New Jersey -- Property Tax: Senate Passes Property Tax Relief Measure

The New Jersey Senate has passed a property tax relief bill that, among other things, provides a maximum 20% homestead tax credit based in part on household income and imposes a 4% cap on local property tax levies.

The measure, which passed the New Jersey General Assembly on January 29, 2007, and has been sent to Governor Jon S. Corzine, replaces the current homestead rebate program for homeowners that provides benefits in set dollar amounts in ranges based on income. The credit program retains the rebate program's definition of income and provides a benefit that is based on a percentage of property taxes paid for the previous year. Households with annual incomes of less than $100,000 will receive a maximum credit of 20%; those with annual incomes over $100,000 but less than $150,000 will receive 15%; and those with annual incomes over $150,000 but less than $250,000 will receive 10%. If a property tax bill is higher than $10,000, the benefit applies only to a percentage of the first $10,000 of property taxes paid. Furthermore, the amounts do not vary on the basis of a taxpayer's age or disability status.

Residents who are 65 years of age or older at the close of the tax year, or who are blind or disabled, are allowed a homestead rebate or credit for the tax year equal to the greater of the new credit formula or the current calculation of property tax rebates. Under the current calculation, the homestead benefit for the tax year equals the amount by which property taxes paid by the claimant in that tax year on his or her homestead exceed 5% of the claimant's gross income. This amount will be rounded to the nearest whole dollar within the appropriate range, but not more than the amount of property taxes actually paid. Those with tax year gross incomes of less than $70,000 have a range of $1,200 to $1,000; those with incomes of over $70,000 but less than $125,000 have a range of $800 to $600; and those with incomes over $125,000 but less than $200,000 are eligible for a benefit of $500.

Credits will be reflected annually in the August and November property tax bills beginning in 2007. A taxpayer must reside in a homestead on October 1 of a tax year to be eligible for the credit.

The measure also clarifies the information that should be reflected on property tax bills.

Constitutionality of Legislation

Prior to passage of the measure, some legislators expressed concern that the property tax credit program was unconstitutional. In response, the New Jersey Attorney General released a formal opinion stating that the Homestead Credit Clause of the New Jersey Constitution vests broad discretion in the Legislature to provide tax credits for homesteads (http://www.nj.gov/governor/news/news/approved/20070205a.html). The New Jersey Constitution encompasses the authority to calculate homestead tax credits on the basis of a property owner's income. Accordingly, consideration of a property owner's income when calculating a tax credit for local property taxes on homesteads is not unconstitutional.

A.B. 1, Laws 2006, as passed by the New Jersey Senate, February 6, 2007; Opinion of the New Jersey Attorney General, No. 2-2007, February 2, 2007

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