S1833

An Act concerning State Aid to municipalities, supplementing chapter 27D of Title 52 of the Revised Statutes, and repealing sections 1 through 4 of P.L.1997, c.167 and section 2 of P.L.1999, c.168.

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

1. a. Commencing July 1, 2025 there is established the "Municipal Property Tax Relief Aid Fund" as a special dedicated fund in the State Treasury into which there shall be credited annually, commencing in State fiscal year 2026, the amount determined pursuant to subsection d. of this section from the following:

(1) net payments under the "Sales and Use Tax Act," P.L.1966, c.30 (C.54:32B-1 et seq.) from sales and use of energy or utility services;

(2) net payments under the Corporation Business Tax Act (1945), P.L.1945, c.162 (C.54:10A-1 et seq.) from gas, electric, and gas and electric public utilities, whether municipal or otherwise, that were subject to tax pursuant to the provisions of P.L.1940, c.5 (C.54:30A-49 et seq.) prior to January 1, 1998,

(3) net payments under the Corporation Business Tax Act (1945), P.L.1945, c.162 (C.54:10A-1 et seq.) from telecommunications public utilities that were subject to tax pursuant to the provisions of P.L.1940, c.4 (C.54:30A-16 et seq.) as of April 1, 1997,

(4) net payments under P.L.1940, c.5 (C.54:30A-49 et seq.) from sewerage and water corporations, net payments under the "Transitional Energy Facility Assessment Act," sections 36 through 49 of P.L.1997, c.162 (C.54:30A-100 through C.54:30A-113), and

(5) such sums from the General Fund or the Property Tax Relief Fund as may be necessary to provide that the annual amount credited to the fund shall equal the amount determined pursuant to subsection d. of this section.

b. Notwithstanding the provisions of P.L.1940, c.4 (C.54:30A-16 et seq.), P.L.1940, c.5 (C.54:30A-49 et seq.), or any other provision of law concerning the apportionment and distribution by the State of taxes paid by public utilities to the contrary, there shall be paid during the State fiscal year 2026 and during each fiscal year thereafter from the "Municipal Property Tax Relief Aid Fund" to the municipalities of the State the amount determined pursuant to subsection d. of this section. A portion of the amount determined pursuant to subsection d. of this section shall be allocated in a manner that provides that each municipality shall receive an amount not less than the amount received by the municipality from the distribution of proceeds from the Energy Tax Receipts Property Tax Relief Fund in calendar year 2024, or State fiscal year 2025 for a municipality that utilizes a State fiscal year budget cycle, and shall be distributed annually to municipalities on the following schedule:

On or before August 1, 45 percent of the total amount due; September 1, 30 percent of the total amount due; October 1, 15 percent of the total amount due; November 1, 5 percent of the total amount due; December 1 for municipalities operating under a calendar year fiscal year, 5 percent of the total amount due; and June 1 for municipalities operating under the State fiscal year , 5 percent of the total amount due; provided, however, that notwithstanding the provisions of any law or regulation to the contrary, the Director of Local Government Services, in consultation with the Commissioner of Community Affairs and the State Treasurer, may direct the Director of the Division of Budget and Accounting to provide such payments on an accelerated schedule if necessary to ensure fiscal stability for a municipality. The Director of the Division of Budget and Accounting shall provide, on the date on of approval, notice to the Legislative Budget and Finance Officer of each accelerated payment authorized pursuant to this subsection.

c. The allocation set forth in subsection d. of this section shall be adjusted to increase each appropriate municipal distribution by the amount necessary to make corrections to apportionment valuations or distribution values made by the Director of the Division of Taxation in the Department of the Treasury pursuant to R.S.54:30-2. Notwithstanding any other provision of this section or any other provision of law to the contrary, in the event a municipality pays a county an amount for county purposes from the amount it received from its apportionment of taxes according to the limitations on the municipalities apportionment under section 4 of P.L.1980, c.11 (C.54:30A-61.1), the highest amount of that payment during calendar years 1994, 1995, and 1996 shall be paid annually directly to that county by the State Treasurer and be deducted from that municipality's distribution otherwise determined pursuant to subsection d. of this section.

d. For State fiscal year 2026, the amount credited to the "Municipal Property Tax Relief Fund" shall be $1,455,000,000 multiplied by the sum of 1.0 and the index rate or zero, whichever is greater, which shall be distributed pursuant to paragraph (1) of this subsection. For State fiscal year 2027 and for each fiscal year thereafter the amount equal to the amount credited in the prior fiscal year multiplied by the sum of 1.0 and the index rate or zero, whichever is greater, which shall be distributed pursuant to paragraph (1) of this subsection. As used in this subsection, "index rate" means the rate of annual percentage increase, rounded to the nearest half-percent, in the Implicit Price Deflator for State and Local Government Purchases of Goods and Services, computed and published quarterly by the United States Department of Commerce, Bureau of Economic Analysis, calculating the annual increase therein at the second calendar quarter which occurred in the next preceding State fiscal year. The Director of the Division of Local Government Services shall promulgate annually the index rate to apply in the next following State fiscal year which shall be the same as the index rate determined pursuant to section 4 of P.L.1983, c.49 (C.40A:4-45.1a).

