2004 Annual Report - New Jersey...2004 Annual Report viii 2004 Annual Report million mark. By April 15, 2004, 1.1 million taxpayers had filed their New Jersey gross income tax returns

2004 AnnualReport

State of New JerseyDepartment of the TreasuryDivision of Taxation

June, 2005

The Honorable Richard J. CodeyActing Governor

Members of the New Jersey Legislature

Dear Acting Governor Codey and Legislators:

I am pleased to present the 2004 Annual Report of the Division of Taxation for the fiscalyear ended June 30, 2004.

The Division continues to expand its paperless filing systems and now mandates electronicfiling in certain cases. Most sales and use tax filers, certain partnerships, as well as alltaxpayers responsible for filing returns for the domestic security fee, the State hotel/moteloccupancy fee and municipal occupancy tax, the motor vehicle tire fee, the cosmetic medicalprocedures gross receipts tax, and the 9-1-1 system and emergency response fee are requiredto file and pay electronically.

As a result of our focus on paperless filing, we have seen tremendous growth in the numberof returns filed electronically � both business tax returns and individual income tax returns.We strongly believe that electronic filing and payment benefits both taxpayers and theDivision, saving time and money. We are steadfast in our commitment to provide cost-effective filing methods. To this end, our goal for the coming years will be to continueexpanding our paperless filing systems, making it easier for taxpayers to fulfill their reportingand payment obligations.

I trust that this report will provide a useful overview of both the Division�s operations aswell as our continued efforts to ensure the efficient administration of New Jersey�s taxlaws and regulations.

Respectfully submitted,

Robert K. ThompsonDirector

2004 Annual Report

CONTENTSHighlights ................................................................................................................................... vii

Organization and Activities .................................................................................................. 1Taxes and Programs Administered ................................................................................. 15

Table 1�Major State Tax Collections ................................................................................. 17Statutory Responsibilities ..................................................................................................... 18Air Toxics Surcharge ............................................................................................................ 19Alcoholic Beverage Tax ....................................................................................................... 19Atlantic City Casino Taxes and Fees .................................................................................... 19Atlantic City Luxury Sales Tax ............................................................................................. 20Atlantic City Tourism Promotion Fee ................................................................................... 20Cape May County Tourism Sales Tax .................................................................................. 20Cigarette Tax ......................................................................................................................... 21Corporation Business Tax ..................................................................................................... 21Corporation Income Tax ....................................................................................................... 26Domestic Security Fee .......................................................................................................... 26FAIR Rebate Program ........................................................................................................... 26Gross Income Tax ................................................................................................................. 27Homestead Rebate Program ................................................................................................. 30Hotel/Motel Occupancy Fee/Municipal Occupancy Tax ..................................................... 32Insurance Premiums Tax ....................................................................................................... 32Landfill Closure and Contingency Tax ................................................................................. 32Litter Control Fee ................................................................................................................. 33Local Property Tax ............................................................................................................... 33Motor Fuels Tax .................................................................................................................... 35NJ SAVER Rebate Program ................................................................................................. 35Outdoor Advertising Fee ...................................................................................................... 36Petroleum Products Gross Receipts Tax .............................................................................. 36Property Tax Reimbursement Program ................................................................................ 37Public Community Water System Tax .................................................................................. 37Public Utility Franchise Tax ................................................................................................. 38Public Utility Gross Receipts Tax ........................................................................................ 38Public Utility Excise Tax ...................................................................................................... 38Railroad Franchise Tax ......................................................................................................... 38Railroad Property Tax ........................................................................................................... 39Realty Transfer Fee ............................................................................................................... 39Sales and Use Tax ................................................................................................................. 41Savings Institution Tax ......................................................................................................... 44Solid Waste Services Tax ...................................................................................................... 44Spill Compensation and Control Tax.................................................................................... 44Tobacco Products Wholesale Sales and Use Tax ................................................................. 45Transfer Inheritance and Estate Taxes .................................................................................. 45Transitional Energy Facility Assessment .............................................................................. 47Uniform Transitional Utility Assessment ............................................................................. 47

Legislation and Court Decisions ....................................................................................... 49

Appendices ................................................................................................................................ 75A� General and Effective Property Tax Rates .................................................................... A-1B� Abstract of Ratables and Exemptions ........................................................................... B-1C� Assessed Value of Partial Exemptions and Abatements ................................................C-1D� County Tax Board Appeals ........................................................................................... D-1E� Taxable Value of Land and Improvements .................................................................... E-1F� Public Utility Taxes ........................................................................................................ F-1G� Individual Income Tax Returns�County Profile ......................................................... G-1H� Average Gross Income and Income Tax by County ..................................................... H-1I� Sales and Use Tax Collections by Business Type ........................................................... I-1J� Major Taxes�Comparison With Nearby States ............................................................. J-1

K� Major State Tax Rates ................................................................................................... K-1

Index

v

2004 Annual Reportvi

2004 Annual Reportvii

DIVISION OF TAXATION HIGHLIGHTS

Organization and Activities

• In September 2003, the Division of Taxation executed a Memorandum ofUnderstanding (MOU) with the Internal Revenue Service (IRS) relating tothe sharing of information collected by the IRS in its investigations of AbusiveTax Avoidance Transactions (ATAT). Pursuant to the MOU, the IRS will shareinformation with the Division of Taxation when it is collected during the courseof its audits and investigation, rather than waiting until they are completed.In past initiatives, the IRS shared information with the states at the conclusionof its investigative/audit activities. This change in process will permit the Divisionof Taxation to use resources more efficiently by avoiding duplication ofinvestigations and audits of taxpayers that are being conducted by the IRS. Asimilar MOU was executed in March 2004 between the Division of Taxation andthe Federation of State Tax Administrators to share information collected in theaudits and investigations of abusive tax avoidance transactions among the 40participating States.

• In January 2004, the Division of Taxation introduced a new telephone-based filingsystem for sales and use tax to complement the existing online filing system. At thesame time, the Division began transitioning 250,000 sales and use taxpayers tomandatory electronic filing and payment methods from filing and paying throughtraditional paper methods. The transition is scheduled to be completed in July 2005.

• The Safekeeping Unit of the Unclaimed Property Branch of the Division ofTaxation held its first auction in October 2003. The Safekeeping Unit is responsiblefor collecting tangible personal property that has been abandoned by its ownersand reuniting owners with their property. The auction offered an assortment ofjewelry, collectibles, and coins to buyers from across the region and netted$104,000. The proceeds are held in the Unclaimed Property Trust Fund in thenames of the owners until they can be located. Once a claim is filed, the ownerreceives a check for the sale price of the property, plus any interest that accruedfrom the date of the sale.

• The Unclaimed Property Branch collected $177 million in cash and $90 millionfrom the liquidation of securities in fiscal year 2004. In addition, securities worth$60 million were escheated to the State. $53 million was returned to claimants infiscal year 2004, up from $41 million returned in the previous year. The increaseis attributable to several things: as more property is turned over to the State, thenumber of claims has gone up; extensive outreach efforts and expanded newspaperadvertisements have heightened public awareness; and traffic on the unclaimedproperty Web site has grown as more people use the Internet.

• For the first time, the number of taxpayers who chose to file their individualincome tax returns using an electronic method rather than paper broke the one

2004 Annual Reportviii

2004 Annual Report

million mark. By April 15, 2004, 1.1 million taxpayers had filed their New Jerseygross income tax returns electronically. This represented an increase of 21% overthe previous tax season.

• Beginning with the fall 2003 issue, State Tax News was published solely inelectronic format. In addition to the same mix of articles, tax briefs, and summariesof court decisions that were included in the paper format, the electronic versionalso includes links to sources on our Web site that are updated on an ongoingbasis. This gives readers access to the most up-to-date information availablewhenever an issue of State Tax News is accessed.

• The Division of Taxation maintains two contracts with an outside debt collectionagency for collection of both known (deficient) and unknown (delinquent) taxliabilities. The vendor is paid on an hourly basis and the revenues collected underthese contracts far outweigh the costs to maintain them. In an effort to furtherdefray the costs of outsourced collection efforts and to shift the burden for thepayment of these services to the noncompliant taxpayers, in November 2003 theDivision implemented a Referral Cost Recovery (RCR) Fee. In addition to the tax,penalties or interest assessed, a 10% RCR fee is added to any case the Divisionrefers to the collection agency. For fiscal year 2004, taxpayers paid $2.58 millionin RCR fees.

• During the fall of 2002 the Division instituted a license suppression project for theapproximately 24,000 cigarette and motor fuels tax licenses. When a licensee�sbusiness tax account shows either delinquent or deficient items, they are notifiedthat their license will not be renewed until these items are resolved. Letters weresent to 2,785 licensees in January 2004 advising them of their outstandingliabilities. By the end of the fiscal year, the Division had received payment and/orinformation which resulted in the renewal of 1,568 of the licenses. Collectionsattributed to the project for fiscal year 2004 totaled $2.6 million. To date theproject has collected $5.9 million.

• In November of 1999, the Division became a participant in the Federal Offset ofIndividual Liability (FOIL) Program which was set up by the Federal ManagementSystem (FMS). Through the FOIL Program the federal government offsets federalpersonal income tax refunds against tax deficiencies of participating states. Affectedtaxpayers are sent notification by certified mail advising them of the intended set-off and giving them 60-days to protest the action. The Division receives paymentsboth directly from taxpayers sent in response to the notification, as well as from theFMS as a result of the offset. The Division collected revenues of $5.9 millionduring Fiscal Year 2004 and more than $34.5 million since becoming a participant.

• In fiscal year 2004, the Office of Criminal Investigation evaluated 520 complaintsof tax evasion, which resulted in the initiation of 32 criminal cases. One-hundredtwenty-eight (128) cases were forwarded for prosecution. At the end of the fiscalyear, there were 183 ongoing criminal investigations.

2004 Annual Report1

New Jersey Division of Taxation

ORGANIZATION AND ACTIVITIES

2004 Annual Report

Division of Taxation

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2004 Annual Report4

2004 Annual Report


5

AUDIT

This Activity is responsible for ensuring tax complianceand the collection of outstanding tax liabilities throughthe examination of information provided on tax returnsand by auditing records at the taxpayer�s place of busi-ness. The Division�s voluntary disclosure and nexus pro-grams are also administered by Audit Activity. This Ac-tivity consists of five branches: In-State Field Audit,Out-of-State Field Audit, Audit Services, Office Audit,and Individual Tax Audit.

In-State Field AuditThe In-State Field Audit Branch audits businesses to de-termine if they have complied with their obligations un-der New Jersey�s tax statutes. The audit examination ofthe taxpayer�s accounting records is comprehensive andcovers all taxes administered by the Division. In addition,as part of several interstate exchange agreements, infor-mation may be obtained for other taxing jurisdictions dur-ing the performance of the audit.

In addition to regular audit activities, the In-State FieldAudit Branch continues to pursue its cash audit initiative.This program is designed to strengthen compliance andcollection efforts as well as level the playing field forcompliant businesses. To help the Division identify thetypes of cash businesses that need assistance, a specialteam does pilot audits and helps develop procedures forother cash initiatives.

Out-of-State Field AuditThe Out-of-State Field Audit Branch is responsible forperforming field audits for all New Jersey taxes on alltaxpayers whose accounting records are maintained out-side of the State. Currently the Division has regional of-fices in Chicago (Illinois) and Anaheim (California), withField telecommuters based in Atlanta, Stamford, Houston,Dallas, and Denver.

Office AuditThe primary responsibility of the Office Audit Branch isthe audit and refund of Corporation Business Tax. Othertaxes audited include the Financial Business Tax, Insur-ance Premiums Tax, Ocean Marine Tax, Retaliatory Tax,Savings Institution Tax, various Sanitary Landfill Taxes,Spill Compensation and Control Tax, and the CorporationIncome Tax.

The Branch is comprised of nine audit groups. Threegroups are assigned general corporate desk audits, and

two groups issue tax clearance certificates. The SpecialAudit Group is responsible for administering the smallertaxes as well as reviewing Internal Revenue audit changes.The Nexus Audit Group has the responsibility to discoverand examine out-of-State entities to determine whetherthey have unreported tax filing and paying obligations.The Corporate Billing Group is responsible for reviewingall deficiencies generated by Corporation Business Taxfilings. The Corporate Refund Audit Group is responsiblefor auditing and approving all Corporation Business Taxrefund claims.

Individual Tax AuditThe Individual Tax Audit Branch is comprised of theGross Income Tax Audit Section and the Transfer Inheri-tance and Estate Tax Section.

Gross Income Tax Audit. The Gross Income Tax AuditSection is responsible for auditing Gross Income Tax re-turns filed with the State of New Jersey. The audits aredone using a variety of criteria developed within theBranch, utilizing information from the Internal RevenueService, neighboring states, and other New Jersey agen-cies, where applicable. The section also pursues delin-quent resident and nonresident taxpayers separately andin joint projects with other Division branches and theInternal Revenue Service.

Transfer Inheritance and Estate Tax. The TransferInheritance and Estate Tax Section is responsible for allphases of the administration of the two taxes, from offer-ing taxpayer services, to auditing, to the issuance ofwaivers.

Audit ServicesThe Audit Services Branch provides audit, technical, andclerical support for every aspect of the Audit Activity. Inaddition, the Branch administers the Alcoholic BeverageTax, Cigarette Tax, Motor Fuels Tax, Petroleum ProductsGross Receipts Tax, Public Utility Tax, Sales Tax (re-funds), Spill Compensation and Control Tax, and theWholesale Tobacco Products Tax.

The Audit Selection Group provides other Audit ActivityBranches with lists of audit candidates. This group proc-esses data from the Division�s internal databases, as wellas from outside sources such as the IRS, U.S. Customs,alcoholic beverage wholesalers, and various other thirdparties.

The Audit Billing Group provides billing capabilities forthe entire Activity. This process includes making the nec-essary adjustments to the Division�s systems to properly

2004 Annual Report


6

reflect taxpayers� accounts, creating bills, correspondingwith taxpayers, applying payments, and transferring filesfor administrative hearings or securing liabilities for fu-ture collection.

The Cooperative Interstate Tax Enforcement Group ad-ministers the agreement between New Jersey and NewYork as it relates to Sales and Use Taxes being chargedby vendors doing interstate business. This unit is also re-sponsible for the assessment of Use Tax on taxable pur-chases which are made out of State, and works with theU.S. Customs Service data in assessing Use Tax that isdue on imported goods being brought into New Jersey byboth businesses and individuals. It also administers theprovisions of the Jenkins Act as it relates to cigarettes be-ing purchased out of State.

The Motor Fuels Group administers the Motor Fuels Tax,Petroleum Products Gross Receipts Tax, and the SpillCompensation and Control Tax. The group is responsiblefor issuing licenses, determining proper bonding, and is-suing refunds. The group conducts office audits, recon-ciliations of taxpayer accounts, and provides taxpayerservices.

The Tobacco and Alcoholic Beverage Tax Group admin-isters the Cigarette Tax, Wholesale Tobacco ProductsTax, and the Alcoholic Beverage Tax. The group is re-sponsible for maintaining pricing requirements along withthe audit and investigation of any Tobacco Tax relatedactivity.

The Public Utility Tax Unit reviews taxpayer reports,conducts office audits, and maintains taxpayer accountsas they relate to various Energy and Utility taxes.

The Word Processing Unit provides centralized word pro-cessing and other clerical support for groups such as Indi-vidual Tax Audit, Nexus, and other areas that require as-sistance with high-volume projects.

This branch was also responsible for the creation of theLocal Area Network for Audit Activity relied on by boththe Gross Income Tax Branch and the Nexus team.

TECHNICAL SERVICES

Conference and AppealsThe Conference and Appeals Branch handles taxpayercomplaints and protests, and conducts informal adminis-trative hearings.

All incoming protests are evaluated by the Review Sec-tion for compliance with the statutory and regulatory pro-visions for Protests and Appeals. Within the Review Sec-tion, the Risk Management Group determines whether theState is at risk relative to the collection of the protestedassessment. Taxpayers may be asked either to pay theoutstanding assessment, furnish a surety bond, or furnisha letter of credit to stay collection. Absent adequate secu-rity, a Certificate of Debt and a �Finding of ResponsiblePerson� will be filed.

The Conferences Section provides informal administra-tive hearings. After the hearing process, conferees issuethe Division�s Final Determinations on assessments, no-tices of individual responsibility for trust fund taxes, de-nials of refunds, as well as determinations on nonmone-tary issues such as nexus, subjectivity, and the denial oforganizations� claims for exempt status.

Final Determinations can be appealed to the Tax Court ofNew Jersey. The Appeals Section tracks and managesthese cases, acting as the Division�s liaison with the Dep-uty Attorney General assigned to defend the Division ofTaxation.

Customer Services BranchCustomer Services is responsible for encouraging volun-tary compliance by providing taxpayers with the informa-tion and assistance they need to meet their New Jersey taxresponsibilities. Additionally, the Branch provides assis-tance to New Jersey residents in applying for and obtain-ing property tax rebates they may be eligible to receive.The Customer Services Branch provides assistancethrough phone services, automated systems, walk-in help,and training and outreach as described below.

� Customer Service Center is a state-of-the-art telephonefacility which can handle over 10,000 calls a day.Agents provide information and assistance on all taxesand programs administered by the Division of Taxation.

� NJ Income Tax TeleFile is a quick, easy, and conve-nient way for New Jersey residents to file their incometax returns from a Touch-tone telephone.

� NJ WebFile provides taxpayers the means to preparetheir income tax returns on a personal computer using

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the Division�s secure Internet site. There is nothing tobuy and no filing fees.

� NJ SAVER TeleFile allows homeowners to file theirNJ SAVER rebate applications by phone 24 hours aday/7 days a week during the NJ SAVER filing season.

� Business Paperless Telefiling System provides aneasy, convenient method for filing various taxes andfees using a Touch-tone phone.

� Automated Tax Information System offers taxpayersa wide variety of information and assistance from aTouch-tone phone including the Automated Refund In-quiry System, the Homestead Rebate InfoLine, NJSAVER InfoLine, New Jersey TaxTalk, and the FormsRequest System.

� NJ TaxFax makes State tax forms and other technicalinformation available to fax machine users.

� Trenton Regional Office, located in the main lobby ofthe Taxation Building in Trenton, is a walk-in officefor taxpayer assistance.

� Training & Outreach presents workshops for the pub-lic on a variety of topics, provides speakers on NewJersey tax-related matters, and administers the VITA(Volunteer Income Tax Assistance) and TCE (TaxCounseling for the Elderly) programs.

Information and PublicationsThe Information and Publications Branch produces in-formational publications and tax return instructions; re-sponds to taxpayer correspondence; resolves problems re-lating to the various property tax relief benefit programsadministered by the Division; mails forms, publications,and other Division material to the public; and providesgeneral technical information via the Web site.

Publications Unit is responsible for most of the Division�sinformational publications, including the instructions forindividual income tax returns and applications for theproperty tax relief programs administered by the Division;the quarterly newsletter for tax practitioners, the New Jer-sey State Tax News; the Annual Report of the Division ofTaxation; and brochures and notices. This unit also pro-vides technical tax material for the Division�s Web site.

E-Mail Unit responds to most of the general taxpayere-mail that comes to the Division directly or that is re-ferred here for reply.

Property Tax Relief Programs Unit responds to corre-spondence and resolves problems related to the State�sHomestead Rebate, NJ SAVER Rebate, and Property TaxReimbursement Programs. The unit assists New Jerseylegislators seeking to resolve constituents� problems, and

responds directly to taxpayer correspondence related tothese property tax relief programs.

Homestead Rebate Eligibility Review Unit is responsiblefor reviewing the eligibility of selected homestead rebateapplications. The unit makes eligibility determinationsbased on documentation submitted by selected applicantsin response to outreach notices.

Taxpayer Forms Services Unit mails out forms and pub-lications in response to taxpayers� requests and handlesbulk mailing for special projects from various branches ofthe Division.

Regulatory ServicesThe Regulatory Services Branch drafts rules, regulations,and notices for publication in the New Jersey Registerand the New Jersey State Tax News. It acts as the Division�sliaison with the Deputy Attorney General assigned to han-dle Division of Taxation technical and regulatory issues;and provides administrative and enforcement advice toDivision management and staff on all tax laws under thejurisdiction of the Division. Further, it drafts proposedlegislation; reviews legislation and prepares comments;provides technical assistance in the implementation ofnew tax laws; analyzes, researches, and responds to alltaxpayers� inquiries and requests for technical advice orletter rulings; and issues Technical Bulletins.

The Branch is charged with the responsibility of coordin-ating the processing of all Division rules and notices. TheAdministrative Practice Officer within the Branch main-tains contact with the Office of Administrative Law in or-der to oversee the promulgation of Division rules andtheir official publication in the New Jersey Register.

Exempt Organization Unit processes and makes deter-minations on applications for Sales and Use Tax ExemptOrganization Certificates.

Taxpayer AccountingThe Taxpayer Accounting Branch issues bills for under-payment of tax and penalties and interest, reviews billsand refund or credit requests for accuracy, adjusts ac-counts to correct errors, and responds to taxpayers� in-quiries regarding the status of their accounts.

Taxpayer Accounting is comprised of the Correspondenceand Review Sections for personal income tax, a BusinessTax Section, and a Support Section. The Branch is alsovery heavily involved in the Property Tax Reimburse-ment, NJ SAVER Rebate, and Homestead Rebate Pro-grams; and staffs a Tax Practitioner Hotline for tax prac-titioners who are unable to resolve client problemsthrough normal channels.

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COMPLIANCE

Special ProceduresThe Special Procedures Branch is responsible for the col-lection of overdue tax liabilities. The specific functions ofSpecial Procedures are as follows:

Attorney General Referrals. Whenever the Division hasexhausted its collection remedies without success, thecase may be referred to the Office of the Attorney Gen-eral for additional collection actions. Such actions mayinclude domesticating the Division of Taxation�s lien inanother state where assets of the debtor may have beenlocated, and/or instituting wage garnishment proceedings.

Bankruptcy. The primary function of the BankruptcySection is to collect delinquent taxes from debtors whohave filed for protection under Federal or State Insol-vency Statutes by submitting Proofs of Claim to the ap-propriate courts of jurisdiction.

Bulk Sales. The Bulk Sales Section is responsible for ex-amining the tax records of each business which disposesof its assets either by sale, transfer, or assignment, otherthan in the normal course of business. This area also is-sues Tax Clearance Certificates for Transfer of Retail Al-coholic Beverage Licenses.

Closing Agreements. This section processes applicationsfor compromise/settlement of tax debts under provisionsof the State Uniform Tax Procedure Law.

Judgments. The Judgment Section collects overdue lia-bilities from taxpayers who neglected or refused to paytaxes and/or file returns. The primary collection instru-ment is the Certificate of Debt, which is filed with theClerk of the New Jersey Superior Court. A Certificate ofDebt has the same force and effect as a Docketed Judg-ment adjudicated in any court of law in New Jersey.

Compliance ServicesThe Compliance Services Branch provides services to thetaxpaying public and the Division of Taxation; and workswith other State agencies such as the Division of MotorVehicles, the State Division of Alcoholic Beverage Con-trol (ABC), and the Lottery Commission.

ABC Clearance Section. This section, working with theState ABC, is responsible for issuing Alcoholic BeverageRetail Liquor License Clearance Certificates to licenseholders prior to their annual license renewal.

Delinquency Section. This section is responsible for issu-ing delinquency notifications when taxpayers fail to filerequired tax returns when due and for securing delinquentreturns and payments.

Deferred Payment Section. This section provides amethod for taxpayers to repay deficient taxes under for-mal payment plans and monitors active payment plans toensure compliance.

Casual Sales Section. This section works with the Divi-sion of Motor Vehicles to verify, assess, and collect theappropriate sales tax on purchases of motor vehicles,boats, and aircraft. Out-of-State purchases are alsoscrutinized.

Contract Liaison Unit. This area is the link to the privatecollection agencies contracted to collect delinquent anddeficient taxes for the Division. They assure that the ven-dors comply with Division policies and procedures andact as facilitators between Division and the collectionagencies� personnel.

This Branch is also responsible for the following pro-grams: Vendor Set-Off, a program that intercepts moniesdue to State vendors for services rendered and applies thepayments to deficient and delinquent taxes owed by thevendor; SOIL, Set-Off of Individual Liability, a programthat withholds income tax refunds and property tax re-bates from taxpayers who have tax debts; FOIL, FederalOffset of Individual Liabilities, a program that withholdsFederal income tax refunds and applies them against Statetax liabilities; Lottery, a project that verifies to the NewJersey Lottery Commission that prospective lottery agentsare current in their taxes; and CATCH, Citizens AgainstTax Cheats, that handles reports received about those sus-pected of not paying, reporting, or collecting taxes.

Field InvestigationsThe Field Investigations Branch is responsible for col-lections, post-judgment civil enforcement, canvassing,and investigation work. Branch personnel work from sixfield offices around the State. Walk-in taxpayer servicesare available at five of these locations.

Civil Tax Enforcement involves personal contact withbusinesses and individuals to secure delinquent tax returnsand tax underpayments. When necessary, the process in-volves recording Certificates of Debt (CODs), which areadministrative judgments, with the New Jersey SuperiorCourt followed by identifying and locating assets in orderto levy, seize, and finally sell those assets at public auction.

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Taxpayers are encouraged to set up payment plans to avoidthe seizure and sale of business and personal assets. Ques-tionable business or financial activity is referred to Audit orto the Office of Criminal Investigations.

Municipal Court Program permits the prosecution ofsome tax violations, such as chronic failure to file or paysales tax or income tax, as disorderly persons offenses inTrenton Municipal Court. Restitution is required in addi-tion to payment of court fines and costs. Probation maybe ordered instead of jail time.

Canvassing of businesses operating from fixed and tran-sient sites is a major tool to discover vendors who are notregistered to do business or are otherwise not in tax com-pliance. Weekend canvassing and the use of jeopardy as-sessment authority at flea markets, special events, and artand craft shows have been important enforcement toolsused against the underground cash economy.

Taxpayer Services is available to the public and to taxpractitioners who call or walk into the field offices. Tax-payers can obtain business and income tax forms as wellas copies of various tax information publications, receiveassistance with tax form preparation and business regis-tration, and get answers to tax questions. Payments fortax liabilities and completed tax forms are also accepted.

Special ProjectsThe Special Projects Branch focuses on transient out-of-State vendors whose business activity in New Jersey cre-ates nexus and triggers a tax obligation in this State.Branch investigators work with Division of Taxation audi-tors as well as various State and Federal agencies to iden-tify potential noncompliance and to enforce our tax laws.

Investigators utilize the authority granted in N.J.S.A.54:49-5 and 54:49-7 to make a jeopardy assessment anddemand immediate payment. Failure to satisfy a jeopardyassessment may result in immediate seizure of availableassets. Companies subject to the jeopardy assessmentprocess have ninety (90) days from the date of the actionto appeal the jeopardy assessment.

PROPERTYADMINISTRATION

Property Administration consists of two branches: LocalProperty and Unclaimed Property. The activities of theLocal Property Branch concern real and certain personalproperty, and those of Unclaimed Property pertain to in-tangible personal property and safe deposit box contents.

Unclaimed PropertyThe Unclaimed Property Branch is responsible for main-taining records of unclaimed property in the protectivecustody of the State. Unclaimed property consists offinancial assets such as savings accounts, wage checks,life insurance policies, dividends, stocks, and bonds.Property is �unclaimed� when it cannot be paid or deliv-ered to the apparent owner, and there is no communica-tion between the holder and the apparent owner for aspecified abandonment period. Any �Holder� of propertybelonging to another is required to turn that property overto the State Treasurer when it is presumed to beabandoned.

Audit Section conducts compliance audits of major cor-porate holders of unclaimed property. Corporate entitiesaudited include insurance companies, banks, brokeragefirms, mutual funds, retailers, utilities, etc. The State alsocontracts with two audit firms for out-of-State holders.

OperationsHolder Reporting Unit receives reports from holders ofunclaimed property that meets the abandonment criteria.The report section works with holders to assure the accu-racy of reports and their correct entry into the electronicsystem. This unit assists holders in complying with un-claimed property laws.

Administration Unit oversees the fiscal activity for Un-claimed Property. Furthermore, the unit is responsible forfinancial reporting to the Office of Management and Bud-get for five trust funds, assuring compliance with variousstatutes. It also does the accounting for the securitiesportfolio and provides checks and balances of paymentsfor all security- and cash-related claims.

Claims Processing Unit receives all claims for the returnof unclaimed property, researches and validates theclaims, and processes payments.

Intestate Estates Unit supervises and oversees the admin-istration of intestate (no will, no apparent heir) estatesthrough the court appointment of an administrator. If the

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search for heirs is unsuccessful, the administrator turnsover proceeds to the State, minus estate expenses andstatutory fees.

Owner Outreach Unit reunites reported owners with theirassets. This is achieved through legal advertisement,Internet listings, attendance at public venues, speaking atprofessional seminars, and the media. This proactive ef-fort also serves to enforce compliance by creating moreawareness of the Unclaimed Property Program.

Safekeeping Unit assures the timely and accurate inven-tory, processing, and marshalling of unclaimed tangiblesfound in safekeeping repositories. Owners� contents arereturned to their rightful owners or auctioned.

Local PropertyPolicy and PlanningCorrespondence/Exemptions/Legislative Analysis Unitreviews and prepares comments on proposed legislationconcerning property tax issues; develops procedures foruniform application of senior citizens� and veterans� de-ductions; handles issues on property tax exemption mat-ters; oversees the administration of the Farmland Assess-ment Act of 1964; prepares written guidelines, materials,and regulations on various property tax programs andstatutes for use by assessors; and responds to general tax-payer inquiries, correspondence, and legislative referralsregarding property tax matters.

Revaluations/Reassessments/Continuing Education Unitreviews and approves revaluation, reassessment and com-pliance programs and contracts; certifies the dollaramounts for State reimbursement to local taxing districtsfor property tax deductions; and administers assessors�continuing education and recertification programs.

County Tax Board Compliance/Assessor Exam/RealtyTransfer Fee Unit responds to inquiries on realty transferfees and monitors the dollar amount collected and re-funded; provides assistance and checks compliance forthe 21 county boards of taxation; coordinates and admin-isters biannual Tax Assessors� Certification Exams; pre-pares written guidelines and materials on various propertytax programs and statutes for use by county tax boardmembers and administrators.

Local Assessment ComplianceRailroad Property Unit classifies, assesses, and taxesrailroad properties; assesses and computes Railroad Fran-chise Tax; and determines railroad replacement revenuesfor municipalities in which railroad property is located.

Tax Maps Unit reviews and approves municipal tax mapsfor conformance to current specifications and as requiredfor municipal revaluations.

Local Assessor Compliance Unit reviews certain infor-mation that pertains to municipal tax assessors. The unitalso conducts periodic inspections of tax assessors� of-fices for compliance with statutory responsibilities, inparticular, municipalities that are reimbursed by the Statefor granting qualified senior citizens� and veterans� prop-erty tax deductions.

Field AssistanceField Assistance and Appraisal Unit provides direct as-sistance to 566 municipal tax assessors� offices and 21county tax boards in solving problems. Field staff also in-vestigate SR-1As for sales ratio purposes; gather andverify data for the Table of Equalized Valuations; in co-operation with the Deputy Attorney General assigned toDivision of Taxation matters, defend the Table of Equal-ized Valuations at appeal; perform audits and investiga-tions relating to local property matters; assist the TransferInheritance Tax Bureau with appraisals for inheritance taxpurposes; and maintain the Real Property AppraisalManual for New Jersey Assessors. (Special studies andinvestigations are conducted as required to meet unusualor unique circumstances.)

Sales Ratio oversees the Assessment-Sales Ratio Programand develops the annual Table of Equalized Valuationsfrom the data analyzed. The Table is used in the calcula-tion and distribution of State School Aid, to apportioncounty and regional school district taxes, and to measuredebt limits of local government units. The Table of Equal-ized Valuations shows the average ratio of assessed totrue value of real estate for each municipality in the State.

Technical Support provides assistance to county boardsof taxation with electronic transmission of sales data,rules and regulations regarding changes in response tolegislative changes affecting equalization, preparation ofthe county abstract of ratables, county equalization tables;and coordinates transmissions of data with data centersand county tax boards.

Property Administration personnel are members of theCounty Tax Board and Tax Assessors� Educational Com-mittees and take a leadership role in training, educationseminars, and courses which provide procedural informa-tion on all aspects of local property administration aimedat improving the performance of county boards andassessors.

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TECHNICAL SUPPORT

This Activity provides the Division of Taxation with thetechnological assistance required to administer the NewJersey State tax laws. These services include the develop-ment and management of the Division�s tax systems; thedesign and procurement of all tax forms and applications;the procurement, installation, and maintenance of com-puter hardware and software; the maintenance and up-dating of the Division�s Web site; and the technical train-ing of Division employees.

Additionally, Technical Support has responsibility fortelecommunications, including the Wide Area Network(WAN), the fiber optic equipment, and micro-based sys-tems that support applications throughout the Division.Technical Support personnel interact with representativesof other State and Federal agencies as well as outsidevendors to provide these services in the most efficientmanner possible. The activity is responsible for imple-menting new technological developments that are con-sistent with and that enhance the mission of the Division.

The Technical Support Activity is comprised of twobranches: Business Tax Systems and MIS SupportBranch, and Individual Tax Systems and IT SupportBranch.

Business Tax Systems and MIS SupportThe responsibilities of this Branch are divided into thefollowing major areas.

Forms is responsible for the design and specifications ofNew Jersey State tax forms, applications, and many re-lated publications. The analysts work in conjunction withthe Division of Revenue to ensure that all of the form re-quirements are met for the processing of the documents.The analysts coordinate with the Division of Purchaseand Property and printing contractors to provide qualityproducts consistent with these requirements. Other dutiesinclude attending bidders� conferences, performing siteinspections of vendor production facilities, and super-vising the production process to ensure quality control.

TULIPS & TAXNET Help Desk. This group possessesexpertise in the various tax and data systems designed foruse within the Division. It is their responsibility to assistDivision personnel on a daily basis in resolving problemsthey encounter with these systems. They are also respon-sible for performing table and file maintenance for thevarious systems, and the management of automated caseflow for various collection activities.

Business Tax Systems and Corporation Tax analysts areresponsible for maintenance and enhancements of exist-ing tax systems and the development of new systems.These groups coordinate their efforts with the Office ofInformation Technology (OIT) in order to ensure that theoperational needs of the Division are met. They providetechnical assistance to Division personnel and aid inproblem resolution with respect to the various systems.These analysts also act as liaisons for the Division withother State, Federal, and local agencies as required.

Individual Tax Systems and IT SupportThe responsibilities of this Branch are divided into fourmajor areas:

Individual Tax Systems. Analysts from this unit determinesystemic needs and provide data processing support in-cluding the development, monitoring, and maintenance ofthe individual income tax system and the various propertytax relief programs. They design all income tax forms andapplications for the property tax relief programs.

Web Development and Training. This team develops andmaintains the Division�s Web and Intranet sites. They arealso responsible for designing and conducting internaltechnical training for desktop software applications andother systems used Division-wide. PowerPoint and othermedia presentations are created by this unit for use by Di-vision management.

Network and Desktop Support. This unit administers theDivision�s WAN and is responsible for ensuring the avail-ability of all network devices and services, including theDivision�s e-mail system and remote access for all fieldoffice employees. In addition, they provide desktop hard-ware and software support for all in-house and fieldlocations.

Application Development. This unit develops and main-tains network-based computer applications and systemsfor Audit, Compliance, and other areas throughout theDivision.

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CHIEF OF STAFF

The Office of the Chief of Staff is responsible for repre-senting the Division of Taxation throughout State govern-ment concerning administrative matters, as well as pro-viding Division-wide support in the area of ManagementServices. The Office of the Chief of Staff works in con-junction with the Department of Treasury�s Fiscal Office,Human Resources, and Department of Personnel to pro-vide internal controls and facilitate requests regardingbudgetary needs, and to coordinate personnel matters, in-cluding disciplinary and grievance actions concerning Di-vision employees.

Management ServicesManagement Services is responsible for providing sup-port in the following areas:

Facilities Management. Responsible for coordinatingbuilding maintenance and management services for 12 of-fice locations throughout New Jersey and for the Division�sout-of-State locations. Facilities Management monitorsall construction projects and coordinates physical movesfor all Taxation locations. In addition, Facilities Manage-ment is responsible for security and providing employeeswith photo identification and building access cards.

Property & Forms. Responsible for the distribution offorms and supplies to the entire Division, as well as man-aging and maintaining the Division�s surplus property,equipment, and forms inventories.

Mail Services. Responsible for the pickup, sorting, re-cording, and delivery of mail for the Division, includingfield offices.

Records Management. Responsible for the Division�srecords management and storage. Maintains a recordsplacement and tracking system that enables Division per-sonnel to retrieve documents and files quickly andefficiently.

OFFICE OF CRIMINALINVESTIGATION

The Office of Criminal Investigation is responsible forthe investigation of alleged criminal violations of theState tax code. In addition, the responsibility of internalsecurity and internal control assessment falls within thejurisdiction of this area.

OCI works closely with prosecutors and investigators atall governmental levels. Liaison activities are encour-aged, and joint investigations are conducted in cases deal-ing with economic and financial crimes that have taxcompliance consequences. Currently, OCI is actively in-volved in cooperative efforts with the Federal Bureau ofInvestigation, the U.S. Attorney�s Office, and stateswithin the Northeast Corridor.

The Financial Investigations Unit and the Special Investi-gations Unit develop cases that indicate criminal viola-tions and willful intent to evade the tax laws of the Stateof New Jersey. Based on the findings of the investigation,recommendations for criminal prosecution are made tothe State Attorney General�s Office or to county prosecu-tors� offices. Cases are generated from projects withinthese units, referrals from other functions within the Divi-sion, participation in joint investigations with prosecu-tors� offices and other law enforcement agencies, andconcerned citizens.

Financial Investigations Unit is staffed by forensic audi-tors who detect and investigate criminal violations ofsales and use tax, gross income tax, corporation businesstax, and all other state tax laws. The unit works closelywith the Division�s Audit and Compliance activities toidentify and combat areas of willful noncompliance. Par-ticular emphasis is placed on prosecution of the theft ofentrusted funds taxes i.e., the failure to pay over sales taxcollected by retailers and gross income tax withheld byemployers acting as trustees on behalf of the State. Thisunit also investigates the filing of fraudulent returns forthe purpose of illegally obtaining refunds and paymentsfrom the State�s Homestead Rebate, NJ SAVER Rebate,and Earned Income Tax Credit Programs.

