New Jersey Tax Appeal Now

• Petition of Appeal
  • The petition of appeal must be received by the County Board of Taxation on or before April 1 of the tax year or 45 days from the date of bulk mailing of Notification of Assessment is completed in the taxing district, whichever is later. (by May 1 in districts which have undergone municipal wide revaluation or re-assessment.)
  • A copy must be served upon the assessor of the municipality in which the property is located.
  • A copy must be served upon the clerk of the municipality in which the property is located.*
  • Any supporting documents attached to the original petition must also be attached to the assessor’s and municipal clerk’s copies.
  • The Petition for appeal form is known as ‘Form A-1 (1-08)’. Download this form from http://www.state.nj.us/treasury/taxation/lpt/exam.shtml .
  • 2nd Source of Appeal form – http://www.state.nj.us/treasury/taxation/prntlpt.shtml
  • Added / Omitted Petition for appeal form is found on the same site and must be filed on or before December 1 of the tax year or 30 days from the date the collector completes the bulk mailing of tax bills for added or omitted assessments, whichever is later.
  • The petition of appeal forms can also be obtained from the county tax boards located in most county office buildings. 

 
*Additional rules apply if the municipality is the appellant which are not be addressed here.

• If the property’s assessed valuation is greater than $1,000,000, the taxpayer or taxing district may bypass the County Board of Taxation and file a petition of appeal called a ‘Form of Complaint’ with the Clerk of The Tax Court by April 1 of the tax year.
  • The Tax Court of New Jersey is located at The Richard J. Hughes Justice Complex, 25 Market Street, Trenton, New Jersey. The Mailing Address of the Court for your complaint form is P.O. Box 972, Trenton, NJ 08625-0972.
  • The Tax Court Phone Number: (609) 292-5082.
  • Any complaint by a taxpayer to review the action of a County Board of Taxation or request for a Direct Review by the Tax Court, (for property exceeding $1,000,000 in assessment value), shall also be served on The County Board of Taxation and on the assessor and the Clerk of the taxing district in which the property is located.
    • Prior filings to the County Board are not sufficient.
• Delivery of the appeal or complaint form.
  •  
    • Service shall be made personally or by certified or registered mail, return receipt requested with the following exceptions:
      • The County Board of Taxation shall be served by leaving a copy with The County Tax Administrator or with a person in charge of the office of by mailing a copy to the County Tax Administrator by ordinary mail.
      • Service upon the assessor and Clerk of a taxing district shall be by leaving a copy with the assessor or the person in charge of the office and by leaving a copy with the Clerk of the taxing district or the person in charge of the office, or by mailing copies to the assessor and the Clerk by ordinary mail.

Additional Requirements

• Commercial, Industrial , Multi – Family Petitions
• Must annex an itemized statement showing all sources of income and expenses for that property for the most recently completed accounting year and any other year requested by the County Board of taxation.
• Separate Parcel Filings
• In local property tax cases, a separate complaint must be filed for each tax year for each separately assessed property.
• A separate complaint must be filed each tax year for a group of properties, (such as a condominium complex), permitted to be included in a single complaint as provided by  R.8:3=5(a)(2). (3) & (4).

Pre-Conditions of Tax Appeal

• Taxes Must Be Paid Current
• An Appeal by a business entity, other than a sole proprietor, e.g. partnership, corporation, LLC, must be prosecuted by an attorney admitted to practice law in New Jersey.
• Chapter 91 Form Completed
• Attorney Must File if Owner is a Corporation, LLC or Business
• October 1 Date of Value
  • ‘True Value’
• Chapter 123 / ‘Test of Fairness’
  • Corridor of Value
    • Common Value Range+/- 15%

Stages of The Tax Appeal Process

• Record Card Review
  • Typographical errors
  • Gross Errors of fact
    • Nature, Size, Quality or Condition of Improvements
    • Site Characteristics
• Correction of Errors Appeal
  • Informal prior to assessor filing of official assessments
  • Formal Appeal required if after filing
  • Freeze Act does not apply

Informal Assessor Review

• First Stage of Official Appeal Process
  • No filing required
  • Burden of Proof on Taxpayer
  • Evidence can be Formal
    • Appraisal
  • Informal
    • Comparable Sales & Market Evidence
  • Assessor has limited authority to remedy
  • Taxpayer Benefits
    • Low risk
    • Cost efficient
    • Evaluate assessor case
    • Determine mind set of municipality

The County Tax Board Hearing

• Formal Appeal Stage
• Filing Date by April 1
  • May 1 if revaluation or municipal wide reassessment
• Evidence Required / Burden on Taxpayer
  • Market data
  • Appraisal – Discovery 7 days prior to hearing required
  • Appraiser presence required at hearing
    • Must be qualified by Board /Cross examination allowed
    • Wide latitude in presentation permitted
    • Appraiser centric / Attorney oversight
    • Strong presentation skills of expert required – Not advocacy

The County Tax Board / Objectives & Realities

• Objectives
  • Present thorough evidence for assessment change
    • Appraiser testimony / attorney guide and blocker
  • Qualify the assessor and their expert
    • Do not allow the assessor to stipulate only to taxpayer report
      • Taxpayer report becomes sole focus and target
      • Errors seem magnified without side by side comparison
  • Negotiate Settlement
    • Multiple Years
    • Apply for Freeze Act
• Realities
  • Board may reject argument / Dismissal without prejudice
  • Board does not typically decide lopsided judgments
  • Dismissal Options
    • Appeal within 45 days to State tax Court
  • Cost to take next step into Courts increases substantially
    • Attorney Leads
    • Must pay tax on increased assessments during process

