Bill Text: NJ A2614 | 2022-2023 | Regular Session | Introduced
Bill Title: Increases maximum allowable five-year property tax exemption and abatement for improvements to certain dwellings located in areas in need of rehabilitation.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2022-02-14 - Introduced, Referred to Assembly Community Development and Affairs Committee [A2614 Detail]
Download: New_Jersey-2022-A2614-Introduced.html
Sponsored by:
Assemblyman RONALD S. DANCER
District 12 (Burlington, Middlesex, Monmouth and Ocean)
SYNOPSIS
Increases maximum allowable five-year property tax exemption and abatement for improvements to certain dwellings located in areas in need of rehabilitation.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning the issuance of property tax exemptions and abatements for certain dwellings and amending P.L.1991, c.441.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 4 of P.L.1991, c.441 (C.40A:21-4) is amended to read as follows:
4. a. The governing body of a municipality may determine to utilize the authority granted under Article VIII, Section I, paragraph 6 of the New Jersey Constitution, and adopt an ordinance setting forth the eligibility or noneligibility of dwellings, multiple dwellings, or commercial and industrial structures, or all of these, for exemptions or abatements, or both, from taxation in areas in need of rehabilitation.
b. (1) The ordinance may differentiate among these types of structures as to whether the property shall be eligible for exemptions or abatements, or both, within the limitations set forth in P.L.1991, c.441 (C.40A:21-1 et seq.). With respect to a type of structure, the ordinance shall specify the eligibility of improvements, conversions, or construction, or all of these, for each type of structure.
(2) The ordinance may differentiate for the purposes of determining eligibility pursuant to this section among the various neighborhoods, zones, areas or portions of the designated area in need of rehabilitation.
(3) If the ordinance provides for the exemption from taxation of improvements to dwellings, the ordinance shall set forth standards for determining the amounts of the exemption, subject to the limitations set forth in subsection a. of section 5 of P.L.1991, c.441 (C.40A:21-5), which amounts may vary among applications based on any considerations that the municipality deems appropriate, including the nature and cost of the improvements as well as the location of the dwelling.
c. An ordinance adopted pursuant to this section may be amended from time to time. An amendment to an ordinance shall not affect any exemption, abatement, or tax agreement previously granted and in force prior to the amendment.
d. Application for exemptions and abatements from taxation may be filed pursuant to an ordinance so adopted to take initial effect in the tax year in which the ordinance is adopted, and for tax years thereafter as set forth in P.L.1991, c.441 (C.40A:21-1 et seq.), but no application for exemptions or abatements shall be filed for exemptions or abatements to take initial effect in the eleventh tax year or any tax year occurring thereafter, unless the ordinance is readopted by the governing body pursuant to this section.
(cf: P.L.2007, c.268, s.2)
2. Section 5 of P.L.1991, c.441 (C.40A:21-5) is amended to read as follows:
5. a. (1) If the ordinance adopted pursuant to [this act] P.L.1991, c.441 (C.40A:21-1 et seq.) shall provide for the exemption from taxation of improvements to dwellings, it shall require that, in determining the value of real property, the municipality [shall] may regard [the first $5,000 or $15,000 or $25,000,] any amount allowable under paragraph (2) of this subsection, as determined by the assessor based on standards set forth in the ordinance [shall specify], in the assessor's full and true value of improvements for each dwelling unit primarily and directly affected by the improvement in any dwelling more than 20 years old, as not increasing the value of the property for a period of five years, notwithstanding that the value of the property to which the improvements are made is increased thereby. During the exemption period, the assessment on the property shall not be less than the assessment thereon existing immediately prior to the improvements, unless an abatement is granted pursuant to subsection b. of this section, or there is damage to the dwelling through action of the elements sufficient to warrant a reduction.
(2) (a) A municipality may exempt up to $50,000 of the assessor's full and true value of improvements to the dwelling, which maximum allowable amount shall be annually adjusted according to the annual percentage change in the Consumer Price Index for All Urban Consumers (CPI-U), as published by the United States Department of Labor.
(b) Before the first day of the second calendar year following the effective date of P.L. , c. (pending before the Legislature as this bill), and each year thereafter, the Director of the Division of Local Government Services in the Department of Community Affairs shall issue a Local Finance Notice setting forth the maximum allowable exemption for the upcoming calendar year, as determined pursuant to subparagraph (a) of this paragraph.
b. An ordinance providing for exemptions for improvements to dwellings may also provide for the abatement of some portion of the assessed value of property receiving the exemption as it existed immediately prior to the improvement. An abatement for a dwelling may be granted with respect to that property for a total of up to five years, but the annual amount of the abatement granted to any single property shall not exceed [30%] 30 percent of the annual amount of the exemption [granted] allowed under [the ordinance] paragraph (2) of subsection a. of this section. The abatement period and the annual percentage of the abatement to be granted shall be set forth in the ordinance, which may include a schedule providing for a different percentage of abatement, up to [30%] 30 percent, for each year of the abatement period.
