Articles Posted in Taxation

As another Tax Appeal season is upon us, we would like to thank our clients and our appraisers for a great season of tax appeals. For the 2016 tax year, we saved our clients more than $12 Million in tax assessments.  Starting on October 5, 2016, our office will begin accepting tax appeals for the 2017 tax year.  Since all final judgments in Monmouth County are under the cloud of the new Assessment Demonstration Program, the following information is essential for all Monmouth County residents.

Monmouth County’s Assessment Demonstration Program was implemented in 2014, ostensibly as a means of ensuring that all taxpayers are paying their fair share of property taxes. Under the new program, property tax assessments are revised annually to bring every assessment to 100% of true market value, as established as of October 1 of the pretax year.   The program also includes provisions to allow for a 5-Year Data Collection Cycle, thereby increasing the frequency at which property data would be collected or verified.

By conducting annual revaluations, the County will effectively remove “fractional assessments.” All properties in Monmouth County will now be assessed at 100% of true market value.  The old system of dividing an assessment by the town’s equalization ration to determine the true value assessment would, therefore, no longer be necessary in Monmouth County.  Similarly, the arithmetic process of adding 15% to the equalization ratio to determine whether the assessment is within the “Chapter 123 corridor” is also not necessary.   However, with annual revaluations comes a consequence for all taxpayers who had previously filed appeals.

Our 2016 Monmouth County Tax Board hearings are now completed. As we prepare for another batch of hearings in the remainder of the County Tax Boards, we will discuss four of the more common errors that taxpayers make that have resulted in dismissals of their matters.

1. Refusal to Allow Access to Premises

When conducting re-assessments or revaluations, tax assessors or employees of the revaluation company may request access inspect houses. Sometimes, even in non-revaluation years, a taxpayer may receive such a request if a tax appeal is pending and the assessor needs to verify his or her information. While you certainly have the right, under the Fourth Amendment to the United States Constitution, to refuse access to government employees, you should expect that the refusal to grant access to the assessor will likely be construed as your affirmation that the assessor’s predetermined information is correct. In other words, if you want to tell the Tax Board that the property information provided by the assessor is not accurate, you should not expect too much sympathy from the Commissioners, once the assessor mentions that you refused access. Notwithstanding the Fourth Amendment, it would not be reasonable to refuse access and then show up at a tax appeal hearing to contest the findings of the assessor.

During the past five months, our office has responded to several hundred inquiries regarding real estate tax appeals for the 2016 tax year.   The initial inquiries mostly concerned Monmouth County properties, where the filing deadline was January 15. A single exception exists for Wall Township properties, where the filing deadline has been extended to April 1, due to the municipal-wide revaluation. Wall Township is the only town in Monmouth County that had not previously undertaken a revaluation since the pilot program was instituted in Monmouth County in 2013.

The revaluation in Wall Township has, however, caused a great deal of confusion among taxpayers, many of whom have the erroneous belief that the drastic increase in their assessments would result in a significant increase in their tax bills. Fortunately, this is not the case. The tax rate for each town is calculated by dividing the municipal budget by total of all assessments. The former assessments, which had been equalized at about 60% of true value, necessitated a very high tax rate. Put simply, when all the properties in town were under-assessed, a higher tax rate was required to ensure that the tax revenue still matched the municipal budget.

Now that Wall Township has undertaken the task of bringing all the assessments back to 100% of true value, the tax rate would need to drop commensurately in order to make the arithmetic work. Of course, any time there is a municipal revaluation, there will be a few property owners who will become over-assessed. While a drastic increase in assessment is not sufficient cause to file a tax appeal, an over-assessment is a very good cause to file a tax appeal. During the next few weeks, our office will continue to field phone calls and emails to answer any questions that taxpayers may have regarding their assessments.