State Tax Court

• Legal Venue
• Discovery Rules Apply
• Rigid format
• Limited Latitude for discussion
• Appeal driven by procedure as opposed to value
• Attorney lead / Experts Can Multiply – so do costs
• Tax Courts 2 year backlog
  • Relief needs immediate?
    • Settlement Offer
  • Well capitalized and determined owner
    • Township forced to increase commitment and cost
    • May lead to more substantial settlement offer

Valuation Issues For Tax Appeal

• Property Assumed Stabilized – Whether it is or not
• Three Valid Approaches
  • Sales Comparison
    • Primary for Owner User Property
    • Verification Critical / ‘Usable’ Sales Required
  • Income Capitalization Approach
    • Direct Capitalization over Cash Flow in most cases
    • ‘Stabilized’ Asset’
      • Capitalization Rate Data / RERC & ACLI Tables, Korpacz, Etc.
      • Net / No Load Factor vs. Gross asset / ‘Loaded Capitalization Rate’
      • Prior court cases definitely influence and may define parameters
      • Actual market performance vs. Tax Court Opinions
    • Strongly favored approach at Court level
  • Cost Approach
    • Limited applicability for Tax Appeal Purposes
    • Better illustration of feasibility in trending markets

Conclusions

• The Tax appeal process can be costly but rewarding
• May yield return versus cost but taxes likely to remain above pre assessment levels regardless of outcome
• Appeal is a strong measure to control expense growth over time for investment property
• The appeal process is driven by legal procedure
• No certainty of outcome based on merit alone
• Points of weakness are numerous for taxpayer
  • Select team, (Lawyer & Appraiser), carefully
• NJ Tax Appeals Filed will increase dramatically in short term
• Will force municipalities to more intensely defend assessments
• You MUST have relevant data to win at tax appeal

The County Tax Board
(The Formal Appeal Process Begins)

The County Tax Board is the first formal stop in the Tax Appeal process. At this stage, any prior discussion with the assessor is irrelevant. The burden of proof is on you the taxpayer. You have presumably satisfied the pre-conditions of tax appeal as required by code and correctly filed your petition of appeal.

• The ‘Tax Appeal Process’ presentation provides a full review of the pre-conditions required for appeal.

Bypassing The County Tax Board

If your property is assessed for more than $750,000, you may file directly with the State Tax Court by April 1st annually or within 45 days from the date of the bulk mailing of Assessment notices, whichever is later. May 1st if in a revalued district.
Many commercial property owners make this choice. They feel the Tax Board level does not offer a real chance for relief and weighs down the appeal with added cost.

• This can be a costly mistake. Appeals at the State Tax Court level can take up to 2 years to be heard and the taxpayer has no remedy in the interim. The very weight of added assessments and taxes in some cases force property owners to the negotiating table before the appeal is even heard by the Tax Court.
• In contrast, the County Tax Board by mandate must hear and determine all appeals within 3 months of the last day for filing appeals. Further, if you are dissatisfied with the judgment of the Tax Board, you have 45 days from the date your judgment was mailed to file a further appeal with the Tax Court of New Jersey.
• There is some economy of scale on cost from the Tax Board to the Tax Court level. The appraisal should be durable through both stages. The appearance / testimony fees and attorney expense at the Board level are real costs and you must weigh each option according to your needs of course. However, the County Tax Board offers the advantages of timing, continued appeal if necessary and forces the taxing district to negotiate in good faith.

County Tax Board Members

The Tax Board is comprised of 3-5 members depending on county population. Each member must live in the County they represent. Code requires a politically balanced board.
Members are chosen based on their ‘knowledge and experience in matters concerning valuation and taxation or property’.
These people live in the County where you own property. Remember this when using data and examples to make a point. Keep analogies local.

Presenting Your Case ‘Pro Se’

• ‘Pro Se’ simply means on your own. Assuming you are not a corporation or taxing district, you are allowed to represent your own case before the board.
• The County Tax Board Hearing is structured to follow the practices and procedures, including rules of evidence of tax court proceedings. However the Board also allows a relative latitude for owners to present their case.
• Like the Assessor Meeting, the Tax Board will typically expect a concise and direct presentation. As an owner, you will not be subject to witness qualification. However, be careful to present your evidence with appropriate verification and clarity. Evidence not properly sourced WILL be challenged and will cast doubt on your entire case.
  • You do NOT need a formal appraisal to present your case pro se before the Tax Board. Be cautioned however, that few people can assemble the necessary data and form a presentation in the required format as readily and competently as a licensed appraiser.  You may save money on the appraisal, but lose the case. 
• The Board level presentation should follow the same outline we presented in the Informal Tax Assessor Meeting.
  • Describe the subject, its physicality, location and site.
  • Present the sales data you have in support of your argument.
  • Follow with a clear and brief discussion of the Income Approach if you present one. The Board will not expect the same level of detail as they would from an appraiser, but they will hold you to a standard of proof nonetheless. 
  • If the assessor or the town appraiser is questioned, do not be afraid to interject when you hear something inconsistent or that you disagree with. Just remember the venue you are in.
  • The Board will respond with their decision within 3 months of the last day for filing appeals.
• If you are dissatisfied with the Tax Board decision, you have 45 days from the date the judgment was mailed to file further appeal with the Tax Court of New Jersey.

Using Experts – The Appraiser

Who is an Expert?
An ‘Expert Witness’ is anyone employed as a real estate appraiser, and designated as such from a legitimate association of professionals, according to licensing or certification requirements of the State of New Jersey.

• An expert’s qualifications may, (and mostly will), be challenged by the municipal attorney at the hearing.
• If you intend to rely on expert testimony at your hearing, you must supply a copy of the appraisal report for the assessor and each County Tax Board member at least 7 days before the scheduled hearing.
• The appraiser who completes the report must be available at the hearing to testify and to afford the municipality an opportunity to cross-examine the witness.

