Bill Text: NJ S250 | 2012-2013 | Regular Session | Introduced
Bill Title: Exempts from real property taxation during construction any building, or portion thereof, to be used for a property tax-exempt purpose.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2012-01-10 - Introduced in the Senate, Referred to Senate Community and Urban Affairs Committee [S250 Detail]
Download: New_Jersey-2012-S250-Introduced.html
STATE OF NEW JERSEY
215th LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2012 SESSION
Sponsored by:
Senator ROBERT M. GORDON
District 38 (Bergen and Passaic)
Senator JEFF VAN DREW
District 1 (Atlantic, Cape May and Cumberland)
SYNOPSIS
Exempts from real property taxation during construction any building, or portion thereof, to be used for a property tax-exempt purpose.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel
An Act concerning the exemption from taxation of certain real property and amending R.S.54:4-3.6.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. R.S.54:4-3.6 is amended to read as follows:
54:4-3.6. a. [The] Except as provided in subsection b. of this section, the following property shall be exempt from taxation under this chapter: all buildings actually used for colleges, schools, academies or seminaries, provided that if any portion of such buildings are leased to profit-making organizations or otherwise used for purposes which are not themselves exempt from taxation, said portion shall be subject to taxation and the remaining portion only shall be exempt; all buildings actually used for historical societies, associations or exhibitions, when owned by the State, county or any political subdivision thereof or when located on land owned by an educational institution which derives its primary support from State revenue; all buildings actually and exclusively used for public libraries, asylum or schools for adults and children with intellectual disabilities; all buildings used exclusively by any association or corporation formed for the purpose and actually engaged in the work of preventing cruelty to animals; all buildings actually and exclusively used and owned by volunteer first-aid squads, which squads are or shall be incorporated as associations not for pecuniary profit; all buildings actually used in the work of associations and corporations organized exclusively for the moral and mental improvement of men, women and children, provided that if any portion of a building used for that purpose is leased to profit-making organizations or is otherwise used for purposes which are not themselves exempt from taxation, that portion shall be subject to taxation and the remaining portion only shall be exempt; all buildings actually used in the work of associations and corporations organized exclusively for religious purposes, including religious worship, or charitable purposes, provided that if any portion of a building used for that purpose is leased to a profit-making organization or is otherwise used for purposes which are not themselves exempt from taxation, that portion shall be subject to taxation and the remaining portion shall be exempt from taxation, and provided further that if any portion of a building is used for a different exempt use by an exempt entity, that portion shall also be exempt from taxation; all buildings actually used in the work of associations and corporations organized exclusively for hospital purposes, provided that if any portion of a building used for hospital purposes is leased to profit-making organizations or otherwise used for purposes which are not themselves exempt from taxation, that portion shall be subject to taxation and the remaining portion only shall be exempt; all buildings owned or held by an association or corporation created for the purpose of holding the title to such buildings as are actually and exclusively used in the work of two or more associations or corporations organized exclusively for the moral and mental improvement of men, women and children; all buildings owned by a corporation created under or otherwise subject to the provisions of Title 15 of the Revised Statutes or Title 15A of the New Jersey Statutes and actually and exclusively used in the work of one or more associations or corporations organized exclusively for charitable or religious purposes, which associations or corporations may or may not pay rent for the use of the premises or the portions of the premises used by them; the buildings, not exceeding two, actually occupied as a parsonage by the officiating clergymen of any religious corporation of this State, together with the accessory buildings located on the same premises; the land whereon any of the buildings hereinbefore mentioned are erected, and which may be necessary for the fair enjoyment thereof, and which is devoted to the purposes above mentioned and to no other purpose and does not exceed five acres in extent; the furniture and personal property in said buildings if used in and devoted to the purposes above mentioned; all property owned and used by any nonprofit corporation in connection with its curriculum, work, care, treatment and study of men, women, or children with intellectual disabilities shall also be exempt from taxation, provided that such corporation conducts and maintains research or professional training facilities for the care and training of men, women, or children with intellectual disabilities; provided, in case of all the foregoing, the buildings, or the lands on which they stand, or the associations, corporations or institutions using and occupying them as aforesaid, are not conducted for profit, except that the exemption of the buildings and lands used for charitable, benevolent or religious purposes shall extend to cases where the charitable, benevolent or religious work therein carried on is supported partly by fees and charges received from or on behalf of beneficiaries using or occupying the buildings; provided the building is wholly controlled by and the entire income therefrom is used for said charitable, benevolent or religious purposes; and any tract of land purchased pursuant to subsection (n) of section 21 of P.L.1971, c.199 (C.40A:12-21), and located within a city of the first, second, third or fourth class, actually used for the cultivation and sale of fresh fruits and vegetables and owned by a duly incorporated nonprofit organization or association which includes among its principal purposes the cultivation and sale of fresh fruits and vegetables, other than a political, partisan, sectarian, denominational or religious organization or association. The foregoing exemption shall apply only where the association, corporation or institution claiming the exemption owns the property in question and is incorporated or organized under the laws of this State and authorized to carry out the purposes on account of which the exemption is claimed or where an educational institution, as provided herein, has leased said property to a historical society or association or to a corporation organized for such purposes and created under or otherwise subject to the provisions of Title 15 of the Revised Statutes or Title 15A of the New Jersey Statutes.
As used in this section "hospital purposes" includes health care facilities for the elderly, such as nursing homes; residential health care facilities; assisted living residences; facilities with a Class C license pursuant to P.L.1979, c.496 (C.55:13B-1 et al.), the "Rooming and Boarding House Act of 1979"; similar facilities that provide medical, nursing or personal care services to their residents; and that portion of the central administrative or service facility of a continuing care retirement community that is reasonably allocable as a health care facility for the elderly.
b. On and after January 1, 2012, any building, or any part of a building, to be used for any purpose set forth in subsection a. of this section shall be exempt from taxation as real property during the construction thereof.