A few years ago, I was attending a conference for the New Jersey Chapter of the International Association of Assessing Officers. The moderator introduced the Monmouth County Tax Administrator, Matthew Clark, to discuss a new program he was implementing.  Mr. Clark discussed his new website to enable the electronic filing of all tax appeals.  He also spoke about changes to the tax appeal calendar to ensure that tax appeals were filed and decided before the date that the municipalities were required to finalize their budgets.  These all seemed like good ideas.  Then Mr. Clark spoke about making data more available to assessors to create a group of “super-assessors,” who could annually perform revaluations.  Since one of the exceptions to the Freeze Act is a revaluation, it is clear that the process of annual revaluations would substantially vitiate the benefits of a tax appeal.  Later that day, I approached Mr. Clark with a request that he reconsider his position on annual revaluations.  That request did not draw much response other than an acknowledgement that the plan was already a fait accompli.

Annual revaluations are commonplace in many towns in Somerset County, although they are not specifically legislated like they are in Monmouth County. Since revaluations are time consuming and expensive, New Jersey towns have historically avoided performing them until they have been compelled to do so by the County Tax Board.  Instead, towns have opted to make adjustments only to the tax rates, which are not appealable.  The arithmetic works out the same, of course.  Either way, the town satisfies its budget, although avoiding revaluations can produce some unfair results in cases where there is a substantial deviation in the changes in real estate values in different parts of the town.

A recent series of newspaper articles heavily insinuated that the annual revaluation program was a ploy to line the pockets of one of the former Tax Board Commissioners, who is now employed by the company that does many of the revaluations. The articles are certainly eye-catching, but they unfortunately lack merit, and they fail to produce any evidence of any actual misfeasance.  Other than a common link between the Tax Board and the revaluation company, there is no substance to support the allegations.

For taxpayers in Mercer, Middlesex and Monmouth Counties, who have matters pending before the New Jersey Tax Court, our job just got even easier (and faster). Historically, a property tax matter filed in the New Jersey Tax Court would require the two attorneys to make several appearances in Court before the matter would finally be scheduled for trial. The first appearance, which would be scheduled anywhere between 8 and 18 months after the original filing, would usually not yield much in the way of productive results. The second appearance, which may have been scheduled about two months later, would generally lead to the parties being instructed by the Court to complete discovery and discuss settlement. On the third appearance, the Judge would tell the parties to go get appraisals and continue discussing settlement. If the matter did not settle by the fifth appearance, we could usually ask the Court to schedule a trial. While each case was unique, we never got to a trial without at least 4 prior Court appearances.

With 60,000 property tax cases pending before the Tax Court and only 6 Judges to hear all of them, the case management process has not only been burdensome for the attorneys, but it has also exhausted the Court’s limited resources. For those of you who have not had the pleasure of showing up to Tax Court on a Wednesday morning, when there are 400 cases scheduled for case management, you have unfortunately missed out on a miraculous event, that has apparently been phased out of the process, at least by one out of the six Judges who hear Real Estate Tax Appeals.

Judge Sundar, who presides over Tax Appeals for Mercer, Middlesex and Monmouth County properties, has implemented a new plan to speed up the Tax Appeal process. The plan involves having the two attorneys work out the details of the case management process on their own and reporting the status to the Judge via email. This will eventually lead to the Court being able to increase the number of cases it can clear, rather than dealing with an issue that can usually be resolved by the two attorneys on a case. As much as I enjoyed spending my Wednesday mornings in downtown Trenton chatting with my colleagues about capitalization rates, equalization ratios and external obsolescence, while waiting for my cases to be called, it will be nice to be able to devote the 3 hours to more productive pursuits.

Our firm’s County Tax Appeals for the 2015 Tax Year have concluded. We are pleased to report that this year, we have reduced the assessments for our tax appeal clients by more than $5.1 Million. In more than 70% of our concluded matters, we were able to reduce the assessments for our clients. In Monmouth County, our appeals in Sea Girt had the largest margin of savings, averaging more than $150,000 per property. In Asbury Park, where a revaluation was recently conducted, assessments did not vary substantially from true market values. In Middlesex County, our concluded matters yielded an average assessment reduction of 24% of assessed value.