Special Investigations Unit is comprised of the CigaretteTax Enforcement Group and the Special Frauds Group.

The Cigarette Tax Enforcement Group�s Special Agentshave the statutory authority to investigate violations of

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New Jersey cigarette tax laws. Investigative resourceshave been directed towards the sale of unstamped ciga-rettes, smuggling, and counterfeiting.

The Special Frauds Group investigates allegations ofcriminal tax fraud related to organized crime, official cor-ruption, and violations of the State�s motor fuels tax andpetroleum products gross receipts tax laws, under whichspecial licenses are required. The group works in coop-eration with law enforcement agencies at all levels andparticipates in numerous joint investigations and case de-velopment projects.

Internal Security Unit handles sensitive matters, includ-ing integrity investigations, background investigations ofprospective employees, and assaults and threats made bypersons attempting to impede the functions of the Divi-sion. The unit also provides training to enable new em-ployees to recognize possible compromising situations.

OFFICE OF REVENUE ANDECONOMIC ANALYSIS

The Office of Revenue and Economic Analysis is respon-sible for providing revenue estimates of 13 major revenuesources which account for 90% of the State Budget. TheOffice also monitors New Jersey economic conditions,provides revenue analyses of proposed legislation, evalu-ates tax policy initiatives, and provides research supportto the Treasurer�s Office.

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COUNSEL TO THEDIRECTOR

DisclosureThe Disclosure office performs many administrative du-ties, including responding to internal and external re-quests for tax records, and recommending and imple-menting exchange agreements with other agencies. Someof the agencies Disclosure works with include the InternalRevenue Service, New Jersey State Police, Division ofCriminal Justice, Division of Gaming Enforcement, andother states through their Departments of Revenue/Taxa-tion. Through this activity the Division of Taxation, aswell as other taxing agencies throughout the UnitedStates, have been able to locate and identify tax evaderswho cross state lines.

The Disclosure office is the Division�s central point forreceipt of public requests for information made pursuantto the Open Public Records Act (OPRA). Disclosure re-views, researches, and prepares the Division�s responsesto all OPRA requests.

Office of Legislative AnalysisThe Office of Legislative Analysis (OLA) is responsiblefor reviewing all tax bills introduced in the legislature. Itevaluates the potential administrative, fiscal, and policyimplications of proposals which are scheduled or likely tobe scheduled for legislative action; it proposes amend-ments to ensure that a bill can be effectively implemented;prepares bill comments and fiscal notes; and recommendspositions to be taken by the State Treasurer.

In addition, OLA monitors legislative activity, keeps trackof when bills affecting the Division are scheduled forcommittee or house action, and follows the progress ofeach bill as it proceeds through the legislature. OLAworks closely with the Treasurer�s Office and, when a billis enacted into law, it often initiates and participates inthe implementation process.

Counsel to the Director also serves as liaison to theAttorney General�s Office.

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TAXES AND PROGRAMS ADMINISTERED


2004 Annual Report

Taxes and Programs Administered

17

Table 1�Major State Tax Collections (Net)Fiscal Years 2002�2004

% of % of % of % ChangeTax Source 20041 Total 2003 Total 2002 Total 2003�04

Collected by the Division:Alcoholic Beverage (General Fund) $ 98,357,152 0.5% $ 94,075,191 0.5% $ 92,280,499 0.5% 4.6%Casino Parking Fee2 15,952,127 0.1 15,545,375 0.1 15,638,832 0.1 2.6Cigarette (including dedicated fund) 767,167,296 3.6 633,536,846 3.2 391,228,753 2.2 21.1Corporation:

Corporation Business 2,370,169,715 11.3 2,525,446,781 12.9 1,171,456,857 6.5 � 6.1CBT Banks & Financials 141,432,025 0.7 128,451,019 0.7 41,649,356 0.2 10.1

Domestic Security Fee3 22,487,568 0.1 19,080,533 0.1 � 17.9Environmental Taxes:

Landfill Closure and Contingency 2,316,540 0.0 2,026,016 0.0 1,910,917 0.0 14.3Litter Control 14,704,529 0.1 13,552,543 0.1 2,946,956 0.0 8.5Public Community Water Systems 3,380,912 0.0 3,033,912 0.0 2,994,626 0.0 11.4Solid Waste Services 5,584,396 0.0 5,368,534 0.0 4,081,230 0.0 4.0Spill Compensation 18,289,389 0.1 15,093,332 0.1 14,782,033 0.1 21.2

Gross Income 7,400,732,606 35.1 6,735,282,357 34.4 6,836,992,402 38.2 9.9Hotel/Motel Occupancy Fee/Tax4 85,198,185 0.4 � � N/AInsurance Premiums 438,101,299 2.1 394,690,473 2.0 345,816,449 1.9 11.0Miscellaneous Revenues 758,900 0.0 905,691 0.0 13,030,294 0.1 � 16.2Motor Fuels 566,830,724 2.7 530,956,596 2.7 523,818,533 2.9 6.8Petroleum Products 216,247,008 1.0 214,417,697 1.1 219,700,547 1.2 0.9Public Utility Excise 9,320,698 0.0 9,549,773 0.0 9,876,021 0.1 � 2.4Railroad Franchise 620,559 0.0 1,097,901 0.0 7,689 0.0 � 43.5Railroad Property 3,659,744 0.0 3,134,560 0.0 3,303,490 0.0 16.8Sales:

Sales and Use 6,261,700,380 29.7 5,936,057,141 30.3 5,996,839,407 33.5 5.5Atlantic City Lux & Promo (Loc. Use) 35,161,029 0.2 25,029,066 0.1 25,926,411 0.1 40.5Tobacco Products Wholesale 10,345,355 0.0 9,292,175 0.0 15,627,272 0.1 11.3Cape May County Tourism (Loc. Use) 5,734,824 0.0 3,105,589 0.0 3,503,632 0.0 84.7

Savings Institution5 (11,912,325) � 0.1 9,485,029 0.0 10,556,862 0.1 N/ATransfer Inheritance and Estate 516,007,975 2.4 445,310,855 2.3 510,367,419 2.8 15.9Taxes Collected by the Division $18,998,348,610 90.2% $17,773,524,985 90.8% $16,254,336,485 90.7% 6.9%

Collected Outside the Division:State Athletic Control Board (tot. rev.) $ 584,833 0.0% $ 847,231 0.0% $ 389,352 0.0% � 31.0%Casino Revenue6 468,071,678 2.2 348,552,307 1.8 350,776,779 2.0 34.3Casino Control 64,645,888 0.3 65,386,670 0.3 62,221,650 0.3 � 1.1Lottery 794,971,914 3.8 765,401,159 3.9 754,549,833 4.2 3.9Motor Vehicle Fees 433,360,177 2.1 445,691,783 2.3 404,162,549 2.3 � 2.8Outdoor Advertising (total revenue)7 7,417,174 0.0 1,558,958 0.0 1,619,318 0.0 375.8Realty Transfer 297,534,743 1.4 163,931,201 0.8 90,003,903 0.5 81.5Taxes Collected Outside the Division $ 2,066,586,407 9.8% $ 1,791,369,309 9.2% $ 1,663,723,385 9.3% 15.4%

Total Major State Tax Collections $21,064,935,016 100.0% $19,564,894,293 100.0% $17,918,059,870 100.0% 7.7%

1The 2004 figures are subject to adjustment.250% of the Casino Parking Fee is deposited into the Casino Revenue Fund for Fiscal Years 2004 � 2006 (P.L. 2003, C. 116).3Domestic Security Fee initiated on August 1, 2002.4Hotel/Motel Occupancy Fee/Tax initiated on August 1, 2003.5Repealed for privilege periods/taxable years beginning after 2001; negative entry reflects prior-year refunds paid in 2004.6Figure includes new Atlantic City Casino Taxes and Fees, including 50% of the Casino Parking Fee, effective July 1, 2003.7Figure includes revised fees effective July 1, 2003.

Note: Some entries for prior years may be revised from earlier versions.Totals may not add due to independent rounding.

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Air Toxics Surcharge ................ 13:1D-59 et seq.

Alcoholic Beverage Tax...............54:41-1 et seq.

Atlantic City CasinoTaxes and Fees ............ 5:12-148.1 to 5:12-148.3

5:12-148.85:12-173.2

Atlantic City Luxury SalesTax ......................................... 40:48-8-15 et seq.

54:32B-24.1 et seq.

Atlantic City TourismPromotional Fee ......................40:48-8.45 et seq.

Cape May County TourismSales Tax ..................................... 40:54D-1 to 10

Cigarette Tax ............................. 54:40A-1 et seq.56:7-18 et seq.

Corporation Business (Net Incomeand Net Worth) Tax................... 54:10A-1 et seq.

CBT Banking Corporation .... 54:10A-1 et seq.CBT Financial Corporation .. 54:10A-1 et seq.

Corporation Income Tax ........... 54:10E-1 et seq.

Domestic Security Fee ..................... App.A:9-78

FAIR Rebate .............................54:4-8.57 et seq.

Gross Income Tax ....................... 54A:1-1 et seq.

Homestead Rebate ....................54:4-8.57 et seq.

Hotel/Motel Occupancy Fee andMunicipal Occupancy Tax ........ 54:32D-1 et seq.

Insurance Premiums Tax..............54:16-1 et seq.54:16A-1 et seq.

54:17-4 et seq.54:18A-1 et seq.

Landfill Closure and ContingencyTax .......................................... 13:1E-100 et seq.

Litter Control Fee ................... 13:1E-213 et seq.

Local Property Tax .........................54:4-1 et seq.

Motor Fuels Tax ...........................54:39-1 et seq.

NJ SAVER Rebate ...................... 54:4-8.58a and54:4-8.58b

Outdoor Advertising Fee .......... 54:4-11.1 et seq.

Petroleum Products GrossReceipts Tax ............................. 54:15B-1 et seq.

Property Tax Reimbursement ...54:4-8.67 et seq.

Public Community WaterSystem Tax................................ 58:12A-1 et seq.

Public Utility Taxes:Public Utility Excise, Franchise andGross Receipts Taxes .......... 54:30A-49 et seq.Railroad Franchise Tax ......... 54:29A-1 et seq.Railroad Property Tax ........... 54:29A-1 et seq.

Realty Transfer Fee ......................46:15-5 et seq.

Sales and Use Tax ..................... 54:32B-1 et seq.

Savings Institution Tax ............. 54:10D-1 et seq.

Solid Waste Services Tax ............ 13:1E-1 et seq.

Spill Compensation AndControl Tax ........................... 58:10-23.11 et seq.

Tobacco Products WholesaleSales and Use Tax ....................... 54:40B-1 to 14

Transfer Inheritance and Estate Taxes:Transfer Inheritance .................54:33-1 et seq.Estate .......................................54:38-1 et seq.

Transitional Energy FacilityAssessment ........................... 54:30A-100 et seq.

Uniform Transitional UtilityAssessment ........................... 54:30A-114 et seq.

Statutory Responsibilities

Responsibilities of the Division of Taxation arise under the following statutory provisions:

Tax N.J.S.A. Citation Tax N.J.S.A. Citation

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Air Toxics SurchargeDescriptionP.L. 2004, C. 51, imposes an Air Toxics Surcharge, effec-tive retroactively to January 1, 2004, upon the owner oroperator of each facility in New Jersey required to file aRelease and Pollution Prevention Report (RPPR) with theNew Jersey Department of Environmental Protection.The surcharge is based on the annual emissions of eachCategory 2, Category 3, and Category 4 toxic substanceas reported in the RPPR. The Air Toxics Surcharge due ina calendar year shall be based upon the data reported inthe RPPR for emissions that occurred two calendar yearsbefore the year for which the return is filed.

RateThe Air Toxics Surcharge is based on pounds of toxicsubstances released as stock or fugitive emissions as re-ported in the RPPR: $0.10 per pound of Category 2 toxicsubstances, $1.00 per pound of Category 3 toxic sub-stances, and $10.00 per pound of Category 4 toxic sub-stances. The law caps the surcharge at $500,000 annually.

Disposition of RevenuesThe Nuclear Power Plant Security Fund shall be creditedwith $2,000,000 from the Air Toxics Surcharges col-lected, with such monies used to improve security atnuclear power plants in New Jersey.

Alcoholic Beverage TaxDescriptionThe Alcoholic Beverage Tax is applied to the first sale ordelivery of alcohol to retailers in New Jersey and is basedupon the number of gallons sold or otherwise disposed ofin the State. The tax is collected from licensed manufac-turers, wholesalers, State beverage distributors, brewer-ies, wineries, and distilleries.

Sales to organizations of armed forces personnel are ex-empt; so are sales for medicinal, dental, industrial, andother nonbeverage uses.

RateType of Beverage Rate per GallonBeer .............................................................$0.12Liquor .........................................................$4.40Still Wine, Vermouth, Sparkling Wine .......$0.70

P.L. 1997, C. 153, reduced the tax rate on hard apple ci-ders containing between 3.2% and 7% of alcohol by vol-ume from $0.70/gallon to $0.12/gallon, effective Novem-ber 1, 1997. Hard apple cider containing over 7% alcoholby volume is taxed at $0.70 per gallon.

Disposition of RevenuesRevenues are deposited in the State Treasury for generalState use, except that beginning on July 1, 1992, $11 mil-lion of the tax revenue is deposited annually into the Al-cohol Education, Rehabilitation and Enforcement Fund. Asmall percentage also goes to the New Jersey Wine Pro-motion Account.

Atlantic City Casino Taxes andFeesDescriptionP.L. 2003, C. 116, imposes various taxes and fees on: thevalue of rooms, food, beverages, or entertainment givenaway for free or at a reduced price as a �complimentary�;multi-casino progressive slot machine revenue; theadjusted net income of casino licensees; casino hotelroom occupancies; and casino hotel parking.

P.L. 2004, C.128, enacted August 30, 2004, provides forthe gradual phase-out of the tax on the above casino�complimentaries� until the tax expires on June 30, 2009.It also transfers from the Division of Taxation to the Ca-sino Control Commission the responsibility for adminis-tering the Casino Complimentaries Tax, the Casino Ad-justed Net Income Tax, the Multi-Casino Slot MachineTax, the Casino Parking Fee, and the $3 Casino HotelOccupancy Fee. The Division of Taxation will not be col-lecting these taxes and fees effective September 2004.

RateTaxes and fees are assessed at the following rates:� 4.25% on the value of rooms, food, beverages, or

entertainment given away for free or at a reducedprice as a �complimentary.�

� 8.0% on multi-casino progressive slot machinerevenue.

� 7.5% on the adjusted net income of casino licensees.� $3.00 per day fee on each hotel room occupied

by a guest in a casino hotel.� $3.00 per day minimum casino hotel parking

charge.

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Disposition of RevenuesAll revenues from the taxes and fees are deposited intothe Casino Revenue Fund with the exception of the Ca-sino Parking Fee, which is collected and held in a specialfund by the State Treasurer. The funds are available to theCasino Reinvestment Development Authority to financepublic improvements in the Atlantic City area.

Atlantic City Luxury Sales TaxDescriptionThe Atlantic City Luxury Sales Tax applies to the receiptsfrom specified retail sales within Atlantic City, includingsales of alcoholic beverages for on-premises consump-tion; cover, minimum, or entertainment charges; roomrental in hotels, inns, rooming, or boarding houses; hiringof rolling chairs, beach chairs, and cabanas; and tickets ofadmission within Atlantic City.

Casual sales, sales to New Jersey or its political subdivi-sions, sales exempt under Federal law, and sales by achurch or nonprofit charitable organization are exempt.

RateThe rate of tax is 3% on sales of alcoholic beverages and9% on other taxable sales. The State sales tax rate is re-duced to the extent that the city rate exceeds 6%, and themaximum combined Atlantic City rate and New Jerseyrate may not exceed 12%.

Disposition of RevenuesRevenues are forwarded to the Sports and Exposition Au-thority for funding and operating Atlantic City Con-vention facilities.

Atlantic City TourismPromotion FeeDescriptionMunicipalities with convention center facilities supportedby a local retail sales tax are authorized under P.L. 1991,C. 376, to collect fees for the promotion of tourism, con-ventions, resorts, and casino gaming. The fee is imposedupon and is payable by all hotels, motels, roominghouses, etc., in such municipalities. Atlantic City is theonly New Jersey municipality that currently qualifies un-

der the law. For filing purposes, the tourism promotionalfee is reported and paid by the taxpayer on the CombinedAtlantic City Luxury Tax/State Sales Tax Return.

RateThe rate is $2 per day for each occupied room in the caseof hotels that provide casino gambling and $1 per day foreach occupied room in other hotels. The fee also appliesto �no charge� occupancies.

Disposition of RevenuesFees are collected by the Director, certified to the StateTreasurer, and distributed to the Atlantic City ConventionCenter Operating Authority.

Cape May County TourismSales TaxDescriptionThe Tourism Improvement and Development District Act,P.L. 1992, C. 165, authorized municipalities in Cape MayCounty to require certain businesses to collect an addi-tional 2% retail sales tax on tourism-related retail salesand/or pay a tourism development fee. At present, busi-nesses in Wildwood, North Wildwood, and WildwoodCrest are affected.

Tourism-related sales include the following items (if alsotaxable under the Sales and Use Tax Act): room rental inhotels, motels, or boarding houses; food and drink soldby restaurants, taverns, and other similar establishments,or by caterers (but not including vending machine sales);and admission charges to amusements (amusement rides,movie theaters, sporting, drama, or musical events) andcover charges in nightclubs and cabarets.

RateThe tax rate is 2% on tourism-related retail sales. The taxis in addition to the 6% State sales tax. Thus, sales sub-ject to the Cape May Tourism and the State sales tax aretaxable at 8%.

�The Phase 2 Tourism Funding Act� imposes a 1.85%tourism assessment on the rent for any occupancy of aroom in a hotel, motel, or other transient accommodation.The assessment is effective for all room rentals on or af-ter April 1, 2003.

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Disposition of RevenuesRevenues are collected by the State Treasurer and areplaced in a special reserve fund to pay principal andinterest on bonds and notes issued by the tourism author-ity for tourism promotion projects and activities. The1.85% tourism assessment is administered by the Divi-sion of Taxation, and revenues collected are deposited ina tourism assessment fund.

Cigarette TaxDescriptionThe Cigarette Tax is collected primarily from licenseddistributors who receive cigarettes directly from out-of-State manufacturers. Unless otherwise provided by law,every package of cigarettes must be stamped before beingtransferred from the original acquirer in New Jersey. Thistax is not imposed on other tobacco products.

Sales to the United States Government or the VeteransAdministration, and sales in interstate commerce areexempt.

RateEffective July 1, 2004, the tax rate is $2.40 per pack of20 cigarettes. Formerly, the tax was $2.05 per pack of 20cigarettes.

A distributor is allowed a .002195% discount on the pur-chase of 1,000 or more stamps or meter impressions.

Disposition of RevenuesRevenues are deposited in the State Treasury for generalState use. Pursuant to P.L. 1997, C. 264, initial collec-tions of $150 million are deposited in the Health CareSubsidy Fund.

Corporation Business TaxDescriptionThe Corporation Business Tax Act imposes a franchisetax on a domestic corporation for the privilege of existingas a corporation under New Jersey law, and on a foreigncorporation for the privilege of having or exercising its

corporate charter in this State or doing business, employ-ing or owning capital or property, maintaining an office,deriving receipts, or engaging in contracts in New Jersey.

The tax applies to all domestic corporations and all for-eign corporations having a taxable status unless specifi-cally exempt. The tax also applies to joint-stockcompanies or associations, business trusts, limited part-nership associations, financial business corporations, andbanking corporations, including national banks. Also, acorporation is defined as any other entity classified as acorporation for Federal income tax purposes and anystate or Federally chartered building and loan associationor savings and loan association.

Taxpayers must pay the greater of their liability under thenet income tax or the alternative minimum assessment.The income-based tax is measured by that portion of thenet income allocable to New Jersey. The tax applies tonet income for the firm�s accounting period (calendaryear or fiscal year), or any part thereof during which thecorporation has a taxable status within New Jersey. Thealternative minimum assessment is based on apportionedgross receipts or gross profits.

Exempt from the tax are certain agricultural cooperativeassociations; Federal corporations which are exempt fromstate taxation; corporations created under the limited-dividend housing corporation law; nonprofit cemeterycorporations; nonprofit corporations without capitalstock; nonstock mutual housing corporations; railroadand canal corporations; sewerage and water corporations;insurance companies subject to premiums tax; and certainmunicipal electric corporations.

RateThe tax rate is 9% upon entire net income, or the portionof entire net income allocated to New Jersey. For taxyears beginning in calendar year 2002 and thereafter, theminimum Corporation Business Tax is $500 or $2,000 forall members of a controlled or affiliated group ofcorporations if the aggregate annual payroll for all corpo-rations is $5 million or more. Rates for New Jersey S cor-porations were also changed in 2002. New Jersey Scorporations with an entire net income of $100,000 orless are still subject to the minimum tax, but if entire netincome exceeds $100,000, the rate for 2002 through 2006is 1.33%.

For accounting years beginning on and after January 1,2002, the 7.5% Corporation Business Tax rate for corpo-rations with entire net income of $100,000 or less is

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reduced to 6.5% for corporations with entire net incomeof $50,000 or less.

Disposition of RevenuesRevenues collected from general business corporationsare deposited in the State Treasury for general State use.Revenues collected from banking and financial corpora-tions are distributed 25% to counties, 25% to municipal-ities, and 50% to the State.

Article 8, Section 2, paragraph 6 of the State Constitutionwas amended to dedicate 4% of Corporation BusinessTax revenue to fund hazardous discharge cleanup, under-ground storage tank improvements, and surface waterquality projects.

Chapter 40, P.L. 2002, Section 32 created within the Gen-eral Fund a restricted reserve fund to be known as the�Corporation Business Tax Excess Revenue Fund.�

HistoryCorporation Business Taxes date back to 1884 when afranchise tax was imposed upon all domestic corpora-tions. Between 1884 and 1946, the franchise tax wasbased upon the total amount of capital stock issued by thetaxpayer and outstanding as of January 1 of each year(C. 159, P.L. 1884).

There was no franchise tax on foreign corporations priorto 1936, when provision was made for an annual tax(C. 264, P.L. 1936). This tax was replaced in 1937 (C. 25,P.L. 1937) with a new franchise tax providing for alloca-tion of capital stock of foreign corporations.

Effective January 1, 1946 (C. 162, P.L. 1945), the tax be-came a net worth tax applicable to both domestic and for-eign corporations and measured by net worth allocated toNew Jersey. Allocation was measured by the greater of anassets factor or a three-part business factor (property,sales, and payroll).

Chapter 88, Laws of 1954, increased the tax on allocablenet worth from 8⁄10 mills per $1 to 2 mills per $1.

Chapter 63, Laws of 1958, amended the CorporationBusiness Tax Act by adding a tax at 1¾% based upon al-located net income to the tax based upon allocated networth. The 1958 amendment also changed the tax yearfrom a calendar year for all corporations to a privilegeperiod coinciding with the accounting year for eachtaxpayer.

In 1975, the Corporation Business Tax was imposed onbanking corporations and incorporated financialbusinesses.

In 1982, there was enacted into law a measure phasingout the Corporation Business Tax on net worth. The taxwas phased out at 25% per year over a four-year periodwith taxpayers whose accounting or privilege periods be-gan on or after April 1, 1983 (C. 55, P.L. 1982). The networth tax has been eliminated for periods beginning afterJune 30, 1986.

Net Income Tax rates have changed as follows:

Effective Date Rate

January 1, 1959 (C. 63, P.L. 1958) 1¾%January 1, 1967 (C. 134, P.L. 1966) 3¼January 1, 1968 (C. 112, P.L. 1968) 4¼January 1, 1972 (C. 25, P.L. 1972) 5½January 1, 1975 (C. 162, P.L. 1975) 7½January 1, 1980 (C. 280, P.L. 1980) 9

For taxable years ending after June 30, 1984, a carryoverof net operating loss was allowed as a deduction from en-tire net income for seven years following the year of theloss (C. 143, P.L.1985, approved April 22, 1985).

A surtax of 0.417% was invoked for privilege periodsending between July 1, 1990, and June 30, 1991; and0.375% for privilege periods ending between July 1,1989, and June 30, 1990, and July 1, 1991, throughJune 30, 1993. The 0.375% surtax on corporate net in-come was repealed effective January 1, 1994. The surtaxhad been scheduled to end July 1, 1994 (C. 3, P.L. 1994).

A new jobs investment tax credit, enacted in 1993 (C. 170),allows corporations to take a credit against CorporationBusiness Tax and property taxes for qualified investmentsin new or expanded business facilities resulting in newjobs in the State. The credit against Corporation BusinessTax is for up to 50% of the portion of the tax that resultsfrom investment in new or expanded facilities. The creditwas extended to midsize businesses by P.L. 2002, C. 40.P.L. 1993, Chapter 171, allows for a credit against Corpo-ration Business Tax for investment in qualified equip-ment. The credit is 2% of the cost of qualified machinerypurchased (the investment credit base). Taxpayers takingthe 2% equipment credit may also take an employmentcredit of $1,000 per new employee (up to a maximum of3% of the investment credit base). A small business ben-efit was added by P.L. 2004, C. 65. Chapter 175 P.L. 1993allows for a credit for increased research activities.

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Two changes in 1993 brought New Jersey corporation taxlaw into closer alignment with Federal corporation taxlaw. Chapter 172 allows corporations to use the Federalmodified accelerated cost recovery system for deprecia-tion of property under the New Jersey Corporation Busi-ness Tax for property placed in service for accountingyears beginning after July 7, 1993. Chapter 173 allows,for the first time, an S election to be made under New Jer-sey law. As noted above, a New Jersey S corporation paysa reduced tax rate on that portion of entire net income notsubject to Federal corporate income tax. The shareholderis taxed on net pro rata share of S corporation income un-der the Gross Income Tax.

The allocation formula for multistate corporations waschanged in 1995. Under prior law, multistate corporationincome was allocated to New Jersey based on equallyweighted New Jersey property, payroll, and sales com-pared to total property, payroll, and sales. The new for-mula counts sales twice, so that sales account for half theallocation formula (C. 245, P.L. 1995).

The legislature continued to provide additional tax ben-efits for corporation business taxpayers. These include atax benefit certificate transfer program to assist certainemerging companies (C. 334, P.L. 1997), later modifiedby P.L. 1999, C. 140 and P.L. 2004 C. 65, and supple-mented by a credit transfer program P.L. 2004, C. 65, theSmall New Jersey Based High Technology Business In-vestment Tax Credit Act (C. 349, P.L. 1997), thecarryforward of net operating losses under the Corpora-tion Business Tax for certain taxpayers (C. 350, P.L.1997), the extension of the carryforward of the researchand development tax credit (C. 351, P.L. 1997), and theNeighborhood and Business Child Care Tax IncentiveProgram (C. 102, P.L. 1999).

Other credits against Corporate Business Tax liabilityhave also been enacted for effluent equipment (P.L. 2001,C. 321), neighborhood revitalization (P.L. 2001, C. 415),HMO credit (P.L. 2000, C. 12), the economic recoverytax credit (P.L. 2002, C. 43), and the remediation taxcredit (P.L. 2003, C. 296).

Electric and telephone companies were subjected to theCorporation Business Tax effective January 1, 1999.

Chapter 369, P.L. 1999, excludes certain hedge fund ac-tivity income of corporations of foreign nations fromtaxation under the Corporation Business Tax.

Chapter 12, P.L. 2000, provides that holders and formerholders of a certificate of authority to operate a healthmaintenance organization are allowed a Corporation

Business Tax credit for certain payments they are re-quired to make.

Chapter 23, P.L. 2001, provides for a three-year phase-outof the corporate taxation of the regular income of S corpo-rations with annual income in excess of $100,000, and forS corporations whose net income is under $100,000 whoseprivilege periods end on or after July 1, 2001. Also, the billprovides for the adjusted minimum tax amount to berounded to the next highest multiple of $10.

Chapter 136, P.L. 2001, provides for the CorporationBusiness Tax payment obligations of certain partnershipsand limited liability companies for privilege periods be-ginning on and after January 1, 2001.

Chapter 40, P.L. 2002, among other things, effects themost extensive changes in the Corporation Business Taxsince 1945. This law provides for a partnership filing fee,an alternative minimum assessment, nonresident partnerwithholding, a �throwout rule� on corporations apportion-ing income outside New Jersey, and new rules for relatedparty transactions. It also increases the minimum tax andbroadens the definition of corporations that are subject tothis tax.

Chapter 43, P.L. 2002, includes some provisions for in-centives in the form of Corporation Business Tax creditsto qualifying taxpayers engaged in a business in the quali-fied municipality during the municipality�s �period of re-habilitation and economic recovery.�

P.L. 2004, C. 47, limits the Corporation Business Tax ap-plication of net operating losses to 50% of taxable in-come for tax years 2004 and 2005.

P.L. 2004, C. 65, decouples Corporation Business Taxfrom changes in Federal bonus depreciation and certainexpensing principles under IRC section 179.

Installment Payments of Estimated TaxTaxpayers are required to make installment payments ofestimated tax. The requirement for making these pay-ments is based on the amount of the total tax liabilityshown on the most recent return.

(a) If the total tax liability is $500 or more, the taxpayermust make installment payments. These payments aredue on or before the 15th day of the 4th, 6th, 9th, and12th month of the tax year.

(b) If the total tax liability is less than $500, installmentpayments may be made as shown in (a) above or, inlieu of making installment payments, the taxpayermay make a payment of 50% of the total tax liability.

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The Business Tax Reform Act (C. 40, P.L. 2002) providesfor two significant changes regarding corporate estimatedtax. First, for the tax year beginning on or after January 1,2002, all corporations must base their fourth quarter pay-ment on 25% of the actual 2002 tax computed under thechanges to avoid penalty. This one-time change super-sedes the prior rules for estimated returns. The fourthquarter payment must be 25% of the year 2002 liabilityeven if the corporation may have already satisfied all orsubstantially all of its year 2002 corporation tax liabilitythrough prior year�s overpayments or quarterly estimatedpayments in the first three quarters. The corporation mustnonetheless remit 25% of the year 2002 tax to avoidpenalties.

Secondly, for large corporations with sales of over $50million, beginning with the year 2003, the second andthird quarter payments, normally due on the 15th day ofthe 6th and 9th months, will be combined into a single50% payment due on the 15th day of the 6th month. Nopayments will be due for such corporations on the 15thday of the 9th month, and normal 25% payments will bedue in the 4th and 12th months.

PartnershipsChapter 40, P.L. 2002, establishes a $150 per partner filingfee for partnerships, LLPs, and LLCs deriving incomefrom New Jersey sources. In general, the $150 per partnerfee is based on the number of K-1s issued. For profes-sional service corporations, the $150 fee applies for eachregistered professional who owns or is employed by theenterprise and is calculated using a quarterly average. Inaddition to the filing fee for the initial year 2002, a 50%prepayment towards 2003 is also required with the 2002New Jersey partnership return. The annual fee is cappedat $250,000.

New Jersey partnership payments made on behalf of out-of-State corporate and noncorporate partners are based ontaxable income whether the income is distributed or un-distributed and are designated as a tax at a rate of 9% fornonresident corporate partners and 6.37% for noncorpo-rate partners. Qualified investment partnerships and part-nerships listed on a U.S. national stock exchange are notsubject to the tax. The calculation is based on the partner-ship�s �entire net income� multiplied by the partnership�sNew Jersey apportionment percentages computed underthe Corporation Business Tax, not under Gross IncomeTax.

Chapter 40, P.L. 2002, subjects savings banks and sav-ings and loan associations to the Corporation BusinessTax and repeals the Savings Institution Tax and the Cor-poration Income Tax.

Banking and Financial CorporationsBanking and financial corporations are subject to theCorporation Business Tax Act at the rate of 9% on net in-come or to the lesser rates stated above if their incomemeets those thresholds.

Chapter 170, P.L. 1975, provides that during each ofprivilege years 1976, 1977, and 1978, the amount paid byeach banking corporation as taxes shall be the greater of(1) the amount which such banking corporation paid incalendar year 1975 as Bank Stock Tax, or (2) a sum equalto total of taxes paid by such banking corporation asCorporation Business Tax and Business Personal Prop-erty Tax.

Formerly, banks were subject to a tax of 1.5% on networth under the Bank Stock Tax Act. Bank Stock Taxwas formerly administered by the Division of Taxationand the 21 separate County Boards of Taxation. Thecorporate tax upon banks is now administered solely bythe Division.

Financial business corporations were formerly subject tothe Financial Business Tax. These included such corpora-tions as small loan companies and mortgage finance com-panies which are now subject to Corporation Business Tax.

Chapter 171, P.L. 1975, provides that during each of theyears 1976, 1977, and 1978, each financial business cor-poration shall pay as taxes, the greater of (1) a sum equalto the amount such financial business corporation paidunder the Financial Business Tax Act in the calendar year1975, or (2) a sum equal to the total of the taxes payableby such financial business corporation pursuant to theCorporation Business Tax Act. Chapter 40, P.L. 1978, ex-tended the save harmless provision through 1979. It ex-pired in 1980. As a result of changes in the Federal andState banking laws, interstate banking is now permitted(C. 17, P.L. 1996). An administrative rule adopted by theDivision of Taxation (N.J.A.C. 18:7-1.14, effectiveJune 16, 1997) sets forth certain conditions under whichforeign banks and certain domestic banks will be taxed inNew Jersey.

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Corporation Business Tax Collections(In Millions)

Banking and Financial Corporations

Fiscal Year Collections1995 44,499,1981996 96,860,0001997 89,716,7921998 56,234,6741999 61,716,1122000 33,483,6922001 51,971,5162002 41,649,3562003 128,451,0192004 141,432,025

Investment CompaniesA taxpayer qualifying and electing to be taxed as an in-vestment company is subject to an allocation percentageof 40% of the net income base. Investment companies aresubject to a minimum tax of $500.

Regulated Investment Company means any corporationwhich, for a period covered by its reports, is registeredand regulated under the Investment Company Act of 1940(54 Stat. 789), as amended.

The Corporation Business Tax on regulated investmentcompanies was eliminated (P.L. 1983, C. 75), approvedon February 24, 1983. Regulated investment companiesin New Jersey were formerly taxed on both entire networth and entire net income. These taxes were eliminatedand a flat tax of $500 per year is imposed.

Real estate investment trusts qualifying and electing to betaxed as such under Federal law are taxed at 4% of entirenet income.

Deferred Predissolution PaymentChapter 367, P.L. 1973, approved in 1974, eliminated therequirement for a certificate to be obtained in the case ofmerger or consolidation involving a domestic or foreigncorporation qualified to transact business in New Jersey.It also provided alternatives to actual payment of taxes,or payment on account of such taxes by providing in lieuthereof, for a written undertaking to be given by a domes-tic corporation, or a foreign corporation authorized totransact business in New Jersey, to pay all taxes whenpayable on behalf of a corporation which otherwisewould have to pay all taxes prior to taking certain corpo-rate actions.

Allocation FactorIf a taxpayer has a regular place of business outside NewJersey, its tax liability is measured by net income allo-cated to New Jersey, according to a three-fraction for-mula based on an average of property, payroll, and sales,which is counted twice. The factor is computed by addingthe percentage of the property and payroll fractions, and afraction representing two times the sales receipts, and di-viding the total by four.

The Business Tax Reform Act (P.L. 2002, C. 40) imposesa �throwout rule� on corporations apportioning incomeoutside the State. The tax effect of the throwout rule onan affiliated or controlled group having $20 million ormore in net income is capped at $5 million.

Chapter 40, P.L. 2002 also introduced an alternativeminimum assessment (AMA) on apportioned gross re-ceipts or gross profits of C corporations when the AMAexceeds the normal Corporation Business Tax. The as-sessment is based on either gross receipts or gross profits,with the taxpayer electing which formula to use. This for-mula must also be used for the next four tax periods. Scorporations, professional corporations, investment com-panies, and unincorporated businesses are exempt fromthe AMA. The AMA also applies to non-New Jersey busi-nesses deriving income from New Jersey sources with orwithout physical presence in the State that are not cur-rently subject to the Corporation Business Tax.

The use of net operating losses is suspended for tax years2002 and 2003. For 2004 and 2005 net operating lossesare limited to 50% of taxable income.

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Corporation Business Tax Collections(In Millions)

General Business Corporations

Fiscal Year Collections1995 1,085,502,0321996 1,171,509,1591997 1,286,447,4751998 1,231,629,1721999 1,402,906,6222000 1,452,135,8082001 1,389,486,3102002 1,171,456,8572003 2,525,446,7812004 2,370,169,715

Corporation Income TaxDescriptionCorporation Income Tax applied to corporations derivingincome from sources within the State which are not sub-ject to the tax imposed under the Corporation BusinessTax Act. However, the tax became practically obsoletedue to Corporation Business Tax regulations as well asNew Jersey�s adoption of the Multistate Tax Commis-sion�s guidelines and the U.S. Supreme Court decision,Quill Corp. v. North Dakota, 112 S.Ct. 1904 (1992), aswell as the New Jersey Tax Court decision in PomcoGraphics v. Division of Taxation, 13 N.J. Tax 578 (1993).

RateThe Corporation Income Tax was repealed, applicable toprivilege periods or taxable years beginning after 2001.Previously, the tax was imposed at the rate of 7¼% of en-tire net income as allocated to New Jersey.

Disposition of RevenuesRevenues are deposited in the State Treasury for generalState use.

Domestic Security FeeDescriptionA statutory assessment designated as the �Domestic Secu-rity Fee� is imposed under P.L. 2002, C. 34 on motorvehicle rental companies for each day or part thereof thata motor vehicle is rented under rental agreements of notmore than 28 days. This fee applies with respect to rentalagreements in New Jersey entered into on or afterAugust 1, 2002.

RateThe $2.00 per day rental fee applies to the first 28 days ofa rental agreement for a rental motor vehicle with thesame renter; thus, the maximum rental fee in the aggre-gate is $56.00 even if the actual rental extends beyond 28days.

