Municipality cries foul over tax appeal refunds

by: Richard De Angelis
4 Apr 2013

The Township of Teaneck does not want to go it alone anymore in issuing refunds to property owners who are successful in challenging their property tax assessment.  Citing the “inequitable burden” such refunds place on municipal government, the Teaneck Township Council passed a resolution calling for a change in State law to require counties and school boards to contribute their share of refunds. As reported in a story that ran on North, Teaneck and other communities around the State are struggling under a mountain of tax appeals that have been increasing annually since 2010. For the full story click here.

However, counties already share in the burden of refunds by issuing credits to municipalities to offset the county portion of the refund. This has not stopped some elected officials, such as those in Teaneck and a few State lawmakers from calling for changes under State law to require counties, as well as school districts and fire districts to share in the refund burden.  One such measure is a bill introduced by Senator Anthony Bucco last year in the State Senate, Senate Bill No. 1846 , with a companion bill in the State Assembly, A-1503.

This effort is seemingly grounded in the principle of everyone paying his or her fair share, but it is questionable whether it would provide any relief to taxpayers or whether it would provide any economies in the administration of refunds.  When a tax appeal refund is owed, it undoubtedly affects the municipal budget, and municipal officials understandably do not want to confront the fallout alone, especially since the large portions of the property tax revenues collected are paid to counties and local school districts.   As a result, municipal officials are now seeking some cover, most specifically from their county and local school district, in sharing the burdens of the refunds.

One of the complexities of this concept is that the property tax assessment, which is the subject of the tax appeal, is set by the municipal assessor and not the county or school board. Also, the municipality, not the county or school board, defends the assessment in a tax appeal.  By trying to create a system where counties and/or local school boards would have more responsibility for property tax refunds, it is possible that those agencies would attempt to gain more authority in the tax assessment and tax appeal processes.

At its core, the tax appeal process involves a claim by a taxpayer that the government has collected more than its fair share of the taxpayer’s money.  If the taxpayer proves correct, and wins an appeal reducing his or her property tax assessment, the taxpayer is entitled to a refund.  While forcing a municipality to bear the full responsibility of refunding overpaid taxes may seem unfair and places fiscal pressure on the municipality, any effort to change the status quo with respect to the responsibility to pay refunds must also ensure that it does not cede control of property tax assessments to other government agencies, and does not merely add another layer of bureaucracy to manage the refund of tax overpayments that resulted from erroneous municipal assessments.

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