Real Estate Broker testimony has been accepted in Board hearings in the past. Brokers can potentially be invaluable as a source of data and even pricing, but they are not recognized outright as expert witnesses by tax appeal literature published by the State of New Jersey. Brokers may act in the capacity of a ‘fact witness’. A ‘fact witness’ as defined by N.J.A.C. 18:12A-1.9(I). has personal knowledge of facts relevant to the issue before the board. This could include a host of issues from vacancy rates to recent listings and sales discussion.
You cannot build a competent case, (unless there are grossly exaggerated assessing errors), using only opinion, and ancillary data. Even competently gathered sales and income data has to be analyzed and reconciled into a True Value estimate. This is the technical point of failing for many witnesses and cases. A licensed appraiser IS qualified and more importantly accepted as someone qualified to make such adjustments and conclusions.
Final Note – There is a point of diminishing return on a tax appeal. Calculate projected tax savings from a successful appeal and consider the ‘Freeze Act’ impact on savings. If your budget permits, get an appraisal. It’s the strongest evidence you can have.

Fully Loaded – The Commercial Tax Appeal With Attorney & Expert

• The fully prepared commercial appellant will view the Tax Board Venue as an opportunity. There is a much stronger motivation at this stage for the taxing district to negotiate prior to the actual hearing. They too face rising costs beyond the County Tax Board level, from the appeal process as well as the potential loss in assessment value.
  • Remember, the burden of proof remains on YOU. The assessment has a presumption of correctness that must be overcome with data, logic and skill.
• The Tax Board hearing will often be precluded by a final effort to negotiate settlement with the taxing district. The lead negotiator is likely to be the taxing district’s attorney. The taxing district attorney will usually communicate directly with your attorney representative instead of you the taxpayer.
  • One point that will come up at this stage is the district’s right to appeal the Board decision just as the taxpayer has this right. If a substantial ratable is on the line, the town can be expected to defend the assessment vigorously, despite reasonableness and this is a strong negotiating tool for them.
    • The high value ratable taxpayer perception of the County Tax Board as an unfair venue is in large part due to the taxing district’s right to appeal the Board Judgment. Effectively, this ensures the Board must consider the impact of the appeal on BOTH sides. Tax Board decisions in our experience rarely fall entirely in favor of the taxpayer OR the taxing district IF the case is presented well. This of course excludes cases dismissed on the basis of improper filing or procedure, and those made pro se without competent expert assistance.
    • Despite the potential for a township appeal, this is not typical and is generally frowned upon by Tax Boards throughout the state, precisely because it increases the perception of unfairness.

Assuming you were not able to negotiate an agreeable settlement prior to the hearing, you must now proceed with your case.
Your team includes your attorney who will dictate the pace of the presentation and your appraiser with his/her appraisal, who will comprise the substance of your hearing.
The hearing may begin with the assessor or town attorney trying to qualify your expert appraiser.

• Have the appraiser prepared to discuss their education, background, licenses and certifications as well as any relevant appraisal experience including prior testimony before Tax Boards.
• Once qualified, your appraiser expert needs to present their appraisal to the Board in a concise, clear and convincing manner. (The appraiser cannot act as an ‘advocate’ of your position without compromising its merit and their license under USPAP guidelines. They can however be advocates of their report, research and conclusions.)

The Tax Board will allow an initial latitude to the expert to present their evidence. This does not mean a recital of the actual appraisal document but a run through of the relevant data. Remember, the Tax Board, (in theory), will have already reviewed the report prior to the hearing. (You provided them copies through discovery.)
Your appraiser expert SHOULD be prepared to present their case and answer questions as to their data, methods and analysis.
There are a few ways to highlight your case. Discuss the following with your attorney and decide which is right for you.

• If your appraiser has strong presence and verbal skills, and knows how to be concise, step back and let them go. Present the case and use the attorney as a blocker to keep the other attorney from breaking their rhythm.
• If the appraisal evidence is strong, but the appraiser’s oral skills are uncertain, have the attorney prepare an outline to follow. The attorney takes the lead and dissects the report into digestible blocks. (See next slide)
• Keep the pace fluid and the appraiser focused. Get to the point and spell out clearly a concluded True Value.
• If there is cross examination, the appraiser needs to address any questions.
• The case begins and ends in this venue with the appraiser / appraisal.

Questioning The Appraiser

Focusing The Expert & The Evidence
The following segments are critical to illustrate the True Value standard expected by the Tax Board:

Property Summary – Mr. Appraiser, please describe the subject property and its trade area.

Sales Approach – Mr. Appraiser, please summarize the conclusions of the sales analysis. (Remember – the Board Members should have read the report. Its time to focus THEM on the conclusions.)

Income Approach – Mr. Appraiser, please discuss your conclusions of market rent, applied vacancy and capitalization rate.

Conclusions – Mr. Appraiser, based on your analysis, can you summarize your data and support your conclusion of True Value. (‘Of course I can’ is the correct answer.)
Note – The Board Members will ask questions. Be prepared.

Cross Examining The Tax Assessor

• The taxing district strategy will be to attack your expert and appraisal. Your attorney should view their task the same way. Force the assessor to discuss their case and reasoning. Few assessor’s will have the time to prepare a cogent detailed case for every appeal. You need to press the advantage here.
  • Did the assessor inspect the property?
  • Did they prepare an appraisal on the subject?
  • If market rent is different then your expert’s, find out why. Did they use similar class data?
  • How did they derive a stabilized vacancy factor?
    • Was it based on some court decision or actual market evidence?
  • Discuss their use of expense terms.
  • Dissect their capitalization rate.
  • Note – There are numerous points of possible contention and weakness is the typical appraisal. Force the assessor to reveal their data and assumptions, not just attack yours.
  • The goal of your attorney should be to illustrate the lack of detailed support in the assessor case while highlighting the diligence used in preparation of your own