Disposition of RevenuesThe fee is paid to the Division of Taxation for deposit inthe New Jersey Domestic Security Account established inthe General Fund.

FAIR Rebate ProgramThe 2004 Homestead Property Tax Rebate Act (P.L. 2004,C. 40) was given the acronym �FAIR� which stands forFAir and Immediate Relief. The Act folded the NJ SAVERRebate Program into the existing Homestead Rebate Pro-gram, and combined certain aspects of each, eliminatingthe NJ SAVER rebate for tax years 2004 and thereafter.See Homestead Rebate Program on page 30 for moreinformation.

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Gross Income TaxDescriptionThis graduated tax is levied on gross income earned orreceived after June 30, 1976, by New Jersey resident andnonresident individuals, estates, and trusts.

RateRates for tax years beginning on or after January 1, 2004,range from 1.4% � 8.97%.

Filing ThresholdFor tax years beginning before January 1, 1994, filerswith incomes of $3,000 or less for the entire year ($1,500or less for married persons filing separately) pay no tax.For the 1994 to 1998 tax years, filers with incomes of$7,500 or less for the entire year ($3,750 or less for mar-ried persons filing separately) pay no tax. The incomelevels were raised for the 1999 tax year as part of a three-year phase-in of higher filing thresholds, and filers withincomes of $10,000 or less for the entire year ($5,000 orless for married persons filing separately) pay no tax. Fortax year 2000, the filing threshold was $10,000 or less forthe entire year (single filers and estates and trusts),$15,000 or less for the entire year (married couples filingjointly, heads of households, and surviving spouses), and$7,500 or less for the entire year (married persons filingseparately). For tax year 2001 and thereafter, the filingthreshold is $10,000 or less for the entire year (single fil-ers, married persons filing separately, and estates andtrusts), and $20,000 or less for the entire year (marriedcouples filing jointly, heads of households, and survivingspouses).

Exemptions� Taxpayer, $1,000.

� Taxpayer�s spouse or domestic partner who does notfile separately, $1,000.

� Taxpayer 65 years old or more, additional $1,000;same for spouse age 65 or older who does not fileseparately.

� Blind or totally disabled taxpayer, additional $1,000;same for blind or totally disabled spouse who does notfile separately.

� Taxpayer�s dependent, $1,500.

� Taxpayer�s dependent under age 22 and attending col-lege full time, additional $1,000.

Deductions� Payments of alimony or for separate maintenance are

deductible by the payer if reported as income by thepayee.

� Unreimbursed medical expenses in excess of 2% ofgross income; qualified medical savings account con-tributions; and for the �self-employed,� qualifiedhealth insurance costs.

� Property tax deduction (or credit).

� Qualified conservation contribution.

Credits� Payments of income or wage tax imposed by another

state (or political subdivision) or by the District ofColumbia, with respect to income subject to tax underthis Act. This shall not exceed the proportion of taxotherwise due that the amount of the taxpayer�s incomebears to the taxpayer�s entire New Jersey income.

� Amounts withheld by an employer and payments of es-timated tax, including any payments made in connec-tion with the sale or transfer of real property by anonresident, estate, or trust.

� Amounts paid by an S corporation on behalf of ashareholder.

� Amounts paid by a partnership on behalf of a partner.

� New Jersey Earned Income Tax Credit.

� Excess unemployment and disability insurance contri-butions withheld.

� Property tax credit (or deduction).

Withholding RequirementAll employers and others who withhold New Jersey in-come tax are required to file quarterly returns of tax with-held and to remit tax on a monthly, quarterly, or weeklybasis.

Those with prior year withholdings of $20,000 or moreare required to remit the income tax withheld by means ofElectronic Funds Transfer (EFT) on or before theWednesday of the week following the week containingthe payday(s) on which taxes were withheld.

Effective for wages paid on and after January 1, 2000,certain employers of household workers may report andremit Gross Income Tax withheld on an annual basis.

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Disposition of RevenuesRevenues are deposited in the �Property Tax ReliefFund� to be used for the purpose of reducing or offsettingproperty taxes.

HistoryThe Gross Income Tax was enacted July 8, 1976, retroac-tive to July 1, 1976 (C. 47, P.L. 1976).

For tax years beginning before January 1, 2000, pensionincome for those eligible for Social Security by reasonof age (62 years or over) or disability was exempt as fol-lows: first $10,000 for a married couple filing jointly;$5,000 for a married person filing separately; and$7,500 for a single taxpayer (C. 40, P.L. 1977). Chapter273, P.L. 1977, extended the exclusion allowed for pen-sions to other types of retirement income. The exclusionapplies to taxpayers who are 62 years of age or olderand whose earned income is not more than $3,000. Anadditional exclusion was provided for taxpayers age 62or older who are not covered by either Social Security orRailroad Retirement benefits.

Chapter 229, P.L. 1982, increased the rate from 2½% to3½% on amounts in excess of $50,000 effectiveJanuary 1, 1983.

Property taxes paid on the taxpayer�s homestead becamedeductible from residents� taxable income effective fortaxes paid after 1984 (C. 304, P.L. 1985).

Chapter 219, P.L. 1989, exempted pension and annuityincome of nonresidents from the Gross Income Tax.

The Gross Income Tax Act was amended in 1990 to in-clude new graduated rates (from 2% to 7%) and two newfiling statuses (head of household and surviving spouse).The legislation also increased the amount of the exemp-tion for dependents from $1,000 to $1,500. In addition tothese amendments, the legislation instituted a new Home-stead Rebate Program and repealed the residential prop-erty tax deduction and credit and tenant credit. Thelegislation extended to heads of household and survivingspouses the exclusion of up to $7,500 of pension and an-nuity income. These changes took effect in 1990. Thenew tax rates became effective January 1, 1991 (C. 61,P.L. 1990).

Chapter 108, P.L. 1993, permitted an exemption from anemployee�s gross income for employer-provided com-muter transportation benefits.

State benefits received for a family member with a devel-opmental disability were removed from the definition ofincome for State tax purposes in 1993 (C. 98, P.L. 1993).

Chapter 173, P.L. 1993, included subchapter S corpora-tion income in the New Jersey Gross Income Tax base,effective with taxable years beginning after July 7, 1993.

Chapter 178, P.L. 1993, changed the method of comput-ing the income of nonresidents for purposes of New Jer-sey Gross Income Tax. For tax years beginning in 1993and thereafter, a nonresident with income from New Jer-sey must compute Gross Income Tax liability as though aresident, and then prorate the liability by the proportionof New Jersey source income to total income. Formerly,the calculation was based only on New Jersey sourceincome.

A 5% reduction in the Gross Income Tax rates (to 1.9% �6.650%) was enacted for tax year 1994 (C. 2, P.L. 1994).

The gross income filing threshold was increased to$7,500 from $3,000 for individuals, heads of households,surviving spouses, married persons filing jointly and es-tates and trusts ($3,750 for married persons filing sepa-rately). (C. 8, P.L. 1994.)

The State reduced the Gross Income Tax rates for taxableyears 1995 and thereafter. These rate reductions, com-bined with the 5% rate reductions for all brackets enactedas P.L. 1994, C. 2, resulted in cumulative decreases fromthe 1993 taxable year levels of 15%, 7.5% and 6% forcertain income brackets (C. 69, P.L. 1994).

Gross Income Tax Rates were reduced again for taxableyears 1996 and thereafter. In combination with the priortwo rate reductions, the cumulative decrease from the1993 taxable year was 30% for the lowest, 15% for themiddle, and 9% for the highest income brackets. Tax ratesrange from 1.4% to 6.37% (C. 165, P.L. 1995).

A property tax deduction/credit is provided on State in-come tax returns for resident homeowners and tenantswho pay property taxes, either directly or through rent, ontheir principal residence in New Jersey. Benefits werephased in over a three-year period, beginning with 1996returns (C. 60, P.L. 1996). For tax years 1998 and there-

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after, taxpayers may take the larger of either a $50 taxcredit or a deduction of up to $10,000 for property taxespaid.

Chapter 237, P.L. 1997, exempts New Jersey Better Edu-cational Savings Trust account earnings and qualifieddistributions.

Chapter 414, P.L. 1997, exempts contributions to medicalsavings accounts that are excludable under section 220 ofthe Federal Internal Revenue Code, effective for tax yearsbeginning on or after January 1, 1998.

Chapter 3, P.L. 1998, amended the Gross Income Tax Actto adopt the new Federal exclusions of up to $500,000 ingain from the sale of a principal residence.

Chapter 57, P.L. 1998, provides a Roth IRA exclusionfrom taxable income that follows the Federal treatment ofRoth IRAs and certain rollovers to IRAs.

Chapter 409, P.L. 1998, exempts military pensions ormilitary survivors� benefits paid to those 62 years of ageor older, or disabled under the Federal Social SecurityAct, effective beginning with tax year 1998.

Chapter 106, P.L. 1998, raised from $100 to $400 thethreshold at which quarterly estimated tax payments arerequired, effective for the 1999 tax year.

Effective for the 1999 through 2001 tax years, certain de-ductions may be available to qualified childcare consor-tium members (C. 102, P.L. 1999).

Chapter 116, P.L. 1999, exempts qualified distributionsfrom qualified State tuition program accounts.

Chapter 260, P.L. 1999, increased the Gross Income Taxfiling threshold to $10,000 ($5,000 for married personsfiling separately) for the 1999 tax year. For married per-sons filing jointly, heads of household, and survivingspouses, the threshold increased to $15,000 ($7,500 formarried persons filing separately) for tax year 2000, andincreased to $20,000 for tax year 2001 and later ($10,000for married persons filing separately).

Chapter 94, P.L. 1999, allows certain employers of do-mestic helpers to file the withholding tax return annually,instead of quarterly or more frequently, for wages paid onor after January 1, 2000.

Chapter 177, P.L. 1999, increases the pension exclusionand �other retirement income exclusion.� For tax year2000, the exclusions were $12,500 for a married couplefiling jointly, $6,250 for a married person filing sepa-rately, and $9,375 for a single filer, head of household, orsurviving spouse. For tax year 2001, the exclusions were$15,000, $7,500 and $11,250 respectively; for tax year2002, the amounts are $17,500, $8,750, and $13,125.For tax year 2003 and later, the exclusion amounts are$20,000 for a married couple filing jointly, $10,000 for amarried person filing separately, and $15,000 for a singlefiler, head of household, or surviving spouse.

Chapter 222, P.L. 1999, allows self-employed taxpayers,including more-than-2% shareholders of S corporations,to deduct the cost of health insurance for the taxpayer andthe taxpayer�s spouse and dependents (subject to certainlimitations) effective for the 2000 and later tax years.

Beginning with the 2000 tax year, C. 372, P.L. 1999, pro-vides a deduction for a qualified conservation contribution.

Chapter 80, P.L. 2001, establishes a New Jersey EarnedIncome Tax Credit, which is a percentage of a person�sFederal Earned Income Credit. To be eligible for the NewJersey credit, a person must have at least one �qualifyingchild� for purposes of the Federal Earned Income Creditand must have no more than $20,000 in New Jersey grossincome.

Chapter 84, P.L. 2001, amended the military pension orsurvivor�s benefit exclusion by eliminating the require-ment that the taxpayer be at least 62 years old ordisabled.

Under P.L. 2001, C. 93, qualified deposits into or with-drawals from an �individual development account� (es-tablished under the New Jersey Individual DevelopmentAccount Program and 42 U.S.C. s. 604(h) for an �eligibleindividual�), including interest earned on such accounts,are exempt from Gross Income Tax.

Effective beginning with the 2002 tax year, C. 162. P.L.2001, increases the exclusion for commuter transporta-tion benefits to $1,200 and authorizes an annual inflationadjustment.

P.L. 2002, C. 40, effective beginning with the 2002 taxyear, requires partnerships to pay a $150 filing fee perowner (up to $250,000) and a tax prepayment made onbehalf of nonresident partners.

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P.L. 2002, C. 43, effective beginning with the 2003 taxyear, creates a tax credit for qualifying first-timehomebuyer-occupants who have purchased residentialproperty in a qualifying municipality during themunicipality�s �period of economic recovery.�

P.L. 2003, C. 9, creates an exclusion for the income ofvictims who have died as a result of the September 11thterrorist attacks. The exclusion applies for tax year 2000and all later years up to and including the year of death.

P.L. 2003, C. 246, allows a $1,000 personal exemptionfor a domestic partner who does not file separately.

Effective beginning with the 2002 tax year, P.L. 2003C. 256, exempts investment clubs from the $150 perowner annual partnership filing fee and from the require-ment that partnerships remit Gross Income Tax paymentson behalf of their nonresident noncorporate partners. Tomeet the definition of �investment club,� the partnershipmust have income below $35,000 per individual (up to atotal of $250,000) and satisfy other limitations andcriteria.

Chapter 40, P.L. 2004, imposes a tax rate of 8.97% on in-come over $500,000, effective beginning with the 2004tax year.

Chapter 55, P.L. 2004, requires that nonresidents, estates,and trusts pay estimated tax on gain from the sale ortransfer of real property in New Jersey as a condition forrecording the deed. The law is effective for sales or trans-fers occurring on and after August 1, 2004.

Effective beginning with the 2004 tax year, section 26 ofP.L. 2004, C. 65, �decouples� the calculation of deprecia-tion and section 179 expenses from recent Federal in-come tax provisions. Under these amendments, the ex-penses must be calculated by applying Federal codeprovisions as they were in effect on December 31, 2001(or December 31, 2002, for section 179 expense).

Gross Income Tax Collections(In Billions)

Fiscal Year Collections1995 4,540,081,7651

1996 4,733,786,1002

1997 4,825,410,6351998 5,590,578,9331999 6,323,893,1292000 7,205,260,4862001 7,989,222,2272002 6,836,992,4022003 6,735,282,3572004 7,400,732,606

1 Rates reduced to 1.7% � 6.58% effective January 1, 1995.2 Rates reduced to 1.4% � 6.37% effective January 1, 1996.

Homestead Rebate ProgramChapter 61, P.L. 1990, created a new Homestead Prop-erty Tax Rebate Program to provide rebates for bothhomeowners and tenants. The new program replaced cer-tain other direct property tax relief programs: (1) theoriginal Homestead Rebate Program (C. 72, P.L. 1976)which provided rebates to homeowners; (2) the residen-tial property tax deduction and credit provided to bothhomeowners and tenants on their income tax returns un-der C. 304, P.L. 1985; and (3) the tenant credit program(C. 47, P.L. 1976, as amended).

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The application for the new homestead property tax re-bate was combined with the resident income tax returnbeginning with the tax return for 1990, and benefits werelinked to income level and amount of property taxes paid.Under this program rebates ranged from $100 to $500 forhomeowners, and $35 to $500 for tenants, depending onthe applicant�s filing status, gross income, and the amountof property taxes paid, either directly or through rent.Those with incomes over $100,000 were not eligible for arebate.

Beginning in 1992, the State Budgets adopted by the Leg-islature limited the amount of the homestead rebate paidto some taxpayers. Under the budget restrictions, onlytaxpayers who were 65 years of age or older, or blind ordisabled were eligible to receive rebates of $100 to $500(homeowners) or $35 to $500 (tenants), provided thattheir gross income did not exceed $100,000. For othertaxpayers, rebates were limited to those with a gross in-come of $40,000 or less, with a standard rebate amountof $90 for homeowners and $30 for tenants. Those withgross incomes over $40,000 were no longer eligible for arebate.

In November 1992 the New Jersey Tax Court ruled thatanyone who resides in a dwelling which does not pay lo-cal property tax is not entitled to a homestead propertytax rebate. This includes tenants living in subsidizedhousing or other dwellings owned by the State, County,Municipal, or Federal government; students living in on-campus apartments at State colleges and universities; andtenants living in dwellings owned by religious, charitable,or other nonprofit organizations, including on-campusapartments at private nonprofit colleges and universities,if the property is exempt from local property taxes. Per-manently and totally disabled veterans and their survivingspouses who do not pay property taxes are also ineligiblefor rebates.

On April 15, 1999, the NJ SAVER and Homestead RebateAct (C. 63, P.L. 1999) created a new, direct property tax re-lief program to be phased in over five years beginning in1999. Under the provisions of this act, homeowners whoqualify for both the homestead rebate and the NJ SAVERrebate would receive either the homestead rebate or the NJSAVER rebate, depending which program provides thegreater benefit.

This same legislation increased the homestead rebate in-come threshold for tenants to $100,000 and set the in-come threshold at $40,000 for homeowners who are not65 or older or blind or disabled. For 1998, tenants who

were under 65, not blind or disabled, and who had in-come between $40,000 and $100,000 were eligible to re-ceive a $30 homestead rebate provided they filed aHomestead Rebate Application by June 15, 1999. Thelegislation increased this amount to $40 for the 1999 taxyear, $60 for the 2000 tax year, $80 for the 2001 tax year,and $100 for 2002 and thereafter.

Chapter 159, P.L. 2001, increased the maximum benefitunder the Homestead Rebate Program for homeownersand tenants who are 65 or older or disabled from $500 to$750 beginning with homestead rebates paid in calendaryear 2001. For homestead rebates paid in 2002 and there-after, the maximum amount would be indexed annually tothe cost of living.

This legislation also increased the maximum tenanthomestead rebate paid in 2001 and thereafter to tenantswho are not 65 or disabled to $100, eliminating the three-year phase-in which, under the prior legislation (C. 63,P.L. 1999), was scheduled to end with rebates paid in2003. It also increased the minimum rebate for tenantswho are 65 or disabled to $100.

Under State Budget provisions for fiscal year 2004 (P.L.2003, C. 122, approved July 1, 2003), homestead rebatespaid in 2003 were not adjusted by the cost-of-livingincrease.

The 2004 Homestead Property Tax Rebate Act (P.L.2004, C. 40) combined the NJ SAVER and HomesteadRebate Programs into the FAIR Rebate Program. For2003 the NJ SAVER and homestead rebates were calcu-lated the same way, taking into account the applicant�s fil-ing status, gross income, and the amount of property taxespaid, either directly or through rent. Eligible applicantsreceived either the homestead rebate or the NJ SAVERrebate. The rebates ranged from $500 to $1,200 forhomeowners, and from $150 to $825 for tenants. Home-owners with incomes over $200,000 or tenants with in-comes over $100,000 were not eligible for a 2003 rebate.

For tax year 2004 and thereafter, tenants apply for theFAIR rebate using Form TR-1040, which can be found inthe income tax return booklet. A separate FAIR rebate ap-plication is mailed to homeowners. Only New Jersey resi-dents who were either homeowners or tenants on Octo-ber 1 and meet the other requirements are eligible for aFAIR rebate for that year.

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Hotel/Motel Occupancy Fee/Municipal Occupancy TaxDescriptionP.L. 2003, C.114, imposes a State Occupancy Fee and au-thorizes the imposition of a Municipal Occupancy Tax oncharges for the rental of a room in a hotel, motel, or simi-lar facility in most New Jersey municipalities.

RateThe State Occupancy Fee rate is 7% for occupancies fromAugust 1, 2003, through June 30, 2004, and 5% for occu-pancies on and after July 1, 2004, or at a lower rate in cit-ies in which such occupancies are already subject to tax:

Atlantic City�1%Newark and Jersey City�1%The Wildwoods�3.15%

In addition, between August 1, 2003, and June 30, 2004,municipalities other than Atlantic City, Newark, JerseyCity, and the Wildwoods may adopt an ordinance to im-pose a Municipal Occupancy Tax of up to 1%. The Mu-nicipal Occupancy Tax rate may be increased from a rateof 1% up to a rate of 3%, at the municipality�s option,pursuant to local ordinance effective July 1, 2004. Themajority of the municipalities that have enacted a Munici-pal Occupancy Tax have authorized the tax rate to in-crease to 3% as of July 1, 2004.

Disposition of RevenuesThe monies collected from the State Occupancy Fee aredeposited to the General Fund and are statutorily allo-cated, in varying percentages, to the New Jersey StateCouncil on the Arts for cultural projects; the New JerseyHistorical Commission; the New Jersey Commerce andEconomic Growth Commission for tourism advertisingand promotion; and the New Jersey Cultural Trust. Anyamount over the dedication is allocated to the GeneralFund. Collections from the Municipal Occupancy Tax aredistributed back to the municipality.

Insurance Premiums TaxDescriptionThe Insurance Premiums Tax applies to premiums col-lected on insurance risks by every insurance companytransacting business in New Jersey. The tax base is grosscontract premiums less specified deductions. Annuityconsiderations and reinsurance premiums are not taxed.

RateWith a few exceptions, the tax rate is 2% of the premiumscollected on insurance risks in this State. Major excep-tions include group accident and health insurance premi-ums (1%); ocean marine risks (5% of three-year averageof underwriting profits); workers� compensation premi-ums (2.25%). If, for any insurance company, the ratio ofNew Jersey business to total business is greater than12.5%, the tax is imposed on only 12.5% of thatcompany�s total premiums. Another .05% is imposed ongroup accident and health premiums and another .1% onall other insurance premiums, the revenues being dedi-cated to the Department of Insurance.

In 1991 the Life and Health Guaranty Association wasformed, supported by assessments of up to 2% each year ondefined life insurance, annuity, and health insurance ac-counts. Each member insurer may offset some portion of itsassessment against its Insurance Premiums Tax liability.

Disposition of RevenuesThe tax is prepaid based on the previous year�s premi-ums, with payments due March 1 and June 1. Revenues,with the exception of some domestic revenues, are depos-ited in the State Treasury for general State use.

Municipalities and counties continue to receive paymentsto replace the revenue from the repealed insurance fran-chise tax on domestic insurance corporations. The StateTreasurer pays an annual amount to each county and mu-nicipality in which the principal office of a domestic in-surance company is located. Payments are made so longas the principal office of a domestic insurance companyremains at the location established on January 1, 1981.

Landfill Closure andContingency TaxDescriptionThis tax is levied upon the owner or operator of everysanitary landfill facility located in New Jersey on all solidwaste accepted for disposal on or after January 1, 1982.In addition, the owner or operator must make a monthlypayment of $1.00 per ton or $0.30 per cubic yard for thehost community benefit surcharge for all solid waste ac-cepted for disposal.

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RateThe tax rate is $0.50 per ton or $0.15 per cubic yard onall solid waste accepted for disposal. The tax rate forsolid waste in liquid form is $0.002 per gallon.

Disposition of RevenuesAll tax revenues are credited to the Sanitary Landfill Fa-cility Contingency Fund, administered by the New JerseyDepartment of Environmental Protection, established toinsure the proper closure and operation of sanitary land-fill facilities in this State.

Litter Control FeeDescriptionThe Litter Control Fee is imposed on all gross receiptsfrom sales of litter-generating products sold within or intoNew Jersey by each person engaged in business in theState as a manufacturer, wholesaler, distributor, or retailerof such products. Any retailer with less than $500,000 inannual retail sales of litter-generating products is exemptfrom this fee. Restaurants are exempt if more than 50% oftheir food and beverage sales are for on-premisesconsumption.

Litter-generating products include beer, cigarettes, clean-ing agents and toiletries, distilled spirits, food, glass con-tainers, metal containers, groceries, tires, newsprint andmagazine paper stock, nondrug drugstore sundry prod-ucts, paper products, plastic and fiber containers, softdrinks, and wine.

RateManufacturers, wholesalers, and distributors of litter-gen-erating products pay a fee of 3⁄100 of 1% (.03%) on allgross receipts from wholesale sales of such products inNew Jersey. Retailers are charged at the rate of 2.25⁄100 of1% (.0225%) on all gross receipts from retail sales of lit-ter-generating products. The fee is paid annually onMarch 15th of each year.

Disposition of RevenuesRevenues are deposited in the Clean Communities Pro-gram Fund and are used for litter pickup and removal andto provide recycling grants to New Jersey counties andmunicipalities.

Local Property TaxDescriptionAn ad valorem tax�The local property tax is measuredby property values and is apportioned among taxpayersaccording to the assessed value of taxable propertyowned by each taxpayer. The tax applies to real estateand tangible personal property of telephone, telegraph,and messenger systems companies.

A local tax�The property tax is a local tax assessed andcollected by municipalities for the support of municipaland county governments and local school districts. Nopart of it is used for support of State government.

Amount of tax (a residual tax)�The amount of localproperty tax is determined each year, in each municipal-ity, to supply whatever revenue is required to meet bud-geted expenditures not covered by monies available fromall other sources. School districts and counties notifymunicipalities of their property tax requirements. Munici-palities add their own requirements and levy taxes to raisethe entire amount. As a residual local tax, the total prop-erty tax is determined by local budgets and not by prop-erty valuations or tax rates.

Property assessment (the tax base)�All taxable propertyis assessed (valued for taxation) by local assessors ineach municipality. Assessments are expressed in terms of�taxable value,� except for qualified farm land, which isspecially valued.

RateThe local property tax rate is determined each year ineach municipality by relating the total amount of tax levyto the total of all assessed valuations taxable. Expressedin $1 per $100 of taxable assessed value, the tax rate is amultiplier for use in determining the amount of tax leviedupon each property. See Appendix A for the 2002 generaland effective property tax rates in each municipality.

Disposition of RevenuesThis tax is assessed and collected locally by the taxingdistricts for support of county and municipal governmentsand local school district purposes.

HistoryIt may be said that the property tax originated in 1670with a levy of one half penny per acre of land to supportthe central government. Through the middle of the 19thcentury property taxes were levied upon real estate and

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upon certain personal property at arbitrary rates withincertain limits called �certainties.� In 1851 the concepts ofa general property tax and uniform assessments accordingto actual value were developed (Public Laws 1851, p. 273).

For almost a century following the 1851 legislation, acontinuing effort was made to accomplish uniform taxa-tion under a general property tax. In 1875 a constitutionalamendment provided that �property shall be assessed fortaxes under general laws and by uniform rules accordingto its value� (Article 4, Section 7, paragraph 12). Courtsheld that the 1875 amendment permitted classification ofproperty for tax purposes and also exemption of certainclasses from taxation, or the substitution of other kinds oftax �in lieu.� Thus began a long period of erosion of the�general property tax� concept. In 1884 a State Board ofAssessors was created and given responsibility for assess-ment of railroad and canal property, thus setting the pat-tern for State assessment of certain classes of property.

Intangible personal property was eliminated from the�general property tax base� in 1945 (replaced with a cor-poration net worth tax). Such elimination shifted the em-phasis for tax reform to tangible personal property.

The New Jersey State Constitution adopted in 1947 pro-vided that �property shall be assessed for taxation undergeneral law and by uniform rules. All real property as-sessed and taxed locally or by the State for allotment andpayment to taxing districts shall be assessed according tothe same standard of value, except as otherwise permittedherein, and such property shall be taxed at the general taxrate of the taxing district in which the property is situated,for the use of such taxing district� (Article 8, Section 1).

This Article was interpreted to preclude any classificationof real estate but to leave the door open for classifiedtaxes upon personal property. In 1963 the Constitutionwas amended to permit assessment of farm property ac-cording to its value for agricultural use only. Chapter 51,Laws of 1960 (effective for tax year 1965) provided forsuch classification and also provided other significantmodifications.

Personal property provisions of Chapter 51, Laws of1960, were replaced by Chapter 136, Laws of 1966. Fortaxes payable in 1968 and until 1993, personal propertyused in business (other than the businesses of local ex-change telephone, telegraph, and messenger system com-panies and other public utilities) was subject to theBusiness Personal Property Tax instead of the local tax.Personal property is no longer subject to any property taxand inventories of all businesses are excluded from prop-erty taxation.

The 1966 law also provided for replacement of local per-sonal property tax revenues from four tax sources:(1) Retail Gross Receipts Tax, (2) Corporation Business(Net Income) Tax, (3) Business Personal Property Taxand (4) Unincorporated Business Tax. This revenue re-placement program was terminated (C. 3, P.L. 1977).Legislation was passed providing for an annualappropriation of not less than $158.7 million.

The decision in Switz v. Middletown Township, et al.,23 N.J. 580 (1957) required that all taxable property beassessed at �true value� (100% assessment). This was thebeginning of a series of New Jersey court decisions whichhave been a major factor in development of uniform realestate tax assessment. R.S. 54:4-23 was amended to pro-vide that when an assessor believes that all or part of ataxing district�s property is assessed lower or higher thanis consistent with uniform taxable valuation or is not insubstantial compliance with the law, and that the public�sinterest will be promoted by a reassessment of such prop-erty, the assessor shall make a reassessment of the prop-erty not in compliance.

Prior to making this reassessment, the assessor shall firstnotify in writing: the mayor, the municipal governingbody, the Division of Taxation, the county tax board, andthe county tax administrator of the basis for the reassess-ment and shall submit a compliance plan to the countyboard of taxation and the Division of Taxation for ap-proval. After reassessment of a portion of a taxing dis-trict, the assessor shall certify to the county board oftaxation, through adequate sampling as determined by theboard, that the reassessed portion of the taxing district isin compliance with those portions of the district whichwere not reassessed.

A long period of legislative history has developed numer-ous exemptions and special property tax treatments.These are found principally in R.S. 54:4-3.3 and in R.S.54:4-3.6. Generally exempt are government-owned prop-erty; and property of religious, educational, charitable,and various types of nonprofit organizations. R.S. 54:4-3.6 was amended to permit a religious or charitableorganization to lease property to another exempt entityfor a different exempt use without the loss of its propertytax exemption. An amendment to R.S. 54:4-3.10 providedthat property owned by any exempt firefighter�s associa-tion, firefighter�s relief association, or volunteer fire com-pany would retain its tax-exempt status although theorganization owning the property used the property for anincome-producing purpose on an auxiliary basis providedthat the auxiliary activity does not exceed 120 days annu-ally and the net proceeds from the auxiliary activity are

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used to further the primary purpose of the organization orfor other charitable purposes. Qualified senior citizensand disabled persons are permitted a tax deduction of$250 annually as per N.J.S.A. 54:4-8.40 et seq. The vet-erans� deduction was increased from $50 to $100 for taxyear 2000, $150 for 2001, $200 for 2002, and $250 for2003 and thereafter pursuant to N.J.S.A. 54:4-8.10 et seq.Wartime service periods were also expanded.

Local Property TaxGross Levy (In Billions)

Fiscal Year Gross Tax Levy1994 11,286,354,0011995 11,746,914,1241996 12,177,920,3071997 12,579,899,7171998 13,040,191,8711999 13,558,860,4592000 14,195,812,7352001 14,992,785,1352002 16,053,021,1232003 17,254,024,652

Motor Fuels TaxDescriptionA tax on motor fuels is applied to gasoline, diesel fuel, orliquefied petroleum gas and compressed natural gas usedin motor vehicles on public highways.

RateThe general motor fuels tax rate is $0.105 per gallon ofgasoline. A tax of $0.0525 per gallon is imposed on pe-troleum gas and liquefied or compressed natural gas soldor used to propel motor vehicles on public highways.

The diesel fuel tax rate is $0.135 per gallon, of which$0.03 per gallon is refundable for fuel used in passengerautomobiles and motor vehicles of less than 5,000 poundsgross weight (C. 73, P.L. 1984, effective September 1,1985).

No tax is due from motor fuels sales to the United Statesor New Jersey government; between licensed distributors;between licensed gasoline jobbers; and for export.

Disposition of RevenuesCertain revenues are credited to a special account in theGeneral Fund and are dedicated from the gasoline tax, thepetroleum products tax, and the Sales and Use Tax to theTransportation Trust Fund for maintenance of the State�stransportation system. See the New Jersey Constitution,Article 8, Section 2, paragraph 4.

NJ SAVER Rebate ProgramChapter 63, P.L. 1999, approved on April 15, 1999, andknown as the New Jersey School Assessment ValuationExemption Relief and Homestead Property Tax RebateAct (NJ SAVER and Homestead Rebate Act), created theNJ SAVER Rebate Program. New Jersey residents, re-gardless of age or income, who own, occupy, and payproperty taxes on a home in New Jersey that was theirprincipal residence on October 1 of any year are eligibleto receive a rebate for that year.

The State calculates the rebate on each applicant�s homeby multiplying the equalized value of a home by theeffective school tax rate for the municipality in which thehome is located. The equalized value for the calculationcannot exceed $45,000. Since school tax rates varyamong municipalities, NJ SAVER rebate amounts willvary. The legislation provided for a five-year phase-in pe-riod beginning in 1999. The first rebate checks mailed in1999 represented 20% of the maximum NJ SAVER re-bate and homeowners received 40% of the maximum re-bate in 2000.

Chapter 106, P.L. 2001, amended the original legislationto accelerate the phase-in period of the NJ SAVER

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Rebate Program from five years to four years. The legis-lation increased the amount to be paid in 2001 from 60%to 831⁄3% of the full amount and provided for the full ben-efit amount to be paid in 2002.

The State Budget adopted by the Legislature for fiscalyear 2003 limited NJ SAVER rebates to homeownersearning $200,000 or less and limited rebates to theamounts paid in 2001.

As part of the State Budget for fiscal year 2004,NJ SAVER rebates were not paid to any individual ormarried couple with gross income in excess of $200,000.Additionally, the amount paid was limited to 50% of theprior year�s NJ SAVER rebate check.

The 2004 Homestead Property Tax Rebate Act (P.L. 2004,C. 40) was given the acronym �FAIR� which stands forFAir and Immediate Relief. The Act folded the NJ SAVERRebate Program into the existing Homestead Rebate Pro-gram, and combined certain aspects of each, eliminatingthe NJ SAVER rebate for tax years 2004 and thereafter.See Homestead Rebate Program on page 30 for moreinformation.

Outdoor Advertising FeeDescriptionPursuant to N.J.S.A. 54:4-11.1, an Outdoor AdvertisingFee is imposed on the gross amounts collected by a retailseller for advertising space on an outdoor advertising sign(billboard). The fee is due from the retail seller and isbased upon the amount that the seller receives from anend user, whether payment is received in money or other-wise, for the sale of space on an outdoor advertising sign.The retail seller is the licensee or permit holder autho-rized by the New Jersey Department of Transportation toengage in the business of outdoor advertising and sellingthe space to the end user. The end user is the person pur-chasing the space in order to place their advertisement onthe sign. The Outdoor Advertising Fee is only imposed onamounts collected for the placement of advertising on thesign.

Although the fee is imposed on the retail seller, the lawprovides that the seller is not subject to the fee onamounts collected from a purchaser/end user that is ex-

empt from New Jersey Sales and Use Tax pursuant toN.J.S.A. 54:32B-9(a) or (b). There is also an exemptionfor �fees received by an advertising agency that is not arelated party of the retail seller and that are not receivedfrom the retail seller.�

RateThe Outdoor Advertising Fee is imposed at a rate of 6%on the gross amounts collected by a retail seller for bill-board advertising space. Recently enacted legislation(P.L. 2004, C.42) amends certain sections of the lawwhich will affect payment of the fee on amounts collectedon and after July 1, 2004. In addition, the fee is reducedfrom 6% to 4% for the period July 1, 2006, throughJune 30, 2007.


Petroleum Products GrossReceipts TaxDescriptionThe Petroleum Products Gross Receipts Tax is imposedon all companies engaged in refining and/or distributingpetroleum products for distribution in this State. It appliesto the first sale, not for export, of petroleum productswithin New Jersey.

Home heating oil (including #2, #4, and #6 heating oils)and propane gas and kerosene used for residential heatingare exempt from tax. Also exempt from tax are receiptsfrom sales of petroleum products used by marine vesselsengaged in interstate or foreign commerce; receipts fromsales of aviation fuels used by airplanes in interstate orforeign commerce other than burnout portion; receiptsfrom sales of asphalt and polymer grade propylene usedin the manufacture of polypropylene; receipts from salesto nonprofit entities qualifying for exemption under theSales and Use Tax Act; and receipts from sales to theUnited States or the State of New Jersey.

Effective January 1, 2001, P.L. 2000, C. 156, phased out,over a three-year period, the Petroleum Products GrossReceipts Tax for fuel used by any utility, co-generationfacility, or wholesale generation facility to generate elec-tricity sold at wholesale or through certain retail channels.

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RateThe petroleum products tax is imposed at the rate of 2¾%on gross receipts from the first sale of petroleum productsin New Jersey. In the case of fuel oils, aviation fuels, andmotor fuels this rate is converted to $0.04 per gallon pur-suant to C. 48, P.L. 2000, adopted on June 30, 2000.

Disposition of RevenuesCertain revenues are credited to a special account in theGeneral Fund and dedicated to the Transportation TrustFund under the New Jersey Constitution, Article 8, Sec-tion 2, paragraph 4.

Property Tax ReimbursementProgramChapter 348, P.L. 1997, approved January 14, 1998, cre-ated the Property Tax Reimbursement (�Senior Freeze�)Program which effectively freezes property taxes for eli-gible New Jersey senior citizens and disabled persons byreimbursing them for property tax increases. The firstyear a resident satisfies all the eligibility requirements be-comes their base year. Residents who remain eligible insucceeding years will be reimbursed for any increase inthe amount of property taxes paid over the base yearamount.

Residents are eligible if they (1) are age 65 or older orreceiving Federal Social Security disability benefits;(2) owned and lived in a homestead (or mobile homewhich is on a leased site in a mobile home park) for atleast the last three years; (3) lived in New Jersey and paidproperty taxes either directly or through rent for at leastten consecutive years; (4) paid the full amount of prop-erty taxes (or site fees if a mobile home owner) due onthe home for both their base year and the year for whichthey are claiming the reimbursement; and (5) meet certainincome eligibility limits for both the base year and theyear for which they are claiming a reimbursement.

The income limits will increase in subsequent years bythe amount of the maximum Social Security benefit cost-of-living increase for that year. Applicants must meet allrequirements for both their base year and the year forwhich they are claiming a reimbursement. Once an appli-

cant�s base year is established, it remains the same aslong as they remain eligible in succeeding years. If ahomeowner (or mobile home owner) does not satisfy therequirements in one year, then their base year will be-come the next year that they satisfy all the requirements.

Under the provisions of the State Budget for fiscal year2004 (P.L. 2003, Chapter 122, approved July 1, 2003),only applicants who received a reimbursement for taxyear 2001 and who met all the eligibility requirements,including the income limits for 2002, were eligible to re-ceive a reimbursement for 2002. The amount applicantsreceived for tax year 2002 could not exceed the amountthey received for 2001. For 2003, reimbursements wereissued to all eligible applicants for the difference betweentheir 2003 property taxes and their base year propertytaxes. For eligible applicants who filed applications forthe first time for 2002 but did not receive checks, the2003 reimbursement represented the difference betweenthe amount of their 2003 property taxes paid and theamount of their 2001 (base year) taxes.

