ASSEMBLY, No. 1516

 

STATE OF NEW JERSEY

 

INTRODUCED FEBRUARY 8, 1996

 

 

By Assemblymen COHEN, SULIGA, Assemblywoman Gill and Assemblyman Wisniewski

 

 

An Act providing a deduction under the gross income tax for property taxes paid by homeowners and tenants and providing for a refund of a portion of certain property taxes paid by persons not subject to the gross income tax, supplementing Title 54A of the New Jersey Statutes.

 

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

 

    1. This act shall be known and may be cited as the "Homeowners' and Tenants' Property Tax Relief Act."

 

    2. As used in this act:

    "Condominium" means the form of real property ownership provided for under the "Condominium Act," P.L.1969, c.257 (C.46:8B-1 et seq.).

    "Continuing care retirement community" means 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 an individual pursuant to an agreement effective for the life of the individual or for a period greater than one year, including mutually terminable contracts, and in consideration of the payment of an entrance fee with or without other periodic charges.

    "Cooperative" means a housing corporation or association which entitles the holder of a share or membership interest thereof to possess and occupy for dwelling purposes a house, apartment, manufactured or mobile home or other unit of housing owned or leased by the corporation or association, or to lease or purchase a unit of housing constructed or to be constructed by the corporation or association.

    "Director" means the Director of the Division of Taxation in the Department of the Treasury.

    "Dwelling house" means any residential property assessed as real property which consists of not more than four units, of which not more than one may be used for commercial purposes, but shall not include a unit in a condominium, cooperative, horizontal property regime or mutual housing corporation.

    "Domicile" means:

    a. a dwelling house and the land on which that dwelling house is located which constitutes the claimant's permanent place of abode and is owned and used by the claimant as the claimant's principal residence;

    b. a dwelling house situated on land owned by a person other than the claimant which constitutes the claimant's permanent place of abode and is owned and used by the claimant as the claimant's principal residence;

    c. a condominium unit or a unit in a horizontal property regime or a continuing care retirement community which constitutes the claimant's permanent place of abode and is owned and used by the claimant as the claimant's principal residence.

    In addition to the generally accepted meaning of owned or ownership, a domicile shall be deemed to be owned by a person if that person is a tenant for life or a tenant under a lease for 99 years or more, is entitled to and actually takes possession of the domicile under an executory contract for the sale thereof or under an agreement with a lending institution which holds title as security for a loan, or is a resident of a continuing care retirement community pursuant to a contract for continuing care for the life of that person which requires the resident to bear, separately from any other charges, the proportionate share of property taxes attributable to the unit that the resident occupies;

    d. a unit in a cooperative or mutual housing corporation which constitutes the permanent place of abode of a residential shareholder or lessee therein, or of a lessee or shareholder who is not a residential shareholder therein, which is used by the claimant as the claimant's principal residence; and

    e. a unit of residential rental property, which unit constitutes the claimant's permanent place of abode and is used by the claimant as the claimant's principal residence.

    "Horizontal property regime" means the form of real property ownership provided for under the "Horizontal Property Act," P.L.1963, c.168 (C.46:8A-1 et seq.).

    "Mutual housing corporation" means a corporation not-for-profit, incorporated under the laws of this State on a mutual or cooperative basis within the scope of section 607 of the Lanham Act (National Defense Housing), Pub.L.849, 76th Congress (42 U.S.C.§1521 et seq.), as amended, which acquired a National Defense Housing Project pursuant to that act.

    "Principal residence" means a domicile actually and continually occupied by a claimant as the claimant's permanent residence, as distinguished from a vacation home, property owned and rented or offered for rent by the claimant, and other secondary real property holdings.

    "Rent constituting property taxes" means 18% of the rent paid by the claimant for occupancy during the taxable year of a unit of residential rental property which the claimant occupies as a principal residence.

