To: New Jersey Law Revision Commission

From: Staff

Re: N.J.S. 54:4-67 Discount for prepayment of municipal property taxes

Date: July 6, 2010

M E M O R A N D U M

At the June meeting, the Commission directed staff to ascertain whether any municipalities took advantage of the statutory authority conferred by N.J.S. 54:4-67, allowing a municipality to fix a discount of up to 6% per annum for the payment of property taxes 30 or more days in advance. This issue arose during staff’s revision of N.J.S. 54:3-27, in response to the decision in Trebour v. Randolph, 25 N.J.Tax 227 (N.J. Tax Ct. 2009).

In Trebour, the court found it unclear as to whether a taxpayer appealing an assessment is first required to pay taxes on all properties, as the township argued, or merely on the property that is the subject of the pending appeal, as the taxpayer contended. Trebour, 25 N.J.Tax at 229-30. Relying on its construction of presumed legislative intent, the court held for the taxpayer.

The court’s review of other statues concerning the taxation of real property, specifically N.J.S. 54:5-6, 5-7, and 5-21, revealed that an “assessment”, as used in N.J.S. 54:3-27, generally entails the assessment of a specific parcel. See, Id. at 232-33. In addition, case law on the topic supports the long-held policy that property taxes are levied against property, not persons, contradicting a literal reading of “assessed against him”. Id. at 233. Finally, the court found no published opinions dismissing an appeal for failure to pay taxes on another, unrelated property. Id. at 235.

Although unrelated to the issue in Trebour, while revising the rest of N.J.S. 54:3-27 for clarity, staff determined that the confusing language in subsection d. referred to N.J.S. 54:4-67. See staff’s comment, below. Staff consulted with one former and two current deputy attorneys general who, despite concurring with staff’s analysis, were unaware of any municipality that exercised its power to fix a rate of discount under N.J.S. 54:4-67, and, furthermore, were previously unaware of the authority that statute conferred.

Staff also consulted Saul A. Wolfe, Tax Counsel for the League of Municipalities. Mr. Wolfe was familiar with both the statute and its history but, in his extensive experience representing both municipalities and taxpayers, had not encountered a New Jersey municipality that granted a discount for early payment. He informed staff, however, that the practice was common in Pennsylvania. Further staff research revealed that several other jurisdictions offer discounts for the early payment of property taxes, although at rates significantly lower than New Jersey’s maximum of 6% per annum. See, e.g., Frank S. Alexander, Tax Liens, Tax Sales, and Due Process, 75 Ind. L.J. 747, 777 n.154 (2000).

Staff seeks Commission direction. In its current draft of N.J.S. 54:3-27, subsection d., staff has replaced the phrase “rate of discount” with an explicit reference to N.J.S. 54:4-67. The Commission may determine that this reference is anachronistic and choose to eliminate it entirely. In addition, it may wish to revise N.J.S. 54:4-67 itself, eliminating the underlying statutory authority granted to municipalities. Alternatively, the Commission may choose to retain subsection d. to avoid a substantive change to existing law.

54:3-27. Payment of tax pending appeal

a. A taxpayer who shall file files an appeal from an assessment against him against a property owned by the taxpayer shall, in order to maintain the appeal, pay to the collector of the taxing district, in the manner prescribed by N.J.S. 54:4-66, no less than the total of all taxes and municipal charges due on the property which is the subject of the appeal, up to and including those imposed for the first quarter of the taxes and municipal charges assessed against him for of the current tax year in the manner prescribed in R.S.54:4-66.

b. A taxpayer who shall file files an appeal from an added or omitted assessment shall, in order to maintain an action contesting the added or omitted assessment, the appeal, pay to the collector of the taxing district:

(1) all unpaid prior years' taxes on the property which is the subject of the appeal, and

(2) all of the taxes for the current year on the property which is the subject of the appeal as said taxes they become due and payable, exclusive of excluding the taxes imposed under the added or omitted assessment.

c. If an appeal involves Class 3B (Farm Qualified) or Classes 15A, B, C, D, E and F (Exempt Property as defined in R.S. N.J.S. 54:4-52) and the subject of the appeal is statutory qualification, the taxpayer shall not be required to meet the payment requirements specified herein in this section.

d. The collector shall accept such amount, when tendered, give a receipt therefor and credit the taxpayer therewith, and the taxpayer shall have the benefit of the same rate of discount on the amount paid as he would have on the whole amount. A taxpayer who pays taxes or assessments in advance, but does not pay an added or omitted assessment under appeal as allowed by subsection b. (2), is still entitled to any discount granted for the early payment of taxes under N.J.S. 54:4-67.

e. Notwithstanding the foregoing provisions of this section, the county board of taxation may relax the tax payment requirement and fix such terms for payment of the tax as the interests of justice may require. If the county board of taxation refuses to relax the tax payment requirement and that decision is appealed, the Tax Court may hear all issues without remand to the county board of taxation as the interests of justice may require.

f. The full or partial payment of part or all of the taxes upon on any property,

(1) due for the year for in which an appeal from an assessment upon such property has been or shall hereafter be taken assessment is appealed, or

(2) due for in subsequent years,

shall in nowise not prejudice the status of the appeal or the rights of the appellant the right of the taxpayer to prosecute such appeal or maintain an appeal, before to the county board of taxation, the Tax Court, or in any other court to which the judgment arising out of such appeal shall be taken, except as may be provided for in by R.S. N.J.S. 54:51A-1.

COMMENT

In addition to the changes made with respect to Trebour, subsection b. has been revised to parallel the format of subsection a.

After consulting with various experts on municipal taxation, including members of the New Jersey Office of the Attorney General, the Commission has concluded that the “rate of discount” in the original language of subsection d. refers to a municipality’s ability to establish a discount for the payment of taxes in advance. N.J.S. 54:4-67. This reading is in accord with that of a 1937 opinion of the Court of Errors and Appeals, which states that if a taxpayer elects to pay only “such portion of the taxes assessed against him as he would be required to pay in the event of his appeal being sustained”, as then allowed under P.L. 1918, c. 236, “it is the duty of the taxing authority to receive it and to give him the proportionate discount if payment is made in advance just as if payment of the assessment, as stated, was made in full.” Hahne Realty v. Newark, 119 N.J.L. 12, 16 (E. & A. 1937).

Memorandum re: N.J.S. 54:4-67 – trebourM070610

1