SENATE, No. 701

 

STATE OF NEW JERSEY

 

INTRODUCED FEBRUARY 15, 1996

 

 

By Senators CAFIERO and CIESLA

 

 

An Act concerning relief for property taxes paid by homeowners and tenants, supplementing Title 54A of the New Jersey Statutes and repealing P.L.1976, c.63.

 

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

 

    1. 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.

    "Homestead" means:

    a. a dwelling house and the land on which that dwelling house is located which constitutes the place of the claimant's domicile 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 place of the claimant's domicile 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 place of the claimant's domicile 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 homestead 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 homestead 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 place of domicile 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 place of the claimant's domicile 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.

    "Net property taxes" means the amount of the local property tax bill for the homestead of a claimant for the local tax year ending in the claimant's taxable year minus the amount received by the claimant during the taxable year as a homestead property tax rebate pursuant to P.L.1990, c.61 (C.54:4-8.57 et seq.).

    "Net 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 minus the amount received by the claimant during the taxable year as a homestead property tax rebate pursuant to P.L.1990, c.61 (C.54:4-8.57 et seq.).

    "Principal residence" means a homestead actually and continually occupied by a claimant as his 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.

    "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 homestead 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 domicile 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.

 

    2. a. A 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 net property taxes not in excess of $5,000 paid on the taxpayer's homestead.

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

    c. If title to a homestead 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 homestead. 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 homestead is held by a husband and wife who own the homestead 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 homestead 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 net property taxes for which they may be jointly eligible pursuant to this section.

    e. If the homestead is a dwelling house consisting of more than one unit, that taxpayer shall be allowed a deduction for net 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.

 

    3. a. A resident taxpayer whose homestead is a unit of residential rental property shall be allowed a deduction from taxable income for that portion of the net rent constituting property taxes not in excess of $5,000 paid for occupancy of that homestead.

    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 net rent constituting property taxes by reason of their having occupied the same rented homestead, it shall be presumed that the deduction shall be equally divided. A taxpayer may, however, deduct an amount for net 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.

 

    4. If a taxpayer who is eligible for a deduction for net property taxes under section 2 of this act for a part of the tax year is also eligible for a deduction for net rent constituting property taxes under section 3 of this act for a part of the tax year, the taxpayer shall be allowed a deduction, not in excess of $5,000, the amount of which shall be equal to the sum of the amount of net property taxes paid on a homestead that is not a unit of residential rental property and the amount of net rent constituting property taxes paid for the occupancy of a homestead that is a unit of residential rental property, provided however, that the amount of net property taxes shall be subject to the limitations set forth in subsections b. through e. of section 2 and the amount of net rent constituting property taxes shall be subject to the limitations set forth in subsections b. and c. of section 3 as may be applicable.

 

    5. 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.

 

    6. P.L.1976, c.63 (C.54:4-6.2 et seq.) is repealed.

 

    7. This act shall take effect immediately except that sections 1 through 5 shall first apply to net property taxes or net rent constituting property taxes paid for the tax year next commencing after enactment and section 6 shall take effect January 1 next following enactment.

 

 

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 for up to $5,000 in property taxes which they paid as homeowners, or the rental equivalent thereof paid as tenants net of amounts received for homestead property tax rebates. In effect, this bill reinstates the deduction of property taxes under the gross income tax which was allowed under the former "Homestead Tax Relief Act," P.L.1985, c.304 (C.54A:3A-1 et seq.), popularly known as the "Ford" act. However, unlike the "Ford" act, this bill limits the deduction for a taxpayer to $5,000, does not allow for a refund of any amount of an unused deduction and does not require that taxpayers receive a set minimum deduction. This bill also differs from that law because the gross income tax deduction in this bill is based on property taxes or rent constituting property taxes after subtraction of the homestead rebate amount a taxpayer received during the taxable year.

    The bill also repeals the "Tenants' Property Tax Rebate Act," P.L.1976, c.63 (C.54:4-6.2 et seq.), under which landlords are required to pass on to their tenants any post-1990 annual reductions in property taxes upon a residential rental property. That act provides a complex method for sharing a minimal level of property tax relief for tenants. Reinstating gross income tax deductions for tenants is a more efficient means of sharing the costs of more inclusive property tax relief for tenants.

 

 

 

Provides for a deduction under the gross income tax for net property taxes paid by homeowners and tenants and repeals the "Tenants' Property Tax Rebate Act."