Tax Court Upholds Non-Residential Development Fee on Property Subject to Long-Term Tax Exemption Law
Feb 9, 2022 | Written by: | Share
Pursuant to New Jersey state law (N.J.S.A. 40:55D-8.1 et seq.) and municipal ordinances, non-residential developers are required to contribute to a municipality’s affordable housing trust fund as a requirement of receiving a final certificate of occupancy. Such fee is calculated as 2.5 percent of the equalized assessed value of the land and improvements for all new construction, minus certain permitted deductions. N.J.S.A. 40:55D-8.4.
In EREZ Holdings Urban Renewal, LLC v. Director, Division of Taxation (decided on February 1, 2022), the New Jersey Tax Court addressed whether, for the purposes of calculating the non-residential development fee, the equalized assessed value of the improvements of a property subject to the Long-Term Tax Exemption Law is $0. The property in question was subject to a tax abatement under the Long-Term Tax Exemption Law and, therefore, the property’s improvements were exempt from traditional taxation. The property owner argued that the equalized assessed value of the improvements for the purposes of calculating the non-residential development fee should be $0. The New Jersey Tax Court disagreed, citing N.J.A.C. 18:12-3.1 and N.J.A.C. 18:12-3.1(b)(2) and holding that exempt properties are required to be assessed a value. The tax rate is simply not applied to that assessed value. The Tax Court stated, “There is undoubtedly value in the improvements, and the tax exemption does not obliterate that value. A tax exemption does not strip a property of its value. Rather it simply relieves a taxpayer from an obligation of paying the tax owed…” The Tax Court further noted that the only properties exempt from paying a non-residential development fee are those that the Legislature specifically exempted pursuant to N.J.S.A. 40:55D-8.4(b), which does not include properties subject to the Long-Term Tax Exemption Law.
Tara St. Angelo, Esq. concentrates her practice primarily in the areas of municipal and land use law. She was named to the NJ Super Lawyers Rising Stars list for State, Local and Municipal law by Thomson Reuters in 2017, 2018, 2019, 2020, and 2021. Contact Ms. St. Angelo at Gebhardt & Kiefer, PC at 908-735-5161 or via email.
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