Property Tax Relief Legislation Advances Through NJ Senate Committee

by: Matthew Erickson
10 Feb 2022

On January 27, 2022, the New Jersey Senate Community and Urban Affairs Committee unanimously approved two pieces of legislation impacting New Jersey property taxes.  These proposed bills, S330 and S343, are lawmaker’s attempts to give some measure of property tax relief to New Jersey residents.  Though they both take very different approaches to that relief, both bills have the possibility of impacting property taxation in New Jersey.

New Jersey residents have long struggled with high property tax bills.  Currently, three New Jersey counties have median property tax bills that exceed $10,000 while seven others have median property tax bills in excess of $8,000.  This has caused New Jersey to have some of the highest property taxes in the nation.  These high taxes became a major political issue in New Jersey’s elections last November and both parties seem interested in tackling this difficult subject.

S330 – Energy Tax Receipts Reform

S330, introduced to the Senate Community and Urban Affairs Committee on January 11, 2022, is a bill that attempts to revise New Jersey’s Energy Tax Receipts Property Tax Relief Fund (ETR) so that municipalities would receive increased funding from the State and would be required to reduce their property tax levies in proportion to that funding.

The ETR along with the Consolidated Municipal Property Tax Relief Aid (CMPTRA) are state budget items that were intended to take taxes the State of New Jersey collected on behalf of the municipalities and direct those funds back to the municipalities for property tax relief.  Originally many of these items were collected directly by the municipalities but were eventually turned over to State collection as a means of administrative convenience.  The funds were always intended to be for the benefit of the municipalities.  To ensure that happened, there was a “poison pill” that was added in the legislation creating the ETR to prevent the State from redirecting the aid anywhere but the municipality.  If the correct amount of funding did not go to the ETR, then the State’s authority to collect the ETR funds would end, and control would revert to the municipalities.

In practice however, large amounts of these funds have been redirected to items in the State’s general fund during the process of budget appropriations.  To avoid the “poison pill”, lawmakers would simply reduce the CMPTRA, which did not have a “poison pill” provision, by the some or all of the amount that was funded through the ETR.  The result of these redirected funds has left New Jersey property owners without billions of dollars of tax relief as municipalities have lost out on their share of the funding.

S330 is targeted to reverse this process.  To guarantee that these revenues are directed back to the municipalities this legislation will attempt to gradually enforce the provisions of the original bill and guarantee that municipalities are given this aid without any offset of the required municipal aid.  The legislation intends to have this aid phase-in through 2027 and allow for municipalities to steadily reduce their tax bills.

S343 – Expansion of Rental Deduction

In contrast, S343 applies a more-simple method of allowing for property tax relief, though only applicable to residents residing in rental property.  Currently, New Jersey renters are only able to consider up to 18% of their rent as constituting property taxes for purposes of filing their New Jersey Gross Income Tax returns.  This bill would allow renters to consider 30% of their rent as property taxes.  Though a small change, this would go a long way to ensuring that most New Jersey Gross Income Tax filers are able to deduct a greater amount of property taxes paid on their returns.

As with any pending legislation, no changes are final until the bill has been passed by both houses of the New Jersey legislature and signed by the Governor.  The current language of these bills is subject to change and there is no guarantee that these bills will be successful in being enacted into law.  Currently, both bills are being reviewed by another Senate committee.

For additional coverage on this issue, please check out these comprehensive stories from NJ.com and WHYY.org.

If you have a question concerning your property taxes, please contact McKirdy, Riskin, Olson & DellaPelle, P.C. to speak with an experienced property tax attorney.

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