    "Residential rental property" means:

    a. any building or structure or complex of buildings or structures in which dwelling units are rented or leased or offered for rental or lease for residential purposes;

    b. a rooming house, hotel or motel, if the rooms constituting the domicile are equipped with kitchen and bathroom facilities; and

    c. any building or structure or complex of buildings or structures constructed under the following sections of the National Housing Act (Pub.L.73-479) as amended and supplemented: section 202, Housing Act of 1959 (Pub.L.86-372) and as subsequently amended, section 231, Housing Act of 1959.

    "Residential shareholder in a cooperative or mutual housing corporation" means a tenant or holder of a membership interest in that cooperative or corporation, whose residential unit therein constitutes the tenant's or holder's permanent place of abode and principal residence, and who may deduct real property taxes for purposes of federal income tax pursuant to section 216 of the federal Internal Revenue Code of 1986, 26 U.S.C.§216.

 

    3. a. Each resident taxpayer under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., shall be allowed a deduction from taxable income for property taxes paid on the taxpayer's domicile which shall be determined as follows:

 

For married individuals filing a joint return

and individuals filing as head of household

or as surviving spouse:

 

    If the taxable income is:            The deduction is the greater

                                                               of actual property taxes paid or:

 

Not over $20,000.00........................................... $4,643

Over $20,000.00 but not

  over $50,000.00................................................ $3,714

Over $50,000.00 but not

  over $70,000.00................................................ $2,653

Over $70,000.00 but not

  over $80,000.00................................................ $1,857

Over $80,000.00 but not

  over $150,000.00.............................................. $1,176

Over $150,000.00............................................... $1,020


For married individuals filing separately

or unmarried individuals

other than individuals filing as head of household

or as a surviving spouse for federal income tax purposes:

 

If the taxable income is:                The deduction is the greater

                                                               of actual property taxes paid or:

 

Not over $20,000.00............................................ $4,643

Over $20,000.00 but not

  over $35,000.00................................................ $3,714

Over $35,000.00 but not

  over $40,000.00................................................ $1,857

Over $40,000.00 but not

  over $75,000.00................................................ $1,176

Over $75,000.00................................................. $1,020

 

    b. A deduction for property taxes shall be allowed pursuant to this section in relation to the amount of the property taxes actually paid by or allocable to a resident taxpayer who is a qualified claimant on more than one domicile during the tax year, but the aggregate amount of the property taxes claimed shall not exceed the total of the proportionate amounts of property taxes assessed and levied against or allocable to each domicile for the portion of the taxable year for which the taxpayer occupied it as the taxpayer's domicile and principal residence.

    c. If title to a domicile is held by more than one individual as joint tenants or tenants in common, each individual shall be allowed a deduction pursuant to this section only in relation to the individual's proportionate share of the property taxes assessed and levied against the domicile. The proportionate share shall be equal to that of all other individuals who hold the title, but if the conveyance under which the title is held provides for unequal interests therein, a taxpayer's share of the property taxes shall be in proportion to the taxpayer's interest in the title.

    d. If title to a domicile is held by a husband and wife who own the domicile as tenants by the entirety, or if that husband and wife are both residential shareholders of a cooperative or mutual housing corporation and occupy the same domicile therein, and who elect to file separate income tax returns pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., that husband and wife shall each be entitled to one-half of the deduction for property taxes for which they may be jointly eligible pursuant to this section.

    e. If the domicile is a dwelling house consisting of more than one unit, that taxpayer shall be allowed a deduction for property taxes only in relation to the proportionate share of the property taxes assessed and levied against the residential unit occupied by the taxpayer, as determined by the local tax assessor.

