In the fall and early winter, as we approach the final days of the calendar year, the farthest thing from the mind of New Jersey taxpayers is their property tax bill. Months ago, the new tax bills were mailed and then filed away to be pulled out when quarterly payments are due. However, an astute taxpayer should make a note on the calendar for the last quarter of the year to look at the total assessment that appears on the tax bill and consider whether it reflects a fair or true value for the property. Acting proactively at this time of year can potentially shave significant dollars from a property owner’s tax bill, depending on the size of the assessment and the tax burden imposed by the municipality. Here’s why.

In several instances (but not all) a total assessment does not reflect the market value of the property that has been assessed. It is not a well-known fact, but the New Jersey Division of Taxation publishes what is known as the Table of Equalized Valuations in October of the pre-tax year. This is closely followed by the table of Common Level Ranges; the so-called Chapter 123 table. This table establishes the ratio of assessed values to true or market values for each municipality in New Jersey. The assessed values are expressed as the numerator and the market values (of selected sales) are expressed as the denominator. By simply dividing the property’s assessment by the ratio for a particular municipality, the equalized assessed value or presumed market value of a property can be determined.

For example, if the municipality’s property is assessed at $900,000, and its ratio is 90%, and its presumed market value is $1,000,000.

Let’s say that an appraisal was recently done on this hypothetical property for financing purposes and the appraiser concluded that its market value was $750,000. Applying the Chapter 123 ratio and presuming the appraiser’s conclusions are on the money, the property would be assessed at $675,000 ($750,000 x .90, the Chapter 123 ratio). Under a Chapter 123 analysis, applying the so-called “corridor rule”, the taxpayer would very likely win a formal appeal. However, a formal appeal will not be decided until much later during the appeal season, which starts after the last day to file or April 1^st of the tax year.

Can anything be done to address this excessive tax burden sooner?

By law, the assessors must perform prescribed duties under certain deadlines throughout the tax year. These statutory responsibilities, along with the Division of Taxation’s publication of the Table of Equalized Valuations and then Chapter 123 table, present an opportunity for the taxpayer to seek tax relief well before the formal appeal season. Here, the phrase “the best defense is a good offense” is particularly apt as taking action can, in many instances, yield results positively impacting the bottom line by reducing the operational costs of a property. It is important, however, to recognize that steps need to be followed in a relatively narrow window of time which closes very soon in the year of the assessment.

The assessor is required to file lists of added and omitted assessments no later than October 1^st of the pre-tax year. N.J.S.A 54:4-35.5 and -63.19. During this time period, the assessor is collecting information usually consisting of property sales but also leases, listings, and similar market data. The assessors and professionals in this field are mindful that October 1^st of the pre-tax year is the valuation date for formal appeals filed the following year. See N.J.S.A 54:4-35.5. Thus, the collection of market data, appraisals, and the publication of the Chapter 123 table all bear on the opportunity to seek an assessment reduction if warranted.

What should you do?

There is a distinct advantage in approaching an assessor at this time. There are essentially two options: First, wait and file a formal appeal by April 1^st of the next year. Second, initiate discussions with the assessor during this time period. Why? Because each year the assessor is under an obligation to file a certified list of assessments with the County Board of Taxation by January 10^th of the tax year, or a later date if an extension to file was granted (not every Board of Taxation will grant extensions).

In carrying out his/her duties, the assessor is given considerable discretion in selecting a property’s assessed value to be included on the certified list. Further, any agreement to reduce an assessment will be done through discussions around a conference table or across a desk, and not in the context of a formal tax appeal. In the latter case, municipal assessors and officials are keenly aware that tax appeals can lead to huge refunds, resulting from an adverse judgment. In that case, the refund monies come directly from municipal coffers and not from any of the public entities that ultimately receive tax receipts such as school districts, counties, fire districts, etc. Also, a taxpayer who is successful in obtaining a lower assessment at this time will receive the immediate benefit of the lower assessment.

Typically, taxes will be adjusted within the first two quarters – either by February 1^st or the latest May 1^st. In the case of a formal tax appeal, even if the taxpayer obtains a favorable judgment, the reduction is retroactive and a refund will be issued at a much later date. However, the taxpayer must continue to pay higher taxes throughout the pendency of the appeal. This can be particularly onerous as sometimes Tax Court tax appeals take years to resolve, causing the taxpayer to pay excessive taxes throughout the appeal.

In the example given above, a reduction to an assessment well below the assessed value of $900,000 is highly likely. Usually, assessors will give some deference to appraisals in discussing whether a property is properly assessed. However, valuation of commercial properties is highly sophisticated, and there are special rules for valuation followed by the County Boards of Taxation and the Tax Court. Here, the value of a professional team cannot be understated. While the taxpayer can engage in discussions with the assessor, attorneys who practice in this field have developed the skills and relationships in order to usually achieve the best results.

In conclusion, it is most important that an owner, or triple net tenant with the right to appeal, be proactive. The Chapter 123 ratio is readily available and relatively easy to employ to get a snapshot of the equalized assessed value of property. With an appraisal or other data, such as the property’s income and expenses, the tools readily exist to perform a check to see if the property is properly assessed.

One last word of caution to property owners or tenants that seek to manage a property’s assessment and its taxes: be sure to complete and timely file the Chapter 91 (Income and Expense) request mailed by the assessors. Ignoring a Chapter 91 request can lead to dire circumstances, including dismissal of a formal appeal, ending the taxpayer’s opportunity to lower the assessment. Further, the assessor may choose not to discuss an assessment reduction informally.