New Jersey Tax Appeal Now

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.