New Jersey’s Tax Exemption And Abatement Laws


PL1991, c.431, with the latest retroactive changes in effect on August 5, 1992, have consolidated into one more flexible law the various long-term tax exemption laws under which municipalities may agree with private entities of Undertake redevelopment projects in exchange for tax exemptions.

PL1991, c.441, in force for the first year of complete taxation beginning after its promulgation on January 18, 1992, grouped the various laws over five years of abatement and exemption from exemption tax in one more standardized law to govern all tax abatements and exemptions regardless of the type of structure.

Long-term tax exemption law

Prior to 1993, which was the first full year of operation governed by the new long-term tax exemption law, under the provisions of NJSA40: 55C-40, the "Urban Renewal Corporation and Association Law of 1961 ", commonly known as the Fox-Lance Act, a qualified municipality (a municipality with" areas to rehabilitate ") could reduce taxes on newly constructed industrial, commercial, cultural or residential projects from 15 to 20 years a company, with profits higher than the limited profits return to the municipality, that is to say 30 to 35 years for the projects of joint ownership. The condominium projects have been granted for 30 to 35 years to provide a realistic period of permanent funding. In addition, before 1993, under the provisions of N.J.S.A. 55: 16-1 et seq., The << Loi sur les sociétés de logement à but non lucratif à dividende limité ou association >>, a qualified municipality could reduce taxes on newly built housing up to 50 years. In addition, under N.J.S.A. 55: 14I-1 et seq., A qualified municipality could reduce taxes on newly built housing for the aged up to 50 years. Finally, before 1993, under the provisions of NJSA40: 55C-77, the "Urban Renewal Nonprofit Corporation Law of 1965", essentially the same types of properties and projects as the Fox-Lance Act could be abolished for 20 to 25 years. all profits being donated to the municipality. In all cases, under these property tax exemption laws, payments in lieu of taxes were required.

From 1993, the provisions of N.J.S.A.40A: 20-1 et seq. allowed a qualified municipality to reduce property and project taxes in the same way as before 1993 law, with the following notable exceptions:

A new flexible formula in lieu of taxes has been implemented with a gradual introduction of payments in lieu of taxes based on the percentage of the gross rent formula and the percentage of total project costs.

The formulas for calculating the payment in lieu of taxes for office projects and housing projects have been changed. The minimum annual service charges for office buildings have been reduced from 15% to 10% of the gross annual income of the project or project units. Municipalities have retained the ability to calculate the payment in lieu of taxes at least 2% of the total project cost or the total cost of project units. For housing projects, the annual service fees increased from a minimum of 15% to a maximum of 15% of the gross annual income from the project or from a minimum of 2% to a maximum of 2% the total cost of the project or the total unit cost of the project.

The payment in lieu of tax formulas remains essentially unchanged for all other types of industrial, commercial or cultural projects.

Five-year exemption and reduction law

Before 1993, which was the first full year of operation under the new five-year exemption and reduction law, there were three types of property to which a qualified municipality (a municipality with "areas to rehabilitate") could grant an exemption and abatement for a period of five years.

These types of properties included:

Homeowner improvements (including additions and additions) to one- and two-unit residential units older than 20 years. As determined by order, the first $ 4,000, $ 10,000 or $ 15,000 of value increased due to the improvement of each unit may be exempt from tax (see NJSA54: 4-3.72-3.79 ).

Commercial and industrial improvements and construction projects (with a building volume increase of less than 30%) could see the full assessed value of the improvement exempt with payments in lieu of taxes made at 2 % of project cost or 15% of gross annual revenue or payment in lieu of tax. (see N.J.S.A.54: 4-3.94 to 3.112).

Improvements to multiple dwellings or the conversion of other types of structures to multiple dwellings could exclude up to 30% of the total value of the improvement or conversion. No payment in lieu of tax was required (see N.J.S.A.54: 4-3.121 to 3.129).

From 1993, the provisions of the N.J.S.A. 40A: 21-1 et seq., The "Five-year Exemption and Reduction Law", which consolidated all the provisions of the previous five-year reduction laws, allowed a qualified municipality to grant partial exemptions and reductions on residential, non-residential structures and multiple dwellings in the same way as the pre-1993 law, with the following notable exceptions to the new law:

A new unique definition of "areas to be rehabilitated" has been established to govern all exemptions and reductions which, if chosen, could allow an entire municipality to be designated as an area to be rehabilitated (thereby allowing new structures facilitate infill construction).

The new five-year law also allowed, for the first time, tax allowances and exemptions for the new construction of single-family and multi-family dwellings and non-residential structures rather than simple improvements or enlargements of these properties.

The new law also increased the maximum allowable tax exemptions for value added from an improvement of $ 4,000, $ 10,000 and $ 15,000 to $ 5,000, $ 15,000 and $ 25,000, respectively, as the municipal ordinance on precise.

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