A3618

An Act limiting annual homestead property taxes to a percentage of the homestead owner's annual New Jersey gross income by allowing a refundable tax credit under the New Jersey 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. a. A resident taxpayer shall be allowed a credit against the tax otherwise due under the New Jersey gross income tax, N.J.S.54A:1-1 et seq., for the taxable year in an amount equal to the amount by which the property taxes due and paid by the taxpayer in that taxable year on the taxpayer's homestead exceed 7% of the taxpayer's gross income in that taxable year.

b. If a resident taxpayer has more than one homestead as a result of a change in principal residence during the taxable year, a credit shall be allowed pursuant to this section in relation to the amount of the property taxes actually paid by or allocable to the resident taxpayer on more than one homestead, provided however, that the aggregate amount of the property taxes used in calculating the credit shall not exceed the total of the proportionate amounts of property taxes assessed and levied against or allocable to each homestead for the portion of the taxable year the taxpayer occupied it as a principal residence.

c. (1) 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 credit pursuant to this section only in relation to the individual's proportionate share of the property taxes assessed and levied against the homestead. The individual's proportionate share of the property taxes on that homestead shall be equal to the share of that individual's interest in the title. Title shall be presumed to be held in equal shares among all co-owners, but if the taxpayer satisfactorily demonstrates to the director that the title provides for unequal interests, either under the conveyance under which the title is held, or as otherwise may be demonstrated, that taxpayer's share of the property taxes paid on that homestead shall be in proportion to the taxpayer's interest in the title.

(2) Resident taxpayers shall include individuals within any of the filing categories set forth in N.J.S.54A:2-1 and any individual or individuals not required to file a gross income tax return because their gross income was below the minimum taxable income threshold established in N.J.S.54A:2-4 and N.J.S.54A:8-3.1. In the case of a married individual filing a separate New Jersey gross income tax return, if the spouse of the resident taxpayer maintains the same homestead as the resident taxpayer and also files a separate gross income tax return in this State the credit claimed under this subsection shall be equal to one-half of the amount of the credit allowable had the spouses filed a joint return and credit application.

d. If the homestead of a resident taxpayer is a residential property consisting of more than one unit, that resident taxpayer shall be allowed a credit pursuant to this section only in relation to the proportionate share of the property taxes assessed and levied against the residential unit occupied by that resident taxpayer, as determined by the local tax assessor.

e. Nothing in this section shall preclude a co-owner, who is other than a husband or wife claiming a credit on the same homestead, from receiving a credit determined pursuant to this section if another co-owner claims a credit pursuant to this section, provided however, that each claim for a credit determined pursuant to this section shall be separately subject to the provisions of subsections c. and d. of this section.

f. In the case of a claim by a resident taxpayer for a credit for a homestead that is a unit in a cooperative, mutual housing corporation or continuing care retirement community, the director may provide that the application shall include the name and address of the location of the property and the amount of real property taxes attributed to the cooperative, mutual housing residential unit or continuing care retirement community residential unit, as shall be indicated in an official notice which shall be furnished by the cooperative, mutual housing corporation or continuing care retirement community for the same year.

g. No credit shall be allowed pursuant to this section except upon annual application therefor, in any manner, upon any form, and in any format, whether in writing or otherwise, as shall be prescribed by the director. The director may require a credit application include a copy of the appropriate property tax bill for the taxable year. The director may require such other verification of eligibility for a credit as the director may deem necessary. The director may require that the application for a credit be submitted (1) as part of the resident taxpayer's gross income tax return filed pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., or, (2) on any other form, in any manner or format and at any time and prior to any date as the director shall prescribe if (a) the claimant is not required to file a gross income tax return or (b) the resident taxpayer has filed an application for extension of time to file the taxpayer's gross income tax return.

h. The amount of the credit allowed pursuant to this section shall be applied against the tax otherwise due under N.J.S.54A:1-1 et seq., after all other credits and payments. If the credit exceeds the amount of tax otherwise due, that amount of excess shall be an overpayment for the purposes of N.J.S.54A:9-7; provided however, that subsection (f) of N.J.S.54A:9-7 shall not apply.

i. As used in this section:

"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. (1) a dwelling house and the land on which that dwelling house is located which constitutes the place of the taxpayer's domicile and is owned and used by the taxpayer as the taxpayer's principal residence;

(2) a dwelling house situated on land owned by a person other than the taxpayer which constitutes the place of the taxpayer's domicile and is owned and used by the taxpayer as the taxpayer's principal residence;

(3) a condominium unit or a unit in a horizontal property regime which constitutes the place of the taxpayer's domicile and is owned and used by the taxpayer as the taxpayer's principal residence;

(4) for purposes of this definition as provided in this subsection, 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 and 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 a share of the property taxes that are assessed upon the continuing care retirement community, if a share is attributable to the unit that the resident occupies; and

b. 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, and which is used by the taxpayer as the taxpayer'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.).

"Gross income" means all New Jersey gross income required to be reported pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., other than income excludable from the gross income tax return, but before reduction thereof by any applicable exemptions, deductions and credits, received during the taxable year by the owner or residential shareholder of a homestead.

"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 (42U.S.C. s.1521 et seq.), as amended, which acquired a National Defense Housing Project pursuant to that act.

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

"Property tax" means payments to a municipality based upon an assessment made by the municipality upon real property on an ad valorem basis on land and improvements, but shall not include payments made in lieu of taxes.

"Resident" means an individual:

a. who is domiciled in this State, unless he maintains no permanent place of abode in this State, maintains a permanent place of abode elsewhere, and spends in the aggregate no more than 30 days of the tax year in this State; or

b. who is not domiciled in this State but maintains a permanent place of abode in this State and spends in the aggregate more than 183 days of the tax year in this State, unless the individual is in the Armed Forces of the United States.

"Residential shareholder in a cooperative or mutual housing corporation" means a holder of a membership interest in that cooperative or corporation, whose residential unit therein constitutes the 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 (26U.S.C. s.216).

2. This act shall take effect immediately and shall apply to taxable years beginning on or after January 1, 2011.

STATEMENT

This bill caps annual property taxes for resident homestead property taxpayers by allowing a refundable gross income tax under the New Jersey gross income tax, and for resident homestead property tax payers not required to file a gross income tax return, in an amount equal to the amount by which the property taxes paid by the property taxpayer on the taxpayer's homestead exceed 7% of the taxpayer's gross income. The restriction of this tax relief to homestead owners limits this to the dwelling unit actually and continually occupied by a taxpayer as the taxpayer's permanent residence, and does not apply to a vacation home, property owned and rented or offered for rent by the taxpayer, and other secondary real property holdings. Any property tax paid in excess of 7% of gross income may continue to be applied as a gross income tax deduction or credit pursuant to the "Property Tax Deduction Act," N.J.S.A.54A:3A-15 et seq.