Articles Posted in Taxation

As the 2014 tax appeal season nears its conclusion, and as the 2015 tax appeal season is ready to begin, we look back at another great year. In 2014, while we reduced the number of tax appeal clients we agreed to represent, we still saved our clients over $3,000,000 in assessments, including a $700,000 reduction in the assessment of one commercial property.

In Monmouth and Ocean Counties, the Hurricane Sandy related tax appeals will soon be dwindling, due to the long-awaited restoration of most of the storm affected properties. Excessive equalization ratios, which were once a major problem for assessors have been mostly cured. Only Allenhurst, Brielle, Keyport, Englishtown, and Farmingdale remained in 2014 with equalization ratios that were substantially over 100%. For the 2015 tax year, Allenhurst is no longer on that list. In Ocean County, Beachwood, Lacey, Little Egg Harbor and South Toms River will continue to have disproportionately high equalization ratios in 2015.

While all municipalities have some properties that are over-assessed, the massive quantities of appeals that were necessitated by an entire town being over-assessed are no longer a major concern in most Monmouth and Ocean County towns. Perhaps part of the reason for the drop in equalization ratios can be correlated to the gradual upturn in the real estate market. According to Zillow, New Jersey real estate values have increased this year (August of 2013 through July of 2014) by 5.5%. Nevertheless, there are still several over-assessed properties and the owners of those properties are paying substantially more than their fair share of real estate taxes. During the past tax year, we obtained property tax reductions for more than 75% of our tax appeal clients.

In 2011, our office reported about a new proposed law that would change the tax appeal filing deadline from April 1 to January 15. The legislation was spurred by a concern that New Jersey municipalities had suffered substantial budget shortfalls as the result of Real Estate Tax Appeals being filed after the municipal budgets had been adopted.

Under the old law, each municipality was required adopt its budget by March 31, which was one day prior to the Tax Appeal filing deadline. Since Tax appeals often do not get heard until several months after they are filed, the judgments resulting from those Tax Appeals resulted in major budget shortfalls.

In light of the current issues, a bill was enacted to fix these problems by simply changing the taxation calendar. Under the proposed calendar, taxpayers would receive their assessment postcards by November 15. Tax Appeal applications would be due by January 15, and decisions would be mailed no later than April 30. The final piece of the proposed bill is that the municipal budget would not be due until May 15, and the tax rates would not be set until May 31, after the municipality already has an accurate picture of what the total tax base would be.

The new filing deadline will become effective for the 2014 Tax Year. All Monmouth County Tax Appeals for 2014 must be filed by January 15, 2014. Our office will accept Monmouth County Tax Appeal intakes until January 6, 2014. Consequently, if you feel your property has been over-assessed, we encourage you to have us file your appeal as early as possible in order to ensure that one of our appraisers will have adequate opportunity to inspect and prepare a report prior to the hearing date. As always, the date of valuation will remain October 1.

There will be no extensions to this deadline. Taxpayers who attempt to file after the January 15 deadline will find their applications rejected. Our office will accept Monmouth County Tax Appeal intakes until January 6, 2014. Taxpayers whose properties are over-assessed may e-mail or call us for our 2014 Tax Appeal Intake.
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On October 29, 2012, Hurricane Sandy brought storm surges in excess of 9 feet. This was bad news for Ocean County, in which 29 of 33 municipalities border the ocean. Our office previously reported on statutory relief available to owners of properties that sustained damage during the hurricane. While the 2013 relief will be limited to loss of value to structures and not loss of value to land, we are surprised by the number of taxpayers in Ocean County whose assessments still do not accurately reflect the diminution of value sustained by the properties.

Some of the more severely affected towns in Ocean County have conducted revaluations or re-assessments this year in order to re-examine the properties and fairly determine their new true values. The towns of Plumsted, Stafford, Manchester, Seaside Heights, Pine Beach, Point Pleasant Beach and Toms River have all been designated for re-assessments this year. While the filing deadline for New Jersey tax appeals is generally April 1, towns in which a revaluation or re-assessment has taken place are usually assigned a tax appeal filing deadline of May 1. All of the aforementioned towns will observe a May 1 filing deadline, except for Point Pleasant Beach and Toms River, in which the deadline has been extended to June 1.

The municipal-wide revaluations of storm affected towns presents two major logistical problems. First, for towns in which all or most properties (line items) have been substantially affected, the lowering of all assessments will provide little relief to taxpayers, who will most likely be forced to begin paying a higher tax rate in order to ensure that the municipal budgets are maintained, without the need for bonding. Second, for towns in which only a few line items were affected, the lowering of assessments of the coastal properties will result in a higher tax rate for all residents, especially the residents of the lower priced inland properties. Very often, these are the residents who can least afford to pay a higher tax rate.

