LEGISLATIVE FISCAL ESTIMATE

[Second Reprint]

SENATE, No. 1331

STATE OF NEW JERSEY

218th LEGISLATURE

 

DATED: JUNE 4, 2019

 

 

SUMMARY

 

Synopsis:

Extends eligibility for veterans’ property tax deduction to residents of continuing care retirement communities.

Type of Impact:

Increase in State expenditures from the Property Tax Relief Fund.

Agencies Affected:

Department of the Treasury.

 

 

Office of Legislative Services Estimate

Fiscal Impact

Year 1 

Year 2 

Year 3 

 

State Cost

$350,000 - $550,000

$350,000 - $550,000

$350,000 - $550,000

 

 

 

 

·         The Office of Legislative Services (OLS) estimates that the enactment of this amended bill would result in an annual increase in State expenditures ranging from approximately $350,000 to $550,000, payable from the Property Tax Relief Fund. 

 

·         This amended bill would extend the eligibility for the veterans’ property tax deduction to include continuing care retirement communities in which beneficiaries reside.  

 

·         Under current law, a person who was honorably discharged after serving in any branch of the Armed Forces of the United States during a time of war or other emergency, and the surviving spouse of any such veteran, is entitled to receive an annual $250 property tax deduction.  The State is required to reimburse each municipality in an amount equal to 102 percent of the total deductions provided to its residents.  The State reimbursement for the maximum property tax deduction of $250 would, therefore, equal $255.

 

·         The increase in State expenditures resulting from this amended bill would be approximately equal to: (1) the number of beneficiaries residing in continuing care retirement communities made newly eligible through the provisions of this amended bill (hereinafter “newly eligible beneficiaries”); multiplied by (2) the amount of the State reimbursement, which would not exceed $255, provided for each property tax deduction. 

·         Using information acquired from the Department of Community Affairs and U.S. Census Bureau, and assuming that every newly eligible veteran receives a $250 deduction, the OLS estimates that the amended bill could result in an annual increase in State expenditures of approximately $424,000. 

 

·         However, due to information constraints, the OLS is unable to determine: (1) the number of newly eligible beneficiaries who would receive a deduction of less than $250, and (2) the number of surviving spouses of eligible veterans residing in continuing care retirement communities who would receive the deduction.  Accounting for these factors, the OLS estimates that the annual increase in State expenditures resulting from this amended bill could range from approximately $350,000 to $550,000.

 

 

BILL DESCRIPTION

 

      This amended bill extends the eligibility for the veterans’ property tax deduction to include continuing care retirement communities in which an eligible veteran resides.  Currently, a person who was honorably discharged after serving in any branch of the Armed Forces of the United States during a time of war or other emergency, and the surviving spouse of any such veteran, is entitled to receive an annual $250 property tax deduction. 

      Under the amended bill, a person who otherwise qualifies for the deduction, but resides in a continuing care retirement community, would be entitled to receive the veterans’ property tax deduction.  Specifically, the deduction would be provided to the continuing care retirement community, which would credit or pay the amount of the deduction to each beneficiary residing in the facility within 30 days of receiving the property tax bill in which the deduction appears.  In addition, the surviving spouse of an eligible veteran would be entitled to receive the veterans’ property tax deduction if he or she resides in a continuing care retirement community.

      The property tax deduction received by each continuing care retirement community would be equal to: (1) the number of beneficiaries residing in the facility, multiplied by (2) the amount of the deduction provided for each beneficiary, which may not exceed $250.  The amount of the deduction provided for each beneficiary residing in the facility would be based on the share of the taxes assessed against the real property of the continuing care retirement community that is attributable to the unit in which the person resides. 

      Under the amended bill, a continuing care retirement community is defined as a residential facility primarily for retired persons where lodging and nursing, medical or other health related services at the same or another location are provided as continuing care to a resident of the facility pursuant to an agreement effective for the life of the resident and in consideration of the payment of an entrance fee with or without other periodic charges, which agreement requires the individual to bear a share of the property taxes that are assessed upon the continuing care retirement community, if a share is attributable to the unit the resident occupies.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS estimates that the enactment of this amended bill would result in an annual increase in State expenditures ranging from approximately $350,000 to $550,000, payable from the Property Tax Relief Fund.  This amended bill is expected to increase State expenditures by increasing the number of persons who would receive the veterans’ property tax deduction.  Specifically, this cost increase would be attributable to the amount of veterans’ property tax deductions provided to continuing care retirement communities on behalf of the beneficiaries residing in the those facilities made newly eligible through the provision of this amended bill (hereinafter “newly eligible beneficiaries”).

