Every year, owners of commercial and multifamily residential real estate in New Jersey may receive letters from their municipal assessors requesting income and expense information. These information requests, commonly called “Chapter 91” requests after the law authorizing them, are permissible and there may be consequences for failing to respond. The question becomes – how should a property owner respond to the tax assessor’s request for income and expense information?
One important consideration is the potential consequences of ignoring the request. Failing to respond to a Chapter 91 request may result in a severe limitation on your ability to challenge the property’s tax assessment in the year after the request is made. This is crucial to remember, particularly if your town is planning a revaluation. If your property is over-assessed in the revaluation, you may lose the ability to effectively challenge that figure for a year. Even if your town isn't planning a revaluation, with ever increasing property tax bills, losing the ability to appeal even one year can have significant tax consequences.
Another important consideration is how you should respond to the request. Many Chapter 91 requests are looking for every detail possible about your property. What is really required for a sufficient response? Is your property actually owner occupied, or will the Tax Court consider it to be income producing? Is the request actually a valid Chapter 91 request? The answers to these questions will determine whether you can safely shortcut a burdensome request, or whether you need to provide more information.
Finally, always remember the time limitation. There must be some response within 45 days of the date of the Chapter 91 request. If the final response can’t be provided within 45 days, there must be a good reason. That reason must also be communicated to the tax assessor within those 45 days.
Ultimately, how you handle your tax assessor’s request for income and expense information could be determinative as to your tax liability for the following year. The Englert Law Firm offers no-cost consultation on responses to Chapter 91 requests to help property owners respond efficiently while preserving their appeal rights.
In a recent unpublished opinion, the Appellate Division of the New Jersey Superior Court affirmed the dismissal of a complaint seeking leave to impose omitted assessments on Riverview Medical Center, now owned by Meridian Health Corporation, in Red Bank, New Jersey. This unusual situation grows out of a 2015 Tax Court decision entitled AHS Hospital Corp v. Town of Morristown. In that case, an exempt hospital had its exemption revoked due to an alleged change in use and lost its challenge to the assessments imposed by the municipality thereafter.
In this case, the municipality filed petitions at the county board of taxation, and later at the Tax Court, seeking to impose omitted assessments for 2014 and 2015. Notably, the petitions were filed after the AHS Hospital Corp. opinion was issued, after the 2015 deadline for filing appeals. The Tax Court found that the omitted assessments would be improper as there had been no showing of a change in use, and no timely appeals had been filed.
The Appellate Division affirmed for substantially the same reasons as the Tax Court. The Appellate Division agreed that the Borough's request for discovery to explore the property's use was a "fishing expedition", and that they had no evidence of a change in use.
While this ruling is helpful for hospitals in that it affirms the requirement of a predicate change in use to trigger a removal of an exemption and subsequent omitted assessment, the underlying rationale for the denial of an exemption announced in AHS Hospital Corp. is unchanged. Nevertheless, the procedural and process safeguards should not be overlooked. The Appellate Division's decision can be accessed below.
The course to economic rent before New Jersey's Tax Court seems straightforward, but taxpayers and municipalities alike continue to run aground on shoals both old and new.
The recent decision in Burr Corporate Center, LLC v. Township of Westamption considered four years of appeals on a "flex (office/warehouse) complex consisting of two buildings totaling about 78,000 square feet.
The taxpayer's expert relied primarily on the subject leases, but failed to articulate the particulars of his analysis and had no market data to support his conclusion that the rents reflected the market. The Court rejected the argument that the subject's rents should constitute the presumptive economic rent, as is assumed of the income derived from apartment buildings and hotels.
The municipal appraiser fared no better. The appraiser failed to articulate a methodology for arriving at the adjustments to the comparable leases utilized in the analysis. In addition, the quantum of the gross adjustments (25 - 50%) to the leases utilized by the appraiser were such that the Court was forced to call into question their comparability.
With no viable conclusion of economic rent, the Tax Court affirmed the assessment. After eight years of litigation, it is a disquieting and unsatisfactory result. However, it is one that happens all too frequently. The Tax Court's full opinion is linked to the button below.
New Jersey law requires drivers of motor vehicles to be in possession of their driver's license, vehicle registration and proof of insurance while on the road.
In the case of an insurance card, the law allows you to show the proof of insurance in "electronic form", which includes showing an image of the card on a tablet, smart phone or laptop. Unfortunately, the exception only applies to your insurance card, so make sure you have your driver's license and vehicle registration when driving.
So, snap a picture of your insurance card or keep an electronic copy accessible on your smart phone. That picture may save you a trip to court and fines and costs of up to $200 or more!
At about 3:30 p.m. on March 31, the local property tax filing season is almost finished for the year. However, the door isn't completely closed. Since April 1 falls on a Saturday this year, that means there is a weekend ahead, and last minute filers can scramble to get their petitions or complaints in on Monday, April 3, 2017.
There are also many municipalities that have conducted reassessments or revaluations, where you can file an appeal as late as May 1, 2017. If you're not sure about the deadline for your municipality, feel free to send me an email and I'll be happy to check it for you.
Of course, if you own property in Monmouth County, you have an entirely different situation. If your assessment is $1,000,000 or less, your chance to appeal for 2017 ended on January 15! Any property over $1,000,000 can still be appealed directly to the New Jersey Tax Court.
Beyond that, what's left? Well, if you think that there was an typographical, trans-positional, or other mistake in your property tax assessment that doesn't have to do with the value of the property, (such as size), there may be an alternative open to you. If you think that may be your case, hit the 'Contact Us' button and describe your situation, and I'll be happy to see if there was a correctable mistake made in your assessment.
Finally, since property tax assessment appeals can be filed annually, there is always 2018!
N.J.S.A. 54:4-34, the statute commonly known as Chapter 91, is a tool in the municipal assessor's repertoire to gather data to set assessments. If a taxpayer fails to respond properly, the appeal is subject to dismissal, subject only to a summary hearing to test the ‘reasonableness’ of the assessment, unless good cause is shown which excuses the taxpayer’s failure to provide the information in the time allotted by the statute. A recent case raises the question again of what does or does not constitute ‘good cause’ for failing to respond to the assessor’s information request.
In Golden Eagle Foundation, Inc. v. Borough of Highland Park, an unpublished opinion issued on December 30, 2016, the Tax Court questioned whether ‘good cause’ existed for a taxpayer to fail to provide income information from a time period when it did not own the property. The assessor sent a Chapter 91 request seeking income information for calendar year 2014, when the taxpayer, a New Jersey corporation, did not own the property. Four days after receiving the assessor’s request, the taxpayer faxed back a reply, indicating that it did not have information from 2014 because it did not own the property at the time. However, the entities did share principals, and the property transferred for minimal consideration.
In opposition to the municipality’s Chapter 91 motion, the taxpayer argued that there was a response provided, and that the reply was not a false account of the property’s income. The Borough argued that the taxpayer had access to the income information and could have given the requested information. The Tax Court agreed that the response which was not false, but ordered a plenary hearing to determine whether ‘good cause’ existed for the new entity to fail to provide the income information.
This case is another study for commercial property owners to carefully consider their responses to Chapter 91 information requests from their local assessors, and to quickly seek help in formulating a response that will preserve their right to appeal.