New Jersey Tax Appeal Now



The Tax Appeal Process in NJ

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