As always, much of the credit goes to our experienced team of real estate appraisers, who have done an excellent job in not only preparing the appraisal reports, but also testifying at the tax appeal hearings. In all, we used a total of 9 appraisers for our 2015 matters, and they have all done an exceptional job in helping us overcome the burden of proof in out matters.

Finally, we note that a property does not need to be assessed for more than it is worth in order to be considered “over-assessed.” In many towns, an “equalization ratio” is used to determine the percentage of value at which properties should be assessed. If your property is assessed at a higher percentage of value than the rest of your town, you may also have a good case for a tax appeal. However, for Monmouth County residents, we note that due to the new “Assessment Demonstration Program” being in effect in Monmouth County, nearly all towns in this County have attempted to assess their properties at or near 100% of “True Market Value.” In cases where the assessments have exceeded true market value, we encourage taxpayers to file appeals.

Since 2004, our office has been representing property owners throughout New Jersey in both residential and commercial tax appeals. For a taxpayer, who has already paid the tax appeal filing fee, and in some cases, has even retained an appraiser to prepare a report, the prospect of having a tax appeal dismissed, before it is even heard by the Tax Board, can be extremely frustrating. As we prepare for another season of tax appeal hearings, we have been asked to address some of the more common causes for dismissals of Tax Appeals.

Nonpayment of Taxes

One of the most common causes of “involuntary” dismissals of tax appeals is the failure of the property owner to pay taxes. Under N.J.S.A. 54:3-27, a taxpayer’s failure to pay the first quarter taxes and any other municipal charges (including sewer charges) prior to the tax appeal hearing will result in the dismissal of the tax appeal. While the Tax Board will generally require a Motion by the municipal attorney before dismissing the matter, the Tax Board will allow the taxpayer to present arguments that the non-payment was subsequently cured, so long as the taxes are paid prior to the hearing.

Our office previously reported on the changes in how Monmouth County’s tax appeals are scheduled. In order to ensure that all County Tax Appeals are heard and resolved prior to the finalization of municipal budgets, Monmouth County had implemented a new calendar that requires tax appeals to be filed by January 15. In this week’s article, we will highlight an additional change in Monmouth County’s approach to tax assessments.

During the past few weeks, our office has fielded hundreds of phone calls from taxpayers who are concerned that their assessments have been dramatically raised. Their first question is “why is my assessment being raised, when the property has not increased in value?” I need to explain that, in some cases, the town previously had all of the properties assessed at a percentage of true value and now that the town is being re-assessed, all properties are (ostensibly) going to be re-assessed at 100% of true value.

In other cases, where the town was already assessed at full market value, there are still several properties, which for variety of reasons, under-assessed. Therefore, the fact that your assessment has increased substantially is not in itself a reason for appeal. Rather, we need to look at the new assessment and determine whether it exceeds the fair market value.

As we enter the 2015 tax appeal season, we have fielded hundreds of phone calls from property owners who are interested in filing appeals. Since the determination of whether a property has been over-assessed is not always apparent without an appraisal, we have taken the time to discuss the questions presented by each caller before determining whether we would accept the matter, or reject the matter, or whether we would immediately assign the matter to one of our appraisers for a more definitive opinion as to whether the tax appeal is worthwhile for both our office and the taxpayer. During this process, the taxpayers have asked us many recurring questions. The following is a list of three frequently asked questions, along with our answers:

1. What is a revaluation or re-assessment?

Sometimes, due to changes in real estate values, the assessments in a town may be significantly lower than the actual values of real estate in the town. Alternatively, in the recent deflationary real estate market from 2007 through 2013, some towns actually had assessments that greatly exceeded the values of their real estate. Historically, towns did not often conduct revaluations due to the time and expense of doing so. Instead, the assessors left old assessments in place, and compensated by adjusting tax rates to make the budgets work. However, Monmouth County recently ordered all municipalities to conduct annual revaluations or re-assessments to ensure that each town remains assessed at 100% of true value. Notwithstanding the fact that a town may conduct a revaluation, assessments are still excessive on occasion, and that is when the taxpayer should file a tax appeal.