Closing The Hearing

• Have the attorney request a closing summary from the appraiser in writing. This is just an exercise to focus the appraisal conclusions into one paragraph, used to make a final impression upon the Board. It should read something like this:
  • ‘In closing, I note the closed sales data range of unit pricing fell between $100.00 and $120.00 psf. The resulting True Value range was between $1,000,000 and $1,200,000. Given the subject location, physicality and function, we project True Value at the lower end of the range.
  • ‘The Income Approach employed market rent at $5.00 psf Net. Four lease comparables were used to determine the lease rent. Stabilized Vacancy was projected at 10% as supported by source data from CB Commercial Central NJ Industrial Market Surveys for 3rd Quarter 2009. The Capitalization Rate at 9.0% is supported by investor surveys including Korpacz, ACLI and RERC reports. The applied Band of Investment and Lenders formula both support the projected rate. Final value via the Income Approach is $1,000,000’.
  • ‘The subject is 18,000 sf in size. It is an owner user oriented property with average location appeal and above average physicality. The applied Sales Comparison and Income Capitalization Approaches support each other. Based on our analysis, True Value as of October 1 was $1,000,000.’
  • The End – Answer any questions and then stop talking. Rambling appraisers are fodder for attorneys and Board Members. Let the case stand on the data.

The ‘Freeze Act’

• The ‘Freeze Act’ allows you to freeze your taxes for the appeal year and 2 subsequent years thereafter. (3 in all)
• Any judgment entered by a county board which is not further appealed by a party shall be deemed binding and conclusive upon the municipality and tax assessor for the tax year in question and two tax years immediately thereafter, unless a revaluation, reassessment or change, (expansion, renovations, etc.), in value has occurred subsequent to the assessing date.
• A taxpayer may apply to the county board of taxation within a reasonable period of time upon proper notice to the municipality seeking the enforcement of the Freeze Act with regard to a judgment previously entered by the county board of taxation.

Conclusions

• The County Tax Board is a venue similar to voluntary arbitration. Neither side can agree to settlement so you both present a case to an intermediary for ‘equitable’ solution. Assuming both sides were able to present a case with competent appraisal and legal representation and what remains is an ongoing difference of opinion of True Value, the Board will weigh the evidence and render a decision.
  • Boxing matches that go to the judges for decision don’t always go the way you expect them to. The County Tax Board is no different. If you present a case, YOU must WIN the case to get true relief.

                If the case has merit, the appeal is won or lost with your appraisal and presentation.

• Remember the standard. The assessment is presumed correct and YOU have the burden of proof. Make sure you give them enough proof. If you don’t know the appeal process thoroughly or are unfamiliar with valuation models and techniques, then consider using a professional appraiser. 

State Tax Court
Getting There

• There are two ways to wind up in State Tax Court.

1. You asked for it. If you are a property owner assessed greater than $750,000, you can file an appeal directly with the State Tax Court, (by April 1, or 45 days from date of bulk mailing of Assessment Notices, whichever is later.) May 1 if in a revalued district.
2. You did not get relief either from your Informal Tax Assessor Meeting or the County Tax Board, or both.

Case ‘Track’ Assignment

• The Tax Court Management Office shall advise the parties of the ‘track’ assignment.

1. Track assignment may be advanced or delayed at discretion of the Presiding Judge.
1. Standard Track – An action not qualifying for assignment to the complex track, farmland assessment and exemption track, small claims track or expedited track shall be assigned to the Standard Track.
2. Complex Track – A case is assigned to the complex track for individual judicial management if it appears likely that the case will require a disproportionate expenditure of court and litigation resources in its preparation for trial or by reason of the number of parties involved, the number of claims and defenses raised, the legal difficulty of the issues presented, factual difficulty of the subject matter, or a combination of these or other factors.
3. Expedited Track – Where specific disposition times are imposed by statute or where it appears that tax policy considerations as reflected in the statutes or court rules demonstrate that a summary proceeding would be more appropriate than a plenary trial.
4. Farmland Assessment and Exemption Track – Reviews of farmland assessment, rollback tax assessment and / or exemption shall ordinarily be assigned this track.
5. Small Claims Track – An action shall ordinarily be assigned to the small claims track if it is indicated on the case information statement that the matter is within the small claims jurisdiction.
1. Complaint does not exceed the sum of $2,000 exclusive of interest and penalties
2. Hears all local property cases involving class 2 property, (1-4 family residence), or class 3A, (farm residence)

What You Need For Tax Appeal At The State Court Level

• To be successful at the State tax Court level.

1. Business Entity other than sole proprietor
1. Licensed NJ Attorney to prosecute the case
2. Competent Professional Appraisal Assistance
3. Appraisal report prepared for Tax Appeal Purposes
1. Specific to rules, dates and methods for ‘True Value’
2. Individual or Business Entity Sole Proprietor
1. Detailed and specific market evidence for your case
1. Appraisal Preferred / Appraiser must then be present
2. Specific sales, leasing, vacancy and cap rate information at the least.
1. Licensed appraisers are recognized as having the necessary expertise to make market adjustments to data. The individual owner will be challenged if they attempt to do same.

• The burden of proof remains on you the taxpayer to prove your case. At this level, you have presumably exhausted all efforts to negotiate the case. You will now have to prove to a sitting judge with a two year backlog, (or more), of tax appeal cases, that your case has merit. You will not have much time.

1. You MUST present relevant data within the rules of the Court. There is far less latitude at the Tax Court level compared to the County Board.
2. If you choose to represent yourself through the process, familiarize yourself with the rules of State Tax Court.
3. You need to weigh the benefits of having a formal appraisal in this venue.
1. Appraisal Cost plus testimony fees vs. loss of case for improper or insufficient data.
2. Weigh the value or YOUR TIME to assemble, verify, prepare, and present your data evidence. Appraisers train for years to learn valuation tools and to locate data sources that give them a time efficiency advantage.
3. Appraisers in the tax appeal venue can be invaluable in terms of case presentation before a judge.

