A3900

An Act providing a gross income tax deduction for homeowner’s payments of certain homeowners association assessments, supplementing Title 54A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. A taxpayer shall be allowed to deduct from the taxpayer's gross income for the taxable year an amount, not to exceed $2,500, paid by the taxpayer during the taxable year for qualified homeowners association assessments for the taxpayer's principal residence.

b. As used in this section,

“Qualified homeowners association assessment” means a regularly occurring, mandatory financial assessment that is paid by a taxpayer to a qualified homeowners association for the taxpayer’s principal residence that directly benefits the principal residence and that arises from the taxpayer’s mandatory and automatic membership in the qualified homeowners association, or that arises from a mandatory obligation imposed by qualified homeowners association on unit owners to pay regularly occurring assessments; and

“Qualified homeowners association” means homeowners association as defined in section 528(c)(1) of the federal Internal Revenue Code of 1986, 26 U.S.C. s.528, but excluding a timeshare association, that is located in this State.

c. A qualified homeowners association that receives qualified homeowners assessments from any individual during a calendar year shall file with the Director of the Division of Taxation in the Department of the Treasury an information return at such time and in such form and manner as the director shall determine, setting forth the name, address, and other identifying information of each paying individual and the amount of qualified homeowners association assessments received from each individual during the calendar year. Every association required to file this information return shall furnish to each individual whose name is required to be set forth in that return a written statement showing the name, address and phone number of the information contact of the person required to file the return and the information required to be on the return for that individual.

2. This act shall take effect immediately and apply to taxable years ending after the date of enactment.

STATEMENT

This bill provides for a gross income tax deduction for homeowner’s payments of certain homeowners association (HOA) assessments. The deduction for the taxable year may not exceed $2,500 paid by the taxpayer during the taxable year for qualified homeowners association assessments for the taxpayer's principal residence. Homeowners associations include condominium management associations and residential real estate management associations but not timeshare associations.

HOA assessments can vary depending on the type of amenities that are provided within the HOA community. The purpose of an HOA is to manage the common area amenities, and assessments are collected from each member of, or unit owner within, the HOA to finance the management and maintenance of the common area amenities. HOA residential communities can vary from high-rise condo complexes to a neighborhood of townhomes and detached single-family residences that have an HOA in order to manage the common land areas and the outside of structures. In the case of condominium form of owners, the HOA may collect assessments to cover more extensive common area costs including services that are akin to municipal government services such as trash removal, water and sewage for common areas, and street cleaning and snow removal.

Because these assessments often replace local property tax funded services in these HOA communities, and benefit both the individual residences, the larger managed community and the municipality at large in which they are located, this gross income tax deduction is provided as a close equivalent of the deduction provided under the gross income tax for local property taxes paid on principal residences owned by homeowners. This deduction will cover some of these HOA assessments that are in place of some local government services typically paid for under the local property tax levy in non-HOA residential housing.