Public Community WaterSystem TaxDescriptionThe Public Community Water System Tax is levied uponthe owner or operator of every public community watersystem in New Jersey based upon water delivered to con-sumers, not including water purchased for resale, on orafter April 1, 1984.

RateThe tax rate is $0.01 per 1,000 gallons of water deliveredto a consumer.

Disposition of RevenuesRevenues are deposited in the Safe Drinking Water Fundadministered by the New Jersey Department of Environ-mental Protection and used to ensure clean drinking waterin New Jersey.

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Public Utility Franchise TaxDescriptionPublic Utility Franchise Tax applies to all sewerage andwater companies having lines and mains along, in, on, orover any public thoroughfare.

The rate is either 2% or 5% of a proportion of the grossreceipts of the taxpayer for the preceding calendar year.The proportion of gross receipts subject to tax is the ratioof the taxpayer�s total length of lines or mains which arelocated along, in, on, or over any street, highway, road, orother public place to the whole length of lines or mains.Measurements of lengths of lines or mains exclude ser-vice connections.

AdministrationThe Franchise Tax levied against the sewerage and watercompanies is payable to the State in three installments:35% due May 15, 35% due August 15, and 30% dueNovember 15.

RateThe rate is 2% for taxpayers with calendar year gross re-ceipts of $50,000 or less and 5% for taxpayers with cal-endar year gross receipts exceeding $50,000.

Disposition of RevenuesRevenues are deposited into an account that is used tofund the Energy Tax Receipts Property Tax Relief Fund,which is distributed to municipalities in accordance withP.L. 1997, C. 167.

Public Utility Gross ReceiptsTaxDescriptionPublic Utility Gross Receipts Tax is in addition to the Fran-chise Tax and is in lieu of the local taxation of certain prop-erties of sewerage and water companies in New Jersey.

AdministrationThe Gross Receipts Tax levied against the sewerage andwater companies is payable to the State in three install-ments: 35% due May 15, 35% due August 15, and 30%due November 15.

Rate7.5% is applied to the gross receipts for the precedingcalendar year.


Public Utility Excise TaxDescriptionPublic Utility Excise Tax is an additional tax on sewerageand water public utilities.

AdministrationThe Public Utility Excise Tax levied against the sewerageand water companies is payable to the State in full onMay 1.

Rate (Calendar Year Basis)0.625% �upon gross receipts subject to the franchise

tax (0.25% for taxpayers with gross receiptsnot in excess of $50,000 annually);

0.9375% �upon gross receipts of all sewerage andwater public utilities.


Railroad Franchise TaxDescriptionThe Railroad Franchise Tax is levied upon railroads (orsystems of railroads) operating within New Jersey. Thetax base is that portion of the road�s (or system�s) net rail-way operating income of the preceding year allocated toNew Jersey. The allocating factor is the ratio of the num-ber of miles of all track in this State to the total number ofmiles of all track over which the railroad or systemoperates.

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RateRailroad Franchise Tax is assessed at the rate of 10%upon the net railway operating income of the precedingyear allocated to New Jersey. The minimum is $100 fortaxpayers having total railway operating revenues in thepreceding year of less than $1 million and $4,000 for tax-payers with operating revenues in excess of $1 million inthe preceding year.


Railroad Property TaxDescriptionRailroad Tax Law of 1948 as amended distinguishes threeclasses of property:

Class I: �Main stem� roadbed�that not exceeding 100feet in width.

Class II: All other real estate used for railroad purposesincluding roadbed other than �main stem� (Class I),tracks, buildings, water tanks, riparian rights, docks,wharves, piers. Excluded is �tangible personal property�:rolling stock, cars, locomotives, ferryboats, all machinery,tools. Facilities used in passenger service are also ex-cluded, being defined as Class III property.

Class III: Facilities used in passenger service: land, sta-tions, terminals, roadbeds, tracks, appurtenances, ballast,and all structures used in connection with rendering pas-senger service, including signal systems, power systems,equipment storage, repair, and service facilities (N.J.S.A.54:20A-2).

The Railroad Property Tax is a State tax on Class IIproperty.

ExemptionsMain stem (Class I), tangible personal property, and facil-ities used in passenger service (Class III) are exemptfrom tax.

Rate$4.75 for each $100 of true value of Class II railroadproperty.

Disposition of RevenuesRevenues are deposited in the State Treasury for generalState use. However, under legislation adopted in 1966,the municipalities where railroad property is located areguaranteed the return of certain replacement revenues. NoState aid has been paid since calendar year 1982, exceptfor 1984�1994 payments to those municipalities in whichClass II railroad property owned by New Jersey TransitCorporation is located (P.L. 1984, C. 58). Since 1995,payments have been paid on Class II railroad propertiesowned by New Jersey Transit Corporation through theConsolidated Municipal Tax Relief Aid Program admin-istered by the Department of Community Affairs.

Realty Transfer FeeDescriptionThe Realty Transfer Fee is imposed upon the recording ofdeeds evidencing transfers of title to real property in theState of New Jersey. The Realty Transfer Fee is calculatedbased on the amount of consideration recited in the deed.

The Realty Transfer Fee does not apply to a deed: for aconsideration of less than $100; by or to the United Statesof America, this State, or any instrumentality, agency, orsubdivision thereof; solely in order to provide or releasesecurity for a debt or obligation; which confirms or cor-rects a deed previously recorded; on a sale for delinquenttaxes or assessments; on partition; by a receiver, trusteein bankruptcy or liquidation, or assignee for the benefit ofcreditors; eligible to be recorded as an �ancient deed�pursuant to R.S. 46:16-7; acknowledged or proved on orbefore July 3, 1968; between husband and wife, or parentand child; conveying a cemetery lot or plot; in specificperformance of a final judgment; releasing a right of re-version; previously recorded in another county and fullRealty Transfer Fee paid; by an executor or administratorof a decedent to a devisee or heir to effect distribution ofthe decedent�s estate in accordance with the provisions ofthe decedent�s will or the intestate laws of this State; re-corded within 90 days following the entry of a divorcedecree which dissolves the marriage between grantor andgrantee; issued by a cooperative corporation, as part of aconversion of all of the assets of the cooperative corpora-tion into a condominium, to a shareholder upon the sur-render by the shareholder of all of the shareholder�s stockin the cooperative corporation and the proprietary leaseentitling the shareholder to exclusive occupancy of a por-tion of the property owned by the corporation.

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RateLegislation (P.L. 2003, C. 113) effective July 14, 2003,provides for the imposition of transfer fees on the sale ofreal estate as follows:

Standard Transactions and New Construction

The Realty Transfer Fee rates for standard transactionsand new construction, including a supplemental fee, are:

$2.00 (includes $.25 supplemental fee) / $500 ofconsideration not in excess of $150,000.

$3.35 (includes $.85 supplemental fee) / $500 ofconsideration in excess of $150,000 butnot in excess of $200,000.

$3.90 (includes $1.40 supplemental fee) / $500 ofconsideration in excess of $200,000.

Senior Citizens or Blind or Disabled Persons;Low and Moderate Income Housing

The law does not increase the Realty Transfer Fee rateson transfers by senior citizens, blind persons, disabledpersons, and on the transfer of property that is low- andmoderate-income housing. Those fees are calculated asfollows:

$0.50 / $500 of consideration of $150,000 or less.

$1.25 / $500 of consideration over $150,000.

Disposition of RevenuesThe Realty Transfer Fees per $500 of consideration willbe allocated according to the type of transaction asfollows:

Standard (no exemption)County State Neighborhood

Consideration Treasurer Treasurer P.N.R. Fund

$150,000 or less $ 0.751 $ 1.25 0

Over $150,000 butnot over $200,000 0.751 1.852 $ 0.75

Over $200,000 0.751 2.403 0.75

Senior Citizens or Blind or Disabled Persons;Low and Moderate Income Housing

County State NeighborhoodConsideration Treasurer Treasurer P.N.R. Fund

$150,000 or less $ 0.50 0 0

Over $150,000 0.50 0 $ 0.75

New ConstructionCounty State Neighborhood

Consideration Treasurer Treasurer P.N.R. Fund

$150,000 or less $ 0.751 $ 1.004 $ 0.25

Over $150,000 butnot over $200,000 0.751 0.604 2.00

Over $200,000 0.751 1.153 2.00

1Under the Public Health Priority Funding Act of 1977, $0.25 per$500 of consideration is deposited into a special fund.

2$0.60 per $500 of consideration is deposited into the ExtraordinaryAid Account.

3$1.15 per $500 of consideration is deposited into the ExtraordinaryAid Account.

4Entire amount is deposited into the Extraordinary Aid Account.

The proceeds of the Realty Transfer Fees collected by thecounty recording officer are accounted for and remitted tothe county treasurer. In fiscal year 2004, a total of$151,000,139 was paid to the State Treasurer in RealtyTransfer Fees.

Amounts not in excess of $25,000,000 paid during theState fiscal year to the State Treasurer from the paymentof the State portion of the basic fee are credited to theShore Protection Fund.

In fiscal year 2004, $70,101,284 was paid to the StateTreasurer and credited to the Neighborhood PreservationNonlapsing Revolving Fund.

A �supplemental fee� is allocated between the countyPublic Health Priority Fund and the State ExtraordinaryAid Account. In fiscal year 2004, the Extraordinary AidAccount received $76,219,960.

Changes for Fiscal Year 2005Legislation (P.L. 2004, C. 66) effective August 1, 2004,imposed a new fee on grantors (sellers) called the �gen-eral purpose fee� for transfers with an entire consider-ation in excess of $350,000. This fee is $.90/$500 forconsideration not in excess of $550,000; $1.40/$500 forconsideration in excess of $550,000 but not in excess of$850,000; $1.90/$500 for consideration in excess of$850,000 but not in excess of $1,000,000; and $2.15/$500 for consideration in excess of $1,000,000. Chapter66 also imposes a new fee on grantees (buyers) for prop-erty transfers zoned for residential use, whether improvedor not, for consideration in excess of $1,000,000, of 1% ofthe entire amount of such consideration recited in the deed.

Legislation (P.L. 2005, C. 19) effective February 1, 2005,revised Chapter 66 to impose the 1% fee on grantees by

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RateThe rate of tax is 6% on taxable sales.


HistoryNew Jersey�s first sales tax became effective on July 1,1935. The tax rate was set at 2%. P.L. 1935, provided thatsales taxation would cease as of June 13, 1938.

Sales and Use Tax next became effective July 1, 1966.Rate of tax was set at 3% (C. 30, P.L. 1966).

Additional exemptions from the tax were provided byC. 25, P.L. 1967. Chapter 7, P.L. 1970, increased the taxrate to 5%, effective March 1, 1970. This Act and C. 25,P.L. 1970, contained certain transitional provisions re-lating to this increased rate.

Effective July 1, 1972, sales of alcoholic beverages, ex-cept draught beer sold by the barrel, to any retail licenseewere made subject to Sales and Use Tax (C. 27, P.L.1972). The 1972 amendment repealed taxation of sales ofpackaged liquor by retailer to consumer. The tax appliedat the wholesale-retail level. Its base was the minimumconsumer retail price as filed with the Board of AlcoholicBeverage Control.

Sale, rental, or lease of commercial motor vehiclesweighing more than 18,000 pounds became exempt fromSales and Use Tax effective January 1, 1978 (C. 217, P.L.1977).

Production machinery and equipment became exemptfrom Sales and Use Tax effective January 1, 1978.

The Division took over administration of the AtlanticCity Luxury Sales Tax (C. 60, P.L. 1980).

A new tax imposed on wholesale receipts of alcoholicbeverage licensees at 6.5% of the wholesale price super-seded the prior tax imposed under the Sales and Use Taxlaw at 5% of the minimum consumer resale price (C. 62,P.L. 1980).

Recycling equipment was exempted from Sales and UseTax effective January 12, 1982 (C. 546, P.L. 1981).

The Sales and Use Tax rate increased to 6%, effectiveJanuary 3, 1983 (C. 227, P.L. 1982).

property class transferred: Class 2 �residential�; 3A �farmproperty (regular)� if effectively transferred with otherproperty to the same grantee; and cooperative units. Infiscal year 2005, the 1% fee, when applicable, is not im-posed by zoning. The 1% fee does not apply to organiza-tions determined by the Internal Revenue Service to beexempt from Federal income taxation that are the buyersin deeds for a consideration in excess of $1,000,000.

Sales and Use TaxDescriptionSales and Use Tax applies to receipts from retail sale,rental, or use of tangible personal property; retail sale ofproducing, fabricating, processing, installing, maintain-ing, repairing, storing, and servicing tangible personalproperty; maintaining, servicing, or repairing real prop-erty; certain direct-mail services; sales of restaurantmeals; rental of hotel and motel rooms; certain admissioncharges; and telecommunications services.

A compensating use tax is also imposed when taxablegoods and services are purchased and New Jersey salestax is either not collected or is collected at a rate less thanNew Jersey�s sales tax rate. The use tax is due when suchgoods, or the goods on which taxable services are per-formed, come into New Jersey. If sales tax was paid toanother state, the use tax is only due if the tax was paid ata rate less than New Jersey�s rate.

All persons required to collect the tax must file a Busi-ness Registration Application (Form NJ-REG). Eachregistrant�s authority to collect the sales tax is certified bya Certificate of Authority issued by the Division, whichmust be prominently displayed at each place of businessto which it applies.

Major exemptions include: sales of newspapers and mag-azines; casual sales except motor vehicles and registeredboats; clothing, except furs; farm supplies and equipment;flags of New Jersey and the United States; unpreparedfood for off-premises consumption; food sold in schoolcafeterias; prescription and nonprescription drugs andother medical aids; motor fuels; periodicals and text-books; professional and personal services; real estatesales; tangible personal property used in research and de-velopment; transportation of persons or property; produc-tion machinery and equipment.

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Nonprescription drugs, household paper products, andsoaps and detergents were exempted from Sales and UseTax, effective July 1, 1983.

The Sales and Use Tax rate increased to 7%, effectiveJuly 1, 1990. Several major exempt items and servicesbecame taxable July 1, 1990, e.g., cigarettes; alcoholicbeverages; household soap and paper products; janitorialservices; telecommunications services; and sales, rentals,leasing, parts, and services for certain commercial motorvehicles (C. 40, P.L. 1990).

Chapter 115, P.L. 1990, approved November 19, 1990,reinstated, with modifications, the exemption for certainsales, rentals, leases, and repair and replacement parts forcommercial motor vehicles, retroactive to July 1, 1990.

Household paper products became exempt again Septem-ber 1, 1991 (C. 209, P.L. 1991).

The Sales and Use Tax rate decreased to 6%, effectiveJuly 1, 1992 (C. 11, P.L. 1992).

Local public pay-phone calls were exempted from the taxunder a law passed January 15, 1993, and retroactive toJuly 1, 1990 (C. 10, P.L. 1993).

Effective July 1, 1994, retail sales of certain tangible per-sonal property in Salem County were taxed at 3%(C. 373, P.L. 1993).

Sales and Use Tax was repealed on advertising space in atelecommunications user or provider directory or indexdistributed in New Jersey, effective April 1, 1996(C. 184, P.L. 1995).

Certain radio and television broadcast production equip-ment was exempted from Sales and Use Tax effectiveApril 1, 1996 (C. 317, P.L. 1995).

Sales and Use Tax was imposed on sales of energy(C. 162, P.L. 1997).

Effective January 8, 1998, the farm use exemption wasamended to apply to tangible personal property (exceptautomobiles, and except property incorporated into abuilding or structure) used �directly and primarily� in theproduction for sale of tangible personal property for saleon farms, ranches, nurseries, greenhouses, and orchards(C. 293, P.L. 1997).

Imprinting services performed on manufacturing equip-ment that is exempt under N.J.S.A. 54:32B-8.13 were ex-empted from Sales and Use Tax effective March 1, 1998(C. 333, P.L. 1997).

Sales and Use Tax was repealed on sales of advertisingservices, other than direct-mail services performed in NewJersey, on and after November 1, 1998 (C. 99, P.L. 1998).

Chapter 221, P.L. 1999, provides for expanded Sales andUse Tax exemptions for film and video industries.

Chapter 246, P.L. 1999, exempts repairs to certain air-craft from Sales and Use Tax.

Chapter 248, P.L. 1999, clarifies the imposition of NewJersey Sales and Use Tax on the retail sale of prepaidtelephone calling arrangements. The statute shifts theincidence of the tax from the point of use to the point atwhich the arrangement is sold to the consumer.

Sales and Use Tax exemption for the amount of salesthrough coin-operated vending machines was increasedfrom $0.10 to $0.25 (C. 249, P.L. 1999).

�The Firearm Accident Prevention Act� (C. 253,P.L. 1999) exempts sales of firearm trigger locks fromSales and Use Tax.

�The Secure Firearm Storage Act� exempts sales of fire-arm vaults from Sales and Use Tax (C. 254, P.L. 1999).

Chapter 273, P.L. 1999, provides for general exemptionfrom Sales and Use Tax of costs of purchase and repair ofcommuter ferryboats.

�Farm use� exemption was revised through C. 314, P.L.1999.

Chapter 365, P.L. 1999, provides Sales and Use Tax ex-emptions for certain purchases by flood victims of Hurri-cane Floyd.

Chapter 416, P.L. 1999, grants exempt organization statusunder the New Jersey Sales and Use Tax Act to the Na-tional Guard, Marine Corps League, and war veterans�posts or associations. This law also creates a Sales andUse Tax Review Commission.

Chapter 90, P.L. 2001, provides for a Sales and Use Taxexemption for the sale and repair of limousines.

The Uniform Sales and Use Tax Administration Act(C. 431, P.L. 2001) authorizes New Jersey to participatein discussions of the Streamlined Sales Tax Project in aneffort to simplify and modernize Sales and Use Tax col-lection and administration.

Chapter 45, P.L. 2002, brings the Sales and Use Tax Actinto compliance with the Federal Mobile Telecommunica-tions Sourcing Act.

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Chapter 136, P.L. 2003, provides that the receipts fromrentals of tangible personal property between �relatedpersons� are exempt from Sales and Use Tax.

Chapter 266, P.L. 2003, provides a Sales and Use Tax ex-emption for the sale of zero emission motor vehicles.

Sales and Use Tax Collections(In Billions)

Fiscal Year Collections1995 4,133,278,0161996 4,318,372,8241997 4,415,427,6001998 4,766,194,6601999 5,054,437,7692000 5,508,045,6032001 5,758,670,3032002 5,996,839,4072003 5,936,057,1412004 6,261,700,380

Urban Enterprise ZonesThe New Jersey Urban Enterprise Zones Act (C. 303, P.L.1983), approved August 15, 1983, provides tax advan-tages and other business tools to enhance development ef-forts in the State�s economically distressed urban centers.The statute was amended in 2002 to add Urban EnterpriseZone-impacted business districts. Urban Enterprise Zone-impacted business districts are areas that have been nega-tively impacted by the presence of two or more adjacentUrban Enterprise Zones. Under the program, qualifiedmunicipalities apply to the Urban Enterprise Zone Au-thority to have a portion of the municipality designated asan Urban Enterprise Zone or Urban Enterprise Zone-im-

pacted business district. Businesses must apply to the lo-cal municipal zone coordinator to be certified as a �quali-fied business� before they can take advantage of thesebenefits.

Initially ten zones (the maximum number provided underthe statute) were established in: Bridgeton, Camden,Elizabeth, Jersey City, Kearny, Millville/Vineland, New-ark, Orange, Plainfield, and Trenton. Chapter 367, P.L.1993, approved January 5, 1994, allowed for the designa-tion of ten additional enterprise zones. This increased thenumber of zones from 10 to 20, adding Asbury Park/LongBranch, Carteret, Lakewood, Mount Holly, Passaic,Paterson, Perth Amboy, Phillipsburg, Pleasantville, andUnion City. Seven new zones were added in 1996: EastOrange, Guttenberg, Hillside, Irvington, North Bergen,Pemberton, and West New York. In 2002, three additionalzones were designated: Bayonne City, Roselle Borough,and a joint zone consisting of North Wildwood City,Wildwood City, Wildwood Crest Borough, and WestWildwood Borough (P.L. 2001 C. 347). Gloucester Citywas added effective April 1, 2004 (P.L. 2003, C. 285).

In 2002, legislation was passed which requires the UrbanEnterprise Zone Authority to extend a zone�s initial desig-nation as an Urban Enterprise Zone if the particular enter-prise zone meets certain requirements. The same legislationprovides for the replacement of the final 5-year period ofthe 20-year Urban Enterprise Zone designation for theeligible zones with a new 16-year period.

The possible tax benefits conferred on qualified busi-nesses within a designated Urban Enterprise Zone include:

� Corporation Business Tax credits for hiring newemployees;

� Sales and Use Tax exemption for purchases of build-ing materials, most tangible personal property, andmost services for business use;

� Unemployment tax rebates;

� Authorization to impose State sales tax at 50% of theregular rate (3%).

The only benefit conferred on qualified businesses withina designated Urban Enterprise Zone-impacted businessdistrict is the authorization to impose State sales tax at50% of the regular rate (3%).

Sales Tax BenefitsA vendor within an Urban Enterprise Zone or Urban En-terprise Zone-impacted business district wishing to col-lect sales tax at the reduced rate must first be certified as

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a �qualified business,� and then apply to the Division ofTaxation for authority to collect tax at the reduced rate.No business may collect sales tax at the reduced ratewithout the proper certification. The certification is validfor one year. Recertification is automatic unless the busi-ness changes or loses its qualified status.

A qualified business may collect sales tax at the reducedrate only on a face-to-face retail sale of tangible propertyto a buyer who comes to its business location within thezone or district and accepts delivery from the location.Thus, telephone, mail order, or catalog sales do not qual-ify for the reduced rate. Sales of certain items are not eli-gible for the reduced sales tax rate. Tax must be collectedat the full regular rate on sales of: restaurant meals andprepared food, cigarettes, alcoholic beverages, energy,and the sale, rental, or lease of motor vehicles. The re-duced rate does not apply to sales of any services by aqualified business.

A qualified business may purchase items of tangible per-sonal property (office and business equipment, supplies,furnishings, fixtures, etc.), and taxable services(construction work, repair, and installation services, etc.)which are for the exclusive use of the business at its loca-tion in the zone without paying sales tax. Building materi-als used at the zone location are also exempt from tax,whether purchased by the qualified business or the con-tractor. The exemption from sales tax does not apply topurchases or repairs of motor vehicles, or purchases oftelecommunications services and energy. Qualified busi-nesses located within Urban Enterprise Zone-impactedbusiness districts are not entitled to this benefit.

Savings Institution TaxDescriptionThe Savings Institution Tax is applicable to every savingsinstitution doing a financial business in New Jersey. TheAct defines Savings Institution as any state or Federallychartered building and loan association, savings and loanassociation, or savings bank.

Excluded from tax are:

(1) 100% of dividends of an owned and qualified sub-sidiary; and

(2) 50% of other dividends included in taxable incomefor Federal tax purposes.

RateThe Savings Institution Tax was repealed applicable toprivilege periods or taxable years beginning after 2001(Chapter 40, P.L. 2002). Previously, the tax was imposedat the rate of 3% of net income.


Solid Waste Services TaxDescriptionThe Solid Waste Services Tax is levied upon the owner oroperator of every sanitary landfill facility located in NewJersey on all solid waste accepted for disposal on or afterMay 1, 1985.

RateThe tax rate in 2004 is $1.45 per ton or $0.435 per cubicyard on all solid waste accepted for disposal. The tax ratefor solid waste in liquid form is $0.002 per gallon. On thefirst of January annually the tax rate increases on solidsby $0.05 per ton or $0.015 per cubic yard.

Disposition of RevenuesThe revenue collected from the Solid Waste Services Taxis deposited in the Solid Waste Services Tax Fund admin-istered by the New Jersey Department of EnvironmentalProtection. Monies in the fund are allocated to the coun-ties based on the amount of waste generated and used forimplementing county solid waste management plans.

Spill Compensation andControl Tax

DescriptionThe Spill Compensation and Control Tax is imposed onowners or operators of one or more major facilities usedto refine, store, produce, handle, transfer, process, ortransport hazardous substances, including petroleumproducts, to insure compensation for cleanup costs anddamages due to discharge of hazardous substances.

The tax is also imposed on owners of a hazardous sub-stance which is transferred to a public storage terminal,

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and to any transferor of a previously untaxed nonpetro-leum hazardous substance from a major facility to onewhich is a nonmajor facility.

Rate1. Nonpetroleum hazardous substances�1.53% of fair

market value;2. Petroleum products�$0.023 per barrel;3. Precious metals�$0.023 per barrel;4. Elemental phosphorus�$0.023 per barrel; and5. Elemental antimony or antimony trioxide�$0.023 per

barrel, with annual approval.

The tax rate may be increased in the case of a major dis-charge or series of discharges of petroleum products to arate not to exceed $0.04 per barrel until the revenue pro-duced by the increased rate equals 150% of the total dol-lar amount of all pending reasonable claims resultingfrom the discharge.

The tax for an individual taxpayer facility which paid thetax in 1986 is capped at a certain percentage of thetaxpayer�s 1986 liability.

Disposition of RevenuesThe proceeds constitute a fund (New Jersey Spill Com-pensation Fund) to insure compensation for cleanup costsand damage associated with the discharge of petroleumproducts and other hazardous substances.

Tobacco Products WholesaleSales and Use TaxDescriptionThe Tobacco Products Wholesale Sales and Use Tax isimposed on the receipts from every sale of tobacco prod-ucts, other than cigarettes, by a distributor or a wholesalerto a retail dealer or consumer. Cigarettes are exempt fromthis tax.

Chapter 448, P.L. 2001, effective March 1, 2002, con-verts the Tobacco Products Wholesale Sales and Use Taxfrom one imposed on the price that a distributor receivesfrom the sale of tobacco products to a vendor or con-sumer to one imposed upon the (lower) price that the dis-tributor pays to buy the products from the manufacturer.

RateThe rate of the Tobacco Products Wholesale Sales andUse Tax and the base for calculating the tax changed. Therate is reduced to 30% and is imposed on the invoiceprice the distributor pays to buy the products from themanufacturer.

Distributors and wholesalers who also sell tobacco prod-ucts at retail or otherwise use the tobacco products mustpay a compensating use tax of 30% measured by the salesprice of a similar tobacco product to a distributor.

Disposition of RevenuesRevenues are deposited in the State Treasury for generalState use. Pursuant to P.L. 1997, C. 264, initial collectionsof $5 million are deposited in the Health Care Subsidy Fund.

Transfer Inheritance andEstate TaxesDescriptionThe Transfer Inheritance Tax applies to the transfer of allreal and tangible personal property located in New Jerseyand intangible personal property wherever situated hav-ing an aggregate value of $500 or more in estates of resi-dent decedents. In estates of nonresident decedents, thetax applies to real property and tangible personal prop-erty located in the State of New Jersey.

The Estate Tax is imposed in addition to the Transfer In-heritance Tax on the estates of resident decedents whereinheritance, estate, succession, or legacy taxes paid areless than the Federal credit allowable.

RateThe Transfer Inheritance Tax rates depend on the amountreceived and the relationship between the decedent andthe beneficiary. No tax is imposed on immediate family(direct ancestors or descendants�Class A), spouses, ordomestic partners. Class C beneficiaries (sibling of dece-dent, spouse or domestic partner, or widow/er of a childof decedent) are taxed at 11%�16%, with the first$25,000 exempt. Class D beneficiaries (all others) aretaxed at 15%�16%, with no tax on bequests of less than$500. Charitable institutions are exempt from tax.

For decedents dying on or before December 31, 2001, theEstate Tax is based upon the credit for state inheritance,estate, succession, or legacy taxes allowable under theprovisions of the Internal Revenue Code in effect on the

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decedent�s date of death. For decedents dying after De-cember 31, 2001, the Estate Tax is based upon the creditfor state inheritance, estate, succession, or legacy taxesallowable under the provisions of the Internal RevenueCode in effect on December 31, 2001.

During 2001 there was no tax due on Federal taxable es-tates of less than $675,000. Under the provisions of theFederal Economic Growth and Tax Relief ReconciliationAct of 2001 (EGTRRA), the applicable Federal exclusionamounts were increased to:

2002 and 2003 $1.0 Million2004 and 2005 1.5 Million2006, 2007, and 2008 2.0 Million2009 3.5 Million2010 Tax Repealed

The New Jersey Estate Tax exclusion was frozen at the2001 level for decedents dying in 2002 and thereafter.The Estate Tax is an amount equal to the allowable Fed-eral credit for inheritance, estate, succession, and legacytaxes less the total of such taxes paid to New Jersey, anyother state, territory or possession of the United States, orthe District of Columbia. For decedents dying after De-cember 31, 2001, the reduction for taxes paid to other ju-risdictions is limited to that portion of the credit whichbears the same relationship to the total credit as the prop-erty subject to tax in the other jurisdiction bears to theproperty subject to tax in New Jersey.

Exemptions From Transfer Inheritance Tax� All transfers having an aggregate value under $500;� Life insurance proceeds paid to a named beneficiary;� Charitable transfers for the use of any educational

institution, church, hospital, orphan asylum, publiclibrary, etc.;

� Transfers for public purposes made to New Jersey orany political subdivision thereof;

� Federal civil service retirement benefits payable to abeneficiary other than the estate;

� Annuities payable to survivors of military retirees; and� Qualified employment annuities paid to a surviving

spouse or domestic partner.


HistoryNew Jersey first imposed an inheritance tax in 1892 at arate of 5% on property transferred from a decedent to abeneficiary.

In 1909, legislation was enacted which formed the basisof the present Transfer Inheritance Tax (N.J.S.A. 54:33-1et seq.).

In 1934, legislation was enacted which formed the basisof the Estate Tax (N.J.S.A. 54:38-1 et seq.). On June 30,1992, the filing date for estate taxes for decedents dyingafter March 1, 1992, was shortened. The due date hadbeen the later of 18 months after the date of death or 60days after the Federal notification of Federal estate taxdue. The new due date is 9 months after date of death(C. 39, P.L. 1992). Estate taxes are paid by the estate tothe extent that inheritance taxes are below the Federalcredit for State taxes.

On February 27, 1985, an amendment to the Transfer In-heritance Tax Act (C. 57, P.L. 1985) eliminated fromtaxation transfers from decedents to surviving spouses(retroactive to January 1, 1985) and to other Class A ben-eficiaries on a phased-out basis through July 1, 1988. OnJuly 1, 1988, other Class A beneficiaries became totallyexempt from the tax. Class C beneficiaries were granted a$25,000 exemption effective on July 1, 1988. EffectiveSeptember 10, 2004, transfers to a domestic partner be-came exempt (P.L. 2003, C. 246).

In July 2002, legislation (C. 31, P.L. 2002) was enactedchanging the manner in which Estate Tax is computed forthe estates of decedents dying after December 31, 2001.Under the changes made to the Federal estate tax law,New Jersey�s Estate Tax would have been phased outover a three-year period.

Transfer and Inheritance Estate TaxCollections (In Millions)

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Fiscal Year Collections1995 275,823,8141996 310,655,9781997 313,447,4961998 337,679,9411999 423,015,3292000 485,948,3392001 478,061,0552002 510,367,4192003 445,310,8552004 516,007,975

Transitional Energy FacilityAssessmentDescriptionThe Transitional Energy Facility Assessment is a tempo-rary, partial substitute for the Public Utility Energy UnitTax previously assessed against public utilities engagedin the sale and/or transmission of energy (therms of natu-ral gas or kilowatt-hours of electricity).

AdministrationThe Transitional Energy Facility Assessment is assessedagainst the public utility energy companies, or their suc-cessors or assignees, and is due May 15.

RateThe rates of taxation for each class and category of natu-ral gas and electricity are established by the New JerseyBoard of Public Utilities.

Disposition of RevenuesRevenues are deposited into an account that is used tofund the Energy Tax Receipts Property Tax Relief Fund,which is distributed to municipalities in accordance withC. 167, P.L. 1997.

Uniform Transitional UtilityAssessmentDescriptionThe Uniform Transitional Utility Assessment is assessedagainst public utilities engaged in the sale and/ortransmission of energy (therms of natural gas or kilowatt-hours of electricity) which were subject to the PublicUtility Energy Unit Tax prior to January 1, 1998, andagainst telecommunication providers previously subjectto the Public Utility Franchise and Gross Receipts Tax as-sessed under C. 4, P.L. 1940.

AdministrationThe Uniform Transitional Utility Assessment is assessedagainst the public utility energy companies and the publicutility telecommunications companies, or their successorsor assignees, and is due May 15. Any amount paid by ataxpayer shall be available only as a nonrefundable creditagainst the tax in which the estimation is made, and shallnot be claimed until after August 1 of the year the assess-ment is paid.

RateFor energy taxpayers, the assessment shall be equal to50% of the total of the taxpayer�s estimate of Sales andUse Tax on energy (natural gas or electricity) and utilityservice (transportation or transmission of natural gas orelectricity by means of mains, wires, lines, or pipes to us-ers or customers) remittance for the calendar year andCorporation Business Tax liability for the calendar year.

For telecommunication taxpayers, the assessment shall beequal to 50% of the taxpayer�s estimate of its CorporationBusiness Tax liability for the calendar year.

Disposition of RevenuesRevenues are deposited into accounts that are used tofund the Energy Tax Receipts Property Tax Relief Fund,which is distributed to municipalities in accordance withC. 167, P.L. 1997.

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LEGISLATION AND COURT DECISIONS


2004 Annual Report

Legislation and Court Decisions

51

LEGISLATION

Administration

P.L. 2004, C. 52 � Electronic Funds TransferEnacted on June 29, 2004, and effective immediately,lowers the threshold for mandatory use of electronictransfer as the means of filing State taxes to those taxpay-ers whose prior year liability was $10,000 or more.

P.L. 2004, C. 56 � Bank Account InformationEnacted on June 29, 2004, and effective immediately,requires financial institutions, in response to a request bythe Director of the Division of Taxation, to transmit elec-tronically a report regarding the accounts of tax debtors.

P.L. 2004, C. 57 � Contractor Registration ChangesEnacted on June 29, 2004, and effective immediately, butremaining inoperative until September 1, 2004, extendsto local government agencies the requirement that publicentities may enter into public contracts with providers ofgoods and services only if they have presented documen-tation showing that they are registered with this State fortax purposes. The act also requires that these providers ofgoods and services and their affiliates remit sales or usetax on tangible personal property delivered to a retailbuyer in this State.

P.L. 2004, C. 58 � License Suspension of Tax-Noncompliant BusinessesEnacted on June 29, 2004, and effective immediately,provides a mechanism whereby the Division of Taxationwill receive information regarding the identity of entities(including individuals) that are holders of licenses to en-gage in a particular profession, trade, or business in thisState, and will then examine their tax records to identifyany areas of noncompliance and will give them an oppor-tunity to contest their indebtedness or delinquency or tocome into compliance. The act authorizes the Director todemand the summary suspension of a professional, occu-pational, or business license of an entity that already hasan unsatisfied judgment for tax indebtedness, or who failsto remedy any tax indebtedness after receiving the noticeprovided for under this act.

P.L. 2004, C. 79 � Report for Study Commission onDiscriminationEnacted on July 2, 2004, and applicable to studies al-ready begun before that effective date, permits the Secre-tary of State to request from the Division of Taxation, andrequires the Division to supply, a report containing basic

information, not including tax information, regardingpublic employees and contractors. This information willbe used by the Governor�s Study Commission on Dis-crimination in State Employment and Contracting, solelyin assessing the nature and scope of any past or presentdiscrimination.

Cigarette Tax

P.L. 2004, C. 67 � Rate IncreaseEnacted on June 30, 2004, and effective July 1, 2004, in-creases the cigarette tax to $.12 per cigarette, increasingthe tax on a pack by $.35.

P.L. 2004, C. 96 � Packaging RequirementsEnacted on July 9, 2004, and effective October 1, 2004,amends the Cigarette Tax Act to prohibit the sale of ciga-rettes in packs of fewer than 20.

Corporation Business Tax

P.L. 2003, C. 166 � Business EmploymentIncentive Program(Signed into law on September 2, 2003) Expands theNew Jersey Business Employment Incentive Program,which is designed to promote economic development,and provides for additional funding by authorizing theEconomic Development Authority to issue bonds. Thisact took effect immediately.

P.L. 2003, C. 194 � Economic DevelopmentIncentives(Signed into law on November 21, 2003) Expands the eco-nomic development incentives for rehabilitation and eco-nomic recovery in certain fiscally distressed municipalities.

Chapter 194 expands both the business incentive programand the jobs creation credit program to extend eligibilityfor the credits allowed under each beyond corporationbusiness tax payers to include insurance companies sub-ject to insurance premiums taxes under P.L. 1945, C.121(C.54:18A-1) and foreign insurance companies subject to�retaliatory� taxes.

This law also increases the maximum percentage of therebate base allowable against either corporation businesstax or the premiums or retaliatory taxes under the busi-ness incentive program from 75% to 100% in cases as towhich the New Jersey Economic Development Authorityfinds that a particular business relocation or expansion

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will more effectively effectuate the purposes of the�Municipal Rehabilitation and Economic Recovery Act.�

The act took effect immediately, and applies to privilegeperiods and reporting periods beginning on or afterJune 30, 2002.

P.L. 2003, C. 296 � Tax Credit for EnvironmentalRemediation Costs(Signed into law on January 14, 2004) Provides a corpo-ration business tax credit for 100% of the eligible costs ofthe remediation of certain contaminated sites in the Stateperformed during privilege periods beginning on or afterJanuary 1, 2004, and before January 1, 2007. The amountof the credit cannot exceed 50% of the tax liability dueand cannot reduce the tax liability to an amount below thestatutory minimum tax. However, in most cases any un-used tax credit not utilized because of these limitationsmay be carried over for the next five privilege periods.

In addition, the tax credit, when combined with the prop-erty tax exemption received under the EnvironmentalOpportunity Zone Act, less any �in lieu of� tax paymentsmade pursuant to that Act, or any other State, local, orFederal tax incentive or grant to remediate a site, cannotexceed 100% of the total cost of the remediation.

