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McPherson
McNeill, P.C.

TAX COURT UPHOLDS NJ PROPERTY TAX

Posted on Thursday, September 29, 2016 by Robert S. Lipschitz , Robert J. Guanci

       In a recent Tax Court decision, Cobblestone Acquisition LLC v. Twp. Of Ocean, (Decided August 16, 2016), the Court clarified an oft-cited exception to the Freeze Act N.J.S.A. 54:51A-8 when it found against defendant-municipality by drawing a distinction between a “reassessment” and a “complete revaluation/reassessment,” thus permitting plaintiff-taxpayer to “freeze” judgment entered for tax year 2015 in 2016 and 2017. 

       Taxpayer filed an appeal against defendant, Ocean Township in 2014 and 2015 challenging the subject property’s then original assessments of $10,421,000 in 2014 and $7,650,000 in 2015.  The parties eventually settled by reducing the 2014 assessment to $7,650,000 and affirming same in 2015.  Judgments were entered on December 5, 2014 and May 22, 2015.  Thereafter, the municipality increased the subject’s assessment for tax year 2016 to $10,041,400.  Plaintiff appealed the 2016 assessment and moved to invoke the Freeze Act based upon judgment entered for tax year 2015. The Township opposed taxpayer’s Freeze Act motion arguing that the Freeze Act was inapplicable in this instance since Monmouth County was a participant in a Real Property Assessment Demonstration Program, (the “Demonstration Program Law”), which mandated a county-wide revaluation for 2016. 

       For those who have recently successfully appealed their property assessments, the Freeze Act offers taxpayers the ability to “freeze” an assessment for up to two successive years following a tax year for which there is a final judgment of the Tax Court N.J.S.A. 54:51A-8.  However, taxpayers should be forewarned that the statute also provides for an exception where a municipality is undergoing a “complete revaluation,” or “complete reassessment.” Pursuant to the statute, “[t]he conclusive and binding effect of the judgment shall terminate with the tax year immediately preceding the year in which a program for a complete revaluation or complete reassessment of all real property within the district has been put into effect.” Id.  In other words, where a municipality implements a “revaluation” or “reassessment” a taxpayer is barred from utilizing the protections of the Freeze Act.   

       The record in the Cobblestone case shows that Monmouth County took part in a special revaluation program.  The Legislature enacted the Demonstration Program Law in 2013 with the intent of achieving uniformity and cost savings in real property assessments.  Under the 2015 Annual Reassessment & the Impact on Property Taxes plan, Monmouth County created a 5-year schedule in which to implement the program across all 53 municipalities.  In regards to Ocean Township, during year one of the schedule, 2014 assessments were to be “revised by assessor to current ratio,” and 2015 assessments were to be “revised to current ratio – revaluation pending for future years.” During the third year of the program, 2016 assessments were to be “revised to market value by traditional revaluation.” Nevertheless, a traditional revaluation was never conducted for tax year 2016.   

       While the statute appears straightforward in its design, the specific meaning behind the terms “complete revaluation” and “complete reassessment” is somewhat ambiguous.  Therefore, the Court in Cobblestone was tasked with clearly defining the meaning of those terms, and their impact on the Freeze Act.  The Court found, for purposes of the Freeze Act, that the terms “revaluation” and “reassessment” are in fact synonymous and often used interchangeably.  This important decision turned on whether or not the measures taken by the Township in 2016 qualified as a “complete” or “district-wide” revaluation or reassessment.

       The record in the case established that for tax year 2016, Ocean Township had done nothing more than change assessments, in certain portions of the taxing district, to comport to the equalization ratio for 2016 (90.18%).  Based on this record, the Court in the Cobblestone case found for taxpayer and invoked the Freeze Act to set the assessment at $7,650,000 holding that Ocean Township had not implemented a “complete revaluation/reassessment” in 2016.  The lesson for taxpayers and practitioners alike is that, where a municipality implements a partial-reassessment, (i.e. any reassessment involving adjustments to less than 100% of all properties), instead of a “complete-revaluation/reassessment,” (100% adjustments district-wide), the protections of the Freeze Act may remain available. In particular, taxpayers in counties participating in Demonstration Programs, (i.e. a program in which a county is to undergo a revaluation, or plans to in the future), are not automatically barred from invoking the protections of the Freeze Act.

 

*The Tax Court opinion which is the subject of this blog article remains subject to appeal.  We will update this post as events dictate.

Please feel free to contact us if you have any questions.

If you would like to read the full Tax Court Decision, please click the link below.

http://law.justia.com/cases/new-jersey/tax-court/2016/008001-2016.html

Contact Info:

Robert S. Lipschitz, Esq.

Email: rsl@lawwmm.com

Phone: (201) 330-7455

Robert J. Guanci, Esq.

Email: rguanci@lawwmm.com

Phone: (201) 330-7463