 

    4. a. Each resident taxpayer whose domicile is a unit of residential rental property shall be allowed a deduction from taxable income for that portion of the rent constituting property taxes paid for occupancy of that domicile which deduction shall be determined as follows:

 

For married individuals filing a joint return

and individuals filing as head of household

or as surviving spouse:

 

If the taxable income is:       The deduction is the greater of

                                                            actual property taxes paid or:

 

Not over $20,000.00............................................$2,500

Over $20,000.00 but not

  over $50,000.00................................................ $2,000

Over $50,000.00 but not

  over $70,000.00................................................ $1,429

Over $70,000.00 but not

  over $80,000.00................................................ $1,000

Over $80,000.00 but not

  over $150,000.00.............................................. $633

Over $150,000.00................................................ $549

 

 For married individuals filing separately

or unmarried individuals rather than individuals

filing as head of household

or as a surviving spouse for federal income tax purposes:

 

If the taxable income is:                    The deduction is the greater of

                                                                  actual property taxes paid or:

 

Not over $20,000.00.......................................... $2,500

Over $20,000.00 but not

  over $35,000.00............................................... $2,000

Over $35,000.00 but not

  over $40,000.00............................................... $1,000

Over $40,000.00 but not

  over $75,000.00............................................... $633

Over $75,000.00................................................ $549

 

    b. A husband and wife who elect to file separate income tax returns pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., shall each be entitled to one-half of the property tax deduction allowed pursuant to this section.

    c. If more than one taxpayer, other than husband and wife, qualify to deduct rent constituting property taxes by reason of their having occupied the same rented domicile, it shall be presumed that the deduction shall be equally divided. A taxpayer may, however, deduct an amount for rent constituting property taxes in the same proportion that the rent paid by that taxpayer bears to the total rent paid by all tenants of the same unit.

 

    5. If a taxpayer who is eligible for a deduction for property taxes under section 3 of this act has also had as a domicile a residential rental property for any part of the tax year, the amount of the total property tax deduction the taxpayer shall be allowed shall be the sum of the actual amount of property taxes paid on a domicile that is not a unit of residential rental property and the amount of rent constituting property taxes paid for the occupancy of a domicile that is a unit of residential rental property.

 

    6. If the deduction for property taxes or rent constituting property taxes allowed under section 3 or 4 of this act reduces taxable income below zero, then the amount by which the deduction reduces taxable income below zero shall be considered an overpayment of tax and a refund on that amount shall be calculated by applying the tax rate for taxable income of $20,000 or less as provided in subsection a. or b. of N.J.S.54A:2-1 to the amount of overpayment. The result of that calculation shall constitute the amount of the refund which shall be paid as in the case of other refunds under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq.

 

    7. a. A citizen and resident of this State who has paid property taxes or whose domicile is a unit of residential rental property and who is required to file a return under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., who has claimed a credit for income taxes paid to other states and political subdivisions thereof pursuant to N.J.S.54A:4-1, shall be entitled to claim either a domicile tax refund as provided in section 8 of this act or a deduction for property taxes or rent constituting property taxes under section 3 or 4 of this act.

    b. The amount of the domicile tax refund allowed in subsection a. of this section may be applied as a credit against any tax liability otherwise due pursuant to N.J.S.54A:1-1 et seq., and any amount remaining shall be considered an overpayment of the tax and shall be refunded in the same manner as any other refund under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq.

 

    8. a. Any citizen and resident of this State who has paid property taxes on a domicile or whose domicile is a unit of residential rental property but who is not required to file a return under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., shall be entitled to claim a domicile tax refund as provided in this section.

    b. The amount of the domicile tax refund shall be calculated by applying the tax rate for taxable income of $20,000 or less as provided in subsection a. or b. of N.J.S.54A:2-1 to the amount of property taxes actually paid by the claimant on a domicile or the amount of rent constituting property taxes paid by the claimant or the sum of both amounts in the case of a claimant who has had as a domicile for part of a tax year a unit of residential rental property and a domicile that is not a unit of residential rental property for another part of the tax year.

    c. No domicile tax refund shall be allowed under this section except upon written application therefor to the Director of the Division of Taxation in a form prescribed by the director. The director may require proof and evidence of payment of property taxes or rent constituting property taxes as the director determines to be necessary.

    d. A domicile tax refund for property taxes shall be allowed pursuant to this section in relation to the amount of the property taxes actually paid by or allocable to an individual who is a qualified claimant on more than one domicile during the tax year, but the aggregate amount of the property taxes claimed shall not exceed the total of the proportionate amounts of property taxes assessed and levied against or allocable to each domicile for the portion of the tax year for which the claimant occupied it as the claimant's domicile and principal residence.