Only taxpayers that are not liable for the contamination ofthe site as �responsible parties� under the Spill Compen-sation and Control Act are eligible for the credit.

This act took effect immediately.

P.L. 2004, C. 65 � DecouplingEnacted on June 30, 2004, and effective immediately, af-fects certain expense deductions and depreciation permit-ted on the New Jersey CBT-100. For property placed inservice on and after January 1, 2004, the law decouplesthe Federal ceiling from the amount permitted to be de-ducted as an expense for New Jersey corporation businesstax purposes under IRC section 179. Returns for periodsending after December 31, 2003, are affected if propertyhas been placed in service on or after January 1, 2004,but during the privilege period. Since the amount of thededuction under prior law was $25,000, that is the limitof the IRC section 179 deduction for New Jersey pur-poses. The act also makes clear that property placed inservice after September 10, 2001, will not receive the bo-nus depreciation treatment.

P.L. 2004, C. 47 � Net Operating Loss ChangesEnacted on June 29, 2004, and effective immediately,provides that for privilege periods beginning duringcalendar year 2004 and calendar year 2005, a limited netoperating loss (�NOL�) deduction is allowed for the

privilege period. The deduction permitted may reduce en-tire net income by up to 50%. To the extent that any NOLis disallowed by reason of this limiting provision, the dateon which the disallowed deduction would otherwise expireis extended by a period equal to the period of disallowance.

Cosmetic Medical Procedures GrossReceipts Tax

P.L. 2004, C. 53 � Cosmetic Medical ProceduresGross Receipts TaxEnacted on June 29, 2004, and effective immediately, butwhich remains inoperative until September 1, 2004, im-poses a new 6% gross receipts tax on the purchase of cer-tain cosmetic medical procedures, which are medicalprocedures performed in order to improve a person�s ap-pearance, but without significantly serving to prevent ortreat illness or disease or to promote proper functioningof the body. �Cosmetic medical procedures� do not in-clude reconstructive surgery or dentistry to correct orminimize abnormal structures caused by birth defects, de-velopmental abnormalities, trauma, infection, tumors, ordisease. The tax will be collected from the patient by thecosmetic medical service provider, who will be requiredto remit the tax quarterly.

Environmental Taxes

P.L. 2004, C. 50 � Spill Compensation and ControlTax ChangesEnacted on June 29, 2004, provides for tax rate increaseseffective immediately and retroactive to transfers occur-ring on and after January 1, 2004. The new tax rate forpetroleum products, hazardous substances containing pre-cious metals, elemental phosphorous, and elemental anti-mony or antimony trioxide for fire retardants is $0.023per barrel transferred. The new tax rate for hazardoussubstances other than the above listed is 1.53% of the fairmarket value of the substance transferred.

P.L. 2004, C. 51 � Air Toxics SurchargeEnacted on June 29, 2004, and effective immediately, im-poses a new annual surcharge ranging from $.10 to $10per pound of toxic substance, depending on the categoryof toxin, on toxic air emissions at certain kinds of facili-ties. A portion of the revenue from this fee will be used toimprove security at nuclear power plants in the State.

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Gross Income Tax

P.L. 2003, C. 246 � Domestic Partnership Act(Signed into law on January 12, 2004) Sets forth therequirements that must be met to establish a domesticpartnership.

The act provides that for gross income tax purposes, themeaning of �dependent� will include a qualified domesticpartner, which will allow the taxpayer to claim an addi-tional $1,000 personal exemption for a qualified domesticpartner who does not file a separate tax return.

The act takes effect on the 180th day after enactment. Theprovisions of sections 47 through 56, which pertain tohealth service providers, will apply to policies or con-tracts issued or renewed on or after the effective date.

P.L. 2004, C. 40 � Increased Tax on High-IncomeTaxpayersEnacted on June 28, 2004, and effective immediately, in-creases the gross income tax rate for the highest-incometaxpayers. It establishes an additional tier in the graduatedgross income tax table for taxpayers with taxable incomeabove $500,000, providing that the portion of income ex-ceeding $500,000 shall be taxed at a rate of 8.97%.

P.L. 2004, C. 55 � Estimated Tax on Income FromSale of Real Property by NonresidentsEnacted on June 29, 2004, and effective August 1, 2004,supplements the Gross Income Tax Act by requiring non-residents who derive income from the sale of real prop-erty in this State to pay estimated gross income tax. Thelegislation provides that a county recording officer, at thetime the deed is filed, must be presented with evidence offiling or payment of estimated tax with respect to the gainrealized from the sale.

Inheritance/Estate Tax

P.L. 2003, C. 246 � Domestic Partnership Act(Signed into law on January 12, 2004) Sets forth therequirements that must be met to establish a domesticpartnership.

This act provides that for transfer and inheritance tax pur-poses, property held jointly by qualified domestic part-ners that is transferred to a domestic partner will betreated as property held jointly by a spouse.

Chapter 246 also states that no tax is imposed on trans-fers of property to a qualified domestic partner for trans-fer inheritance tax purposes. In addition, the value of any

pension, annuity, retirement allowance, or return of con-tribution payable to a domestic partner is exempt fromtax.

The act takes effect on the 180th day after enactment. Theprovisions of sections 47 through 56, which pertain tohealth service providers, will apply to policies or con-tracts issued or renewed on or after the effective date.

Local Property Tax

P.L. 2003, C. 125 � Long-Term Tax Exemption(Signed into law on July 9, 2003) Makes various changesin the law governing long-term real property tax exemp-tions. The law took effect immediately and governs taxappeals filed for tax year 2003 and thereafter.

Miscellaneous

P.L. 2003, C. 197 � Veterans� Benefits(Signed into law on December 16, 2003) Extends eligibil-ity for certain veterans� benefits to veterans who served atleast 14 days in the theater of operation of Operations�Enduring Freedom� and �Iraqi Freedom.� Section 5 ofthe law provides that an eligible person is entitled to theannual $250 property tax deduction or a property tax ex-emption if the eligible person has a total and permanentservice-incurred disability.

Chapter 197 also makes technical changes and updates todescriptions of what constitutes service during Operation�Restore Hope� in Somalia, and Operations �JointEndeavor� and �Joint Guard� in the Republic of Bosniaand Herzegovina.

Chapter 197 took effect immediately, but section 6 (theimplementation section) remained inoperative untilJanuary 1, 2004.

P.L. 2003, C. 256 � Investment Clubs(Signed into law on January 14, 2004) Exempts invest-ment clubs from the $150 per owner annual partnershipfiling fee and from the requirement that a partnershipmake payments of New Jersey gross income tax on behalfof its nonresident noncorporate partners.

The act provides that a qualified �investment club� is anentity that is classified as a partnership for Federal in-come tax purposes in which all of the owners are indi-viduals; and all of the assets are securities, cash, or cashequivalents; and the market value of the total assets does

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not exceed an amount equal to the lesser of $250,000 or$35,000 per owner of the entity, as measured on the lastday of its taxable year. Also, the partnership is not re-quired to register itself or its membership interests withthe Federal Securities and Exchange Commission.

Chapter 256 also provides for an annual inflationary ad-justment for the cap on the total assets of the entity andaverage assets of the owners.

The act took effect immediately, and applies to taxableyears and privilege periods beginning on and after Janu-ary 1, 2002.

P.L. 2003, C. 266 � Low Emission Vehicle Program(Signed into law on January 14, 2004) Requires that theDepartment of Environmental Protection implement theCalifornia Low Emission Vehicle program in New Jerseybeginning on January 1, 2009. A provision in this act pro-vides that receipts from sales of zero emission vehiclessold on and after May 1, 2004, are exempt from the taximposed under the Sales and Use Tax Act.

Chapter 266 defines �zero emission vehicle� and alsoprovides that the Commissioner of Environmental Protec-tion shall certify to the State Treasurer the make andmodel of those motor vehicles that are zero emission ve-hicles eligible for the exemption.

The act took effect immediately.

P.L. 2004, C. 17 � Medical Malpractice LiabilityInsurance Premium Assistance Fund(Signed into law on June 7, 2004) The �New JerseyMedical Care Access and Responsibility and PatientsFirst Act� provides comprehensive reforms affecting thetort liability system, health care system, and medical mal-practice liability insurance carriers to ensure that healthcare services continue to be available and accessible toresidents of New Jersey.

The act establishes the Medical Malpractice LiabilityInsurance Premium Assistance Fund, which will be com-prised of the following revenues: an annual $75 charge im-posed on all physicians, podiatrists, chiropractors, den-tists, optometrists, and attorneys licensed to practice inthis State, along with an annual $3 per employee chargefor all employers subject to the New Jersey unemploy-ment compensation law.

Revenues generated from this fund will be used for a va-riety of health care purposes, including, among otherthings providing relief towards the payment of medicalmalpractice liability insurance premiums for certain

health care providers in this State and providing pay-ments to hospitals as charity care subsidies.

The Division of Taxation is responsible for collecting theannual $75 fee payable by each person licensed to prac-tice law in this State. The fund and annual charges pro-vided for in the act will expire after three years.

P.L. 2004, C. 49 � HMO AssessmentEnacted on June 29, 2004, and effective immediately, es-tablishes an interim assessment on health maintenance or-ganizations and mandates a comparative study of theequity of various taxes imposed on all health care insur-ance companies.

P.L. 2004, C. 128 � Phase-Out of CasinoComplimentaries TaxEnacted on August 30, 2004, and effective immediately,provides for the gradual phase-out of the tax on casino�complimentaries� until the tax expires on June 30, 2009.It also transfers from the Division of Taxation to the Ca-sino Control Commission the responsibility for adminis-tering the casino complimentaries tax, the casino adjustednet income tax, the multi-casino slot machine tax, the ca-sino parking fee, and the $3 casino hotel occupancy fee.

P.L. 2004, C. 129 � Casino ReinvestmentDevelopment Act ChangesEnacted on August 25, 2004, and effective immediately,extends the investment alternative tax obligation of ca-sino licensees from 35 to 50 years, authorizes the CasinoReinvestment Development Authority to approve five ad-ditional �entertainment retail districts,� and allows forgrants to the Authority for 20 years from sales tax rev-enue generated in entertainment districts.

Mobile Telecommunications Fee

P.L. 2004, C. 48 � Mobile Telecommunications FeeEnacted on June 29, 2004, and effective immediately, ap-plicable to billing periods ending on or after July 1, 2004,for most services, and to billing periods ending on or af-ter August 1, 2004, for certain services, imposes a $.90fee on periodic billing to mobile telecommunications andtelephone exchange customers. The fee shall be used tofund the �911� system and certain other emergency re-sponse systems.

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Motor Vehicle Tire Fee

P.L. 2004, C. 46 � Motor Vehicle Tire FeeEnacted on June 29, 2004, and effective August 1, 2004,imposes a fee of $1.50 on the sale of new motor vehicletires, including tires sold as a component part of a newmotor vehicle either sold or leased in New Jersey.

Outdoor Advertising Fee

P.L. 2004, C. 42 � Fee ChangesEnacted on June 29, 2004, and effective immediately,provides for gradual reduction in the rate of the feeimposed on outdoor advertising signs and provides thatentities that are treated as exempt organizations for salesand use tax purposes shall be exempt from the outdooradvertising fee as well. It also subjects outdoor advertis-ing signs to real property tax.

Property Tax Relief Programs

P.L. 2004, C. 40 � Homeowner and Tenant BenefitsIncreasedEnacted on June 28, 2004, and effective immediately, aspart of the new FAIR (Fair and Immediate Relief) pro-gram, provides increased property tax relief benefits toNew Jersey homeowners and tenants.

Realty Transfer Fee

P.L. 2004, C. 66 � General Purpose Fee AddedEnacted on June 30, 2004, and effective immediately,applicable to realty transfers taking place on or after Au-gust 1, 2004, imposes an additional �general purpose fee�at a graduated rate on grantors of realty where the valueof the deed is more than $350,000, and makes otherchanges in fees and clarifications in the provisions gov-erning realty transfer fees.

Sales and Use Tax

P.L. 2003, C. 136 � Rentals Between Closely RelatedEntities Exempt(Signed into law on August 1, 2003) Provides thatreceipts from the rental of tangible personal property on

which sales tax was paid or use tax obligations have beensatisfied between related persons not engaged in the regu-lar trade or business of renting that property to other per-sons are exempt from sales and use tax. For this purpose,�related persons� means persons that are 80% or moreowned by each other, or by the same third party. This lawtook effect immediately but will remain inoperative untilNovember 1, 2003.

P.L. 2003, C. 165 � Concession Stand Sales inVeterans� Homes Exempt(Signed into law on August 31, 2003) Exempts from salesand use tax retail sales made at concession stands (can-teens) that are located in State-owned and operated resi-dential veterans� homes. This act took effect immediately,and applies to sales made on or after December 1, 2003.

P.L. 2003, C. 224 � Cleanup of HazardousSubstances(Signed into law on January 14, 2004) Amends certainprovisions of the Spill Compensation and Control Act andthe Brownfield and Contaminated Site Remediation Actconcerning site remediation.

The amendments provide that if the redevelopment of theproperty is performed in phases, payments to reimbursethe developer may commence prior to the completion ofthe redevelopment at the entire site.

This act also provides a method of computing the salesand use tax on the purchase of materials used forremediation, the construction of new structures, or theconstruction of new residences at the site. When an exactaccounting is not available, the Director of the Divisionof Taxation will presume the tax equals 1% of thedeveloper�s contract price for the remediation and im-provement. An amount not to exceed 3% may beapproved by the Director when clear and convincing evi-dence that the tax on materials is greater than 1% ispresented.

This act took effect immediately.

Transitional Energy FacilityAssessment

P.L. 2004, C. 43 � Phase-Out ScheduleEnacted on June 29, 2004, and effective immediately, ex-tends the end date of the phase-out period for this assess-ment to 2010 and modifies the annual rates.

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Urban Enterprise Zones

P.L. 2003, C. 285 � New Zone Designated(Signed into law on January 14, 2004) DesignatesGloucester City in Camden County the 31st qualifyingUrban Enterprise Zone based on the required populationcriteria. Qualified businesses in the designated Urban En-terprise Zone are permitted to collect sales tax at a re-duced rate of 3% rather than at the current 6% rate. Thereduced sales tax rate is applicable for a period of at least20 years, and potentially as long as 35 years, duringwhich the revenues collected at that reduced rate aredivided between the municipality and the State under aformula that is adjusted according to a statutory schedule.

Chapter 285 takes effect on April 1, 2004.

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COURT DECISIONS

Administration

Timeliness of ProtestHarry and Susan Dashoff v. Director, Division of Taxa-tion, decided July 30, 2003; Tax Court No. 004747-1998.The Appellate Division remanded this case to the Tax Courtfor an evidentiary hearing. Previously, the Tax Court heldthat plaintiff failed to timely file the complaint. At issueon remand is whether the mailing of a Notice of Assess-ment that was never received by plaintiff triggered thestatutory period to file a protest with the Division or anappeal with the Tax Court.

The Division mailed plaintiff a Notice of Assessment(�Notice�) by certified mail, return receipt requested. TheNotice�s envelope indicated that unsuccessful attempts todeliver the Notice were made and that therefore the un-claimed mailing was being returned to the Division. Sub-sequently, the Division mailed a Certificate of Debt(�Certificate�) via certified mail to plaintiff. Plaintiff re-ceived the Certificate and thereafter filed a protest withthe Division. The Division determined that the protestwas untimely, as it was not received within the statutoryperiod to file a protest from the date of the Notice.

This Court found that plaintiff chose not to claim the No-tice and that the evidence was conclusive that the Noticewas never received by plaintiff. The general rule is thatthe mailing of a properly addressed notice is presumptiveevidence of receipt pursuant to N.J.S.A. 54:50-6a. How-ever, this statute creates only a rebuttable presumption ofreceipt, not effective receipt. Regardless, the Court ruledthat the presumption of receipt does not apply to certifiedmail. Therefore, the Court found �that the attempted serv-ice of the Notice by certified mail failed regardless ofwhether the Notice was simply unclaimed or purposelyrefused by Dashoff.� The Court opined that had the No-tice been sent by regular or ordinary mail simultaneouslyor subsequently that service would have been effectuated.

Time Period to File ComplaintJames Liapakis v. Director, Division of Taxation, decidedSeptember 15, 2003; Appellate Division No. A-5341-00T5.The Division�s gross income tax determination letter wassent by certified mail on August 18, 2000, and receivedby plaintiff (Liapakis) on August 21, 2000. Liapakis filedhis complaint on November 17, 2000, which was 91 daysafter the determination letter was mailed and 88 daysafter Liapakis received it. The Tax Court ruled that thecomplaint was untimely as it was filed beyond the 90-day

time period to file a complaint because the mailing datecommenced the calculation of the 90-day period.Liapakis appealed arguing that the date the letter wasreceived should start the running of the 90 days.

In determining whether the mailed or received date com-menced the running of the 90 days, the AppellateDivision�s analysis commenced with N.J.S.A. 54A:9-10(a),which requires that a taxpayer appeal the Director�s deci-sion within 90 days in conformity with the State Tax Uni-form Procedure Law. Thereafter, there is an apparent in-consistency among the statutes. On one hand, the StateTax Uniform Procedure Law N.J.S.A. 54A:51-18 statesthat all matters regarding the complaint and practice inthe Tax Court are prescribed by the rules of court unlessotherwise specifically provided by law. Rule 8:4-2(a)states that the time period is calculated from the date ofservice, and Rule 1:5-4(b) provides that service is com-plete upon the date of acceptance of certified mail. On theother hand, State Tax Uniform Procedure Law N.J.S.A.54:49-18a states that the time to appeal commences fromthe final determination date, which date is defined byN.J.S.A. 54A:9-10(e) as the mailing date.

The Court ruled in favor of Liapakis noting that ambigu-ities in the tax law are construed in the taxpayer�s favorand relied upon its previous ruling in Township of Holmdelv. Director, Division of Taxation, 12 N.J. Tax 112 (1991),as well as Winberry v. Salisbury, 5 N.J. 240, cert. denied,340 U.S. 877 (1950), a New Jersey Supreme Court caseinvolving a separation of powers issue. In Holmdel, thisCourt previously held that N.J.S.A. 54:51A-18 itself �con-stitutes express legislative recognition of the judiciary�sresponsibility to prescribe the procedure for the calcula-tion of the limitation period.� Consequently, the Courtreversed the Tax Court and held that Liapakis�s complaintwas timely because the date that the certified mail was re-ceived and signed for begins the calculation of the 90-dayperiod.

The Director, Division of Taxation filed a petition of cer-tification to the New Jersey Supreme Court.

Time Period to File ComplaintJames Liapakis v. Director, Division of Taxation, deniedMarch 9, 2004; Supreme Court of New Jersey No. C-421September Term 2003, 55,336. The New Jersey SupremeCourt denied the Division of Taxation�s petition for certi-fication. Previously, the Appellate Division ruled that the90-day period to file an appeal with the Tax Court com-mences on the date the taxpayer receives the Division ofTaxation�s notice rather than on the mailed date.

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Cigarette Tax

Cigarette Purchases via Internet or TelephoneGary Mosher v. Director, Division of Taxation, decidedNovember 22, 2002; Tax Court No. 001180-2002. Afterviewing vendor�s advertisements that claimed cigaretteswere sold �tax free,� plaintiff (Mosher) purchased 52 car-tons of cigarettes over the Internet and/or telephone fromSmokers Advantage of Louisville, Kentucky, for hisfriends and his personal use. Smokers Advantage is anout-of-State, unlicensed distributor of unstamped ciga-rettes. Smokers Advantage did not remit sales or cigarettetaxes to New Jersey, but did inform the New Jersey Divi-sion of Taxation (Division) of Mosher�s purchases pursu-ant to the Federal Jenkins Act. In September 2000 the Di-vision notified and assessed Mosher sales and use tax aswell as cigarette tax on purchases that occurred betweenAugust 1999 and March 2000.

The Tax Court held that Mosher�s purchases were subjectto sales and use tax, as well as the cigarette tax ruling thatthe vendor�s advertisements stating that the cigaretteswere �tax free� did not excuse him from being chargeablewith knowledge that the tax could be collected by NewJersey because New Jersey charges tax on cigarettes. Re-lying on case law, the Court found that the Jenkins Act,Sales and Use Tax Act, and the Cigarette Tax Act wereheld to be constitutional. The Court also ruled that theJenkins Act disclosure did not violate Mosher�s right ofprivacy because even if the right asserted was a funda-mental right, the State�s compelling and substantial needfor this information would outweigh Mosher�s privacy in-terest. Finally, the Court found that the assessment wassubject to 5% amnesty penalty, pursuant to a law enactedin 2002, of which Mosher was previously notified.

Cigarette Purchases via Internet or TelephoneGary Mosher v. Director, Division of Taxation, decidedFebruary 17, 2004; Appellate Division No. A-2515-02T3.The Appellate Division affirmed the Tax Court for sub-stantially the reasons stated by the Tax Court. Further-more, the Court found that plaintiff�s arguments werewithout sufficient merit to warrant a written decision.

Mosher filed a petition of certification with the NewJersey Supreme Court.

Corporation Business Tax

Net Operating Loss CarryoverMacy�s East, Inc. v. Director, Division of Taxation,decided March 26, 2003; Tax Court Nos. 000018-98,003989-1998, 00415-2000, 002019-2001 and 002754-2002. Macy�s East was incorporated on December 13,1994, as an Ohio corporation. Macy�s Northeast, a Dela-ware corporation, and Macy�s South were merged intoMacy�s East on December 19, 1994, after conclusion ofbankruptcy proceedings. Jordan Marsh, a Delaware cor-poration, and Abraham and Strauss, an Ohio corporation,were merged into Macy�s East in 1995. Abraham andStrauss Real Estate, a Delaware corporation, was mergedinto Macy�s East in 1998. Each entity, except Macy�sSouth, that was merged into Macy�s East had a New Jer-sey net operating loss carryover before the merger. How-ever, the Division disallowed Macy�s East from deductingthe net operating loss carryovers of the other entities thatmerged into it.

The Court reviewed the legislative and regulatory back-ground concerning net operating loss carryovers. As en-acted in 1985, N.J.S.A. 54:10A-4(k)(6) permitted net op-erating loss carryovers. In 1986, the Division�s regulationN.J.A.C. 18:7-5.13(b) permitted only the actual corpora-tion that sustained the loss and the net operating losses ofthe surviving corporation of a statutory merger to be uti-lized in the carryover. Furthermore, the regulation disal-lowed a taxpayer that changed its state of incorporationor which was part of a statutory consolidation to carryover net operating losses. In 2002, N.J.S.A. 54:10A-4.5was added and essentially contained the same limitationson carryovers as the regulation with respect to mergers,consolidations, and changing the state of incorporationwith respect to years 1984 and forward.

First, the Court dealt with plaintiff�s argument thatRichard�s Auto City, Inc. v. Director, Division of Taxation,140 N.J. 523 (1995) is limited to the facts of that casewhere the surviving corporation did not conduct the samebusiness as the pre-merger entities and there was an at-tempt to deduct leasing losses from the operations of anautomobile dealership. Here, plaintiff differentiated itselfas being engaged in the identical business to that of theentities merged into it. The Court ruled that plaintiff�s ar-gument was misplaced because the New Jersey SupremeCourt dealt with the validity of the regulation, and therewas no indication in the opinion that its determinationwas based on the facts before it, or that the regulation wasvalid only as applied to these facts. The Court also notedthat Macy�s East was an Ohio corporation whereas some

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of the corporations were incorporated in Delaware, whichfact also violates the regulation�s requirement that a tax-payer not change its state of incorporation.

Secondly, the Court spoke to the validity of N.J.A.C.18:7-5.13(b) as to whether or not the regulation is invalidbecause it is inconsistent with N.J.S.A. 54:10A-4(k)(6).The Court found that it was bound by the New JerseySupreme Court�s determination in Richard�s Auto City,where it stated that Richards Auto City had not carried itsburden of proving that the regulation was invalid. Regard-less, the Court stated that even under its own independentanalysis it would conclude that the regulation is valid.

Third, the Court addressed the issue of whether, under theSupremacy Clause of the United States Constitution, theU.S. bankruptcy code is controlling authority over theNew Jersey tax statute and regulations. The Court adopteda prior Tax Court decision in A.H. Robbins Co. v. Direc-tor, Division of Taxation (2002 Westlaw 31932043) and astatement from Collier on Bankruptcy to decide that thebankruptcy code is not controlling.

Finally, the Court considered whether N.J.S.A. 54:10A-4.5, enacted in 2002, is unconstitutional. The Court ruledthat N.J.S.A. 54:10A-4.5 merely codified the law as itpreviously existed and that there was a rational basis forthe statute.

Macy�s East appealed this decision to the AppellateDivision.

Nexus and Physical PresenceLanco, Inc. v. Director, Division of Taxation, decidedOctober 23, 2003; Tax Court No. 005329-97. Plaintiff(�Lanco�) is a Delaware corporation that owns trade-marks, trade names, and service marks, but has no real ortangible property, offices, or employees in New Jersey.Lanco licenses these intangibles to Lane Bryant, Inc., anaffiliated corporation, that has retail operations in NewJersey as well as in other states. Lanco and Lane Bryant,Inc. have a direct, long-term contractual relationship. Forthe use of these intangibles, Lane Bryant, Inc. remits roy-alty payments to Lanco; therefore, Lanco derives incomefrom a New Jersey source. Although Lane Bryant, Inc. re-ceived a deduction for the royalty payments on its corpo-ration business tax return, Lanco did not pay income orfranchise tax on the royalty income to Delaware. The Di-vision of Taxation determined that Lanco was required tofile New Jersey corporation business tax returns due tothe activity under the license agreement.

In general, states must comport with the Due Process andCommerce Clauses of the United States Constitution in

their taxation of entities engaged in interstate commerce.The Court opined that the major issue for the instant casewas whether the Commerce Clause�s physical presencerequirement for sales and use taxation, following QuillCorp. v. North Dakota, 504 U.S. 298 (1992), to establishnexus with the taxing state also applied to the impositionof a state income or franchise tax. After reviewing andanalyzing the leading cases in the nexus arena, the Courtruled that the Commerce Clause requires physical pres-ence in the taxing jurisdiction for the constitutional exer-cise of State taxing power. Therefore, in order for the tax-payer to have nexus and be subject to taxation, physicalpresence must be established, as it is a necessary elementof Commerce Clause nexus for taxation. The Court rea-soned that the differences between the income tax and usetax are not significant enough to justify a different rule re-garding physical presence, and that pre-Quill cases sug-gest that physical presence is required.

The Court recognized that the South Carolina Court caseof Geoffrey Inc. v. South Carolina Tax Commission, 437S.E.2d 13 (S.C. 1993) found Commerce Clause nexuswithout physical presence and that other cases existed.However, after dissecting Geoffrey, it dismissed the hold-ing as relying on dictum and not being supported by theauthorities it cited. The Court noted that because theUnited State Supreme Court denied certiorari it did notaddress the merits of the holding, and that the ruling isonly binding precedent in South Carolina. Moreover, theCourt found that despite considerable activity in thenexus area, other courts were not following Geoffrey. Inother cases where courts stated that physical presencewas not required for nexus, this Court dismissed them asit found that the taxpayer did have physical presence inthe taxing jurisdiction anyway.

The Court recognized that Lanco had no real or tangibleproperty, offices, or employees in New Jersey, or any-thing else that would constitute physical presence. There-fore, the Court held Lanco was not subject to New Jerseycorporation business tax in �that the state may not assertnexus, absent physical presence, against a corporationthat receives income from the use of trademarks or otherintangibles employed in a New Jersey business conductedby an affiliated corporation.�

The Division of Taxation appealed this decision to theAppellate Division.

Pre-Merger Net Operating LossA.H. Robins, Inc. v. Director, Division of Taxation, decidedJanuary 12, 2004; A-3468-01. This case involves A.H.Robins� (�Robins�) claim for a $22 million refund ofcorporation business taxes. Robins, which incurred

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significant financial obligations as a result of substantialtort litigation, filed a Chapter 11 reorganization petitionin the Richmond, Virginia Bankruptcy Court. The reorga-nization plan granted Robins, the surviving entity in thebankruptcy, the rights and property of the company thatinitially filed for bankruptcy. One of those assets was amulti-million dollar net operating loss (NOL) for NewJersey corporation business tax purposes. New Jersey netoperating loss tax law, codified in the Business Tax Re-form Act as N.J.S.A. 54:10A-4.5, allows NOLs to beused only by the corporation that incurs the loss. The Di-rector denied the refund claim because the corporationwhich survived under the reorganization plan is a differ-ent corporation than the entity that incurred the loss andwas later dissolved. Robins sought relief in both the Vir-ginia Bankruptcy Court and the New Jersey Tax Court. AFederal Court judge in Virginia found the New JerseyDivision of Taxation to be immune from Robins� suit un-der the United States Constitution Eleventh Amendment.Robins did not appeal the Federal Court�s decision.

Then the matter returned to the New Jersey Tax Court.The Appellate Division affirmed the Tax Court�s opinionfinding that N.J.S.A. 54:10A-4.5 is constitutional. Thetaxpayer had argued that the retroactivity provision ofthis statute is unconstitutional because it violates the dueprocess clauses of the United States and New Jersey Con-stitutions, the New Jersey Constitution�s prohibitionagainst special legislation, and the separation of powersdoctrine. The Appellate Division also affirmed the TaxCourt�s decision upholding the Director�s denial oftaxpayer�s refund claim for corporation business taxbased on the New Jersey Supreme Court�s decision inRichards Auto City, Inc. v. Director, Division of Taxation.

Interest-Free LoansMetro Touch, Inc. v. Director, Division of Taxation, de-cided Letter Opinion March 26, 2004, and Formal Opin-ion May 11, 2004; Tax Court No. 004359-2002. In 1996,Ida Shapiro owned 100% of the corporate stock of plain-tiff Metro Touch, Inc. Shapiro also owned 75% of thecorporate stock of Perfect Host, Inc. as well as a 75%ownership interest in its successor, Perfect Host, LLC. In1997, Shapiro�s ownership interest in Perfect Host, LLCdecreased to 49.3097%.

Since January 1, 1996, Metro Touch�s balance sheet re-flected non-interest-bearing loans to Perfect Host, Inc. orPerfect Host, LLC. The Division therefore imputed inter-est income to Metro Touch pursuant to N.J.S.A. 54:10A-10 of the Corporation Business Tax Act (CBTA).

N.J.S.A. 54:10A-10a permits the Division to make ad-justments to and redetermine a corporation�s incomewhere the income is improperly or inaccurately reflected.Additionally, N.J.S.A. 54:10A-10b allows the Division toinclude in a corporation�s income the �fair profits� from atransaction where it is determined that the transaction wasentered into at less than a fair price for the direct or indi-rect benefit of a shareholder. Under the regulations,N.J.A.C. 18:7-5.10(a)(5) provides that interest should becharged on loans between related parties.

Relying on guidance from Federal court decisions, theCourt found that marketplace loans would not be made onan interest-free basis and as a result the loans in questionwere at less than a fair price and resulted in plaintiff�s in-come being improperly or inaccurately reflected. Further-more, the Court determined that the Division�s imputationof interest income was not dependent on the two entitiesbeing controlled by the same person or persons becausethe statutory standard is whether the arrangement benefitsa shareholder directly or indirectly. Therefore, the Courtupheld the Division�s assessment finding it neither arbi-trary nor unreasonable and a proper exercise of his dis-cretion under the statute and regulation. The Court alsonoted that N.J.A.C. 18:7-5.10(b) �represents a reasonableexercise by the Director of the discretion granted to himby the Legislature.�

Metro Touch, Inc. did not appeal the Tax Court�s decision.

Real Estate Investment TrustUNB Investment Company, Inc. v. Director, Division ofTaxation, decided May 12, 2004; Tax Court No. 004760-2003. Bridgewater Mortgage Company, Inc. (BMC) is awholly owned subsidiary of plaintiff (UNB), a New Jer-sey corporation. BMC qualifies as a real estate invest-ment trust (REIT) under both Federal income tax law andthe New Jersey Corporation Business Tax Act (CBTA).

In 1997, BMC paid an $11.7 million dividend to UNB,which BMC deducted on its corporation business tax(CBT) return when it computed taxable income. UNB re-ported the dividend as dividend income on its CBT returnand then excluded the dividend pursuant to N.J.S.A.54:10A-4(k)(5), which provided for a 100% dividends-received deduction from 80% or more ownedsubsidiaries.

The Division acknowledged that BMC�s deduction fromtaxable income for dividends paid was proper as it was inaccordance with the Corporate Property Investors deci-sion, where the Court held that for New Jersey CBT pur-poses a REIT is permitted the same dividends-paid de-duction as is permitted under Federal income tax law.

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However, the Division denied UNB�s N.J.S.A. 54:10A-4(k)(5) dividends-received deduction as a logical conse-quence of the Corporate Property Investors decision. TheDivision recognized that Internal Revenue Code §243(a)generally permitted corporations to deduct dividends re-ceived; however, Internal Revenue Code §857(c) deniedthis deduction where dividends were received from REITs.

In analyzing the legislative history and case law, theCourt concluded that the Division�s interpretation of theCBTA was reasonable and made with sufficient statutoryauthority; however, the Court voided the assessment be-cause of the Division�s failure to promulgate a regulationaddressing this issue pursuant to the Administrative Pro-cedure Act (APA). The Court reasoned that the denial ofthe deduction was consistent with the legislative intent toattract REITs into New Jersey, did not result in the doubletaxation of dividends, and was consistent with the entirestatutory scheme. Regardless, the Court found that thestatute was ambiguous, that the Division�s determinationwas not obviously inferable from the statute, and that theDivision�s determination was in the nature of interpreta-tion of law or general policy. Therefore, the Court con-cluded that the Division�s determination constituted a rulethat must be formally promulgated pursuant to the APA.The Court also rejected the argument that a regulationwas not needed because under N.J.S.A. 54:10A-10 theDirector is granted the authority to make adjustments toincome amounts to correct distortions of income, orwhere income was improperly or inaccurately reflected.The Court concluded that dividends had been properly re-ported and deducted on UNB�s CBT return, and that own-ing a REIT cannot be regarded as conducting business todistort income.

The Director did not appeal the Tax Court�s decision.

SubjectivityHome Impressions, Inc. v. Director, Division of Taxation,decided June 7, 2004; Tax Court No. 000099-2003.Plaintiff (Home Impressions) is a North Carolina corpo-ration that did not own, rent, or maintain property in NewJersey. Independent sales contractors solicited orders inNew Jersey from potential customers of Home Impres-sions� tangible products and then forwarded orders forapproval to Home Impressions� principal place of busi-ness in North Carolina. Products were later shipped to thecustomers from Home Impressions� Virginia distributioncenter.

The Division determined that Home Impressions was re-quired to file corporation business tax (CBT) returns be-cause it was subject to the minimum flat tax. Home Im-

pressions claimed that it did not have to file income taxreturns because it was protected by Pub. L. 86-272.

The Court�s analysis commenced with first determiningwhether the instant tax violated either the CommerceClause or Due Process Clause of the Federal Constitu-tion. In Quill, the United States Supreme Court ruled thatthe solicitation of orders satisfied the minimum contactsrequirement of the Due Process Clause. Therefore, theCourt opined that solicitation by Home Impressions� in-dependent contractors was sufficient. Addressing Com-merce Clause concerns, the Court found that the standardwas whether taxpayer�s activities created a substantialnexus with the taxing state. Substantial nexus, in turn, re-quires physical presence. The Court found that the physi-cal presence of the independent contractors in New Jerseyconstituted the substantial nexus required by the Com-merce Clause. As stated in the United States SupremeCourt decision in Scripto, the fact that independent con-tractors are not traditional employees is not a distinctionof any constitutional significance.

As there was no constitutional impediment, the Courtturned to the issue of whether the minimum flat tax con-flicted with Pub. L. 86-272. In pertinent part, Pub. L. 86-272 provides that a state may not impose a net income taxon income derived within the state where the only busi-ness activity in the state is the solicitation of orders fortangible personalty, where the orders are sent outside thestate for approval, and where the products are shippedinto the state from a point outside the state. Home Im-pressions claimed that despite its label as a franchise tax,the CBT minimum flat tax is in reality based on income.

The Court ruled that Pub. L. 86-272 did not protect foreigncorporations from the CBT minimum flat tax because thistax is not based on net income. The Court relied on NewJersey case law that the imposition of a reporting require-ment on foreign corporations did not conflict with Pub. L.86-272 and that Pub. L. 86-272 did not apply to the networth portion of the CBT. It should be noted that prior tothe CBT minimum flat tax, the amount of CBT liabilitywas measured by both net worth and net income. TheCourt reasoned that the Director was using the activity ofHome Impressions in New Jersey as a reporting require-ment and not as a means of calculating the amount ofminimum flat tax due.

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Gross Income Tax

Severance PaymentsDonald M. Kopczynski v. Director, Division of Taxation,decided January 7, 2003; Tax Court No. 008748-1996.Two days after his 60th birthday, plaintiff�s employer no-tified him by letter that his employment would be termi-nated in two weeks. The letter outlined severance benefitsthat were available to him that included $31,282.02 paidunder the severance payment plan in equal monthly in-stallments in accordance with the employer�s regular pay-roll, payment for unused vacation and personal time, andto provide medical and dental benefits for the duration ofthe severance or until employment was secured in ex-change for plaintiff�s signed general release form within21 days. In part, the general release form stated thatplaintiff specifically releases his claims and demandsagainst the employer under numerous areas including theAge Discrimination in Employment Act of 1967, as wellas any actions that existed as of the date of the release un-der any tort laws.

Plaintiff consulted an attorney and signed a retaineragreement for purposes of negotiating a settlement agree-ment of his unspecified claims against his employer.Thereafter, the plaintiff and employer agreed to increasethe $31,282.02 to a $41,500 severance, and the agree-ment included all the other provisions stated above.Plaintiff executed the general release form. Employerpaid plaintiff $19,466 in 1993 and $21,833 in 1994 whilewithholding taxes for Federal and State income taxes.

Plaintiff filed 1993 and 1994 returns with the Division ofTaxation (Division) where he included the severance pay-ments as taxable income from wages, salaries, and otheremployee compensation. Afterwards, plaintiff filed refundclaims asserting that the severance payments were actu-ally received in exchange for plaintiff�s not bringing anage discrimination lawsuit against the employer throughan agreement with plaintiff�s attorney. Thereafter, plain-tiff filed a complaint contending that his severance pay-ments were not taxable as damages under N.J.S.A.54A:6-6(b).