Pre-Trial Conference

• Local Property Tax Cases

1. Pre-trial conferences may be held at the discretion of the court either on its own motion or on a party’s written request.
1. The request of a party for a pre-trial conference shall include a statement of the facts and reasons supporting the request.
2. The pre-trial conference may be conducted by telephone.
3. Each party shall file with the court and exchange with each other its pre-trial memorandum no less than 7 business days before the pre-trial conference.
1. Pre-trial memorandum to be in form prescribed by court.

Discovery Rules of State Tax Court

• As per ‘Rules Governing Practice in The Tax Court of New Jersey’

1. Discovery may be taken in accordance with the provisions of R. 4:10-1 through R. 4:18-2 and R. 4:22 through R. 4:25 as applicable except as follows:
1. In state tax cases, (other than small claims cases), leave of court, granted with or without notice, must be obtained if a party seeks to take a deposition by oral examination prior to the expiration of 60 days after service of complaint.
2. In state tax cases the 150 days for completion of discovery prescribed by R. 4:24-1 shall commence to run 60 days after the service of complaint.
3. In actions to review the equalization table, answers to interrogatories shall be served within 20 days from the date of service of the interrogatories.
4. In local property tax cases assigned to the Small Claims Track, discovery shall be limited the property record card for the subject premises, inspection of the subject premises, a closing statement if there has been a sale of the subject premises within three years of the assessing date, the costs of improvements within three years of the assessing date, and income, expense, and lease information for income producing property. The court may grant additional discovery for good cause shown. (Discoverable with 30 day response time limit after being served.)
5. In local property tax cases, interrogatories and requests for production of documents shall be in the form and manner prescribed by the Tax Court.
6. In local property tax cases, the following time limits  are applicable to discovery:
1. Small Claims Track Cases: To be completed within 75 days of filing complaint.
2. Standard Track Cases: To be completed within 150 days of filing of complaint.
3. Complex Track Cases: To be completed within 150 days of filing if complaint unless extended by court.
4. Expedited Track Cases: To be completed within the time set by the court.
5. Farmland Assessment & Exemption Track: Within 150 days of filing of complaint.

Exchange of Appraisals and Comparable Sales and Rentals

• A party intending to rely on the testimony of any person testifying as a valuation expert, shall furnish each opposing party with a copy of the written appraisal report of the expert .

1. Standard Track Cases – 30 days prior to trial date as designated by the court.
2. Small Claims Track – 20 Days prior to trial date.
3. All Other Track Cases – As directed by the court.

• Same Discovery Standard applied to sales and rental data for comparable properties to be used as evidence.

1. Sale Comparables must list the location of the property by block, lot, street, street number and municipality.  Each sale must note the name of seller and purchaser, date of sale, consideration, book and page number and if available the form SR1A identification number of the Division of taxation.
2. Rent Comparables must note the location of the property by block, lot, street, street number and municipality. The name of the landlord and tenant, date of lease and relevant lease terms must be identified.

Notes on Discovery

• Chapter 91, (otherwise known as N.J.S.A 54:4-34), is a request for information form used by assessor’s to gather information on income producing properties to assist in the valuation process.

1. For the most part, assessors do NOT use this data to compile accurate vacancy estimates or to support market rent.
2. Chapter 91 is often utilized as a weapon against property owners. If the owner does not respond in a timely manner, they lose the right of appeal in a given tax year.
3. This information IS often shared with the taxing district expert, who will provide an appraisal and market evidence to defend the district at appeal.
4. This information has historically been classified by taxing districts as ‘confidential’, however if the data has been used by the taxing district expert in their defense, you may request copies of these forms to assist in your appeal.
1. Note – this remains a hotly contested issue. Assessors insist the chapter 91 forms are confidential, yet many tax appeal attorneys seem to agree that once this data is shared with the taxing district expert for their own defense, it is discoverable. You should absolutely utilize your rights under OPRA, The Open Public Records Act, to target suitable comparable properties for this invaluable data.
5. Property Record Cards for your subject property and all sales data that you employ in the report should be requested under OPRA, from the appropriate taxing district. This will assist you in the verification process for your data.

The Power of ‘OPRA’

• The New Jersey Open Public Records Act

1. Powerful tool to obtain data needed for appeal.
2. Can be used to obtain information on the physical character of the subject, sales or lease data.
3. Can be potentially used to access Chapter 91 data.
4. SHOULD be used as leverage to access data quickly and completely from municipal sources.
5. http://www.state.nj.us/opra/ – website

Presenting Your Case in State Tax Court

• Presenting your case in tax court is the easy part. The difficulty is in the preparation. Effectively, the case at the State Tax Court level is driven by the attorney, (if you are using one), and proven by the appraiser, (again if you are using one).
• If you are presenting the case pro se, then you will simply have to pre-determine your agenda, ensure that it complies with the rules and procedures governing tax court in New Jersey and comply with discovery and filing deadlines.

1. This assumes you HAVE an appraiser expert. If you do not, then you will add gathering suitable data and forming a cogent report for the Court to that list.

• The same logic and goals that you presumably brought into the County Tax Board hearing will apply at this level. The case presentation outline is presented on the following slide, as was illustrated in the presentation for appearance before the County Tax Board.

The hearing will likely begin with the taxing district attorney trying to qualify your expert appraiser.

1. Have the appraiser prepared to discuss their education, background, licenses and certifications as well as any relevant appraisal experience including prior testimony before Tax Boards.
2. Once qualified, your appraiser expert needs to present their appraisal in a concise, clear and convincing manner. (The appraiser cannot act as an ‘advocate’ of your position without compromising its merit and their license under USPAP guidelines. They can however be advocates of their report, research and conclusions.)
3. If you are presenting the case without an appraiser, you may be questioned as to your competence to do so.