    e. If title to a domicile is held by more than one individual as joint tenants or tenants in common, each individual shall be allowed a domicile tax refund pursuant to this section only in relation to the individual's proportionate share of the property taxes assessed and levied against the domicile. The proportionate share shall be equal to that of all other individuals who hold the title, but if the conveyance under which the title is held provides for unequal interests therein, a claimant's share of the property taxes shall be in proportion to that claimant's interest in the title.

    f. If the domicile is a dwelling house consisting of more than one unit, the claimant shall be allowed a domicile tax refund only in relation to the proportionate share of the property taxes assessed and levied against the residential unit occupied by the claimant, as determined by the local tax assessor.

    g. A husband and wife shall each be entitled to one-half of the domicile tax refund allowed pursuant to this section.

    h. If more than one taxpayer, other than husband and wife, qualify to deduct rent constituting property taxes by reason of their having occupied the same rented domicile, it shall be presumed that the domicile tax refund shall be equally divided. A claimant may, however, apply for a domicile tax refund for rent constituting property taxes in the same proportion that the rent paid by that claimant bears to the total rent paid by all tenants of the same unit.

 

    9. An application for a domicile tax refund under section 8 of this act shall be made on or before April 15 for property taxes paid or rent constituting property taxes for the immediately preceding calendar year.

 

    10. The domicile tax refund allowed under section 8 of this act shall be considered an overpayment of tax under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., and shall be paid as in the case of refunds under that act.

 

    11. a. No application for a domicile tax refund under section 8 of this act shall be approved if a deduction for actual property taxes or rent constituting property taxes has been taken pursuant to section 3 or 4 of this act.

    b. No domicile tax refund allowed in section 8 shall be paid except upon approval by the director of a written application required under subsection c. of section 8 of this act.

 

    12. a. The director shall provide a supplemental form to be filed as a part of the form of return required under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., and shall not provide for a separate application for any deduction or refund under section 3, 4 or 7 of this act.

    b. The application for a domicile tax refund pursuant to section 8 of this act shall be in similar form to that prescribed in subsection a. of this section and shall be filed on or before April 15; provided however, that the applicant shall not be required to file the form of return under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., as a part of the application.

 

    13. Any domicile tax deduction allowed under section 3 or 4 and refundable under section 6, or any domicile tax refund allowed under section 7 or 8, shall be paid as in the case of other refunds under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., and shall be added to any other refunds otherwise due and a single payment made to the taxpayer or claimant.

 

    14. The director shall promulgate rules and regulations in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) as the director deems necessary to administer the provisions of this act.

 

    15. This act shall take effect immediately and shall first be


applicable with respect to property taxes or rent constituting property taxes paid for the tax year 1996.

 

 

STATEMENT

 

    This bill will enable eligible resident taxpayers under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., to claim a deduction against their taxable income equal to property taxes which they paid as homeowners, or the rental equivalent thereof paid as tenants. For tenants, the bill defines property taxes to be the equivalent of 18% of rent. To ensure that the full value of the property tax deduction is available to every homeowner and tenant the bill provides for a refundable credit in the event that the deduction of property taxes reduces the tax liability to zero or below. State residents who are not required to file a gross income tax return may file a separate application for a tax refund as prescribed in the bill.

    In effect, this bill reinstates the major provisions of the former "Homestead Tax Relief Act," P.L.1985, c.304 (C.54A:3A-1 et seq.), with minimum standard deductions of $65 for homeowners and $35 for tenants. That law was repealed on July 12, 1990 by enactment of P.L.1990, c.61, which significantly revised the gross income tax and the State's homestead property tax relief programs.

    This bill takes effect for property taxes paid in 1996, with the returns or applications to be filed on or before April 15, 1997 along with the filing of income tax returns. The refund for property taxes would be paid as an income tax refund.

 

 

                             

"Homeowners' and Tenants' Property Tax Relief Act;" providing for deductions or credits under the gross income tax.