The Tax Court determined that severance and severance-like payments are includable in gross income underN.J.S.A. 54A:5-1(a) as salaries, wages, tips, fees, com-missions, bonuses, or other remuneration received for ser-vices rendered unless they are excludable under N.J.S.A.54A:6-6(b). Moreover, the Court ruled that severancepayments are includable in gross income, recognizing thatthe services were previously rendered and that there wasnot concurrent consideration. The Court reached its result

by relying upon guidance from Federal case law regard-ing taxability of severance payments as it was applied tothe Internal Revenue Code.

Under N.J.S.A. 54A:6-6(b), damages received due to per-sonal injury or sickness are excludable from gross incomeregardless of whether they are received by suit or agree-ment. As there was no prior New Jersey case law and asthe statute is similar to Internal Revenue Code §104(a)(2), the Court looked to Federal cases for guidance. TheCourt found that the Federal Courts relied on the payer�sintent in determining whether the payment was for per-sonal injury or sickness in cases where there was eitherno express language or evidence as to a specific amountto compensate the person. One Federal Court noted thatthe withholding of taxes significantly suggests that theemployer intended severance payment. Another FederalCourt found that the payment was not for personal injuryor sickness as it was based on a formula relating to theemployer and employee relationship. In Commissioner v.Schleier, 515 U.S. 323 (1995), the United States SupremeCourt stated that neither the person�s reaching age 60 norbeing discharged because they are 60 years old could bedescribed as a personal injury or sickness. Furthermore,the Supreme Court ruled that neither back wages nor pu-nitive damages for age discrimination constituted com-pensation for personal injury or sickness.

Plaintiff presented no evidence or testimony that he re-ceived the payments for personal injury or sickness. Infact, the employer withheld income taxes, both State andFederal. Therefore, the Court held that the payments werenot excludable under N.J.S.A. 54A:6-6(b) as damages re-ceived due to personal injury or sickness.

Basis in Partnership InterestEugene and Janet Schenkman v. Director, Division ofTaxation, decided November 3, 2003; Tax Court No.000223-1998. Plaintiff (Schenkman) was a general part-ner in Hoes Lane Associates between 1983 and 1991. In1992, Schenkman, along with other partners of HoesLane, contributed his partnership interest in Hoes Lane toS/K Birdsall, another partnership, which then became ageneral partner in Hoes Lane.

Hoes Lane reported a net loss for each year that it was inexistence. Schenkman was able to utilize only a portionof his allocated Hoes Lane losses to offset other partner-ship income for gross income tax (GIT) purposes.

In 1992, Hoes Lane petitioned for bankruptcy. Hoes Lanetransferred its real property to the mortgagor in exchangefor discharge of the mortgage. The parties agree thatSchenkman�s amount realized from the disposition of

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property is gain income for GIT purposes. However, theparties disagreed as to whether Schenkman could offsethis gain with his GIT basis in Hoes Lane that he subse-quently transferred to S/K Birdsall upon contribution.

Schenkman claimed that his GIT basis in Hoes Lanetransferred to S/K Birdsall upon contribution. The Divi-sion argued that S/K Birdsall, being an entity, is not en-titled to and cannot be transferred the New Jersey adjust-ments to Federal basis (i.e., the Koch effect). Thus,Schenkman�s New Jersey adjusted basis in Hoes Lane(i.e., his basis in Hoes Lane unadjusted by allocated HoesLane losses that were not deducted for GIT purposes) be-fore the transfer to S/K Birdsall is also his New Jerseyadjusted basis in S/K Birdsall by virtue of his contribu-tion to S/K Birdsall. Also, the Division claimed thatSchenkman could obtain the Koch adjustment only whenhe disposed of his interest in S/K Birdsall.

The Court decided that Federal tax partnership rules wereapplicable, because under N.J.S.A. 54A:5-1 (c), gainsand losses from the disposition of property are deter-mined under the Federal income tax method of account-ing. Internal Revenue Code (IRC) section 722 states thata contributing partner�s basis in its partnership interestwill increase by the amount of the partner�s adjusted basisin the contributed property. IRC section 723 states thatthe partnership�s basis in contributed property is equal tothe contributing partner�s basis. Upon disposition of thecontributed property, any built-in gain or loss recognizedis allocated to the contributing partner pursuant to IRCsection 704(c)(1)(A) and Treas. Regs. section 1.704-3.

After reviewing the aforementioned IRC sections, Walshv. Director, 10 N.J. Tax 447 (1989) and Koch v. Director,Division of Taxation, 157 N.J. 1 (1999), the Court foundthat Schenkman�s GIT basis in his partnership interest inHoes Lane transferred to and was Schenkman�s basis inS/K Birdsall. The Court also stated that Schenkman�s al-located loss on the disposition of Hoes Lane property oc-curs with the transaction, and not when Schenkman dis-poses of his partnership interest in S/K Birdsall.

Gain on Sale of Rental Real Estate Not Held by aBusiness EntityJohn J. and Mary T. Moroney and Thomas J. Jr. and Su-san Denitzio v. Director, Division of Taxation, decidedJanuary 8, 2004; Tax Court Nos. 005582-1998 and005564-2002. The Moroneys acquired rental real estatefor $327,399 and sold the property eight years later for$245,000. The property was not held by a business entity.In each year of ownership, the annual operating expenses,exclusive of depreciation, exceeded the annual income. In

determining their gain or loss, the Moroneys calculatedan $82,399 capital loss by subtracting the original pur-chase price from the sales price. Pursuant to an audit, theDivision determined that the $104,330 of depreciation re-duced the real estate�s basis. Therefore, the Division cal-culated an N.J.S.A. 54A:5-1(c) gain on this sale under thetheory that the property�s basis decreased to the extentthat annual depreciation offset annual gross income be-fore considering any other deductions. The Denitzios� le-gal issue is identical and therefore the cases were heardtogether, but were not consolidated.

The Tax Court commenced its analysis by reviewingKoch where the New Jersey Supreme Court held that taxcould not be imposed unless there is recovery of a pasttax benefit or an accession to wealth and, therefore, that apartner�s basis in his partnership interest could not be re-duced by nondeductible partnership losses. The Koch de-cision prevented the Division from taxing what the NewJersey Supreme Court described as a return of capital be-cause the taxpayer did not receive a tax benefit for non-deductible losses. After Koch, the Division stated in theState Tax News that the Koch decision would also applyto the sale of rental real estate that is not held by a busi-ness entity. In a later State Tax News article, the Divisionexplained that unutilized depreciation expense would ad-just basis in that it would increase basis when calculatinggain (loss) from the sale of rental real estate that is notheld by a business entity. The Division defined unutilizeddepreciation as the amount that allowed or allowable de-preciation exceeds gross income (gross receipts) beforeconsidering any other expenses or deductions. This calcu-lation resulted in limiting basis reductions to depreciationthat resulted in tax benefits to the taxpayer.

In calculating N.J.S.A. 54A:5-1(c) gain from the disposi-tion of property, the Court ruled that basis could only bereduced by depreciation to the extent that depreciationcould offset income remaining after first deducting oper-ating expenses (actual out-of-pocket expenses as opposedto accounting expenses such as depreciation) againstgross income. The Court determined that althoughN.J.S.A. 54A:5-1(c) authorized the Division to assign pri-ority and assignment to deductions for S corporations,that otherwise there was no statutory language applicableto the sale of property. Also, the Court found that theDivision�s assignment of a first priority deduction to de-preciation produced a result that was both contrary toKoch and inconsistent with the Internal Revenue Code.

Sale, Exchange or Other Disposition of PropertyDiana King v. Director, Division of Taxation, decidedApril 16, 2004; Tax Court No. 005337-2002. In April

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1991 plaintiff, Ms. Diana King (King), entered into a loanagreement with Amiro Fiorintino Associates, Inc. (AFA).The loan was evidenced by a revolving credit note. Theprincipal shareholder of AFA was the guarantor of theloan. The loan was also secured pursuant to a securityagreement granting King a security interest and lien incertain AFA collateral. When King recorded her securityinterest pursuant to the Uniform Commercial Code(UCC), King�s loan was subordinated to a bank loan. In1992 and 1995 the loan agreement was amended. Essen-tially, Ventura Entertainment Group (VEG) was an addi-tional guarantor of AFA�s obligation and the loan was se-cured pursuant to a security agreement that granted Kinga security interest in 100,000 shares of VEG.

In 1996 AFA filed Chapter 11 bankruptcy. King filed aproof of claim as a secured creditor in the amount of$568,857.35 consisting of the $450,000 principal,$106,090.65 interest, and $12,766.70 arrears. As a juniorsecured creditor, King consented to the sale of AFA�s assetsconditioned upon her receipt of $120,000 and that she bereleased from claims against the debtor. King�s consentwas evidenced on a bankruptcy document titled �Responseof Diana King to the Debtor�s Application for an OrderApproving a Purchase Agreement and Authorizing a Saleof Assets.� Thereafter, King terminated her UCC filingsand the bankruptcy proceeding was later dismissed.

On her 1996 Form NJ-1040, King reported a $330,000loss ($450,000 less $120,000) and $32,973 of attorneyfees as a $362,973 nonbusiness bad debt deduction.Thereafter, she filed an amended return reclassifying the$362,973 as a long-term capital loss, claiming that it wasan investment loss on the disposition of a security. Onboth her NJ-1040 return and amended return, King offsetthis loss against other gains included under N.J.S.A.54A:5-1c disposition of property category. However, theDivision disallowed the deduction, claiming that it was anondeductible, nonbusiness bad debt.

N.J.S.A. 54A:5-1c includes net gains, net losses, and netincome derived from the sale, exchange, or other disposi-tion of property. At issue is whether King engaged in asale, exchange, or disposition of property. The Courtfound that King settled her claim for a reduced amount bygiving up her right to sue on the note and that she did notsell or transfer the note evidencing the debt or any othersecurity. Also, the Court noted that King presented noevidence that she exchanged the note. Citing Vinnick andWalsh, the Court upheld the Division�s assessment.

Insurance Premiums Tax

Retaliatory TaxAmerican Fire and Casualty Company & West AmericanInsurance Company v. Director, Division of Taxation, de-cided December 2, 2003; Tax Court No. 004714-2001.Plaintiffs are foreign casualty insurance corporations thatseek refunds of retaliatory tax assessed against each ofthem pursuant to N.J.S.A. 17:32-15 after they each calcu-lated their tax liability under N.J.S.A. 54:18A-6.

Under N.J.S.A. 54:18A-6, a non-life insurance companymay calculate insurance tax on 12.5% of its total premi-ums where its New Jersey taxable premiums are greaterthan 12.5% of the company�s and all its affiliates� totalpremiums. However, pursuant to N.J.S.A. 17:32-15, retal-iatory insurance tax is imposed against a foreign insurerwhen the foreign insurer�s insurance tax and other obliga-tions in New Jersey are less than what a foreign insurer�sinsurance tax and other obligations would have been in itshome state if it were a New Jersey insurance companydoing business there.

In the instant case, the Division permitted each taxpayerto file under the 12.5% statute, but then the Division as-sessed retaliatory tax on the amount of tax that eachwould have had to hypothetically pay to their home stateon its New Jersey premiums, if it were a New Jersey in-surance company doing business there, to the extent thatamount exceeded the tax that they were obligated to payto New Jersey. Plaintiffs claim that the retaliatory tax pro-vision is unconstitutional in that it denies plaintiff equalprotection because the statute functions as a preferencefor domestic insurers. Alternatively, plaintiffs claim thatwhen the two statutes are read in pari materia, theDivision�s methodology provides an interpretation that isinconsistent with the purpose and policy considerations ofboth statutes.

The Court read the statutes in pari materia because theyrelated to the same subject matter. The Court found thatthe purpose of N.J.S.A. 54:18A-6 was to encourage for-eign and domestic insurance companies to expand theiroperations in New Jersey, and that the purpose of retalia-tory tax statutes was to influence foreign states to reduceinsurance company taxation in order to promote interstateinsurance business by maintaining low taxes and otherobligations on domestic insurers.

In addressing whether there was an irreconcilable conflictbetween the statutes, the Court found that neither the stat-utes, amendments, nor legislative history provided anyguidance as to one statute�s relationship with the other.

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Therefore, the Court ruled that there was an inference thatthe legislative intent was that neither statute should affectthe interpretation of the other. The Court reasoned thatthe Legislature�s failure to address any possible conflictwas indicative that the statutes function independentlyand in the manner as applied by the Division.

The Court found that the United States Supreme Courtpreviously upheld the constitutionality of retaliatory taxunder the Equal Protection Clause of the United StatesConstitution using the rational basis test. In applying therational basis test to the instant case, the Court ruled thatthe Division�s methodology of calculating retaliatory taxserved the legitimate purpose of influencing other statesregarding taxes imposed on New Jersey insurers, and thatthe Legislature could have reasonably believed that themethod of calculating the tax could achieve that purpose.Therefore, the Court also upheld the Division�s methodol-ogy on constitutional grounds.

Retaliatory TaxPruco Life Insurance Company v. Director, Division ofTaxation, decided March 23, 2004; Tax Court No. 004058-2003. Plaintiff (Pruco) is an Arizona corporation and awholly owned subsidiary of the Prudential InsuranceCompany of America, a New Jersey insurance company.Pruco�s principal office is located in Newark, New Jersey.

In 1998 and 1999, Pruco filed returns but did not reportany retaliatory tax obligation to New Jersey, arguing thatthe N.J.S.A. 54:18A-6 cap applied to both the New Jer-sey tax obligation and Arizona tax obligation in the calcu-lation of determining retaliatory tax due to New Jersey.The cap statute functions to limit New Jersey tax liabilitywhere New Jersey premiums exceed 12.5% of total world-wide premiums. If this threshold is met, then the tax is ap-plied to 12.5% of the worldwide premiums. Although theDivision acknowledged that the 12.5% cap applied, theDivision assessed retaliatory tax because Pruco is a for-eign corporation. In determining the amount of retaliatorytax liability, the Division calculated the tax that would bedue under the tax laws of Arizona and subtracted theamount of New Jersey tax due using the 12.5% cap.

Relying on its recent decision in American Fire and Ca-sualty Company & West American Insurance Company(See New Jersey State Tax News, Summer 2004), theCourt rejected Pruco�s first two arguments. First, theCourt found that calculating the retaliatory tax involved amathematical calculation comparing the actual tax obliga-tion due in New Jersey under New Jersey law with the ac-tual tax obligation that would be due in Arizona pursuantto Arizona law. Therefore, Pruco�s arguments relating to

statutory interpretation as well as the policies and pur-poses of the cap and retaliatory tax statutes were rejected.Secondly, the Court rejected Pruco�s constitutional chal-lenge that the Division�s interpretation converted the re-taliatory tax into a revenue measure rather than a regula-tory measure and was an equal protection violation. As inAmerican Fire and Casualty Company, the Court foundthat the application of the two statutes served a legitimateState interest and that the Legislature could have deter-mined that the statutes as applied reasonably furthered orfulfilled that State interest.

Plaintiff also challenged the assessment, asserting that theDivision was not in compliance with the AdministrativeProcedure Act (APA) because the Division�s policy forapplying the cap and retaliatory tax statutes was not em-bodied in any official promulgation and therefore re-flected rulemaking. After weighing and analyzing the sixMetromedia factors along with the Airwork Service Divi-sion decision, the Court determined that the Division�s in-terpretation and application of the N.J.S.A. 17B:23-5 re-taliatory tax statute together with the N.J.S.A. 54:18A-6cap statute did not constitute rulemaking activities underMetromedia and therefore did not violate the APA.

Pruco Life Insurance Company has appealed the TaxCourt�s decision.

Local Property Tax

Denial of Tax ExemptionEssex Properties Urban Renewal Associates, Inc. v. Cityof Newark, decided September 4, 2002; Tax Court ofNew Jersey. Plaintiff (Essex Properties Urban RenewalAssociates, Inc.) requested property tax exemption pursu-ant to N.J.S.A. 54:4-3.6. Essex Properties is incorporatedas a nonprofit organization in New Jersey and owns thesubject property which it administers as a 24-unit apart-ment facility for developmentally and/or physically dis-abled persons. A property tax assessment of $278,700was imposed on the subject property for tax year 2000.

In 1999 plaintiff applied for property tax exemption withthe assessor of Newark. Upon the assessor�s denial of theexemption request, taxpayer appealed to the EssexCounty Board of Taxation. The county board of taxationaffirmed the assessment without prejudice. Essex Proper-ties appealed to Tax Court.

To qualify for exemption under N.J.S.A. 54:4-3.6, ataxpayer must satisfy the following conditions: (1) mustbe organized exclusively for a tax-exempt purpose;

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(2) property must be actually and exclusively used for thetax-exempt purpose; and (3) use and operation of theproperty must not be conducted for profit. Both partiesstipulated to conditions (1) (organization for an exemptpurpose) and (3) (nonprofit operation). The sole issuebefore the Court is whether Essex Properties� activityqualifies as an actual and exclusive use for an exemptcharitable purpose within the meaning of the statute.

The burden of proving tax-exempt status is upon the partyclaiming exemption. In this case, plaintiff fails to provethat its activity qualifies as an actual and exclusive usefor a charitable purpose within the exempt purposes setforth under N.J.S.A. 54:4-3.6. Depending upon the spe-cific facts and circumstances of each case, the courts havegranted property tax exemption to certain charitable orga-nizations. Plaintiff relies on Salt and Light Co., Inc. v.Mount Holly Twp., 15 NJ Tax 274 (Tax 1995), aff�d, 16NJ Tax 40 (App. Div. 1996), cert. denied, 148 NJ 458,690 A.2d 606 (1997) in support of its claim for tax ex-emption. Salt and Light provided temporary housing andcounseling services to homeless persons. They operated24 residences in Mount Holly Township, which were pur-chased and renovated using funds from HUD, Federalhome loan grants, government grants and funds, includingcharitable contributions. Two-thirds of its residents re-ceived public assistance, which included some form ofgovernment welfare, distributed directly to Salt andLight. To the extent they were able, the remaining resi-dents paid up to 30 percent of their income as rent. Saltand Light showed that its average daily cost to supportthe homeless was less than it would cost the governmentto do so. Rental payments were below market and noindividual was evicted solely because of an inability topay. Under these facts, the Tax Court held that althoughSalt and Light received government subsidies, it qualifiedfor tax exemption in its use of its facilities to providetemporary shelter and services to the homeless.

Essex Properties argues that, like Salt and Light, they areentitled to tax exemption because they are a nonprofitcorporation which provides housing and counseling tolow-income, developmentally and/or physically disabledpersons, and thereby relieves the government from doingso. However, unlike Salt and Light, Essex Propertiesfailed to show evidence that (1) their rents were belowmarket; (2) individuals not eligible for aid would be ad-mitted into the facility; (3) plaintiff evicts or does notevict tenants who are unable to pay rent left uncovered byHUD; and (4) plaintiff would admit or retain a disabledperson who could pay no rent at all.

Essex Properties also argues that, in addition to housing,they provide on-site counseling and support similar toSalt and Light. While Salt and Light provided case man-agers who offered regular sessions, Healthcare Founda-tion and HUD paid for Essex Properties� social worker atno cost to plaintiff. This Court found that plaintiff�s coun-seling service is not so unique as to warrant tax exemp-tion. The Court also found that plaintiff�s counseling andsupport service is incidental to plaintiff�s main functionof renting apartments.

As per Presbyterian Homes, 55 NJ at 286, 261 A.2d 143�nonprofit status cannot be equated with charitableness.�It is only one factor to consider when determining ifproperty is being used for charitable purposes. Accord-ingly, plaintiff�s IRS nonprofit charitable organization501(c)(3) designation is not, in and of itself, enough toqualify plaintiff for property tax exemption underN.J.S.A. 54:4-3.6.

The Court stated in Salt and Light that �A truly charitableuse is not necessarily vitiated by the receipt of govern-ment support on behalf of beneficiaries�so long as thecharitable entity to some extent relieves a burden on gov-ernment.� Plaintiff fails to demonstrate that its operationof the subject property relieves the government of anyburden. In Southern Jersey Family Medical Centers, Inc.v. City of Pleasantville, 351 NJ Super. 262, 798 A.2d 120(App. Div. 2002), plaintiff�s policy was to �treat anyone,�and charged patients without insurance according to asliding fee scale based on each patient�s income. No per-son was denied service solely because of inability to pay.Southern Jersey received funds for services rendered(Medicaid payments) and funds received from Federalgrants. The Court found that the facility earned the formerby providing medical services to indigent patients and�receipt of these funds�does not impact uponits�exclusive operation for charitable purposes.�

Contrary to Southern Jersey, supra, plaintiff receivedfunds from HUD to construct the subject property andcontinues to receive Federally subsidized rent income.These amounts are rents paid by HUD for plaintiff�s ten-ants, all of whom qualified for assistance. These pay-ments are not earned for services rendered, such ashealthcare or medical services, but simply rental pay-ments. There is no evidence that plaintiff�s rental ratesare below market, that plaintiff serves disabled personswho are not supported by government subsidies, or ifplaintiff subsidizes tenants who are unable to pay, thus re-lieving the government of this burden. If a tenant wasevicted for financial reasons, that person would become apublic charge, and the State would be obligated to pro-vide care.

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This Court finds that plaintiff�s case is analogous to 1711Third Avenue, Inc. v. Asbury Park, 16 NJ Tax 174 (Tax1996). Third Avenue, a nonprofit corporation, ownedproperty which housed tenants suffering from mental ill-ness. The property was funded in large part by HUD�sSection 811 supportive housing program. The tenantswere unemployed and derived their income from socialsecurity payments. The tenants made rental paymentsequal to 30 percent of their income. Management pro-vided counseling and other services to the tenants. TheCourt held that Third Avenue failed to offer the properproofs to bring itself clearly within the exempting statuteof N.J.S.A. 54:4-3.6.

The Court held that the following can be used as evidencein determining a plaintiff�s exemption claim: (1) financialstatements of plaintiff and its managing company, (2) de-tailed explanation of plaintiff�s and managementcompany�s use of revenues, including amounts paid forsalaries, (3) proof that plaintiff charges below marketrents, (4) explanation of financial arrangements betweenplaintiff and management company, (5) breakdown ofplaintiff�s and management company�s sources of rev-enues, (6) whether plaintiff competes with for-profit enti-ties providing housing, and (7) whether plaintiff evictstenants who are unable to pay rent. St. Luke�s Village, Inc.v. Peapack & Gladstone Borough, 11 NJ Tax 76 (Tax 1990)held that providing affordable housing to low-income per-sons was not a charitable purpose where there was secu-rity for rental payments and residents were required toleave if unable to pay for operating expenses. Plaintiffwas unable to demonstrate that the subject property isused for charitable purposes within the meaning of N.J.S.A.54:4-3.6. Plaintiff failed to meet its burden of proof andbring itself clearly within the meaning of the exemptingstatue. Without such proof in the record, the Court canonly conclude that plaintiff is subject to property tax.

Exemption StatusRegent Care Center, Inc. v. Hackensack City, 19 N.J. Tax455 (2001); aff�d Appellate Division, No. A-540-01T2(July 22, 2003). The issue before the Superior Court, Ap-pellate Division, on appeal from the Tax Court of NewJersey, was whether plaintiff Regent Care Center, Inc.�sincreased assessment was an illegal spot assessment fortax year 1998. They also claimed that �assessment main-tenance� was unconstitutional. A further claim was that ifassessment maintenance was a valid practice, it shouldnot be permitted because there were no uniform regula-tory standards in place.

After a trial, the Tax Court, in a published opinion, Re-gent Care Center, Inc. v. Hackensack City, 19 N.J. Tax

455 (2001), upheld the increased assessment, concludingit was not a constitutionally prohibited spot assessment.

On appeal, Regent Care contends the trial court erred, as-serting that because the increased assessment was notbased on a change in the zoning, change in legal status, orphysical change to the property, and it was one of only asmall group of properties for which assessments werechanged, it is a prohibited spot assessment. Regent Carefurther urges the practice of �assessment maintenance� bedeclared an unconstitutional device creating spot assess-ments. Finally, Regent Care argues that even if assess-ment maintenance is a constitutionally permissible prac-tice, it was conducted in this case without the benefit ofuniform guidelines from either the Division of Taxationor the Bergen County Board of Taxation, and thereforethe resulting increase in the assessment of its propertycannot be sustained.

Hackensack�s last prior revaluation was in 1988, followedby a districtwide reassessment in 1993, approved by theBergen County Board of Taxation, in which all 11,209line items were reviewed. As of October 1, 1996, for taxyear 1997, as part of an assessment maintenance plan, theassessor changed the assessment, leaving the land at$546,000, but increasing the improvement to $7,544,300,for a total of $8,090,300, which remained in place throughthe time of the trial in 2001. The assessor reviewed the11,209 property record cards for the entire city, all avail-able sales ratio data, all available �Chapter 91� income andexpense information, and applicable zoning changes. Indoing so, the assessor determined that about 150 commer-cial properties were grossly underassessed.

In order to determine the value of the nursing home, theassessor used comparable sale prices allocated on a perbed basis. He was aware of recent nursing home sales insurrounding communities in the range of $40,000 to$60,000 per bed. Regent Care�s original assessment was$24,000 per bed. Regent Care did not present any evi-dence as to value, did not challenge the assessor�s per bedvaluation method, and did not contend its property wasoverassessed or assessed outside the corridor permittedby Chapter 123, P.L. 1973.

The Court reviewed the Van Decker Welcome Strangerprinciples and concluded that the assessor did not use the�sale of the subject� factor, but relied upon appropriatedata (sales of nursing homes in neighboring municipali-ties) to determine the increased assessment. The Courtnoted, however, that spot assessing was not limited to theWelcome Stranger scenario. The Court found that the re-assessment of Regent Care�s nursing home did not consti-tute arbitrary intentional discrimination. The reassessment

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was implemented as part of a comprehensive review ofall properties in the district. All commercial and industrialproperties were evaluated. Those that were not underass-essed were not changed. But all were evaluated and con-sidered. Those selected for increases were not selected ar-bitrarily, but based upon objective, non-sales-relatedevidence, and in relation to other similarly situated prop-erties within the class.

The Appellate Court then addressed Regent Care�s decla-ration that the practice of �assessment maintenance� wasan unconstitutional device creating spot assessments.�Assessment maintenance� refers to the practice by whichan assessor changes some assessments in a year when adistrictwide revaluation or reassessment is not performed.The Court declined to declare that all �assessment main-tenance� is impermissible stating that such a declarationwas not warranted, would be contrary to established pre-cedent, and must be decided on a case-by-case basis.

The Appellate Court also rejected Regent Care�s conten-tion that the absence of formal uniform guidelines per-taining to assessment maintenance renders the practice il-legal. The Court noted that guidelines do exist. TheHandbook for New Jersey Assessors, New Jersey Divi-sion of Taxation (1989), was cited with approval in VanDecker as a source of proper assessment maintenance. Inparticular, the Court cited sections of Chapter 9, which isdevoted to assessment maintenance. Further, assessors aretrained, tested, and certified professionals. Whether as-sessors fulfilled their obligations under N.J.S.A. 54:4-23in a fair and nondiscriminatory manner should be judgedby their actions on a case-by-case basis.

The dominant principle of the State Constitution�s unifor-mity clause is to mandate equality of treatment and bur-den. Taxpayers must be treated in a manner comparableto other taxpayers. Although performing a districtwide re-valuation or reassessment every year would be the bestway of meeting that mandate, it is simply not feasible.And yet, assessors cannot be expected to do nothing inyears between districtwide revaluations or reassessments.The Court noted that although ��assessors are prohibitedfrom arbitrarily singling out property for increased as-sessment,� they nevertheless �have a statutory obligationto monitor all available indicia of property value and tocorrect inequities in tax years other than years of district-wide revaluations. N.J.S.A. 54:4-23.�� It was held that theassessor properly discharged his statutory obligation toassess all property annually at full and fair value. The in-creased assessment was upheld.

Omitted Added and Added AssessmentsFreehold Borough v. Nestle USA, decided November 10,2003; Tax Court, Nos. 004915-2001, 004916-2001. Theissue before the New Jersey Tax Court was whether theomitted added assessment of $1 for tax year 2000 and theadded assessment of $1 for tax year 2001 made by theFreehold Borough assessor against a food processing/manufacturing facility owned by Nestle USA should bevoided.

Nestle moved for summary judgment voiding the $1 as-sessments and dismissing the complaints on grounds thatany increases in value attributable to improvements to thesubject property should have been included in the regularassessment for the 2000 and 2001 tax years. Nestle al-leges that the assessor�s use of the omitted added andadded assessment procedures was an attempt to manipu-late and extend the time for municipal appeals seeking in-creased assessments on the subject property.

The assessor claims he became aware of projects under-taken by Nestle in late 1999 when he received copies ofbuilding permits for various projects at the site taken out byNestle during 1997, 1998, and 1999. The assessor deter-mined that some permits indicated the subject property�svalue might change as a consequence of the projects and aninspection would be required. Due to the assessor�s lack ofexpertise in valuing the manufacturing property, he re-quested an appraiser be hired in 2000. But because of thecost involved, the Borough did not retain an appraiser until2001. The appraiser was unable to quantify the amount ofincrease, but confirmed that there was a significant valueincrease over the current value of the subject property.Prior to the deadline for filing added assessments with thecounty tax board, the assessor knew that an added assess-ment in an unknown amount was called for as a result ofthe construction described in the building permits. He madean omitted added assessment and an added assessment fortax years 2000 and 2001, for $1 each respectively. Freeholdappealed the assessments to the Monmouth County Boardof Taxation, which affirmed them, and then appealed theBoard�s judgments to this Court.

Nestle contended that the assessor�s method of reflectingadditional value was invalid. It argued that the admittedlyfictitious $1 omitted added and added assessments wereimproper attempts to increase erroneous valuations of thesubject property as reflected in the regular assessments fortax years 2000 and 2001. It asserted that the omitted addedand added assessment for 2000 and 2001 were imposedsolely to extend the time for the Borough to contest thevalue of the improvements constructed prior to September2001, which it should have appealed as regular assessments

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for those tax years as permitted by N.J.S.A. 54:3-21.Nestle asked that the assessment be voided.

The purpose of the added assessment law is to permittaxation of real property which becomes assessable dur-ing the year following the statutory October 1 assessmentdate. The assessor is authorized to make an added assess-ment �when any parcel of real property contains anybuilding or other structure which has been erected, addedto or improved after October 1 and completed betweenJanuary 1 and October 1 following.� The added assessmentis imposed for the tax year in which the improvement iscompleted, and is prorated for the months remaining inthe calendar year following completion of the project.The omitted assessment statute may be used where the as-sessor has failed to make an added assessment on an im-provement through error. Omitted assessments may beimposed in the year in which the property should havebeen assessed or in the next succeeding year.

The Court found that both the omitted added assessmentfor tax year 2000 and the added assessment for 2001were fictitious as to amount and that the years to whichthe assessor attributed the completion of the improvementwere arbitrary. The assessor admitted he had not in-spected the subject property until sometime in 2001. Heknew by 1999 that building permits had been taken out byNestle during 1997, 1998, and 1999, and candidly admit-ted that there might have been value added to the prop-erty by October 1, 1999. He further testified that he wasunable to specify which projects resulted in the 2000omitted added assessment and which projects resulted inthe 2001 added assessment.

The courts of New Jersey have prohibited the use ofomitted and added assessments to reflect a change inopinion as to the value of property on the regular assess-ment date. Omitted assessment procedures cannot be usedto correct an assessor�s valuation error. Also there was no�discovery� of undisclosed improvements here, but rathera refusal to determine the date on which known improve-ments were completed and their value. An assessor�soriginal assessment is entitled to a presumption of cor-rectness. In this case, the $1 assessments were so wide ofthe mark of true value and deficient in assessment meth-odology that no presumption of correctness could attachto them.

The Court found the assessor failed to perform his statu-tory duties. The assessments were made contrary to thestatutory scheme for added assessments, which mandatesthat, after examination and inquiry by the assessor, suchassessments are to be made for the tax year in which theimprovements are completed or in the next succeeding

year. In addition, the municipality could have timely ap-pealed the regular assessments for 2000 and 2001 whenthe assessor, by requesting an appraiser, made the Bor-ough aware that the values were inadequate. The assess-ments appealed from were made only with the knowledgethat the improvements had been made sometime beforethe inspection of the subject property in 2001. The Court,therefore, concluded that the omitted added assessmentfor tax year 2000 and the added assessment for tax year2001 must be voided.

Exemption StatusCongregation Ahavath Torah v. City of Englewood, de-cided January 23, 2004; Tax Court No. 004020-1999.Plaintiff Congregation Ahavath Torah appeals a judgmentof the Bergen County Board of Taxation applicable to taxyear 1999 which denied a property tax exemption for thehome of the church�s cantor. Plaintiff CongregationAhavath Torah claims the building occupied by the cantoris entitled to exemption pursuant to N.J.S.A. 54:4-3.6 be-cause the �Parsonage Exemption� allows an exemption ofup to two buildings �actually occupied as a parsonage bythe officiating clergymen of any religious corporation ofthis State.�

Plaintiff is a religious corporation of the State of NewJersey which owns two residential properties inEnglewood. One of the properties is a parsonage for thesynagogue�s rabbi and is exempt without dispute. At issueis whether 157 Van Nostrand Avenue (Block 2911, Lot20), which is used as a residence for the synagogue�s can-tor, has exempt status.

The full-time, permanent cantor lives in the subject prop-erty. He performs a variety of services for the congrega-tion including: directing liturgical prayer, conductingvarious prayer services, assisting in the daily services,participating in weddings and funerals, and reading orchanting from the sacred texts on holidays. Members ofthis congregation are not allowed to perform duties of acantor without the cantor�s consent. The parties agree thatthe rabbi�s residence is exempt under the statute. How-ever, they disagree about whether the cantor�s role is suchthat a residence set aside by the synagogue for the use ofthe cantor qualifies for exemption.

Decisions interpreting the Parsonage Exemption under-take a factual inquiry to determine whether the individualin question serves a congregation in a way that is consis-tent with the concept of an officiating clergy. The caseslook to the character and extent of activities within the re-ligious organization. Friends of Ahi Ezer Congregation,Inc. v. Long Branch City, 16 N.J. Tax 591 (Tax 1997),

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Shrine of Our Lady of Fatima v. Mantua, 12 N.J. Tax 392(Tax 1992). The decision examined many factors to deter-mine if an individual is an officiant within the meaning ofthe Parsonage Exemption, and it is clear that it is not sta-tus or title, but services performed that determine if theexemption will apply. The Appellate Division, in St.Matthew�s Lutheran Church for the Deaf v. Division ofTax Appeals, 18 N.J. Super 552 (App. Div. 1952), ex-plained that the Parsonage Exemption requires that an�officiating clergyman� when associated with �parson-age� must be a pastor installed over a parish, church, orcongregation. When he is an �officiating clergyman ofany religious corporation� he must be serving the needsof a reasonably localized and established congregation.

New Jersey�s Parsonage Exemption recognizes that morethan one individual with a congregation may be consid-ered officiating clergy under the statute, as evidenced bythe 1962 amendment to N.J.S.A. 54:4-3.6, which in-creased the number of exempt buildings from one to two.The allowance contemplates that two persons may eachhave officiating clergy duties, either simultaneously or atdifferent times. Federal Courts have recognized that Juda-ism assigns ministerial functions to both rabbis and can-tors. Also, the courts have qualified cantors under theFederal exemptions applicable to members of the clergy.

In this case, the criteria established in St. Matthew�s andsubsequent New Jersey cases supports the interpretationof the exemption statute that permits both rabbis and can-tors to qualify as officiating clergy. The Court entered ajudgment in favor of the plaintiff allowing the ParsonageExemption for the residence occupied by the cantor.

Farmland AssessmentAlexandria Township v. Philip and Joan Orban and Tho-mas Pajak, et al., decided May 4, 2004. The issue beforethe Tax Court on cross-motions for summary judgment iswhether the failure to establish and file a woodland man-agement plan pursuant to N.J.S.A. 54:4-23.3(a) beforeJanuary 1, two years before the year for which farmlandassessment is sought, will result in the denial of farmlandassessment.

N.J.S.A. 54:4-23.6 provides that, in order to qualify forfarmland assessment, the land must be actively devoted toagricultural or horticultural use for �at least two succes-sive years immediately preceding the tax year for whichthe valuation�is requested.� For example, where an ap-plication for farmland assessment is made for the year2003, the land must be actively devoted to agricultural orhorticultural use during the entire period of the calendaryears 2001 and 2002. N.J.A.C. 18:15-6.2(a)(6) defines

�Devoted to agricultural or horticultural use� as �land inwhich trees and forest products are produced for sale andsuch land is in compliance with the written approvedwoodland management plan.�

Philip and Joan Orban purchased a parcel of property inAlexandria Township. In May of 2000, the Orbans com-menced work on a woodland management plan so that theproperty could qualify for farmland assessment. JohnPerry, a registered forester, was hired by Mr. Orban onDecember 19, 2000, to review the woodland managementactivities which Mr. Orban had performed since May of2000. Mr. Perry confirmed that Mr. Orban had been com-plying with the woodland plan and was involved in theactive management of the woodland plan.

Mr. Perry then prepared a written woodland managementplan, which was filed by Mr. Orban with the Departmentof Environmental Protection and the assessor of Alexan-dria Township on May 26, 2001. During 2001, hardwoodtrees were sold producing an income in excess of $6,000.In 2002, additional trees were cut and sold in accordancewith the woodland plan, producing an income in excessof $6,000. Timely applications for farmland assessmentunder the woodland management plan were filed on orbefore August 1, 2001, and August 1, 2002.

The assessor denied farmland assessment for the year2003 based upon the fact that the formal woodland man-agement plan was not filed until May of 2001. It is theposition of the tax assessor that he cannot grant an appli-cation for farmland assessment unless the formal plan isfiled two full calendar years before the tax year for whichfarmland assessment is sought.

The township contends that since the woodland manage-ment plan was not in effect for two consecutive full yearsprior to the year for which farmland assessment is sought,the subject property is not entitled to farmland assess-ment. Property owners, to the contrary, contend that �ac-tively devoted to agricultural or horticultural use� doesnot require that a woodland management plan be writtenand filed with a municipality on or before January 1 twoyears preceding the year in which farmland assessmentfor the woodlot is sought. Owners contend that so long astheir activities conformed to a woodland managementplan filed after their activities commenced, they meet thestandards of the statute.