Throughout the year, this office has published a series of articles about real estate tax assessments. We have discussed how assessments are calculated, and how assessments can be appealed when they are too high. We have also discussed the fact that most real estate assessments in New Jersey do not exceed the actual value of the properties, and for many taxpayers, the high taxes they are paying is simply a function of a high real estate tax rate, which cannot be appealed. For our final article of this year, we will discuss some reasons why your tax rate may be as large as it is, and some ways that the local governments can (but probably will not) lower them.

The free market system, driven by the traditional principle of supply and demand, not only controls the prices of the products we buy, but also dictates the price that we pay for labor. We certainly would not continue to give raises, for example, to an undeserving employee, especially when many qualified applicants were waiting to take that person’s job. Recently, much attention has been brought to the paradigm, which awards teachers for seniority, rather than academic achievement. Perhaps one of the greatest casualties of the expensive union contracts for public school teachers is that it comes at the expense of the school system’s ability to hire additional necessary teachers, in the absence of substantial increases to the municipal budget.

According to recent data, the average cost to the taxpayers was $17,469 per child for the 2010-2011 school year. In Asbury Park, the cost per student for that same time frame was $29,819! We compared that figure to the prices for the 50 most expensive private schools in the nation. There was not much difference in the prices. In Newark, where the annual cost to the taxpayers for each school child now exceeds $25,000, hard working parents are forced to pay exorbitant taxes, as their children continue to receive subpar educations. Governor Christy has agonized over the inequality of treatment between children, based solely upon where they live. While private schools continue to be far less expensive, and in many cases, have higher academic standards than their public counterparts, there is still no tax credit for New Jersey parents that wish to send their send their children to private schools.

Nearly every resident in the State of New Jersey has been affected by Hurricane Sandy. In little more than 24 hours between the dates of October 29 and October 30, New Jersey residents experienced massive flooding and storm related damage from the hurricane. In the aftermath of Sandy and the considerable destruction it caused, many affected property owners have been left wondering if there will be any property tax relief available.

Historically, N.J.S.A. 54:4-35 has established that the assessed value of all New Jersey real estate must be determined as of October 1 of the pre-tax year. For example, the assessed value of a person’s property in 2013 must be based upon what the property was worth as of October 1, 2012. For this reason, a taxpayer who files an appeal should present evidence of sales of comparable properties that sold on or before October 1. However, for practical reasons, County Tax Board commissioners and Tax Court Judges will routinely allow evidence of sales that may have closed a month or two after the October 1 assessing date.

The question then becomes whether there is any legal basis for reducing assessments for damage from a storm that occurred 4 weeks after the assessing date. A similar situation had occurred in March of 1962 when many homes were severely damaged as a result of a coastal storm. At that time, there was no law reducing taxes for those damaged properties.

We are frequently asked questions regarding the necessity of the appraiser at the tax appeal hearing. For owners of more moderately priced properties, the decision is not an easy one to make. Very often, taxpayers conclude that the cost of an appraisal may exceed the savings that will be derived from the tax appeal. For the first time, this year, several dozen taxpayers asked us to file their appeals without appraisals.

The disadvantages of failing to obtain an appraisal are twofold. Primarily, we will focus on the role of the appraisal during the tax appeal hearing. At the hearing, the taxpayer has the burden of proving that the assessment is too high, while the municipality, on the other hand, is afforded the presumption of correctness. Put simply, the municipality does not need to prove anything. Consequently, for hearings at the county level, the municipality generally does not produce a full appraisal, but rather a list of comparable sales that will be relied upon. In some cases, the municipality will not produce any proof at all in support of its assessment and simply argue that the taxpayer has not satisfied his burden to prove that assessment wrong. Absent a well-prepared appraisal and expert testimony, it is nearly impossible for the taxpayer to satisfy his or her burden of proof.

To illustrate how this works, we will look at the matter of Greenblatt v. Englewood City. We previously reported on the case with regard to the use of “unusable sales.” In Greenblatt, the Court also visited the issue of whose duty it was to put forth credible evidence. The Court, in that matter, remarked that neither the taxpayer, nor the municipality had put forth any good evidence. However, since the taxpayer was the party bearing the burden of proof and the municipality was the party that was afforded the presumption of correctness, the Court ultimately ruled that, in a matter where neither side had put forward a good case, the Court must rule in favor of the municipality.