(1) No municipality shall receive less than the amount received in Energy Tax Receipts Property Tax Relief Aid in calendar year 2024 or State fiscal year 2025 for a municipality operating under the State fiscal year. Any amount of aid distributed to municipalities in excess of the amount of aid distributed to municipalities from the “Energy Tax Receipts Property Tax Relief Fund in State fiscal year 2025 shall be distributed to municipalities pursuant to a formula developed by the Commissioner of Community Affairs that shall include:

i. population according to the most recent federal decennial census;

ii. median household income according to the most recent estimate by the United States Bureau of the Census;

iii. equalized property valuation per capita;

iv. the ratio of the average equalized value of residential property in the municipality to the average equalized value of residential property Statewide ;

v. the value of State property that is exempt from ad valorem taxation as a percentage of the total value of property in a municipality;

vi. the ratio of assessed value to true value of real property of the municipality, as published in the table of equalized valuations by the Director of the Division of Taxation in the Department of the Treasury, pursuant to section 1 of P.L.1954, c.86 (C.54:1-35.1), in relation to a minimum ratio of 85 percent;

vii. the level of distress experienced by a municipality as measured by the Municipal Revitalization Index established by the Department of Community Affairs; and

viii. a spending restraint factor calculated as the difference between estimated and actual spending, based on criteria established by the Commissioner of Community Affairs that predict such spending.

e. Annually, within two days of the transmittal of the State budget message to the Governor pursuant to section 11 of P.L.1944, c.112 (C.52:27B-20) the Director of the Division of Local Government Services shall notify each municipality of the amount of Municipal Property Tax Relief Aid payable to the municipality in the succeeding fiscal year pursuant to the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).

f. Any amount of aid distributed to a municipality from the “Municipal Property Tax Relief Aid Fund” in excess of the amount distributed to the municipality from the "Energy Tax Receipts Property Tax Relief Fund" during State fiscal year 2002 shall be used solely and exclusively by each municipality for the purpose of reducing the amount the municipality is required to raise by local property tax levy for municipal purposes.

g. As used in this section:

“State property” means land and improvements owned by the State and includes, but shall not be limited to, State offices, hospitals, institutions, schools, colleges, universities, garages, inspection stations, warehouses, barracks, and armories together with abutting vacant land held for future development for the same purposes. State property shall not include that used or held for future use for highway, bridge, or tunnel purposes.

2. If, in any State fiscal year, net payments under the "Sales and Use Tax Act," P.L.1966, c.30 (C.54:32B-1 et seq.) from sales and use of energy or utility services, net payments under the Corporation Business Tax Act (1945), P.L.1945, c.162 (C.54:10A-1 et seq.) from gas, electric, and gas and electric public utilities, whether municipal or otherwise, that were subject to tax pursuant to the provisions of P.L.1940, c.5 (C.54:30A-49 et seq.) prior to January 1, 1998, net payments under the Corporation Business Tax Act (1945), P.L.1945, c.162 (C.54:10A-1 et seq.) from telecommunications public utilities that were subject to tax pursuant to the provisions of P.L.1940, c.4 (C.54:30A-16 et seq.) as of April 1, 1997, net payments under P.L.1940, c.5 (C.54:30A-49 et seq.) from sewerage and water corporations, net payments under the "Transitional Energy Facility Assessment Act," P.L.1997, c.162 (C.54:30A-100 through C.54:30A-113) exceed $1,425,000,000, 75 percent of that amount of net payments in excess of $1,425,000,000 shall be credited to the "Municipal Property Tax Relief Aid Fund" in addition to the amount credited pursuant to section 1 of P.L. , c. (pending before the Legislature as this bill), for distribution to municipalities as additional aid.