On January 13, 2003, a portion of the parcel was sold toThomas and Susan Pajak. On March 28, 2003, the Orbansand the Pajaks filed tax appeals with the HunterdonCounty Board of Taxation appealing the denial of farm-land assessment for the year 2003. On June 13, 2003, the

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County Board granted the farmland assessment on theproperties. On July 28, 2003, Alexandria Township filedappeals with the Tax Court seeking to reverse the CountyBoard�s determinations granting farmland assessment forthe properties. On February 11, 2004, the township filedthis motion for summary judgment, and on March 3, 2004,the property owners filed a cross-motion for summaryjudgment

In this case, taxpayers seek farmland assessment for taxyear 2003, thus N.J.S.A. 54:4-23.6 requires the land tohave been actively devoted to agricultural or horticulturaluse for the two preceding years, 2002 and 2001. N.J.A.C.18:15-3.1. The Court cited the cases of Mt. Hope MiningCo. v. Rockaway Twp., 8 N.J. Tax 570, 575 (Tax 1986),Clearview Estates, Inc. v. Mt. Lakes Borough, 188 N.J.Super. 99 (App. Div. 1982), and Green Pond Corp. v.Rockaway Twp., 2 N.J. Tax 273 (Tax 1981) and statutesto indicate that the use must be during the entire two fullcalendar years preceding the year for which farmland as-sessment is sought.

Amended regulations were adopted effective October 6,1997, so that they would comply with N.J.S.A. 54:4-23.3as amended by P.L. 1986, c.201 and P.L. 1995, c.276.Prior to 1986, the statute did not require a written wood-land management plan. The 1986 amendments to the stat-ute were intended to provide a reasonable means of elimi-nating the widespread practice of indiscriminate cuttingof woodlands to meet the earned income requirements offarmland assessment.

Land on which trees and forest products are produced forsale is �actively devoted to agricultural or horticulturaluse� when it is in compliance with a written approvedwoodland management plan. N.J.A.C. 18:15-6.2. A wood-land management plan was written by Forester John Perryand filed by the defendants on May 26, 2001. Taxpayersmaintain that even though the woodland managementplan was not written and filed until May 26, 2001, the ac-tivities were taking place on the land from January 1,2001, in accordance with good forestry management andthe implementation of the woodland plan that was laterfiled and approved. However, N.J.A.C. 18:15-6.2requires the plan to be a �written approved managementplan.� Since the plan in this case was not written or fileduntil May 26, 2001, the land does not meet the definitionof actively devoted to agricultural or horticultural use forthe full year 2001. Since it was not actively devoted tohorticultural use for all of 2001, it cannot qualify forfarmland assessment in 2003.

The Court held that in order to be in compliance with aplan, a plan must be drawn up, submitted, and approved

prior to the activities undertaken in accordance with thatplan. Accordingly, a woodland management plan must befiled by January 1 two years prior to the year for whichfarmland assessment as a woodlot is sought.

F.M.C. Stores v. Morris Plains, 100 N.J. 418 (1985)stands for two propositions that: (1) filing deadlines areto be strictly construed, and (2) in dealing with taxpayers,the government must turn square corners. Having anambiguous date on which a woodland management plancan be filed complies with neither of these principles, andalthough the result in this case may hurt the taxpayer, it isessential in construing beneficial tax provisions that clearlines be drawn so that both taxpayer and municipality canbe on adequate notice and make adequate plans for thetax base and so that taxes due can be anticipated.

The township�s motions for summary judgment aregranted and taxpayer�s cross-motions are denied as moot.

Sales and Use Tax

Derivative ExemptionSodexho Operations, LLC v. Director, Division ofTaxation, decided August 13, 2003; Tax Court No.001793-2001. Sodexho contracted to provide manage-ment services for the food and cleaning service depart-ments of various hospitals and other institutions thatqualified as tax-exempt organizations for sales and usetax purposes. As part of the management services,Sodexho purchased supplies for use in the cleaning de-partment; various paper goods such as plates, cups, nap-kins, straws, and utensils for the food service department;and furniture and materials to renovate the cafeteria andcoffee shops. Sodexho claims that these purchases are notsubject to sales and use tax because it acted as an agentfor the tax-exempt organizations, and therefore is entitledto a derivative exemption. Alternatively, Sodexho arguesthat all the purchases are exempt as a purchase for resaleto the tax-exempt organizations, and that the furniture andmaterial purchases are exempt because Sodexho shouldbe considered a contractor.

In addressing the issue of derivative exemption, the Courtreviewed the New Jersey Sales and Use Tax Act and caselaw. The Court found that there was no express statutoryauthorization to permit Sodexho to use the exempt organi-zations� sales and use tax exemption, nor did New Jerseycase law exist regarding this issue. After discussing bothstate and Federal case law, the Court determined thatUnited States Supreme Court decisions dealing with the ex-tension of sovereign immunity to government contractors

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were applicable to resolving Sodexho�s claim of deriva-tive exemption. The Court decided that in order forSodexho to be entitled to the exempt organizations� taxexemption, Sodexho must meet the Supreme Court stan-dard as stated in United States v. New Mexico that Sodexhoand the exempt organization �cannot realistically beviewed as separate entities, at least insofar as the activitybeing taxed is concerned.� The Court determined that al-though an agency relationship existed between Sodexhoand the exempt organizations, the evidence indicated thatSodexho retained substantial elements of discretion andcontrol while performing its management services, andthat it operated an independent business in pursuit of itsown profit-making purposes and objectives. Conse-quently, the Court held that Sodexho could not use the ex-empt organizations� tax exemption, as it could be viewedas a separate entity. The Court noted that even though theultimate burden of the tax would fall upon the tax-exemptorganizations, that that fact does not affect its decision.

Turning to the alternative argument that Sodexho�s pur-chases are exempt as the purchases were for purposes ofresale to the exempt organizations, the Court stated thatN.J.S.A. 54:32B-2(e)(1) excludes from tax a sale for re-sale of tangible personalty �either as such or as convertedinto or as a component part of a product produced forsale by the purchaser.� In addressing the issue of whethertangible personalty or services were sold to the exemptorganizations �as such,� the Court found that it needed todetermine what was the true or real object sought by thebuyer, and whether the tangible personalty was a criticalelement of the transaction. The Court opined that the trueobject of the agreements between the parties was forSodexho�s expertise in providing management services,and that the purchase of tangible personalty was merelyincidental to providing these management services, suchas training the tax-exempt organizations� employees anddetermining appropriate inventory levels, as well as con-venience for the tax-exempt organizations. The Courtconcluded that the purchases could not be exempt as con-verted into or as a component part of a product producedby Sodexho for sale to the tax-exempt organizations be-cause Sodexho did not produce a product. The Courtstated that the fact that Sodexho was reimbursed by thetax-exempt organizations for the cost of most of the itemswas not determinative to the issue of whether there was aresale. Finally, the Court found that language contained inthe agreements between the parties contradicted that therewas a sale to the tax-exempt organizations where theagreement stated that the inventory shall remain the prop-erty of Sodexho, Sodexho would absorb the cost, and af-ter a time period the tax-exempt organizations would nothave to pay for the materials.

Finally, the Court addressed Sodexho�s claim that the fur-niture and material purchases are exempt because itshould be considered a contractor. The Court ruled thatSodexho was not a contractor as it did not produce evi-dence that qualified itself for the statutory definition ofcontractor. Furthermore, the Court determined that thetrue object of these purchases was for Sodexho to earn itsmanagement fees, and for the tax-exempt organizationsnot to terminate the agreements.

Floor Covering MaterialsSanford Rever v. Director, Division of Taxation, decidedAugust 14, 2003; Tax Court No. 005566-2002. Plaintiffentered into a contract for the construction of a newhouse with a contractor. The contractor referred plaintiffto a dealer to select floor covering if plaintiff desired toupgrade items contained in the contract. Plaintiff pur-chased flooring material and carpeting from this dealer.The invoice detailed three types of materials, the numberof units purchased, the item price, and the extended price.In determining the total invoice price, the dealer calcu-lated sales tax on the materials and then deducted abuilder�s credit. Dealer refused to accept plaintiff�s FormST-8, Certificate of Capital Improvement, as a basis forsales tax exemption. Therefore, plaintiff paid dealer salestax. The floor covering was installed by an installer, notthe dealer, who plaintiff alleged was a subcontractor.Plaintiff timely filed a sales tax refund claim, which wasdenied by the Division.

Here, the Tax Court found that the agreement between theplaintiff and the contractor required plaintiff to purchasethe upgraded flooring materials himself, with an allow-ance towards their cost to be paid by the contractor. Thisallowance reflected the cost that was presumably in-cluded in the original selling price of the house. There-fore, the contractor did not purchase the upgraded materi-als and did not pay sales tax on plaintiff �s purchase ofupgraded flooring.

Plaintiff contested the refund denial claiming that thedealer should have paid sales tax when the dealer pur-chased the inventory it resold to plaintiff because the con-tractor, which plaintiff identified as the dealer, not thecustomer is obligated to pay the sales tax. The Tax Courtdetermined that this transaction was the retail sale offloor covering materials from the dealer to the plaintiffand that this transaction is subject to sales tax. Althoughit was undisputed that the installed floor material consti-tuted a capital improvement, the Court found that a taxexemption existed only for the installation involved in thecapital improvement and not for the materials installed.

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Plaintiff also argued that he contracted with the dealer forthe purchase as well as the installation of flooring materi-als. The Court ruled that the capital improvement installa-tion services are exempt from sales tax where the chargesare stated separately on the invoice. Here the Court foundthat there was no evidence that installation services werecontained in the invoice and noted that it was not dis-puted that there was no separate charge for installation.

Plaintiff filed a motion for amendment pursuant toR. 1:7-4(b) that was denied by the Court on September 26,2003, as the Court addressed the same issues in its previ-ous decision.

Chemical and Catalyst ExemptionAtlantic City Linen Supply Inc. v. Director, Division ofTaxation, decided November 6, 2003; Appellate DivisionNo. A-5146-01T1. Plaintiff (A.C. Linen) is a commerciallaundry that uses a variety of chemicals, cleaning agents,and detergents in various stages of the laundering pro-cess. A.C. Linen claims that these chemicals and deter-gents used in its laundering process are exempt from salestax as materials used in the manufacturing and refiningprocess pursuant to N.J.S.A. 54:32B-8.20. The Tax Courtruled that plaintiff did not qualify for this exemption be-cause the laundry process did not result in a tangible fin-ished product different from the material input into theprocess. A.C. Linen appealed that determination.

The Appellate Division affirmed the Tax Court for sub-stantially the reasons expressed in its opinion. The Courtemphasized that A.C. Linen did not create a different endproduct, but performed a service on the product, and thatthis provider of laundry services is entitled to tax exemp-tions that are not applicable to refining and manufactur-ing operations.

Atlantic City Linen filed a petition of certification to theNew Jersey Supreme Court.

Chemical and Catalyst ExemptionAtlantic City Linen Supply, Inc. v. Director, Division ofTaxation, decided February 10, 2004; Supreme Court ofNew Jersey No. C-646, September Term 2003, 55,533.The New Jersey Supreme Court denied Atlantic CityLinen�s petition for certification. Previously, the Appel-late Division upheld the Tax Court�s ruling that chemicalsand detergents used in Atlantic City Linen�s launderingprocess were not exempt from sales tax as materials usedin the manufacturing and refining process pursuant toN.J.S.A. 54:32B-8.20. The Appellate Division empha-sized that A.C. Linen did not create a different end prod-uct, but instead performed a service.

Cigarette Purchases via Internet or TelephoneGary Mosher v. Director, Division of Taxation, decidedNovember 22, 2002; Tax Court No. 001180-2002; de-cided February 17, 2004; Appellate Division No.A-2515-02T3.

See Cigarette Tax, page 58, for both case summaries.

RefundsJennifer Nicoletta and Tzvi Kulger v. Elrac, Inc., D/B/AEnterprise Rent-A-Car, decided February 17, 2004; Ap-pellate Division No. A-1214-02T2. Plaintiffs rented carsas individual consumers from the defendant. At the timeof rental, plaintiffs obtained optional driver protectionoptions on which they paid sales tax and claim that defen-dant knew that these transactions were not subject to salestax. Thereafter, plaintiffs filed a complaint seeking recov-ery of damages for consumer fraud, unjust enrichment,negligent misrepresentation, and a refund of sales taxpaid for themselves and a class of all taxpayers, as well aspunitive damages and equitable relief. Initially, the Courtgranted a class certification and found that defendant im-properly charged sales tax. Pursuant to a motion for re-consideration, the Court reversed vacating the prior certi-fication and ruling that filing a refund application to theDivision of Taxation was a superior remedy to a classaction.

The Appellate Division dismissed the complaint holdingthat the complaint did not state a cause of action underthe Consumer Fraud Act. In order to have a cause of ac-tion under the Consumer Fraud Act, there is a require-ment that plaintiff prove an �ascertainable loss.� TheCourt determined that plaintiffs� claim was for a refund ofsales tax that is specifically governed by Sales and UseTax Act N.J.S.A. 54:32B-20. Therefore, the Court foundit improbable that a similar cause of action would existunder the Consumer Fraud Act, and that the governing taxstatutes indicate an �unmistakable legislative intent thatthe Sales and Use Tax Act statute is the exclusive frame-work for refunds of the tax.� Finally, the Court noted thatunjust enrichment does not occur when a vendor collectsand timely remits sales tax to the Division of Taxation.

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A General and Effective Property Tax Rates

B Abstract of Ratables and Exemptions

C Assessed Value of Partial Exemptions and Abatements

D County Tax Board Appeals

E Taxable Value of Land and Improvements

F Public Utility Taxes

G Individual Income Tax Returns�County Profile

H Average Gross Income and Income Tax by County

I Sales and Use Tax Collections by Business Type

J Major Taxes�Comparison With Nearby States

K Major State Tax Rates


APPENDICES


A-12004 Annual Report

Appendix A

General Effective General EffectiveCounty Tax Rate Tax Rate County Tax Rate Tax Rate

2003 General and Effective Property Tax RatesBy Municipality

Atlantic Absecon City 3.498 3.140Atlantic City 3.369 2.700Brigantine City 2.850 1.970Buena Borough 3.249 2.810Buena Vista Township 2.942 2.390Corbin City 2.366 2.520Egg Harbor City 4.727 3.690Egg Harbor Township 2.961 2.510Estell Manor City 2.083 2.130Folsom Borough 2.199 1.990Galloway Township 2.977 2.710Hamilton Township 3.075 2.630Hammonton Town 3.000 2.790Linwood City 2.768 3.110Longport Borough 1.071 1.020Margate City 2.334 1.830Mullica Township 3.107 2.660Northfield City 3.319 2.870Pleasantville City 3.751 3.430Port Republic City 2.525 2.170Somers Point City 3.139 2.620Ventnor City 2.357 2.730Weymouth Township 2.180 1.840

BergenAllendale Borough 1.910 2.050Alpine Borough 1.130 0.800Bergenfield Borough 4.410 2.960Bogota Borough 3.090 2.790Carlstadt Borough 2.370 1.590Cliffside Park Borough 2.890 1.930Closter Borough 2.550 2.130Cresskill Borough 3.180 2.010Demarest Borough 1.720 2.190Dumont Borough 3.530 2.600Elmwood Park Borough 2.900 2.170East Rutherford Borough 2.240 1.780Edgewater Borough 2.520 1.610Emerson Borough 3.120 2.430Englewood City 3.460 2.310

Englewood Cliffs Bor. 0.940 0.940Fair Lawn Borough 3.370 2.380Fairview Borough 3.140 2.630Fort Lee Borough 2.650 2.110Franklin Lakes Borough 2.040 1.460Garfield City 2.950 2.360Glen Rock Borough 2.210 2.450Hackensack City 4.300 2.950Harrington Park Borough 3.010 2.290Hasbrouck Heights Bor. 3.100 2.430Haworth Borough 3.330 2.330Hillsdale Borough 3.020 2.040Ho Ho Kus Borough 2.230 1.640Leonia Borough 2.990 2.370Little Ferry Borough 3.470 2.650Lodi Borough 4.110 2.840Lyndhurst Township 2.990 2.320Mahwah Township 1.410 1.330Maywood Borough 3.260 2.380Midland Park Borough 2.270 2.240Montvale Borough 2.490 1.780Moonachie Borough 2.460 1.680New Milford Borough 3.160 2.430North Arlington Borough 3.370 2.680Northvale Borough 2.950 2.310Norwood Borough 2.600 2.020Oakland Borough 3.110 2.160Old Tappan Borough 1.730 1.770Oradell Borough 3.240 2.150Palisades Park Borough 2.860 1.960Paramus Borough 2.440 1.570Park Ridge Borough 2.470 1.820Ramsey Borough 1.810 2.130Ridgefield Borough 1.900 1.300Ridgefield Park Village 3.080 2.910Ridgewood Village 2.340 2.120River Edge Borough 3.360 2.480River Vale Township 2.920 2.050Rochelle Park Township 2.060 2.020Rockleigh Borough 1.420 0.900Rutherford Borough 3.410 2.530

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Bergen (continued)Saddle Brook Township 2.610 2.040Saddle River Borough 0.720 0.820South Hackensack Twp. 2.330 2.200Teaneck Township 3.990 2.890Tenafly Borough 1.910 2.220Teterboro Borough 1.360 1.320Upper Saddle River Bor. 1.610 1.600Waldwick Borough 3.440 2.310Wallington Borough 2.720 2.210Washington Township 2.760 1.880Westwood Borough 3.120 2.120Woodcliff Lake Borough 1.480 1.730Wood-Ridge Borough 2.080 2.030Wyckoff Township 2.310 1.660

BurlingtonBass River Township 3.187 2.870Beverly City 4.025 3.670Bordentown City 3.898 3.300Bordentown Township 3.349 2.710Burlington City 3.040 2.980Burlington Township 2.836 2.390Chesterfield Township 3.086 2.550Cinnaminson Township 3.499 2.760Delanco Township 3.468 2.910Delran Township 3.332 2.910Eastampton Township 3.541 3.010Edgewater Park Township 3.087 2.630Evesham Township 3.439 2.810Fieldsboro Borough 3.448 2.860Florence Township 3.061 2.660Hainesport Township 2.759 2.350Lumberton Township 2.820 2.370Mansfield Township 2.913 2.340Maple Shade Township 3.150 2.820Medford Township 3.528 2.940Medford Lakes Borough 4.240 3.360Moorestown Township 3.590 2.400Mount Holly Township 3.404 2.900Mount Laurel Township 3.132 2.770New Hanover Township 2.029 2.320North Hanover Township 2.452 2.170Palmyra Borough 3.390 3.000Pemberton Borough 3.743 3.180Pemberton Township 2.923 2.770Riverside Township 2.969 2.630Riverton Borough 4.114 3.290Shamong Township 3.152 2.610

Southampton Township 2.568 2.610Springfield Township 3.474 2.640Tabernacle Township 3.255 2.640Washington Township 2.312 1.900Westampton Township 2.650 2.410Willingboro Township 3.947 3.500Woodland Township 2.435 2.360Wrightstown Borough 2.329 2.350

CamdenAudubon Borough 4.248 3.550Audubon Park Borough 4.920 4.820Barrington Borough 4.288 3.730Bellmawr Borough 4.268 3.730Berlin Borough 3.629 3.210Berlin Township 3.650 3.540Brooklawn Borough 3.579 3.430Camden City 4.578 3.660Cherry Hill Township 3.810 3.190Chesilhurst Borough 3.200 3.010Clementon Borough 3.910 3.720Collingswood Borough 3.949 3.790Gibbsboro Borough 2.807 3.290Gloucester City 3.350 3.240Gloucester Township 3.840 3.410Haddon Township 3.841 3.420Haddonfield Borough 4.000 3.120Haddon Heights Borough 4.231 3.620Hi-Nella Borough 5.565 4.970Laurel Springs Borough 3.920 3.560Lawnside Borough 3.360 3.360Lindenwold Borough 4.530 4.420Magnolia Borough 4.360 4.240Merchantville Borough 4.170 4.050Mount Ephraim Borough 3.851 3.740Oaklyn Borough 3.802 3.660Pennsauken Township 3.380 3.220Pine Hill Borough 4.780 4.240Pine Valley Borough 1.660 1.660Runnemede Borough 3.995 3.790Somerdale Borough 4.460 4.180Stratford Borough 4.137 3.870Tavistock Borough 3.939 3.870Voorhees Township 4.860 3.350Waterford Township 4.035 3.710Winslow Township 3.810 3.310Woodlynne Borough 5.460 5.010

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A-3

Cape MayAvalon Borough 0.860 0.620Cape May City 1.840 1.100Cape May Point Borough 0.690 0.660Dennis Township 2.080 1.620Lower Township 2.610 1.990Middle Township 2.720 2.210North Wildwood City 2.620 1.880Ocean City 0.970 1.140Sea Isle City 1.690 0.840Stone Harbor Borough 0.780 0.640Upper Township 2.160 1.760West Cape May Borough 1.850 1.400West Wildwood Borough 2.870 1.950Wildwood City 3.380 2.750Wildwood Crest Borough 1.220 1.540Woodbine Borough 2.260 1.770

CumberlandBridgeton City 3.303 2.847Commercial Township 2.895 2.429Deerfield Township 3.922 2.961Downe Township 3.164 2.696Fairfield Township 2.227 2.156Greenwich Township 4.359 3.225Hopewell Township 2.737 2.803Lawrence Township 2.876 2.534Maurice River Township 2.976 2.458Millville City 4.106 2.855Shiloh Borough 3.701 3.390Stow Creek Township 2.251 2.323Upper Deerfield Twp. 2.696 2.624Vineland City 3.090 2.499

EssexBelleville Township 14.090 3.380Bloomfield Township 4.230 3.160Caldwell Borough Twp. 15.270 2.430Cedar Grove Township 9.990 2.080East Orange City 27.120 5.330Essex Fells Township 14.040 1.810Fairfield Township 2.320 1.840Glen Ridge Bor. Twp. 12.760 3.270Irvington Township 23.020 4.380Livingston Township 11.980 2.360Maplewood Township 3.420 3.180Millburn Township 1.860 1.850Montclair Township 4.670 3.020Newark City 2.160 2.730

North Caldwell Borough 6.760 2.150Nutley Township 13.750 2.900Orange City 32.800 3.960Roseland Borough 9.350 2.010S. Orange Village Twp. 5.280 3.320Verona Township 7.630 2.520West Caldwell Township 3.250 2.420West Orange Township 8.800 3.200

GloucesterClayton Borough 3.929 3.510Deptford Township 3.000 2.940East Greenwich Township 3.149 2.640Elk Township 3.348 2.880Franklin Township 3.143 2.850Glassboro Borough 3.891 3.650Greenwich Township 2.865 2.520Harrison Township 3.380 2.780Logan Township 2.583 2.740Mantua Township 3.589 3.070Monroe Township 3.657 3.110National Park Borough 4.051 3.590Newfield Borough 3.982 3.170Paulsboro Borough 3.216 3.050Pitman Borough 3.813 3.320S. Harrison Township 3.083 2.620Swedesboro Borough 3.883 3.310Washington Township 3.626 3.000Wenonah Borough 3.647 3.210West Deptford Township 3.113 2.830Westville Borough 3.465 3.200Woodbury City 4.784 4.310Woodbury Heights Bor. 3.204 3.390Woolwich Township 3.594 2.790

HudsonBayonne City 4.591 3.320East Newark Borough 6.571 2.567Guttenberg Town 4.272 2.631Harrison Town 4.143 2.576Hoboken City 3.242 1.688Jersey City 4.606 2.715Kearny Town 6.608 3.046North Bergen Township 3.832 2.928Secaucus Town 2.682 2.333Union City 4.437 3.592Weehawken Township 2.975 2.230West New York Town 4.474 3.136

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HunterdonAlexandria Township 2.970 2.010Bethlehem Township 2.440 2.410Bloomsbury Borough 3.160 2.380Califon Borough 3.730 2.700Clinton Town 2.570 2.410Clinton Township 2.130 1.970Delaware Township 1.900 1.990East Amwell Township 2.870 2.000Flemington Borough 2.710 2.550Franklin Township 3.060 2.030Frenchtown Borough 3.540 2.340Glen Gardner Borough 2.410 2.330Hampton Borough 4.030 3.250High Bridge Borough 3.550 2.660Holland Township 1.740 1.730Kingwood Township 2.680 1.840Lambertville City 2.080 1.800Lebanon Borough 3.020 2.030Lebanon Township 2.240 1.960Milford Borough 2.200 2.050Raritan Township 2.990 2.000Readington Township 1.960 1.940Stockton Borough 2.990 1.970Tewksbury Township 1.960 1.820Union Township 2.070 1.880West Amwell Township 1.780 1.750

MercerEast Windsor Township 3.900 2.960Ewing Township 3.730 2.970Hamilton Township 2.940 2.590Hightstown Borough 4.770 3.520Hopewell Borough 3.330 2.460Hopewell Township 2.960 2.190Lawrence Township 2.990 2.490Pennington Borough 3.720 2.530Princeton Borough 3.060 2.070Princeton Township 2.790 1.980Trenton City 3.980 3.790Washington Township 3.630 2.670West Windsor Township 4.110 2.820

MiddlesexCarteret Borough 3.970 2.993Cranbury Township 3.530 2.011Dunellen Borough 7.540 2.790

East Brunswick Township 6.220 2.572Edison Township 3.110 2.403Helmetta Borough 6.570 2.961Highland Park Borough 4.950 3.076Jamesburg Borough 4.030 3.287Metuchen Borough 3.400 2.380Middlesex Borough 5.400 2.850Milltown Borough 3.260 2.502Monroe Township 2.730 1.941New Brunswick City 3.750 2.788North Brunswick Twp. 3.330 2.697Old Bridge Township 3.430 2.587Perth Amboy City 3.070 2.432Piscataway Township 4.340 2.487Plainsboro Township 2.810 2.442Sayreville Borough 3.180 2.340South Amboy City 5.340 2.334South Brunswick Twp. 2.960 2.364South Plainfield Bor. 3.690 2.217South River Borough 4.450 2.031Spotswood Borough 6.810 2.762Woodbridge Township 5.850 2.572

MonmouthAberdeen Township 4.274 2.876Allenhurst Borough 1.208 1.175Allentown Borough 3.594 2.951Asbury Park City 3.943 3.121Atlantic Highlands Bor. 3.777 2.448Avon-by-the-Sea Bor. 2.140 1.349Belmar Borough 1.361 1.902Bradley Beach Borough 2.351 2.193Brielle Borough 2.661 1.827Colts Neck Township 2.823 1.765Deal Borough 0.758 0.832Eatontown Borough 2.983 2.566Englishtown Borough 3.363 2.460Fair Haven Borough 1.768 2.149Farmingdale Borough 3.461 2.398Freehold Borough 3.380 2.555Freehold Township 2.872 2.136Hazlet Township 3.688 2.596Highlands Borough 5.180 3.192Holmdel Township 2.961 1.917Howell Township 3.388 2.522Interlaken Borough 1.096 1.439

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Monmouth (continued)Keansburg Borough 4.333 3.161Keyport Borough 3.624 2.751Little Silver Borough 1.846 2.177Loch Arbour Village 1.366 1.360Long Branch City 2.159 2.560Manalapan Township 3.456 2.259Manasquan Borough 2.936 1.700Marlboro Township 3.531 2.251Matawan Borough 4.199 3.026Middletown Township 3.205 2.200Millstone Township 2.008 2.014Monmouth Beach Bor. 3.067 1.718Neptune Township 3.485 2.350Neptune City Borough 3.819 2.753Ocean Township 3.398 2.239Oceanport Borough 3.005 2.039Red Bank Borough 2.974 2.388Roosevelt Borough 4.629 3.537Rumson Borough 3.047 1.651Sea Bright Borough 3.024 1.836Sea Girt Borough 1.870 1.024Shrewsbury Borough 1.981 2.275Shrewsbury Township 4.204 3.059South Belmar Borough 3.660 2.511Spring Lake Borough 1.535 0.861Spring Lake Heights Bor. 1.615 1.571Tinton Falls Borough 3.211 2.367Union Beach Borough 2.374 2.856Upper Freehold Township 2.820 2.218Wall Township 2.044 2.017West Long Branch Bor. 2.657 2.131

Morris Boonton Town 2.880 2.150Boonton Township 2.460 1.840Butler Borough 2.130 2.280Chatham Borough 3.100 1.620Chatham Township 2.440 1.570Chester Borough 2.110 2.280Chester Township 2.760 1.870Denville Township 1.970 1.960Dover Town 3.250 2.500East Hanover Township 1.460 1.460Florham Park Borough 1.960 1.310Hanover Township 1.960 1.440Harding Township 0.840 0.930Jefferson Township 3.090 2.320Kinnelon Borough 2.190 2.090

Lincoln Park Borough 3.240 2.430Long Hill Township 1.980 2.010Madison Borough 1.920 1.650Mendham Borough 2.750 1.690Mendham Township 2.700 1.760Mine Hill Township 3.380 2.470Montville Township 2.360 1.870Morris Township 1.870 1.740Morris Plains Borough 2.500 1.930Morristown Town 3.230 2.310Mountain Lakes Borough 3.080 2.030Mount Arlington Borough 3.210 2.050Mount Olive Township 3.050 2.670Netcong Borough 3.190 2.760Parsippany-Troy Hills Twp. 1.720 2.120Pequannock Township 3.060 2.140Randolph Township 2.470 2.150Riverdale Borough 2.310 1.810Rockaway Borough 2.960 2.490Rockaway Township 2.500 2.500Roxbury Township 2.780 2.330Victory Gardens Borough 3.100 2.040Washington Township 2.890 2.220Wharton Borough 3.250 2.350

OceanBarnegat Township 3.564 2.700Barnegat Light Borough 1.929 1.068Bay Head Borough 0.871 0.864Beach Haven Borough 2.283 1.237Beachwood Borough 2.849 2.250Berkeley Township 2.516 1.945Brick Township 2.901 2.061Dover Township 2.714 1.887Eagleswood Township 3.025 2.547Harvey Cedars Borough 2.141 1.118Island Heights Borough 3.430 2.295Jackson Township 3.215 2.278Lacey Township 2.716 2.040Lakehurst Borough 3.749 3.121Lakewood Township 3.152 2.261Lavallette Borough 1.719 1.042Little Egg Harbor Twp. 3.246 2.702Long Beach Township 1.794 1.059Manchester Township 2.569 2.118Mantoloking Borough 0.726 0.693Ocean Township 3.263 2.526

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A-6

Ocean (continued)Ocean Gate Borough 3.242 2.498Pine Beach Borough 2.633 2.022Plumsted Township 2.795 2.104Point Pleasant Borough 2.916 2.057Pt. Pleasant Beach Bor. 2.602 1.538Seaside Heights Borough 3.090 2.320Seaside Park Borough 1.463 1.690Ship Bottom Borough 1.930 1.197South Toms River Bor. 3.261 2.503Stafford Township 2.439 2.134Surf City Borough 1.942 1.107Tuckerton Borough 3.529 2.885

PassaicBloomingdale Borough 4.220 2.930Clifton City 3.260 2.660Haledon Borough 3.780 3.130Hawthorne Borough 3.570 2.610Little Falls Township 3.670 2.160North Haledon Borough 5.050 2.310Passaic City 4.370 3.400Paterson City 22.970 3.510Pompton Lakes Borough 4.180 3.020Prospect Park Borough 3.570 2.920Ringwood Borough 3.970 2.810Totowa Borough 2.710 2.230Wanaque Borough 4.540 2.960Wayne Township 3.100 2.220West Milford Township 4.470 2.970West Paterson Borough 3.150 2.380

SalemAlloway Township 2.638 2.530Carneys Point Township 3.402 2.800Elmer Borough 3.909 3.200Elsinboro Township 3.476 3.020Lower Alloways Crk. Twp. 1.496 1.000Mannington Township 2.977 2.130Oldmans Township 3.342 2.740Penns Grove Borough 4.507 3.460Pennsville Township 3.181 2.830Pilesgrove Township 2.909 2.580Pittsgrove Township 4.090 2.840Quinton Township 2.838 2.740Salem City 4.335 3.500Upper Pittsgrove Twp. 3.239 2.360Woodstown Borough 3.492 3.110

SomersetBedminster Township 1.200 1.250Bernards Township 1.700 1.740Bernardsville Borough 1.410 1.520Bound Brook Borough 3.500 2.850Branchburg Township 2.120 2.110Bridgewater Township 1.910 1.740Far Hills Borough 1.050 1.100Franklin Township 2.190 2.420Green Brook Township 2.960 2.090Hillsborough Township 2.470 2.310Manville Borough 3.140 2.450Millstone Borough 2.090 2.340Montgomery Township 2.300 2.360North Plainfield Borough 3.920 3.180Peapack & Gladstone Bor. 1.560 1.500Raritan Borough 2.880 2.060Rocky Hill Borough 2.330 1.620Somerville Borough 3.870 3.320South Bound Brook Bor. 4.120 3.300Warren Township 1.700 1.730Watchung Borough 1.540 1.690

SussexAndover Borough 2.870 2.420Andover Township 2.480 2.770Branchville Borough 2.200 1.800Byram Township 3.920 2.870Frankford Township 3.070 2.580Franklin Borough 4.080 3.110Fredon Township 3.010 2.380Green Township 3.360 2.610Hamburg Borough 2.860 2.910Hampton Township 3.070 2.660Hardyston Township 3.200 2.530Hopatcong Borough 3.370 2.870Lafayette Township 3.010 2.260Montague Township 2.870 2.440Newton Town 3.700 3.080Ogdensburg Borough 3.770 3.190Sandyston Township 2.800 2.510Sparta Township 2.520 2.530Stanhope Borough 4.570 3.250Stillwater Township 3.550 2.710Sussex Borough 3.480 2.860Vernon Township 3.480 2.780Walpack Township 1.740 1.570Wantage Township 3.430 2.660

2004 Annual Report

Appendix A


A-7

UnionBerkeley Heights Twp. 2.441 1.790Clark Township 5.691 2.370Cranford Township 3.531 2.120Elizabeth City 14.217 2.800Fanwood Borough 8.520 2.550Garwood Borough 5.868 2.570Hillside Township 4.664 3.380Kenilworth Borough 2.658 2.060Linden City 3.360 2.620Mountainside Borough 4.073 1.650New Providence Borough 2.889 2.070Plainfield City 4.454 3.110Rahway City 3.736 3.030Roselle Borough 5.174 4.300Roselle Park Borough 7.955 3.160Scotch Plains Township 6.666 2.480Springfield Township 4.329 2.410Summit City 2.615 1.560Union Township 11.395 2.560Westfield Town 5.256 2.040Winfield Township 134.274 12.430

Warren Allamuchy Township 1.700 2.000Alpha Borough 3.660 3.170Belvidere Town 3.560 3.030Blairstown Township 2.440 2.010Franklin Township 3.040 2.550Frelinghuysen Township 2.850 2.370Greenwich Township 2.100 2.120Hackettstown Town 3.310 3.030Hardwick Township 2.350 2.260Harmony Township 1.700 1.860Hope Township 2.800 2.320Independence Township 3.130 2.350Knowlton Township 2.490 2.440Liberty Township 2.250 2.700Lopatcong Township 2.780 2.390Mansfield Township 2.220 2.740Oxford Township 3.010 2.460Phillipsburg Town 2.990 2.720Pohatcong Township 2.600 2.910Washington Borough 3.050 3.160Washington Township 2.620 2.820White Township 2.330 1.720

2004 Annual Report

Appendix B

B-1

Abs

trac

t of R

atab

les

and

Exe

mpt

ions

200

3

Col

. 1C

ol. 2

Col

. 3C

ol. 4

TA

XA

BL

E V

AL

UE

(a)

(b)

Lan

dIm

prov

emen

ts(I

nclu

des

Par

tial

Exe

mpt

ions

&A

bate

men

ts)

Tot

al T

axab

leV

alue

of

Lan

d an

dIm

prov

emen

ts(C

ol. 1

(a)

+ (b

))

Tot

al T

axab

leV

alue

�P

arti

alE

xem

ptio

ns a

ndA

bate

men

ts(A

sses

sed

Val

ue)

Net

Tot

al T

axab

leV

alue

of

Lan

d an

dIm

prov

emen

ts(C

ol. 2

� 3

)C

OU

NT

Y

Atl

anti

cB

erge

nB

urlin

gton

Cam

den

Cap

e M

ay

Cum

berl

and

Ess

exG

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rH

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ris

Oce

an

Pas

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mSo

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set

Suss

exU

nion

War

ren

TO

TA

LS

$

7,52

6,05

6,80

0$

13,

739,

350,

668

$ 2

1,26

5,40

7,46

8$

32

,055

,600

$ 2

1,23

3,35

1,86

841

,020

,038

,104

45,6

17,0

31,3

1286

,637

,069

,416

7,33

5,70

086

,629

,733

,716

6,87

8,75

0,01

716

,527

,285

,067

23,4

06,0

35,0

8447

,988

,200

23,3

58,0

46,8

845,

451,

282,

214

14,6

93,4

98,1

7620

,144

,780

,390

42,8

79,2

5020

,101

,901

,140

12,2

48,6

65,9

508,

232,

324,

200

20,4

80,9

90,1

509,

517,

200

20,4

71,4

72,9

50

977,

453,

945

3,27

1,15

6,37

54,

248,

610,

320

48,2

77,4

004,

200,

332,

920

13,1

54,5

48,7

5020

,079

,857

,741

33,2

34,4

06,4

9127

0,09

2,40

032

,964

,314

,091

3,59

0,23

3,85

19,

502,

130,

605

13,0

92,3

64,4

5640

,377

,263

13,0

51,9

87,1

937,

285,

831,

746

13,1

67,3

71,1

1220

,453

,202

,858

582,

729,

375

19,8

70,4

73,4

835,

715,

319,

501

9,26

9,41

3,24

814

,984

,732

,749

240,

300

14,9

84,4

92,4

49

7,28

3,78

3,42

614

,618

,450

,819

21,9

02,2

34,2

4518

,415

,960

21,8

83,8

18,2

8513

,908

,945

,725

26,3

63,5

67,4

7540

,272

,513

,200

128,

569,

200

40,1

43,9

44,0

0021

,158

,957

,043

29,8

28,6

18,4

6450

,987

,575

,507

20,3

91,8

5050

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,183

,657

23,8

28,0

85,9

9131

,921

,802

,745

55,7

49,8

88,7

362,

036,

000

55,7

47,8

52,7

3616

,408

,105

,159

21,1

65,4

07,4

5037

,573

,512

,609

2,55

3,60

037

,570

,959

,009

8,94

5,00

8,58

911

,969

,428

,536

20,9

14,4

37,1

255,

409,

700

20,9

09,0

27,4

2567

8,02

5,32

32,

171,

889,

862

2,84

9,91

5,18

512

8,60

02,

849,

786,

585

13,7

79,9

37,4

8125

,693

,430

,721

39,4

73,3

68,2

025,

606,

800

39,4

67,7

61,4

023,

630,

023,

600

6,37

7,29

2,40

310

,007

,316

,003

10,0

07,3

16,0

039,

572,

386,

250

14,1

79,4

80,5

5023

,751

,866

,800

13,9

02,4

0023

,737

,964

,400

2,33

4,69

7,60

05,

430,

505,

047

7,76

5,20

2,64

78,

216,

645

7,75

6,98

6,00

2

$225

,376

,137

,065

$343

,819

,292

,576

$569

,195

,429

,641

$1,2

86,7

23,4

43$5

67,9

08,7

06,1

98

2004 Annual Report

Appendix B

B-2

Abs

trac

t of R

atab

les

and

Exe

mpt

ions

200

3 (c

onti

nued

)

Taxa

ble

Val

ueof

Mac

hine

ry,

Impl

emen

ts a

ndE

quip

men

t of

Tel

epho

ne,

Tele

grap

h an

dM

esse

nger

Syst

emC

ompa

nies

Net

Val

uati

onTa

xabl

e(C

ol. 4

+ 5

)

Gen

eral

Tax

Rat

e to

App

lype

r $1

00V

alua

tion

Cou

nty

Equ

aliz

atio

nTa

ble�

Ave

rage

Rat

io o

fA

sses

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rue

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fR

eal P

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(R.S

. 54:

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to

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. 54:

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(a)

Am

ount

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educ

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er(R

.S. 5

4:3-

17 t

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4:3-

19)

Col

. 5C

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. 7C

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0

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cB

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nion

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ren

TO

TA

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$ 8

1,73

0,05

6$

21,

315,

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924

$

262

,848

,909

200,

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839

86,8

30,1

01,5

551,

787,

642,

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110,

629,

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76,0

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124,

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20,2

26,3

89,4

7626

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,856

35,4

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,506

,918

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1,39

6,01

6,51

0

34,2

66,5

954,

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599,

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7,74

5,15

916

5,78

4,89

233

,130

,098

,983

2,23

3,92

1,66

521

9,10

8,52

813

,271

,095

,721

41,3

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,134

,590

19,9

53,6

08,0

7353

,256

,456

15,0

37,7

48,9

0532

,528

,626

100,

294,

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21,9

84,1

12,9

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,777

175,

715,

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40,3

19,6

59,5

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5,51

1,69

651

,152

,695

,353

1,34

6,01

9,35

516

5,63

8,14

355

,913

,490

,879

1,89

5,28

3,97

511

4,46

3,72

437

,685

,422

,733

91,2

67,2

72

63,1

11,6

0020

,972

,139

,025

18,6

25,9

232,

868,

412,

508

102,

240,

753

39,5

70,0

02,1

551,

196,

564,

401

46,3

59,6

5110

,053

,675

,654

73,8

87,6

3466

,146

,841

23,8

04,1

11,2

41

38,2

66,3

297,

795,

252,

331

377,

581,

990

$2,1

84,5

86,7

77$5

70,0

93,2

92,9

75$1

,387

,777

$10,

785,

998,

856

2004 Annual Report

Appendix B

B-3

Abs

trac

t of R

atab

les

and

Exe

mpt

ions

200

3 (c

onti

nued

)

Sect

ion

AC

ount

y Ta

xes

III

AD

JUST

ME

NT

S R

ESU

LT

ING

FR

OM

Col

. 10

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. 11

Col

. 12�

AP

PO

RT

ION

ME

NT

OF

TA

XE

S

EQ

UA

LIZ

AT

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(b)

Am

ount

sA

dded

Und

erR

.S. 5

4:3-

17 t

oR

.S. 5

4:3-

19 a

ndN

.J.S

.A. 5

4:11

D-7

Net

Val

uati

on o

nW

hich

Cou

nty

Taxe

s A

reA

ppor

tion

ed (

Col

. 6 �

9(a

)+

9(b)

� 1

0(a)

+ 10

(b))

Cou

nty

Equ

aliz

atio

n Ta

ble

App

eals

(R

.S. 5

4:51

A-4

)(a

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Und

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l Cou

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Taxe

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App

eals

and

Cor

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rror

s(R

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)(c

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$ 4

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$ 2

5,07

3,12

5,40

0$

101,

683

,478

.10

$1,8

36,1

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7$

7

52.6

523

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,831

108,

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109,

373

225,

582,

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5080

0,97

4.50

4,52

5,94

7,78

627

,977

,523

,843

121,

763,

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9914

8,16

2.99

3,24

3,99

8,02

223

,444

,110

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0038

7,96

3.00

4,57

9,10

2,65

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,690

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,454

69,4

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586

,246

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911,

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5,13

8,44

3,34

647

,120

,116

.70

155,

116.

