S2229

An Act providing a gross income tax deduction for certain water supply and sewerage charges, amending P.L.1996, c.60.

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

1. Section 2 of P.L.1996, c.60 (C.54A:3A-16) is amended to read as follows:

2. 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.

"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 taxpayer's domicile and is owned and used by the taxpayer as the taxpayer's principal residence;

b. 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;

c. a condominium unit or a unit in a horizontal property regime or a continuing care retirement community which constitutes the place of the taxpayer's domicile and is owned and used by the taxpayer as the taxpayer'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 taxpayer as the taxpayer's principal residence; and

e. a unit of residential rental property, which unit constitutes the place of the taxpayer's domicile and 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.).

"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 Public War Housing Act (“National Defense Housing Act”), [Pub.L.849, 76th Congress (42 U.S.C. 1521 et seq.)] Pub.L.76-849 (42 U.S.C. s.1587), 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 taxes" means (1) payments to municipalities for which an assessment by a municipality has been made on an ad valorem basis on both land and improvements, [and shall] but not [include] including payments made in lieu of taxes, and (2) rents, rates, fees, or other charges for direct or indirect connection with, or for the use or service of, a water supply system or sewerage system, to the extent that such connection, use, or service pertains to the taxpayer's homestead.

"Rent constituting property taxes" means 18% of the rent paid by the taxpayer for occupancy during the taxable year of a unit of residential rental property which the taxpayer occupies as a principal residence; notwithstanding the definition of "property taxes" herein, rent constituting property taxes includes the rent paid for the occupancy of a manufactured home installed in a mobile home park.

"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 (12 U.S.C. s.1701 et seq.), as amended and supplemented: section 202[,] of the National Housing Act of 1959 [(], Pub.L.86-372 (12 U.S.C. s.1701q), and as subsequently amended, section 231[,] of the National Housing Act of 1959 (12 U.S.C. s.1715v).

"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] (26 U.S.C. s.216).

(cf: P.L.1996, c.60, s.2)

2. Section 3 of P.L.1996, c.60 (C.54A:3A-17) is amended to read follows:

3. 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 gross income for property taxes not in excess of $10,000, subject to the limitations of subsection f. of this section, due and paid for the calendar year in which the taxes are due and payable on the taxpayer's homestead.

b. A deduction for property taxes shall be allowed pursuant to this section in relation to the amount of the property taxes actually paid by or allocable to a resident taxpayer who has more than one homestead, but the aggregate amount of the property taxes claimed 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 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 or allocable to 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 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 property taxes only in relation to the proportionate share of the municipal ad valorem levy portion of the property taxes assessed and levied against the residential unit occupied by the taxpayer, as determined by the local tax assessor.

f. Notwithstanding the provisions of subsection a. of this section to the contrary: (1) a resident taxpayer shall be allowed a deduction for a taxpayer's taxable year beginning during 1996 based on 50% of the property taxes not in excess of $5,000 paid on the taxpayer's homestead; and (2) a resident taxpayer shall be allowed a deduction for a taxpayer's taxable year beginning during 1997 based on 75% of the property taxes not in excess of $7,500 paid on the taxpayer's homestead.

g. Notwithstanding any other provision of this section, the deduction allowed under this section to a resident taxpayer eligible to receive a homestead property tax reimbursement pursuant to P.L.1997, c.348 (C.54:4-8.67 et al.) shall not exceed that resident taxpayer's base year property tax liability as determined pursuant to P.L.1997, c.348 (C.54:4-8.67 et al.).

h. Notwithstanding any other provision of this section, for the taxable year beginning January 1, 2009, a taxpayer who has gross income for the taxable year of more than $250,000 and is not:

(1) 65 years of age or older at the close of the taxable year; or

(2) allowed to claim a personal deduction as a blind or disabled taxpayer pursuant to subsection (b) of N.J.S.54A:3-1, shall not be allowed a deduction pursuant to this section;

provided however, the deduction for a taxpayer who has gross income for the taxable year of more than $150,000 but not exceeding $250,000 and is not:

(1) 65 years of age or older at the close of the taxable year; or

(2) allowed to claim a personal deduction as a blind or disabled taxpayer pursuant to subsection (b) of N.J.S.54A:3-1, shall not exceed $5,000.

(cf: P.L.2009, c.69, s.2)

3. This act shall take effect immediately and apply to taxable years beginning on or after the January 1 of the year of enactment.

STATEMENT

This bill would extend the current gross income tax deduction for property taxes to include water supply and sewerage charges for direct or indirect connection with, or for the use or services of, a water supply or sewerage system, to the extent that the connection, use or services pertain to the taxpayer's homestead. The deduction would apply to persons whose residential water supply or sewerage services, or both, are provided by a municipality that recovers the cost of those services by billing service recipients directly rather than through local property tax assessments; it would also apply to those whose water supply or sewerage services, or both, are provided by an entity other than a municipality, such as a utility, authority, or private company.

The deduction would be available only to resident income taxpayers who own their homestead. The amount of the deduction could not, when added to the amount of property tax for which the taxpayer is already allowed a deduction under the "Property Tax Deduction Act," P.L.1996, c.60 (C.54A:3A-15 et seq.), exceed the overall cap on the deduction allowed under that act; that cap is currently $10,000 per taxable year.