      Under current law, a person who was honorably discharged after serving in any branch of the Armed Forces of the United States during a time of war or other emergency, and the surviving spouse of any such veteran, is entitled to receive an annual $250 property tax deduction.  A municipality applies the property tax deduction to each beneficiary’s tax bill, and the State is required to reimburse the municipality in an amount equal to 102 percent of the total amount of the deductions provided in that municipality.  The State reimbursement for the maximum property tax deduction of $250 would, therefore, equal $255. 

      The amended bill provides that a continuing care retirement community is entitled to receive a veterans’ property tax deduction on behalf of each of its residents who qualify for the deduction.  However, if Senate Concurrent Resolution No. 110 (1R)/Assembly Concurrent Resolution No. 134 (1R), pending before the Legislature, is approved, the State Constitution would provide that only those persons who received the veterans’ property tax deduction immediately before residing in the continuing care retirement community would be entitled to receive the deduction.

      The increased State expenditures associated with this amended bill would be approximately equal to: (1) the number of newly eligible beneficiaries residing in continuing care retirement communities; multiplied by (2) the State reimbursement, which may not exceed $255, for each property tax deduction.  Although the State does not record the number of veterans that reside in continuing care retirement communities, the OLS estimates this total by multiplying the total occupants of all continuing care retirement communities in the State by the percentage of persons over the age of 65 years who are veterans. 

      According to information provided by the Department of Community Affairs, the total occupancy of all continuing care retirement communities located in New Jersey is currently 9,835 persons.  In addition, the American Community Survey (Five-Year Estimate, 2012-2016) published by the U.S. Census Bureau, indicates that a total of 1,312,291 people over the age of 65 years currently reside in the State, with 212,818 of those residents being veterans.  As a result, approximately 16.9 percent of State residents over the age of 65 years are veterans.

      Assuming that 16.9 percent of the 9,835 people who reside in continuing care retirement communities are veterans, the OLS estimates that approximately 1,662 veterans currently reside in these facilities.  Also assuming that each of these veterans: (1) received the property tax deduction immediately prior to residing in the continuing care retirement community; (2) served in the Armed Forces of the United States during a time of war or other emergency; and (3) will be credited or paid the full $250 property tax deduction; the estimated increase in State expenditures associated with this amended bill would be approximately $424,000 per year.  This estimate is calculated by multiplying the estimated number of newly eligible beneficiaries (i.e., 1,662 veterans) by the maximum State reimbursement of $255 for each deduction.

      However, the OLS notes that the amount of the deduction received by each newly eligible beneficiary would be based on the share of the taxes assessed against the real property of the continuing care retirement community that is attributable to the unit in which the person resides.  As a result, if the share of the total property taxes attributable to a beneficiary’s housing unit does not exceed $250, the amount of the deduction provided for that person will be less than $250.  In addition, the amended bill also entitles the surviving spouse of eligible veterans to receive the veterans’ property tax deduction if he or she resides in a continuing care retirement community.  Due to information constraints, the OLS is unable to determine the extent to which these factors would reduce the amount of each property tax deduction and increase the number of newly eligible beneficiaries.

      In order to account for these factors, the OLS therefore estimates that the enactment of this amended bill could result in an annual increase in State expenditures ranging from approximately $350,000 to $550,000, payable from the Property Tax Relief Fund.  However, this estimate should be viewed as a broad approximation, not a precise determination, of the anticipated cost.

      The OLS notes that if a person who currently receives the veterans’ property tax deduction moves to a continuing care retirement community, the State would not incur an increase in expenditures associated with that property tax deduction in a subsequent fiscal year.  The OLS also notes that the provisions of this bill will not become operative until the approval of an amendment to the State Constitution to extend the eligibility for the veterans’ property tax deduction to include continuing care retirement communities.  

 

 

Section:

Local Government

Analyst:

Joseph A. Pezzulo

Associate Research Analyst

Approved:

Frank W. Haines III

Legislative Budget and Finance Officer

 

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).