7022

,269

,850

,235

53,1

66,0

27,5

5330

6,45

5,27

0.08

2,13

8,49

9.53

126,

523.

451,

785,

018,

500

15,0

14,7

99,7

6390

,554

,564

.39

96,9

97.7

514

2,43

3.36

10,6

45,2

16,5

8430

,598

,824

,657

201,

382,

939.

0855

7,61

2.08

2,54

3,24

3,53

917

,548

,463

,818

65,1

33,9

43.7

410

5,67

7.74

6,08

2,70

5,34

528

,065

,430

,557

159,

604,

885.

3122

7,89

5.43

21,1

13.1

220

,575

,462

,173

60,8

95,1

21,7

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5,92

7,22

1.99

265,

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1316

8,52

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17,5

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5867

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581,

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1233

0,60

8.12

10,7

41,0

48,1

6464

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161,

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8,16

6.05

23,0

38.7

414

,634

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,754

52,2

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82,2

1521

4,63

6,10

9.31

569,

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31

10,6

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55,6

6831

,609

,594

,693

180,

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9,69

0,62

73,

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34,7

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30.6

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,206

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156.

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5,73

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54,6

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5.00

22,5

90,2

62,7

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,374

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191,

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0,41

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25,6

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$185

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$744

,794

,562

,709

$3,0

89,0

88,5

42.3

1$1

0,68

7,30

4.78

$518

,296

.02

2004 Annual Report

Appendix B

B-4

Abs

trac

t of R

atab

les

and

Exe

mpt

ions

200

3 (c

onti

nued

)

(c)

Cou

nty

Ope

nSp

ace

Tax

es

(b)

Cou

nty

Hea

lth

Taxe

s

(a)

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nty

Lib

rary

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s

VN

et C

ount

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unic

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e A

id(R

.S. 5

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AP

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ME

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OF T

AX

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Sect

ion

AC

ount

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B

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III

Net

Cou

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Taxe

sA

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ed

$

99,

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9

9,84

8,12

5.88

$ 5

,161

,000

.00

$ 3

,995

,980

.00

$5,0

14,6

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4,78

1,52

6.00

224,

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1,61

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121,

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8,58

1,73

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8,59

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2,34

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1.06

69,3

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,371

,987

.00

5,04

9,63

6.76

2,36

9,00

0.45

46,9

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00.0

046

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,000

.00

1,23

6,55

6.00

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844.

3330

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3,29

4.00

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443,

294.

005,

316,

636.

0090

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,000

.00

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00,0

00.0

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5,32

7.00

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825,

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0065

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.00

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28,2

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533,

321.

005,

278,

000.

00

159,

398,

103.

0015

9,39

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3.00

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830,

000.

0021

5,83

0,00

0.00

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70,4

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425

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251,

000.

009,

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332.

001,

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041.

0016

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.00

160,

493,

950.

69$1

00,0

00.0

016

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3,95

0.69

27,8

88,4

85.9

121

4,06

6,77

3.00

214,

066,

773.

0022

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,000

.00

7,75

0,00

0.00

6,25

2,00

0.00

179,

158,

896.

0417

9,15

8,89

6.04

3,12

9,42

6.00

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97,7

80.9

434

,697

,780

.94

141,

605,

000.

0014

1,60

5,00

0.00

8,67

7,63

4.00

12,1

13,4

59.7

254

,525

,004

.00

20,8

66.0

054

,504

,138

.00

3,81

7,44

4.00

1,11

2,53

0.00

2,20

4,69

4.00

191,

332,

767.

0019

1,33

2,76

7.00

6,95

9,15

6.11

45,5

00,0

00.0

045

,500

,000

.00

3,24

7,22

6.00

4,87

8,93

1.00

$3,0

78,9

19,5

33.5

5$1

20,8

66.0

0$3

,078

,798

,667

.55

$86,

477,

929.

76$1

5,47

5,10

7.00

$143

,738

,105

.30

2004 Annual Report

Appendix B

B-5

Abs

trac

t of R

atab

les

and

Exe

mpt

ions

200

3 (c

onti

nued

)

(a)

Dis

tric

t Sch

ool

Bud

get

(Adj

uste

d by

Add

endu

m 1

(b))

(b)

Reg

iona

lC

onso

lidat

ed a

ndJo

int

Scho

ol B

udge

ts

(c)

Loc

alSc

hool

Bud

get

(a)

Loc

al M

unic

ipal

Bud

get

(Adj

uste

d by

Add

endu

m 1

(c))

(b)

Loc

al M

unic

ipal

Ope

n Sp

ace

Col

. 12�

AP

PO

RT

ION

ME

NT

OF T

AX

ES

Sect

ion

CL

ocal

Tax

es t

o be

Rai

sed

for

III

DIS

TR

ICT

SC

HO

OL

PU

RP

OSE

SL

OC

AL

MU

NIC

IPA

L P

UR

PO

SES

CO

UN

TY

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anti

cB

erge

nB

urlin

gton

Cam

den

Cap

e M

ay

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berl

and

Ess

exG

louc

este

rH

udso

nH

unte

rdon

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cer

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dles

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outh

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ris

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an

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saic

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mSo

mer

set

Suss

exU

nion

War

ren

TO

TA

LS

$ 2

42,5

76,0

49.1

6$

3

7,87

3,71

4.97

$ 5

,117

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.25

$ 2

37,7

11,2

51.8

1$

372

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.00

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8.41

161,

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688.

901,

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0065

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374,

287,

600.

0011

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0.00

121,

191,

837.

836,

044,

594.

3438

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4.00

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015

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624.

3910

0,12

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010

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096,

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7834

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6982

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78

204,

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0020

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444,

300,

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9986

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1728

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249,

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026

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1515

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5054

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7649

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193,

044.

00

86,0

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032

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.00

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33.4

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593,

258.

23

$7,7

26,3

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3$1

,743

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,874

.49

$72,

644,

239.

00$4

,327

,838

,048

.49

$59,

171,

358.

85

2004 Annual Report

Appendix B

B-6

Abs

trac

t of R

atab

les

and

Exe

mpt

ions

200

3 (c

onti

nued

)

Sect

ion

DT

otal

Tax

Lev

yon

Whi

chT

ax R

ate

isC

ompu

ted

(Col

s. A

V +

B(a

), (

b), (

c)+

CI(

a), (

b), (

c)+

CII

(a),

(b)

)

(a)

Pub

lic S

choo

lP

rope

rty

(b)

Oth

er S

choo

lP

rope

rty

(c)

Pub

lic P

rope

rty

(d)

Chu

rch

and

Cha

rita

ble

Pro

pert

y

Col

. 12

Col

. 13

RE

AL

PR

OP

ER

TY

EX

EM

PT

FR

OM

TA

XA

TIO

N

CO

UN

TY

Atl

anti

cB

erge

nB

urlin

gton

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den

Cap

e M

ay

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berl

and

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nH

unte

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cer

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dles

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outh

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ris

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an

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mSo

mer

set

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nion

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ren

TO

TA

LS

$

637

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$

643

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$

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$ 2

17,8

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702,

220,

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662.

611,

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309,

850

650,

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375

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4,62

01,

083,

753,

930

762,

778,

267.

1365

9,86

5,46

075

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1,91

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041

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080

1,58

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834,

343,

319

199,

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900

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0,86

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0

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100

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91,

110,

389,

400

452,

520,

618.

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019

6,03

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081

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633,

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732,

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025

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300

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062

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0

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447,

978.

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350

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77$1

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040,

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557

1 Inc

lude

s sp

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rbag

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evy

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.00

2 Inc

lude

s sp

ecia

l ga

rbag

e di

stri

ct l

evy

$1,9

51,3

20.0

0

2004 Annual Report

Appendix B

B-7

Abs

trac

t of R

atab

les

and

Exe

mpt

ions

200

3 (c

onti

nued

)

(e)

Cem

eter

ies

and

Gra

veya

rds

(f)

Oth

er E

xem

ptio

ns N

otIn

clud

ed in

For

egoi

ngC

lass

ific

atio

ns

(g)

Tot

al A

mou

nt o

f R

eal

Pro

pert

y E

xem

pt F

rom

Taxa

tion

(a +

b +

c +

d +

e +

f)

(a)

Surp

lus

Rev

enue

App

ropr

iate

d

(b)

Mis

cella

neou

sR

even

ues

Ant

icip

ated

Col

. 13

Col

. 14

RE

AL

PR

OP

ER

TY

EX

EM

PT

FR

OM

TA

XA

TIO

N

AM

OU

NT

OF M

ISC

EL

LA

NE

OU

S R

EV

EN

UE

FO

R

TH

E S

UP

PO

RT

OF T

HE

LO

CA

L M

UN

ICIP

AL

BU

DG

ET

CO

UN

TY

Atl

anti

cB

erge

nB

urlin

gton

Cam

den

Cap

e M

ay

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berl

and

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nH

unte

rdon

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cer

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dles

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outh

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ris

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an

Pas

saic

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mSo

mer

set

Suss

exU

nion

War

ren

TO

TA

LS

$

16,

950,

800

$

848,

090,

894

$ 3

,368

,014

,994

$ 28

,669

,560

.03

$ 8

4,86

6,27

7.40

376,

716,

300

2,97

2,00

2,83

712

,209

,333

,912

93,1

62,6

44.3

323

7,14

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14,0

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5059

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73,

664,

536,

377

51,8

73,4

54.0

011

1,86

2,56

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31,7

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0055

3,69

7,27

53,

730,

493,

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31,8

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76.4

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428,

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25,1

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300

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4,40

041

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4,20

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500

41,3

82,9

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121

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014

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4,62

1,58

6,46

4$8

34,4

28,6

05.2

4$3

,496

,785

,276

.70

2004 Annual Report

Appendix B

B-8

Abs

trac

t of R

atab

les

and

Exe

mpt

ions

200

3 (c

onti

nued

)

Tota

l Rat

able

sD

eter

min

edP

ursu

ant

toR

.S. 5

4:1-

35A

fter

Equ

aliz

atio

nU

nder

R.S

. 54:

1-33

and

R.S

. 54:

1-34

(b)

Vet

eran

sD

educ

tion

s

Col

. 14

Col

. 15

Col

. 16

AM

OU

NT

OF M

ISC

EL

LA

NE

OU

S R

EV

EN

UE

FO

R

TH

E S

UP

PO

RT

OF T

HE

LO

CA

L M

UN

ICIP

AL

BU

DG

ET

DE

DU

CT

ION

S A

LL

OW

ED

(c)

Rec

eipt

s fr

omD

elin

quen

t Tax

and

Lie

ns

(d)

Tot

al o

f M

isce

llane

ous

Rev

enue

s (a

+ b

+ c

)

(a)

Ful

l Est

imat

edA

mou

nt o

f Sen

ior

Cit

izen

, Tot

ally

Dis

able

d an

dSu

rviv

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Spou

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educ

tion

s A

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anti

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erge

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gton

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den

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dles

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ris

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mSo

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set

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ren

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$

5,86

8,69

3.04

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19,4

04,5

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8

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30,5

84,9

5077

8,60

052

9,91

1,75

113

31

468,

224,

351

29,3

72,6

282,

337,

988

441,

189,

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558

143,

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784

16,6

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128,

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174

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7,21

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69,2

29,7

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81

146,

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3,58

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00

142,

434,

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321

68,3

39,3

397,

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800

497,

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61,4

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39

5,05

670

$7,4

68,6

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l

E-12004 Annual Report

Appendix E

Total Taxable ValueLand and Improvements in New Jersey

1994 � 2003

Billions

2003 County ValuesAtlantic $ 21,265,407,468Bergen 86,637,069,416Burlington 23,406,035,084Camden 20,144,780,390Cape May 20,480,990,150Cumberland 4,248,610,320Essex 33,234,406,491Gloucester 13,092,364,456Hudson 20,453,202,858Hunterdon 14,984,732,749Mercer 21,902,234,245

Middlesex $ 40,272,513,200Monmouth 50,987,575,507Morris 55,749,888,736Ocean 37,573,512,609Passaic 20,914,437,125Salem 2,849,915,185Somerset 39,473,368,202Sussex 10,007,316,003Union 23,751,866,800Warren 7,765,202,647

Total $569,195,429,641

2004 Annual Report

Appendix F

F-1

Taxe

s A

dmin

iste

red

by th

e P

ublic

Uti

lity

Tax

Sect

ion

for

2004

(Cal

enda

r Y

ear

Due

)P

ublic

Uti

lity

Taxe

s (E

xcis

e, F

ranc

hise

, and

Gro

ss R

ecei

pts

Taxe

s),

Tra

nsit

iona

l Ene

rgy

Fac

ility

Ass

essm

ent

(TE

FA),

and

Uni

form

Tra

nsit

iona

l Uti

lity

Ass

essm

ent

(UT

UA

)

Ass

esse

d by

the

Stat

e an

d A

vaila

ble

for A

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pria

tion

and

Dis

trib

utio

n to

Mun

icip

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esD

istr

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ion

Subj

ect t

o B

udge

tary

and

Sta

tuto

ry L

imita

tions

and

Res

tric

tions

Cla

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ion

No.

of

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85$9

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$322

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03,1

53

G-12004 Annual Report

Appendix G

County No. of Returns NJ Taxable Income Net Charged Tax

Atlantic 108,928 $ 4,114,374,000 $ 105,637,000Bergen 378,936 27,567,279,000 738,971,000Burlington 176,169 9,407,203,000 252,863,000Camden 196,166 8,809,857,000 209,969,000Cape May 39,648 1,608,407,000 45,319,000

Cumberland 52,676 1,774,594,000 41,330,000Essex 299,712 16,315,514,000 429,700,000Gloucester 104,041 4,805,060,000 105,126,000Hudson 245,912 9,045,047,000 153,294,000Hunterdon 50,067 4,095,142,000 143,701,000

Mercer 137,217 8,556,801,000 261,565,000Middlesex 310,076 15,748,523,000 383,156,000Monmouth 249,640 17,760,553,000 513,685,000Morris 201,360 16,836,627,000 559,926,000Ocean 216,502 8,856,646,000 226,735,000

Passaic 199,912 8,027,110,000 197,112,000Salem 24,645 988,772,000 21,224,000Somerset 128,099 11,716,988,000 390,214,000Sussex 57,463 3,301,878,000 92,155,000Union 216,117 12,026,332,000 313,458,000

Warren 41,672 2,063,239,000 53,965,000County Unknown 215,630 10,081,223,000 273,914,000

Totals 3,650,588 $203,507,168,000 $5,513,019,000

Individual Income Tax ReturnsCounty Profile 2002

H-12004 Annual Report

Appendix H

SUSSEXAverage Income

$64,342Average Tax

$1,604

PASSAICAverage Income

$45,577Average Tax

$986

MORRISAverage Income

$90,954Average Tax

$2,781

WARRENAverage Income

$55,693Average Tax

$1,295

HUNTERDONAverage Income

$89,868Average Tax

$2,870

SOMERSETAverage Income

$98,722Average Tax

$3,046

ESSEXAverage Income

$60,010Average Tax

$1,434

MIDDLESEXAverage Income

$56,479Average Tax

$1,236 MONMOUTHAverage Income

$78,010Average Tax

$2,058

CAPE MAYAverage Income

$45,682Average Tax

$1,143

CUMBERLANDAverage Income

$37,951Average Tax

$785

SALEMAverage Income

$44,918Average Tax

$861

GLOUCESTERAverage Income

$51,554Average Tax

$1,010

ATLANTICAverage Income

$42,661Average Tax

$970

CAMDENAverage Income

$50,182Average Tax

$1,070

BURLINGTONAverage Income

$59,223Average Tax

$1,435

BERGENAverage Income

$79,423Average Tax

$1,950

UNIONAverage Income

$61,615Average Tax

$1,450

MERCERAverage Income

$68,352Average Tax

$1,906

HUDSONAverage Income

$40,491Average Tax

$623

OCEANAverage Income

$46,682Average Tax

$1,047

Statewide AveragesAverage Gross Income $61,535Average Income Tax $1,510

Average Total Income andAverage Income Tax

By County � Tax Year 2002

2004 Annual Report

Appendix I

I-1

Sale

s an

d U

se T

ax C

olle

ctio

ns b

y B

usin

ess

Type

Ret

urn

Yea

rs 2

001�

2003

(Dol

lar

Am

ount

s in

Tho

usan

ds)

Bus

ines

s T

ype

Num

ber

of V

endo

rsTo

tal C

olle

ctio

ns%

Cha

nge

2001

2002

2003

2001

2002

2003

2001

�200

220

02�2

003

Exe

mpt

Org

aniz

atio

ns

Man

ufac

turi

ng

Serv

ice

Who

lesa

le

Con

stru

ctio

n

Ret

ail

Gov

ernm

ent

Not

Cla

ssif

ied

Tota

ls

776

765

755

$

3,

508

$

3,

442

$

3,

499

�1.9

%1.

7%

14,1

6514

,637

15,5

0327

7,56

024

3,38

823

0,84

7�1

2.3

�5.2

82,1

8180

,344

79,0

581,

504,

266

1,46

4,02

51,

502,

825

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2.7

11,8

2011

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9,37

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723

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1,27

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3

92,6

8689

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793,

174,

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338,

427

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312,

562

2,41

31,

198

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8,04

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552

9,29

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1,57

610

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710

3,99

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5

228,

459

223,

923

220,

690

$5,4

31,9

42$5

,398

,719

$5,5

24,9

33�0

.3%

�0.4

%

2004 Major TaxesComparison with Nearby States

CT DE MD MA NJ NY NY OH PAState City

6.5%,CORPORATION 7.5%, 5.1%,NET INCOME 7.5% 8.7% 7% 9.5% 9% 7.5% 8.85% 8.5% 9.99%

PERSONAL *3%� *2.2%� *2%� *1.4%� *4%� *2.907%� *0.743%�INCOME 5.0% 5.95% 4.75% 5.3% 8.97% 7.7% 4.45% 7.5% 3.07%

*Graduated Rates

MOTOR FUELS1

� Excise Tax/Gal.Gasoline $0.25 $0.23 $0.235 $0.21 $0.1052 $0.08 0 $0.26 $0.12

Diesel $0.26 $0.22 $0.2425 $0.21 $0.135 $0.08 0 $0.26 $0.12

� Sales Tax 0 0.5% 0 0 0 4.25% 4.125% 0 0

1 Various other taxes are applied to motor fuels in the states of Delaware,New Jersey, New York, Ohio, and Pennsylvania.

2 Liquefied petroleum gas and compressed natural gas used in motorvehicles on public highways is taxed at ½ the general motor fuels tax rate($0.0525 per gallon).

ALCOHOL

� Excise Tax/Gal.Beer $0.19 $0.16 $0.09 $0.11 $0.12 $0.11 $0.232 $0.18 $0.08

$0.60� $0.55� $0.30� See Foot-Wine $1.50 $0.97 $0.40 $0.70 $0.70 $0.1893 $0.1893 $1.48 note 4

$2.05, $3.64, $2.54, $3.54, See Foot- See Foot-Liquor $4.50 $5.46 $1.50 $4.05 $4.40 $6.44 $7.442 notes 3 and 4 note 4

� Sales Tax 6% None 5% 5%1 6% 4.25% 8.625%2 6% 6%

1 Purchases for off-premises consumption are not taxable.2 New York City rate includes New York State rate.3 Ohio Department of Liquor Control must pay the State Treasury $3.38

for each gallon sold.4 In these states, the government directly controls all sales. Revenue is

generated from various taxes, fees, and net profits.

TOBACCO

� Excise TaxCigarettes (20/pack) $1.51 $0.55 $1.00 $1.51 $2.05 $1.50 $1.50 $0.55 $1.00

Other Tobacco(% of Wholesale Price) 20% 15% 15% 90% 30% 37% 37% 17% 0

� Sales Tax 6% None 5% 5% 6% 4.25% 4.125% 6% 6%

2004 Annual Report

Appendix J

J-1

2004 Major TaxesComparison with Nearby States (continued)

SALES AND USE CT DE MD MA NJ NY NY OH PAState City

YEAR OF ADOPTION 1947 � 1947 1966 1966 1965 1965 1934 1953

CURRENT RATE 6% None 5% 5% 6% 4.25%1 8.625%2 6%3 6%4

1 State rate is 4.25%; counties and municipalities may impose additional tax up to 4.125% plus anadditional metropolitan area surcharge of .25%.

2 New York City rate includes New York State rate.3 State rate is 5%; each county may impose an additional 1.5%.4 State rate is 6%; City of Philadelphia imposes an additional 1% for a total of 7%.

SALES AND USE TAX EXEMPTIONS(T�Taxable; E�Exempt)

CT DE* MD MA NJ NY NYC OH PA

Beer On�Premises T E T T T T T T TBeer Off�Premises T E T E1 T T T T TCigarettes T E T T T T T T TClothing E2 E T E3 E T T T EFood Off�Premises E4 E E4 E4 E4 E4 E4 E4 E4

Liquor On�Premises T E T T T T T T TLiquor Off�Premises T E T E1 T T T T TManufacturing Equipment E E E E E E E E EMotor Fuels E E E E5 E T T E E

*Delaware does not impose sales and use taxes. Gross receipts taxes of varying amounts (lessthan 1%) imposed on different types of sales.

1 If purchased as �take-out� item from a package store.2 Single article under $50; however, single article $50 or over is taxable.3 Single article $175 and under; however, single article over $175 is taxed on the amount in

excess of $175.4 If purchase is in same form and condition as found in supermarket; however, prepared food

ready to be eaten and snack food are subject to tax.5 If fuel is subject to excise tax. If not for �on-road use,� it is not subject to excise tax and,

therefore, subject to sales tax. Example: Contractor has a bulldozer for �off-road use� whichruns on diesel fuel. The fuel is not subject to excise tax; therefore, it is now subject to salestax, unless used in performance of a government contract.

J-22004 Annual Report

Appendix J

Major State Tax Rates(On July 1, 2004)

Corporation NetPersonal Income Motor Fuels CigarettesIncome (Excluding Surtax) Sales (Per Gallon) (20�Pack)

State (%) (%) (%) ($) ($)

Alabama *2%�5% 6.5% 4% $0.16 $0.425Alaska None *1�9.4 None 0.08 1.00Arizona *2.87�5.04 6.968 5.6 0.18 1.18Arkansas *1�7 *1�6.5 6 0.215 0.315California *1�9.3 8.84 6.25 0.18 0.87

Colorado 4.63 4.63 2.9 0.22 0.84Connecticut *3�51 7.5 6 0.25 1.51Delaware *2.2�5.95 8.7 None 0.23 0.55Dist. of Columbia *5�9.3 9.975 5.75 0.225 1.00Florida None 5.5 6 0.04 0.339

Georgia *1�6 6 4 0.075 0.37Hawaii *1.4�8.25 *4.4�6.4 4 0.16 1.40Idaho *1.6�7.8 7.6 6 0.25 0.57Illinois 3 4.8 6.25 0.19 0.98Indiana 3.4 8.5 6 0.18 0.55

Iowa *0.36�8.98 *6�12 5 0.20 0.36Kansas *3.5�6.45 4 5.3 0.24 0.79Kentucky *2�6 *4�8.25 6 0.174 0.03Louisiana *2�6 *4�8 4 0.20 0.36Maine *2�8.5 *3.5�8.93 5 0.22 1.00

Maryland *2�4.75 7 5 0.235 1.00Massachusetts 5.3 9.5 5 0.21 1.51Michigan 3.9 1.9 6 0.19 2.00Minnesota *5.35�7.85 9.8 6.5 0.20 0.48Mississippi *3�5 *3�5 7 0.18 0.18

2004 Annual Report

Appendix K

K-1

Major State Tax Rates (continued)(On July 1, 2004)

Corporation NetPersonal Income Motor Fuels CigarettesIncome (Excluding Surtax) Sales (Per Gallon) (20�Pack)

State (%) (%) (%) ($) ($)

Missouri *1.5%�6% 6.25% 4.0% $0.17 $0.17Montana *1�6.9 6.75 None 0.27 1.70Nebraska *2.56�6.84 *5.58�7.81 5.5 0.254 0.64Nevada None None 6.5 0.24 0.80New Hampshire 52 8.5 None 0.18 0.52

New Jersey *1.4�8.97 6.5, 7.5, 9 6 0.105 2.40New Mexico *1.7�6 *4.8�7.6 5 0.17 0.91New York *4�7.7 7.5 4.25 0.08 1.50North Carolina *6�8.25 6.9 4.5 0.266 0.05North Dakota *2.1�5.54 *2.6�7 5 0.21 0.44

Ohio *0.743�7.5 5.1,8.5 6 0.26 0.55Oklahoma *0.5�6.65 6 4.5 0.16 .23Oregon *5�9 6.6 None 0.24 1.18Pennsylvania 3.07 9.99 6 0.12 1.35Rhode Island 253 9 7 0.30 2.46

South Carolina *2.5�7 5 5 0.16 0.07South Dakota None None 4 0.22 0.53Tennessee 62 6.5 7 0.20 0.20Texas None 4.5 6.25 0.20 0.41Utah *2.3�7 5 4.75 0.245 0.695

Vermont *3.6�9.5 *7�9.75 6 0.19 1.19Virginia *2�5.75 6 4 0.175 0.20Washington None None 6.5 0.23 1.425West Virginia *3�6.5 9 6 0.205 0.55Wisconsin *4.6�6.75 7.9 5 0.291 0.77Wyoming None None 4 0.14 0.60

US AVERAGE 2.14%�6.34% 4.06%�7.30% 5.33% $0.195 $0.80

*Graduated Rates1Applied to percent of adjusted gross income ranging from 25% to 100%.2Imposed on interest and dividend income only.3Of Federal income tax liability.

K-22004 Annual Report

Appendix K

2004 Annual Report

Index

115

INDEX

AAbstract of Ratables (Appendix B) ...................... B-1Air Toxics Surcharge .............................................. 19Alcoholic Beverage Tax ......................................... 19Appendices ............................................................. 75Assessed Value of Partial Exemptions

and Abatements (Appendix C) .........................C-1Atlantic City Casino Taxes and Fees ...................... 19Atlantic City Luxury Sales Tax .............................. 20Atlantic City Tourism Promotion Fee .................... 20Audit (Unclaimed Property) ..................................... 9Audit Services .......................................................... 5

BBanking Corporations ............................................ 24Business Tax Systems and MIS Support ................. 11

CCape May County Tourism Sales Tax .................... 20Chief of Staff .......................................................... 12Cigarette Tax .......................................................... 21Comparison of Tax Rates of Nearby States

(Appendix J) ...................................................... J-1Compliance ............................................................... 8Compliance Services ................................................ 8Conference and Appeals ........................................... 6Corporation Business Tax ...................................... 21Corporation Income Tax......................................... 26Counsel to the Director .......................................... 14County Tax Board Appeals (Appendix D) ........... D-1Court Decisions ...................................................... 57Criminal Investigation ............................................ 12Customer Services .................................................... 6

DDescription of Taxes ............................................... 19Disclosure ............................................................... 14Domestic Security Fee ............................................ 26

EEnvironmental Taxes (See particular tax)Estate Tax ........................................................... 5, 45

FFAIR Rebate Program ............................................ 26Field Assistance ...................................................... 10

Field Investigations .................................................. 8Financial Corporations ........................................... 24Fuel Tax (See Motor Fuels Tax)

GGasoline Tax (See Motor Fuels Tax)Gross Income and Income Tax

by County (Appendix H) ................................. H-1Gross Income Tax ................................................... 27Gross Income Tax Audit ........................................... 5

HHomestead Rebate Program ................................... 30Hotel/Motel Occupany Fee and

Municipal Occupany Tax ................................... 32

IIn-State Field Audit .................................................. 5Income Tax ............................................................. 27Income Tax Returns, County Profile

(Appendix G) ................................................... G-1Individual Tax Audit ................................................. 5Individual Tax Systems and IT Support .................. 11Information and Publications ................................... 7Inheritance Tax ................................................... 5, 45Insurance Premiums Tax ........................................ 32Investment Companies ........................................... 25

LLand and Improvements, Taxable Value

(Appendix E) .................................................... E-1Landfill Closure and Contingency Tax .................. 32Legislation .............................................................. 51Legislative Analysis ................................................ 14Litter Control Fee ................................................... 33Local Assessment Compliance ............................... 10Local Assessor Compliance Unit ........................... 10Local Property ........................................................ 10Local Property Tax ................................................. 33Luxury Sales Tax (Atlantic City) ........................... 20

MMajor State Tax Collections (Table 1) ................... 17Major State Tax Rates (Appendix K) ................... K-1Management Services ............................................. 12Motor Fuels Tax ..................................................... 35

2004 Annual Report

Index

116

NNJ SAVER Rebate Program ................................... 35

OOffice Audit .............................................................. 5Operations (Unclaimed Property) .......................... 10Organization of the Division .................................... 3Out-of-State Field Audit ........................................... 5Outdoor Advertising Fee ........................................ 36

PPersonal Income Tax .............................................. 27Petroleum Products Gross Receipts Tax ................ 36Policy and Planning (Local Property) .................... 10Property Administration ........................................... 9Property Tax Rates (Appendix A) ........................ A-1Property Tax Reimbursement Program .................. 37Public Community Water System Tax .................... 37Public Utility Taxes:

Excise Tax .......................................................... 38Franchise Tax ..................................................... 38Gross Receipts Tax ............................................ 38

Public Utility Taxes (Appendix F) ........................ F-1

RRailroad Franchise Tax ........................................... 38Railroad Property Tax ............................................ 39Railroad Property Unit ........................................... 10Realty Transfer Fee ................................................ 39Regulatory Services .................................................. 7Revenue and Economic Analysis ........................... 13

SSales and Use Tax................................................... 41Sales and Use Tax Collections by

Business Type (Appendix I) .............................. I-1Savings Institution Tax ........................................... 44Senior Freeze (See Property Tax Reimbursement)Solid Waste Services Tax ....................................... 44Special Procedures ................................................... 8Spill Compensation and Control Tax ..................... 44Statutory Responsibilities ....................................... 18

TTax Collections (Table 1) ....................................... 17Tax Maps Unit ........................................................ 10Tax Rates

Comparison With Nearby States(Appendix J) ...................................................... J-1Major Taxes of All States (Appendix K) ......... K-1

Taxes and Programs Administered ......................... 19Taxpayer Accounting ................................................ 7Technical Services .................................................... 6Technical Support ................................................... 10Tobacco Products Wholesale

Sales and Use Tax .............................................. 45Transfer Inheritance and Estate Taxes ............... 5, 45Transitional Energy Facility Assessment ........ F-1, 47

UUnclaimed Property .................................................. 9Uniform Transitional Utility Assessment ........ F-1, 47Urban Enterprise Zones .......................................... 43Utility Taxes (See Public Utility Taxes)

Contact Information

Onlinewww.state.nj.us/treasury/taxation/

E-mail - Contact [email protected]

In WritingNew Jersey Division of Taxation50 Barrack StreetPO Box 269Trenton, NJ 08695-0269

Regional Offices

Asbury Park630 Bangs AvenueAsbury Park, NJ 07712

CamdenSuite 200, One Port Center2 Riverside DriveCamden, NJ 08103

Fair Lawn2208 Route 208 SouthFair Lawn, NJ 07410

Newark124 Halsey Street, 2nd FloorNewark, NJ 07101

Northfield1915-A New Road (Route 9)Northfield, NJ 08225

Somerville75 Veterans Memorial Drive EastSuite 103Somerville, NJ 08876

TrentonTaxation Building50 Barrack Street1st Floor LobbyTrenton, NJ 08695

E-Mail Service

Subscribe to NJ Tax E-News, the Division of Taxation�s online informationservice at: www.state.nj.us/treasury/taxation/listservice.shtml

Quarterly Newsletter

The New Jersey State Tax News is published on the Division of Taxation�s Website at: www.state.nj.us/treasury/taxation/publnews.shtml

http://www.state.nj.us/treasury/taxation/publnews.shtml

http://www.state.nj.us/treasury/taxation/listservice.shtml

https://www.state.nj.us/treas/taxation/contactus_tyttaxa.shtml

Acknowledgments

The 2004 Annual Report was prepared by the Division of Taxation

Technical Services Activity/Information and Publications BranchSheri B. Silverstein, Editor

Sara E. Murphey, Assistant EditorDon Byrnes, Graphic Artist

Publications Section, Production and Design

Cover from original art by Don Byrnes

Special appreciation to:

Office of Revenue and Economic Analysis,Regulatory Services Branch and Property Administration.

The mission of the Division of Taxation isto administer the State�s tax laws

uniformly, equitably, and efficientlyto maximize

State revenuesto support

public services;and, to ensure

that voluntary compliancewithin the taxing statutes is achieved

without being an impediment to economic growth.

ISSN 0733-1584

Documents

2004 Annual Report - New Jersey...2004 Annual Report viii 2004 Annual Report million mark. By April 15, 2004, 1.1 million taxpayers had filed their New Jersey gross income tax returns