There are a few ways to highlight your case.

1. If your appraiser has strong presence and verbal skills, and knows how to be concise, step back and let them go. Present the case and use the attorney as the director.
2. If the appraisal evidence is strong, but the appraiser’s oral skills are uncertain, have the attorney prepare an outline to follow. The attorney takes the lead and dissects the report into digestible blocks. 
3. Keep the pace fluid and the appraiser focused. Get to the point and spell out clearly a concluded True Value.

If there is cross examination, the appraiser needs to address any questions.
Typical Case Outline – Highlights

Focus The Expert, (If Applicable) & The Evidence
Property Summary – Concisely describe the subject property and its trade area. Discuss relevant trending conditions and market drivers. Where does the subject lie with respect to commuter and commercial links and amenities.        
Cost Approach – If Applied, you will need to thoroughly support the highest and best use conclusions and land values. The contributory value of the depreciated replacement costs new are problematic when presented in court because of the largely subjective nature of estimating accrued depreciation. You will need to clearly illustrate your logic and applied costs.
Sales Approach – Presentation in summary of the sales data and a concluded value range.          
Income Approach – The Income Approach must establish Market Rent, (regardless of whether the subject is leased), market stabilized vacancy, stabilized expenses, and a capitalization rate.

1. Taxes should NOT be included as a line item cost if terms employed are Net or where the tax cost is typically passed through to tenants.
2. Depending on market lease terms, you may or may not be required to ‘load the cap rate’ with the equalized taxing district tax rate.

Conclusions – Tie the applied approaches together. Choose which is dominant and highlight the conclusions. Illustrate the supportive nature of any secondary approach. If the approaches do not corroborate each other, one is likely unsuitable based on the property class and type or there are potential issues with your arguments that will need to be addressed. In closing State clearly your, (or the appraiser’s opinion of ‘True Value’. Do not be ambiguous or indirect.

Settlement / The ‘Freeze Act’

• The State Tax Court provides a form called a ‘Stipulation of Settlement’ when a judgment is entered to reduce assessments. This form is completed by the taxpayer, (or their attorney), and is the basis for enforcement of the Freeze Act.

1. The ‘Freeze Act’, (N.J.S.A.54:51A-8) – effectively allows taxpayers to freeze the amended assessments after judgment of appeal for two successive years following the original judgment.
1. Can be voided by municipality under  certain conditions
2. An alternative to the submission of the stipulation form is to have the settlement presented in open court on the record or by recorded telephone conference call.

Realities of State Tax Court

• According to New Jersey Courts Annual Report for 2008-2009:

1. In court year 2009, 10,016 cases were filed in the Tax Court of New Jersey, a 36% increase over the prior year.
2. On June 30, 2009, there were 25,893 cases pending, a number greater than any year-end inventory in the 30 year history of the court.
3. There are 12 authorized judgeships on the Tax Court. As of the filing of the 2008-2009 report, the active roster included 10 judges.
4. Cases being filed as of the 2009 Annual Report are being assigned trial dates fully two years from the date of filing.

Conclusions

• State Tax Court is typically the final stop of a tax appeal. Appeal beyond this point is rarely worth the cost and effort to seek remedy. 

1. Remedy beyond the Tax Court can be sought at the Appellate Division and subsequently at the Supreme Court.

• The State Tax Court is a formal venue with well defined rules and procedures. If you can adhere to filing deadlines, discovery and hearing rules, AND you have assembled the necessary data to prove your case, then the hearing itself is nothing to fear.
• The Tax Appeal Process is a mechanism meant to be used by the taxpayer. If you have questions or concerns along the way to settlement:

1. Ask your attorney. If you don’t have one, ask the Court Clerk or assigned Case Manager where you can find the information you need. You would be surprised at the volume of published data that is available to assist you at each level of the appeal process. The Main page of this site has links to the pertinent sites and publications you will need for your appeal.

What Does ‘Informal’ Mean?

• The Tax Assessor can be considered to be an informal appeal agency. However, timing is a critical issue with this approach. On or before December 31 of the pre-tax year, (or approximately 10 days before filing of the complete tax list and duplicate), the assessor must give notice by advertisement when and where taxpayers may inspect their assessment for the coming year. If the taxpayer is is able to convince the assessor that the Tax List is in error, a correction can be made before the list is filed with the County Board of Taxation on January 10 of the tax year. After the tax list is filed, the assessor no longer has the ability to change the tax list. If errors are discovered after certification of the Tax List by the County Board of Taxation, most county tax boards will require filing a formal appeal to correct the error.
• Taxpayers may meet with the assessor prior to formal appeal to discuss their assessments. During the months immediately preceding the tax appeal filing deadline of April 1, assessors will typically field many calls from taxpayers to discuss their assessments. Be aware that once the Tax List has been certified by the County Board of Taxation, the formal appeal process must proceed for a taxpayer to obtain assessment reduction for the current tax year, regardless of the outcome of your informal meeting. During the informal meeting, the assessor may discuss assessment reduction in subsequent years as a trade off against the current year formal appeal. This would save a town from having to reimburse a taxpayer for monies already billed or collected. There is no procedure here or rules of evidence per se. It is ‘informal’ and open.

Informal Doesn’t Mean Sloppy

• Depending on the size of the taxing district, the assessor will have between several hundred and several thousand taxable line items and potential appeal cases to deal with. Be friendly but direct. Come prepared. Have a goal assessment in mind, but remember the time line of assessments and the latitude of the assessor relative to your meeting date.
• It never hurts to be nice. The assessor is a human being. While they may present a cold front, they are not immune to kindness and respect. That said, you must also show that you are determined to win.
• Be direct. You will probably get between 15 and 30 minutes for a scheduled meeting during high appeal season. Make them count. 
• Pre-determine your goal assessment. This is a negotiating stage for the taxing district. Their goal is to make you go away with as little a reduction, (if any) as possible. Know your lower and upper limits and define a win or loss. Weight a future year reduction against present tax year rebate.
• If you have access to an appraiser expert or need your attorney to file the appeal, consider taking them with you. Owners tend to get emotional and side tracked in meetings of this nature. The attorney and/or appraiser can help keep the pace of this meeting fluid without being confrontational.

