New Jersey's Tax Exempt Property

BRIEF HISTORYGenerally, prior to 1900 New JerseyStudy Commission looked into the Tax Exempt
local tax assessors seldom entered a complete list ofProperty problem and determined that while exempt
tax exempt property located within their municipality onproperty owners paid a "ready and available fee" to
their tax rolls. Why should they, nobody would evertheir local water utility to use water up "on demand"
think about levying a property tax on governmental,and be billed for its usage those same exempt
educational, church or other property used forproperty owners did not pay their municipal
charitable purposes. It made little sense to those earlygovernments for their public work departments or
property tax assessors to spend the resources to find,police departments to have those public servants and
list and value such tax exempt property. Why, taxingtheir equipment "ready and available" to meet the
government and other tax exempt property ownersneeds of the exempt property owners when
that served fundamentally public rather than privaterequired.The Commission made estimates as to the
interests would be just taking publics money from oneamount of revenue that could be raised Statewide if
pocket and putting it in the other pocket, right?Taxsuch taxing authority was given to municipal
exemption cases brought before the New Jerseygovernments by the Sate and recommended that the
Courts after 1900 show many questionable propertyLegislature adopt such a law. Of course the
tax exemption claims were filed by not for profitLegislature acted swiftly to draft a legislative resolution
entities. Assessors found that tax exempt propertystating that the Legislature had no knowledge of and in
owners organized for charitable and religious purposesno way supported such a user fee on churches and
leased their tax exempt property rights to other forother not for profit charitable and educational
profit businesses. At the same time other educationalinstitutions.LESSONS LEARNED AND THE
institutions went way beyond the charges set forth inFUTUREEncourage local tax assessors to remain
their charter's provisions by including under their taxvigilant in granting tax exemptions to only those
exemption umbrella such questionable property usesproperty owners who meet the letter of the law. Do
as polo fields for the use of their students and othernot attempt to impose user fees on tax exempt
private polo teams. With increasing complaints aboutproperty during sunlight hours in Trenton. Partisan
the abuses of tax exempt claims some local taxLegislative staff should remind their legislators that the
assessors began to assess certain questionableclergy can speak from the pulpit on Sunday about the
educational, charitable and church property owners forfoolish and wrong headed user fee proposals of
property that was not being used strictly for theirlegislators who suggest imposing user fees on
chartered tax exempt purposes.Of course, these taxchurches and the November elections falls on a
exempt property owners complained to their legislatorsTuesday only two short days from the Sunday
in Trenton about the wrongs caused them by the localsermon.If history is any prediction of the future then
property tax assessor. Their governmentNew Jersey may see more State owned properties
representatives in Trenton then started to providelike the Garden State Art Center have its name
some standards in the property tax law for the taxleased out for a profit. Perhaps one day instead of the
assessors to follow. So, for different uses of exemptAtlantic City Expressway New Jersey will have the
property, presumably based on the worthiness toTrump Expressway or the Mack Truck Turnpike. It is
society of a particular property's use, the law specifiedeven possible that one day New Jersey will sell its
different standards. School buildings for example hadSate House to a large corporation to raise needed
to be actually used for their intended purpose, whilerevenues and then rent it back. Would that require
buildings for the work of churches had to be actuallymore friendly Sate treatment of the corporate
and exclusively used for religious purposes, etc. Thencommunity, else eviction could ensue? Perhaps it really
County Boards of Taxation and the State Courts hadcomes down to the public being vigilant watch dogs.
