LEGISLATION BULLETIN: NEW LAW TO EXTEND TAX REFUND PERIOD UP TO 3 YEARS
On August 9, 2019, the New Jersey Legislature signed into law an amendment to N.J.S.A. 43:3-27.2 governing tax refunds resulting from successful real property tax appeals. Under the old law, taxing districts were required to refund overpaid taxes to taxpayers who had succeeded in an appeal within 60 days following the date of judgment, interest accruing thereon at 5% per annum.
The recently enacted amendments now modify the statute as follows:
- Refund Extension Deadline - Municipalities are now to issue tax refunds “in substantially equal payment periods and substantially equal payment amounts within three years” following the date of judgment. (Note: the 3-year refund period applies only to nonresidential properties where the total refund amount exceeds $100,000).
- Variable Interest Rate - The interest rate on refunds, previously 5% across the board, is now the lesser of either 5% per annum, or “one percentage point above the prime rate.”
- Exceptions Created – For all residential real property, and those nonresidential properties that produce a refund less than $100,000, refunds must be issued within 60 days following the date of judgment.
According to sponsors of the bill, the above-cited amendments are designed to alleviate the financial burden some local governments bear following successful appeals on major commercial properties. With an extended payment period municipalities can avoid having to sell bonds to raise the funds to pay refunds.
The full impact of this new legislation on municipalities and the tax appeal process as a whole remains to be seen. How municipalities plan to implement this new payment schedule is also questionable at this time. While it has been common practice for parties to a tax appeal settlement to agree to extended refund periods and the waiver of interest as a term of the settlement, three year payouts are exceedingly rare.
Please note that while this amendment takes effect immediately, it does not apply to tax appeals filed before the enactment date of August 9, 2019. We are available to assist any taxpayer with questions related to the above amendments and potential impacts.
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