c. An ordinance providing for exemptions or abatements, or both, for improvements to dwellings may also provide for the exemption of some portion of the assessed valuation of construction of new dwellings or of conversions of other buildings and structures, including unutilized public buildings, to dwelling use, or both. If so, the ordinance shall require that, in determining the value of real property, the municipality shall regard a percentage, not to exceed [30%] 30 percent, of the assessor's full and true value of the dwelling constructed, or conversion alterations made, as not increasing the value of the property for a total up to five years, notwithstanding that the value of the property upon which the construction or conversion occurs is increased thereby. The exemption period and the annual percentage of the exemption to be granted shall be set forth in the ordinance, which may include a schedule providing for a different percentage of exemption, up to [30%] 30 percent, for each year of the exemption period.
d. An ordinance providing for the exemption of some portion of the assessed valuation of construction of new dwellings, or of conversions of other buildings and structures to dwelling use, or both, may also provide for the abatement of some portion of the assessed value of the property receiving the exemption as it existed immediately prior to the construction or conversion alteration. An abatement for a dwelling may be granted for a total of up to five years, but the annual amount of the abatement shall not exceed [30%] 30 percent of the total cost of the construction or conversion alteration, and the total amount of abatements granted to any single property shall not exceed the total cost of the construction or conversion alteration. The abatement period and the annual percentage of the abatement to be granted shall be set forth in the ordinance, which may include a schedule providing for a different percentage of abatement, up to [30%] 30 percent, for each year of the abatement period.
(cf: P.L.1991, c.441, s.5)
3. This act shall take effect immediately, but shall remain inoperative until the first day of the calendar year next following the date of enactment.
STATEMENT
This bill increases the maximum allowable property tax exemption that a municipality may provide, under the "Five-Year Exemption and Abatement Law," P.L.1991, c.441 (C.40A:21-1 et seq.), for improvements to certain dwellings located within areas in need of rehabilitation.
As permitted under Article VIII, Section I, paragraph 6 of the New Jersey Constitution, municipalities may issue property tax exemptions and abatements to encourage the development of buildings and structures located within areas in need of rehabilitation. Under current law, a municipality may exercise this authority by adopting an enabling ordinance that meets the requirements of the "Five-Year Exemption and Abatement Law."
Under the "Five-Year Exemption and Abatement Law," a municipality may issue property tax exemptions and abatements to taxpayers who undertake improvements on qualifying residential, commercial, and industrial buildings. A property tax exemption occurs when a portion of the value of improvements to a property is excluded from the property's assessed value for property tax purposes. In contrast, a property tax abatement occurs when a portion of a property's assessed value, as existed before the completion of any improvements thereon, is exempt from property taxation. Importantly, property tax exemptions and abatements allowed under the "Five-Year Exemption and Abatement Law" may remain in effect for no longer than five years and may only be issued for properties located within areas in need of rehabilitation.
Currently, if a municipality provides a property tax exemption for improvements to an eligible dwelling (i.e., residential properties, not including multiple dwellings, that are more than 20 years old), the amount of the exemption may not exceed $5,000, $15,000, or $25,000, as specified in the municipality's enabling ordinance. However, current law generally prohibits the exemption from causing the property's assessed value to be less than the amount assessed before the improvements. Alternatively, if a municipality provides a property tax abatement for an eligible dwelling, the amount of the abatement may not exceed 30 percent of the maximum allowable exemption.
This bill increases the maximum property tax exemption that may be allowed under the "Five-Year Exemption and Abatement Law." Specifically, the bill provides that during the first calendar year following the date of enactment, a property tax exemption for improvements to eligible dwellings may be issued in an amount up to $50,000. Thereafter, the maximum allowable exemption would be annually adjusted according to the annual percent change in the Consumer Price Index for All Urban Consumers (CPI-U). Because the maximum allowable property tax abatement for dwellings is tied to the amount of the property tax exemption, the bill also increases the amount of the maximum allowable abatement for these properties.
Additionally, the bill gives greater flexibility to municipalities when determining the amount of the exemption that may be issued for the improvements to eligible dwellings. Under the bill, the amount of each exemption would be determined by the municipal tax assessor based on standards set forth in the municipality's enabling ordinance. Notably, these standards may allow tax exemptions to be issued in varying amounts based on any considerations that the municipality deems appropriate, including the nature and cost of the improvements as well as the location of the dwelling.
By increasing the maximum allowable property tax exemption for improvements to eligible dwellings, the sponsor intends to encourage the improvement of aging residential properties throughout the State. Moreover, given that the maximum allowable exemption has not been increased since the enactment of the "Five-Year Exemption and Abatement Law" in 1991, the sponsor contends that this bill is necessary to ensure that these impactful tax incentives reflect current economic realities.