We are frequently asked questions from clients regarding the Tax Appeal filing deadline. Generally, the filing deadline for all real estate tax appeals is April 1, although the deadline is routinely extended by a month in during revaluation years. In one such matter, our firm successfully argued to the Tax Court that while the taxpayer missed the filing deadline, the delay in filing was excusable due to the fact that the taxpayer was not afforded proper notice of the change in his assessment. However, cases in which the filing deadline is waived are extremely rare and taxpayers must take special care to ensure that the April 1 filing deadline is not missed.

In the matter of Shin v. Borough of Norwood (App. Div. 2012), the appellants were property owners who had attempted to file their 2010 tax appeals with the Bergen County Board of Taxation on the April 1, 2010 filing deadline. The problem was that the attorney for the taxpayers had retained the services of a courier service, who apparently did not understand the urgency of the filing deadline. The courier showed up to the Bergen County Board of Taxation on April 1, but after the Board’s 4:30 closing time. The courier then re-attempted service on April 2. The filing was rejected as a “late filing.”

The Taxpayer then appealed to Tax Court, claiming that the filings should have been accepted. The municipality filed, and was granted a Motion to Dismiss, based upon the relevant law that states that all filings must be received by April 1. The taxpayer subsequently appealed the Tax Court’s decision. In affirming the Tax Court’s decision to dismiss the Taxpayer’s appeal, the Appellate Division remarked that the County Boards of Taxation have authority to set their own hours and that they were simply following their usual procedure and closing at 4:30 P.M. There was no bad faith or malfeasance on the part of the County Tax Board and it was the Taxpayer’s obligation to ensure that the application was filed by April 1, prior to the Board’s closing time.

For more than 80 years, Fort Monmouth had been a vital component of Monmouth County’s economic base. It had provided thousands of residents with jobs and housing, and has provided indirect benefits to thousands of businesses, including those in the retail sector. In April of 2005, the Pentagon recommended that Fort Monmouth be permanently closed. During the years that followed, some of the Fort Monmouth jobs were relocated to other bases within the State of New Jersey, others were relocated out of state, and some jobs were phased out of existence. On September 15, 2011, the Fort Monmouth Army Base was retired.

The sudden loss of jobs has resulted in a downturn in the economy throughout Monmouth County. Some of the towns that bordered or neighbored Fort Monmouth have felt the most serious impact. In particular, Eatontown, Oceanport, Tinton Falls, Shrewsbury and West Long Branch have seen major downturns in their housing markets. As with all deflationary markets, some of the diminution in value is directly attributable to the loss of demand and some of the deflation is attributable to a distorted the supply and demand quotient created by a surplus of sellers and a deficiency of buyers amidst concerns that the area will not make a speedy recovery.

The unfortunate result is that some towns, like Shrewsbury and West Long Branch, are now assessed at more than 100% of value. Other over-assessed towns in Monmouth County include Brielle, Englishtown, Farmingdale, Loch Arbour, and Red Bank. While assessors strive to create assessment models that will minimize their coefficients of deviation, it is an inevitability of basic arithmetic that a ratio of greater than 100% must yield several line items that are over-assessed. During the course of the past 5 years, during the downturn of the real estate market, towns have raced against time to perform re-assessments or revaluations to avoid this problem. Not coincidentally, during this same time period, our firm has enjoyed great success at reducing the assessments for several hundred taxpayers in towns whose assessments have not kept pace with the deflation of the market.

In the State of New Jersey, the amount of real estate tax you must pay is based in part on the municipality’s “assessment” or assigned value of your property. As property values have declined over recent years, some towns have reduced their assessments in order to keep up with the changes in value. They have then raised their assessments to make sure their budgets can continue to grow. The net result is that, even though the assessments have gone down, the taxes still have gone up.

Other municipalities have kept their assessments high, and have then been forced to defend a deluge of tax appeals from property owners and their attorneys. Unfortunately, these towns have relied on various unscrupulous methods to defend otherwise indefensible property tax assessments. One method employed is the use of the “N.U.” or “Non-usable” code. Here’s how it works:

In most cases, the taxpayer will attempt to prove his assessment is too high by offering evidence of comparable sales. The goal, when choosing a comparable sale, is to pick the properties that are most similar to your property, while also confining your search to sales that occurred soon before October 1 of the pre-tax year, or in some cases, within a month or two after October 1. The other requirement that had been imposed upon the taxpayer is that the sales must be “usable.” N.J.A.C. 18:12-1.1 sets forth several categories of sales that may be considered non-usable by the tax assessor. Historically, the designation of non-usable or “NU” meant that the Tax Board or Tax Court did not need to consider the sale reliable in their determination of value of the subject property. The only sales that would be considered would be “arms length sales.” With the surge of “distress sales” including foreclosures and short sales, it is becoming increasingly prevalent that the distress sales are defining the market. Put simply, the price that a buyer is willing to pay will be substantially affected by the abundance of bank sales.