Presenting Your Evidence

• Commercial /Industrial /Investment
• Residential
  • The presentation process will not change because property type varies. Your evidence will however change. Evidence and comparative elements by property type are addressed in a sister presentation. This slide will simply outline the meeting and help you identify realistic expectations from the assessor.
  • Commercial / Industrial / Investment is addressed followed by a residential meeting outline

15 to 30 minute Assessor Meeting

• Commercial/Industrial/Investment Property
• Meet & Greet. Be nice…for now, (5 minutes)
• Review your record card together. (10 minutes)
  • Mistakes on the assessor’s record card are common and costly.
    • Is their estimate of size correct?
    • Did they count mezzanine, or other semi functional area as fully functional square footage?
    • How did they treat any ‘shell’ condition areas or space that is under renovation for an extended period.
    • Is their lot size and site improvement, (parking) estimate correct?
    • Etc. – You and your appraiser know the key points of value on a property. Make sure they are properly recorded.
      • You may find during this process that some renovation you made was never recorded. Be aware that this process works both ways. If you see that a significant error in the record card data that works in your favor, proceed with caution. You may correct the record, but lose big on appeal. If added square footage or evidence of value is discovered, the assessor can amend the assessments upward as well

Record Card Checklist

• Mixed Use and Special Purpose Property
• Mixed use can mean anything from retail at grade with offices above to office at grade with apartments above and anything in between.
  • Always check square footage and mix of space 1st. Finish, age, condition and type of construction come next. Finally check the lot size and site improvements. Make sure they are in line with what you have. Mixed use property is very commonly misidentified on record cards.
  • Special Purpose property can mean anything from Self Storage to Hotel/Motel use. Gas Stations, Bowling Alleys, Car Washes, etc. The same cautions apply with virtually all property classes and types. Check the record for accuracy. You may be over paying for a simple error.

Presentation of Data / Comparable Sales

1. • Have your sales organized. Use a summary sheet with important details for the property type.*
   • Present the sales and discuss your property in comparison briefly. If you can’t present your data in 10 minutes clearly, concisely and convincingly, then you need to let an expert help you.
   • All data used must be ‘arms length’ in nature and classified as a ‘usable sale’ by the assessor. Recent sales with similar location, physicality and function, and which are recent to the ‘True Value’ date are ideal.

Points to Highlight

1. • Highlight the position of your property relative to the sales you present.
     • Better / Worse / Similar – Need more than opinion. Know WHY.
   • Show location advantages / disadvantages
     • Proximity to highways, (commuter and commercial links as well as mass transit access)
     • Nearby market drivers or lack thereof and their impact on your property.
   • Physicality of your property relative to the sales
     • Condition – Better / Worse / Similar to the data
     • Size – Discuss economy of scale.
   • Functionality – If there are marginal functional aspects to your property, point them out. At the minimum, some discounting should be considered to lesser space.
   • Site Conditions – Excess / Surplus land issues. Wetlands, Highlands designations and buffers. Approved land, versus build by right and non conforming areas. Environmental concerns and zoning classification or use questions.  If your property has any of these impacting conditions, you need to find out how the assessor handled them in the context of the property tax assessment.

Presentation of Data / Income Capitalization Approach

Commercial / Industrial / Investment property owners will need to present evidence of lease data, vacancy, expenses and capitalization rates. T

Critical – Remember that income producing property is analyzed as if ‘stabilized’ for tax appeal purposes and in the fee simple estate. Market rent is assigned to the GLA of the property regardless of contract rents in place.

Market Rent – Use comparable leases from the local market to prove market rent for the subject. If your property exhibits some functional issues, then split the lease rate accordingly and explain the breakout to the assessor. Use language like, ‘Can we both agree market rent is $5.25 psf Net?’ If they say no, then ask their opinion of market rent and move on. Make a mental note that this is an area you will have to fight over later if necessary at the Board level.

Vacancy – Tax Appeals utilize a ‘stabilized’ vacancy standard. The term ‘stabilized’ has no specified time frame in it. Tax Court opinions have interpreted vacancy as stabilized in a number of ways, few of which have any real meaning or relationship to actual market conditions. Tax Assessors are fully aware of this and tend to fall back to this standard. At this stage, proving vacancy is an unrealistic goal. It also isn’t necessary. Discuss vacancy in real terms with the assessor. If they shoot down your figure, at least you will find out what THEY are using. Again – take notes. You will need them later at the Tax Board level.

Expenses – Property type will dictate terms used. If using net terms, make sure to still account for management and reserves as a landlord cost. If using gross or modified gross terms, DO NOT account for taxes as a landlord expense. Taxes are omitted from the expense structure.

Net Operating Income/NOI – After expenses are applied, you have a net operating income.

Capitalization Rate – Cap Rates can be projected in a number of ways. See our break out presentation for data sources.

Critical – If using gross or modified gross terms, you will need to Load the Cap Rate, using the equalized tax rate.

Value Estimate – The bottom line. While it seems like it took a lot to get here, there is no real burden on you at this stage to formally present your case. Work your way to the NOI with the notes and data available and capitalize into a value estimate. Presenting a range is best. Get the assessor to tip their hand on the applied rate and thinking. How did THEY derive the rate? Take notes for the Board level in the case you cannot settle reasonably with the assessor.