to begin settling disputes over what those termsWhy not require the Division of Taxation to post on its
meant in actual application.Today, the property taxweb page a listing of Tax Exempt Property, by
exemption battle continues. Should your church be ablemunicipality, by ownership and by purpose? Property
to build a large building to lease to a For Profit Daytaxation is a battle, and the tax assessors in New
Care Center and with the rent money pay off theJersey need the support of the public to enforce the
building's mortgage? Does a private school need a golfletter of the law.A New Jersey Governor one day
course for golfers who are not students when schoolmay sign a law permitting the sale, lease, or granting of
is out so as to defray the expense of the golfnaming rights on State Owned Property to raise
course? These are the questions that local taxmoney for some worthwhile State purpose. Such
assessors, the courts and the government in Trentonrevenue could be used to pay off State Debt so as to
struggles with daily.GOLD MINE OR MINE FIELDPriorfree up cash for property tax relief. The payment
to the Cahill Tax Policy Commission in 1973 other Taxstreams from such activities could become a new
Commissions created by the Legislature had lookedsource of annual State revenue. Once the State
solely into the legal status of tax exempt property ingovernment adopted this new funding mechanism my
New Jersey and took extensive testimony concerningguess is that the local municipal and county
perceived tax exempt property abuses. Nevertheless,governments would follow suit soon thereafter. If State
little could be done legislatively at that time becauseand Local governments keep doing the same fiscal
there was no Statewide tabulation of Exemptthings over and over and hoping to find new sources
Property values in New Jersey and therefore theof revenue they will never be able to fully serve their
fiscal tax impact locally of changes in the law could notcitizens.I also think it would be all right for the State to
be weighed by the State Government decisionsell certain State owned property, so long as that sale
makers.To remedy that problem the Division ofdid not jeopardize the future economic prosperity of
Taxation in 1971, at the request of the Cahill Tax Policythe State or threaten the future safety of its people.
Commission took on the job of collecting over 100,000For example, the sale of the New Jersey Turnpike or
exempt properties listed by Local Tax Assessors onGarden State Parkway would leave the business and
their local Tax Exempt Lists. The submission ofpeople in New Jersey who depend on those vital
Governor Cahill's Tax Policy Report to the legislaturearteries at the mercy of a profit driven corporation.
was delayed so that the Exempt Property StudyHowever, the sale and lease back of a State
could be completed because it was thought that suchwarehouse would free up cash to pay off State debt
a list could contain the pot of gold needed to avertthat is eating into the State's ability to provide vital
major new tax increases to pay for property tax relief.services and provide property tax relief. The State
The study was finished and its results were reportedmight even sell a State property and use part of the
in the ensuing Tax Policy Commission Report withproceeds to invest in other property that holds the
recommendations that in large did not meet the politicalpotential to increase substantially in value in the future.
and social needs of the day for a new source ofMy point is that State asset and debt management
revenue for property tax relief.However, while no newneeds a higher viability than it now receives.Biography:
revenue source for property tax relief was foundGerald ‘Jerry' Dowgin "The Property Tax
because of the Exempt Property Study, the largeDoctor" and the author of the Homeowner's
concentrations of exempt property found in certainAssessment Review Guide ( a former tax assessor
cities and towns lead to the adoption of a State Aidworked in the field of public finance at the State and
Program called the PILOT Program which stood forlocal levels in New Jersey for more than three
"payments in lieu of taxes." In essence, the Statedecades until his retirement in 2001. As a Supervising
made payments to municipalities at the effectiveTax Analyst in the Office of Research and Statistics
municipal purpose tax rate for certain propertiesin the Division of Taxation in the New Jersey
owned by the State. Those Sate Aid payments overDepartment of Treasury he worked principally on local
the years were seldom fully funded according to theproperty tax issues. Then he joined the Office of
formula set forth in the law because the program hadLegislative Services (OLS) in 1983 and served as the
its pay out level reduced by a fixed percentage forSecretary to the New Jersey Property Tax
many State Budget years. Then the PILOT programAssessment Study Commission for four years. While
was incorporated into the COMPTRA State aidworking in the OLS, Local Government Section he
program which in effect locked up both the propertyresearched, drafted, and estimated the cost of the
values used to calculate its funding along with the localSenior Property Tax Freeze Bill which was signed
effective municipal purposes tax rates used in theonto law and worked on legislation that became law
formula at a static level. That COMPTRA programthat virtually stopped the tax assessment practice of
consolidated more than a dozen State aid programs"Spot Assessments" in New Jersey that had treated
along with the PILOT program into one State Budgetmany property taxpayers unfairly.
line item.In 1985 the New Jersey Tax Assessment