $500,000 and $550,000 a year in rent and (2) businesses making between $5 million and $10 million a year and paying less than $550,000 in annual rent.

The bill also provides exemptions for not-for-profit organizations and businesses located in certain areas, such as the World Trade Center area or those areas impacted by the Lower Manhattan Commercial Revitalization Program.

A credit for businesses that pay between $250,000 and $300,000 in annual rent, without consideration of annual income, is left unchanged.