For each tax year during the construction of any such building, or any part of a building, the tax assessor of the municipality in which the building, or any part of a building, under construction is situate shall assess the building, or any part of a building, that is under construction as of October 1 of the pretax year, and shall keep a record of that assessment as part of the property record card, as a partial assessment for a period not to exceed three years starting on October 1 of each pretax year in case the building, or any part of a building, is not used for the purpose set forth in subsection a. of this section.
If, at the end of the third year after the construction of the building, or any part of a building, has commenced, it is not used for a purpose set forth in subsection a. of this section, the building, or any part of a building, under construction shall be subject to taxation for the current tax year and the two prior years or part thereof, for which there was a partial assessment recorded in the property's record file. The assessments shall be listed on the Omitted Assessment list and treated as rollback assessments pursuant to section 1 of P.L.1947, c.413, (C.54:4-63.12) The owner of the building may appeal the taxation of the building, or part thereof, to the county board of taxation or the Tax Court, as appropriate, and the property tax exempt status of the building shall be restored by the board of taxation or the Tax Court, as appropriate, upon a showing by the building owner that the construction shall be completed and used for a purpose set forth in subsection a. of this section within a reasonable period of time. The property taxes due and owing for the previous tax years shall be calculated by multiplying the partial assessment attributable to the building, or any part thereof, that is not used for any purpose set forth in subsection a. of this section for each of the tax years by the total tax rate of the municipality in which the building is situate for those tax years.
(cf: P.L.2011, c.35, s.4)
2. This act shall take effect immediately.
STATEMENT
This bill would require that, on and after January 1, 2012, any building to be used for any property tax-exempt purpose must be exempt from taxation as real property during the construction thereof.
The bill requires that for each tax year during the construction of such a building, the tax assessor of the municipality in which the building under construction is situate shall assess the building that is under construction as of October 1 of the pretax year, and shall keep a record of that assessment as part of the property record card, as a partial assessment for a period not to exceed three years starting on October 1 of each pretax year in case the building is not used for a tax exempt purpose.
The bill also requires that if, at the end of the third year after the construction of the building, or any part of a building, has commenced, it is not used for a tax exempt purpose, the building, or any part of a building, under construction shall be subject to taxation for the current tax year and the two prior years or part thereof, for which there was a partial assessment recorded in the property's record file. The bill requires that the assessments shall be listed on the Omitted Assessment list and treated as rollback assessments pursuant to section 1 of P.L.1947, c.413, (C.54:4-63.12)
The bill also requires that the owner of the building may appeal the taxation of the building, or part thereof, to the county board of taxation or the Tax Court, as appropriate, and the property tax exempt status of the building shall be restored by the board of taxation or the Tax Court, as appropriate, upon a showing by the building owner that the construction shall be completed and used for a tax exempt purpose within a reasonable period of time.
Finally, the bill requires that the property taxes due and owing for the previous tax years shall be calculated by multiplying the partial assessment attributable to the building, or any part thereof, that is not used for any tax exempt purpose for each of the tax years by the total tax rate of the municipality in which the building is situate for those tax years.
The provisions of this bill address an issue that has recently raised concerns within the non-profit and charitable communities. Under the language of N.J.S.A.54:4-3.6, the buildings and land exempt from property taxation under the statute must be actually used for the tax-exempt purpose; a building under construction, because it is unfinished, cannot be used for such a purpose. Effectively, this statutory language authorizes municipalities to assess and levy property taxes against the value of the building under construction until such time as the construction is completed and the building is used for the non-profit or charitable use. For many years, municipalities, realizing that these buildings would be taxable as real property for only brief periods of time (during the construction process only), did not assess property taxes against these unfinished buildings.
However, recently, efforts were made by a municipality to assess property taxes against the value of a major hospital in central New Jersey during its recently completed construction, although no such taxes were paid by the hospital during its construction. This municipality's effort is supported by New Jersey Tax Court decisions.
In Hillcrest Health Service System, Inc. v. Hackensack City, 18 N.J. Tax 38, (1998) where a subsidiary of the plaintiff operated a hospital in Hackensack, the New Jersey Tax Court determined that a property tax exemption, available to a new building constructed for a property tax-exempt use, would not be available to the owner of that building until the building was actually used for the tax-exempt purpose: ". . . . exemption requires an actual use of property for exempt purposes and not merely an intended or projected use. Even where the character of the building under construction and its adaptation to an exempt use are evident, an exemption does not attach until actual use commences." Id. at 47.
These efforts to tax as real property those buildings being constructed for a property tax-exempt purpose have raised concerns and alarm in non-profit and charitable circles, because an unforeseen property tax assessment would represent an additional cost to the non-profit or charitable entity constructing the building. The taxation of partially constructed buildings under these circumstances also would be a temporary measure, because as soon as the construction is completed and the building is occupied by the tax-exempt entity for the tax-exempt purpose, the building would be tax-exempt, and no property taxes could be collected thereon.
It is the intent of the sponsor that the provisions of this bill will provide certainty to the non-profit and charitable community by exempting from taxation as real property buildings under construction by those entities that are intended to be used for the tax-exempt purposes of those entities, while offering municipalities the ability to recoup back property taxes if in fact, after construction is completed, such a building is used for a non-tax exempt purpose, or is leased or sold to a non tax-exempt entity for its own use.