3. a. The annual appropriations act for each State fiscal year commencing with fiscal year 2026 shall appropriate an amount not less than the amount determined pursuant to subsection d. of section 1 of P.L. , c. (pending before the Legislature as this bill) from the "Municipal Property Tax Relief Aid Fund" pursuant to the provisions of P.L. , c. (pending before the Legislature as this bill), for the purposes of that fund.

b. If the provisions of subsection a. of this section are not met on the effective date of an annual appropriations act for the State fiscal year, or if an amendment or supplement to an annual appropriations act for the State fiscal year should violate the provisions of subsection a. of this section, the Director of the Division of Budget and Accounting in the Department of the Treasury shall, not later than five days after the enactment of the annual appropriations act, or an amendment or supplement thereto, that violates the provisions of subsection a. of this section, certify in writing to the Director of the Division of Taxation that the requirements of subsection a. of this section have not been met.

c. The Director of the Division of Taxation shall, no later than five days after certification by the Director of the Division of Budget and Accounting in the Department of the Treasury that the provisions of subsection a. of this section have not been met or have been violated by an amendment or supplement to the annual appropriations act pursuant to subsection b. of this section, notify all taxpayers that have filed a return under the Corporation Business Tax Act (1945), P.L.1945, c.162 (C.54:10A-1 et seq.) during the previous calendar year, other than taxpayers that are gas, electric, and gas and electric, or telecommunications public utilities as defined pursuant to subsection (q) of section 4 of P.L.1945, c.162 (C.54:10A-4) as amended by P.L.1997, c.162, that the taxpayer shall have no liability pursuant to the provisions of P.L.1945, c.162 for any corporation business tax for the taxpayer's current privilege period, notwithstanding any other provision of law to the contrary.

4. Notwithstanding the provisions of P.L.1945, c.162 (C.54:10A-1 et seq.) or any other law to the contrary, for a privilege period of a taxpayer, other than a taxpayer that is a gas, electric, and gas and electric, or telecommunications public utility as defined pursuant to subsection (q) of section 4 of P.L.1945, c.162 (C.54:10A-4) as amended by section 2 of P.L.1997, c.162, in which the taxpayer would otherwise have had a tax liability or minimum tax due under P.L.1945, c.162, during which privilege period the Director of the Division of Budget and Accounting in the Department of the Treasury makes a certification that the provisions of subsection a. of section 3 of P.L. , c. (pending before the Legislature as this bill) have not been met or have been violated by an amendment or supplement to the annual appropriations act, there shall be no liability pursuant to the provisions of P.L.1945, c.162 for any such taxpayer's current privilege period.

5. The following sections are repealed:

Sections 1 through 4 of P.L.1997, c.167 (C.52:27D-438 through 441); and

Section 2 of P.L.1999, c.168 (C.52:27D-442).

6. This act shall take effect immediately and shall first apply to the State fiscal year beginning July 1, 2026.

STATEMENT

This bill repeals sections of law providing for the distribution Energy Tax Receipts Property Tax Relief and Consolidated Municipal Property Tax Relief Aid, and replaces the Energy Tax Receipts Property Tax Relief Aid program with a new initiative, the Municipal Property Tax Relief Program. The bill requires State revenues currently deposited into the Energy Tax Relief Property Tax Relief Fund to be deposited into the Municipal Property Tax Relief Fund and dedicates those revenues to support State aid payments to municipalities under the new program.

For State fiscal year 2026, the amount credited to the "Municipal Property Tax Relief Fund" is to be $1,455,000,000 multiplied by the sum of 1.0 and the index rate or zero, whichever is greater. For State fiscal year 2027 and for each fiscal year thereafter, the amount credited to the “Municipal Property Tax Relief Fund” would be equal to the amount credited to the fund in the prior fiscal year, multiplied by the sum of 1.0 and the index rate or zero, whichever is greater. Under the bill, no municipality would receive less than the amount received in Energy Tax Receipts Property Tax Relief Aid in calendar year 2024, or State fiscal year 2025 for a municipality that utilizes a State fiscal year budget cycle. State aid provided to municipalities in excess of $1,455,000,000 would be distributed pursuant to a formula developed by the Commissioner of Community Affairs, as specified in the bill.

Similar to the Energy Tax Receipts Property Tax Relief Act, the bill includes a provision providing that if the State does not make the appropriations and distributions required under the bill, the State would forgo the collection of certain corporation business tax revenues from all corporate taxpayers that are not public utilities for that tax year.

Amounts distributed to municipalities from the “Municipal Property Tax Relief Aid Fund” in excess of the amount distributed to the municipality from the "Energy Tax Receipts Property Tax Relief Fund" during the State fiscal year 2002 is to be used for the purpose of reducing the amount the municipality is required to raise by local property tax levy for municipal purposes.

Under the bill, in any year that certain net payments from specified sources to the State exceed $1.425 billion, 75 percent of the amount in excess of $1.425 billion would be required to be credited to the "Municipal Property Tax Relief Aid Fund" and distributed to municipalities as additional aid.