New Long Term Tax Abatement Law Takes Effect in New Jersey

Gov. Chris Christie recently signed legislation into law that imposes new requirements on municipalities that provide long term tax abatements. Most notably, cities and towns will be required to file the financial agreements required in relation to long term tax exemptions with their county finance officer and counsel, as well as make quarterly payments of their county share of payment in lieu of tax. New Tax Abatement Law Takes Effect in New Jersey

As previously discussed on the Scarinci Hollenbeck Business Law News Blog, many New Jersey municipalities, such as Jersey City and more recently Newark, use tax abatements to incentivize local development projects. Municipalities must enter into a written financial agreement with applicant developers that calls for the payment of an annual service charge in place of traditional real estate taxes on improvements for a specified period of time, typically at a much lower overall rate. The process is governed by local ordinances, as well New Jersey statutes such as the Five-Year Exemption and Abatement Law and the Long Term Tax Exemption Law.

The recently enacted legislation (S-3019/A-4771) imposes new conditions for financial agreements under the Long Term Tax Exemption Law. Below is a brief summary of the changes:

  • Financial agreements must be transmitted to the chief financial officer of the county, and the county counsel within 10 calendar days of the date of its adoption by the governing body.
  • Within 10 calendar days following the later of the effective date of an ordinance following its final adoption by the governing body approving the tax exemption or the execution of the financial agreement by the urban renewal entity, the municipal clerk must transmit a certified copy of the ordinance and financial agreement to the chief financial officer of the county and to the county counsel for informational purposes.
  • Municipalities are now required to remit to the county five percent of the portion of the payment in lieu of taxes actually collected from an urban renewal entity during a tax quarter rather than five percent of the amount due and payable.

The amended long term tax abatement took effect on January 19, 2016.

For more information about the new tax abatement law or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group.

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