The Cost Approach / Cost Analysis

• The Cost Approach is certainly valid to use in a host of valuation scenarios. However, tax appeal is not generally one of them. The Cost Approach is applicable in certain cases such as with a ‘special purpose’ property or one with a disproportionate underlying land value. However, realistically, you will need an appraiser or related expert to develop this approach in a logical format and present it as such to either the assessor or at the Tax Board level.

Conclusions

• Keep the meeting fluid, brief and be direct. Remember, plan for 15 to 30 minutes.
• Present your case and then tell the assessor where you feel the assessment should be. If you have an expert with you, have them put in plain terms where the assessment range should fall.
  • No appraiser expert can commit to a value or even a range of value without preparing an appraisal in conformity with USPAP.  However, they can be used to consult on market trends, and to search pertinent data for discussion with the assessor. Using the appraiser expert correctly at this stage is cost efficient and effective.
• Highlight relevant data and analysis. If you have an owner user class building, weight the sales data heavily. If you have a multi tenanted office building, concentrate on the income analysis and use sales as support data.
• Remember ‘True Value’ is determined as of October 1 in the appeal year. Data used must be current or recent to the True Value date.
• The tax appeal analysis is made under a fee simple assumption in New Jersey. Discard contract rent and plug in market rent to determine Gross Income.
• All property is analyzed for tax appeal purposes as if stabilized.
• Discard taxes as a line item cost if market terms dictate the landlord would typically pay them. (Gross – Mod. Gross Terms). For net terms, it is not necessary to consider this step.
• ‘Load’ the Capitalization Rate in the Income Approach using the equalized tax rate if using Gross – Modified Gross market terms. If Net terms are projected as the market norm, disregard the load factor.
• NEVER LEAVE YOUR PRESENTATION OR DATA ON THE TABLE. When you leave, take your data with you. Do not allow an assessor to keep your research or notes. If they want to review your notes and ‘get back to you’, make sure you it is understood that you will be back to collect your analysis and that this is NOT something you consider discoverable. (You want them to do their own analysis should this go beyond the current venue, not to simply poke holes in your data and reasoning).
• Take note of areas of agreement and disagreement expressed by the assessor. . This will help at the next stage if necessary.
• Finding and analyzing this type of data is a task. Presenting it within 15 – 30 minutes in a way that makes sense while trying to rapport the assessor and getting him or her to reveal their full case takes years of experience. This task requires a person cross trained as an assessor, appraiser, poker player, psychologist and investigator. It is strongly recommended that you confer with an appraiser on valuation issues for tax appeal.

New Jersey is the highest taxed state in the nation according to a 2009 Tax Foundation Study. Yet High taxes alone do not guarantee a successful appeal. Tax appeals are judged to have merit based on specific criteria. Pleading poverty or unfairness is NOT considered grounds for assessment reduction.

Chapter 123 – Test of Fairness

• In 1973 the New Jersey Legislature adopted a formula known as Chapter 123 to test the fairness of an assessment. Once the Tax Board determines a property’s True Market Value during an appeal, they are required to compare ‘true’ market value to assessed value, (or Equalized Market Value in taxing districts with Equalization Ratios other than 100%.)
• If the ratio of Assessed/Equalized MV to True Value exceeds 15%, the assessment is reduced to the common level.
• If the ratio falls within the common level range, no adjustment is made.
• If the Assessed Value to True Value ratio falls below the common level, the Tax Board must INCREASE the assessment to the common level.

Note – The Chapter 123 test assumes the taxpayer will supply the Tax Board with sufficient evidence to determine the true market value of the property subject to appeal.

Appellants should inquire into their districts average ratio BEFORE filing a tax appeal. The ratio changes each October 1 for use in the next tax year.

*State of New Jersey, Department of the Treasury, Division of Taxation. A Guide to Tax Appeal Hearings. Retrieved October 30, 2009 from www.state.nj.us/treasury/taxation/.

Equalization Ration / Equalized Market Value

• Assessments and the ‘Equalization Ratio’, must be viewed together to understand the assessor’s estimate of market value.
• The total assessment divided by the equalization ratio results in the ‘equalized market value’ of your property for tax purposes.
• For example, if your assessments, (Land Value and Improvement Value Total), reflect a total of $1,000,000, and the equalization ratio is 35%, then the equalized market value for tax purposes is $2,857,143, ($1,000,000/0.35 = $2,857,143).  This is the amount the assessor has estimated your property to be worth in terms of ‘True Value’ for tax purposes.
• The Tax Rate has no direct relevance in this analysis. It is a factor used simply to calculate your tax bill and has been set according to budgetary need of the taxing district where your property is located.
• Note – If you are appealing taxes in April 2010 for the 2009 tax year for example, be sure you use the correct year’s applied ratio for calculating Equalized Market Value.

‘True Value’

• True Value is the estimated Market Value of your property as of October 1 in the appeal year. If you are appealing taxes in April 2010, the applied date of ‘True Value’ would be October 1, 2009.
• If this sounds confusing, that’s because it is. A relatively simple concept has been twisted into a maze by the appeal process and is further exacerbated by procedural hurdles, required filings and critical dates plus discovery.

Closing Thoughts

• Chapter 123 is a quirky and somewhat confusing process in taxing districts that are not assessed at 100%. Still, it takes only basic math, (once you know the True Value of your property),to calculate whether you have a case for appeal. The preliminary view of your case is certainly a necessary step. If you have a marginal case or a poor case, you could be throwing good money after bad in pursuing an appeal using the formal process. Finally, if you appeal and True Value falls below the common level range, you could actually spur an assessment increase. In this case, it is better to let sleeping dogs lie.
• Proving ‘True Value’ goes to the heart of your case. If you cannot reasonably gather and present market evidence to the Tax Board, (which requires access to data and expertise in valuation and procedure), then hire the expert appraiser. Typically, a consultation to discuss your case is a free or could be a nominal cost and could save you significant time, effort and money.