The NJ Tax Blog

The Tax Court of New Jersey recently issued a published opinion, Thirty Mazel et al v. City of East Orange, in which it reconciled the Appellate Division opinion Alfred Conhagen, Inc. v. Borough of South Plainfield, 16 N.J. Tax 470 (1997), with the recent Appellate Division opinion H.J. Bailey Co. v. Township of Neptune, 399 N.J. Super 381 (App. Div. 2008).

Both of these Appellate Division opinions concerned N.J.S.A. 54:4-34, which is commonly known as "Chapter 91," and the application of this statute's sanction limiting a taxpayer's right to appeal a tax assessment for failure to respond to a tax assessor's inquiry for income and expense information.

Previously, in Conhagen, the Appellate Division held that Chapter 91's appeal-preclusion provision applied when a taxpayer failed to respond to an assessor's request for income and expense information, even though the subject property was not producing income at the time of the request.

Last year, however, the Appellate Division in H.J. Bailey, held that non-income-producing property is not subject to Chapter 91's appeal limitation provision, even if the assessor's request for income and expense information pursuant to the statute went unanswered by the taxpayer.

At issue in the recently published Tax Court case Thirty Mazel, was a property owner who did not respond to a tax assessor’s request for income and expense information who owned several apartment buildings that were formerly income-producing, but during the tax year at issue received no income, as the properties were undergoing substantial renovations.

In the published opinion, the Tax Court stated:

The gap in rent collection was occasioned not by a change in the use of the property or by owner occupancy, but because the living units had been vacated while a major renovation, presumably to enhance the future earning potential of the buildings, was undertaken. The court finds that plaintiffs never intended to abandon the income-producing nature of the properties and instead committed resources to enhancing the revenue generating potential of the properties.

As a result of the above, the Tax Court reasoned that the property owner who owned the apartments was barred by Chapter 91 from filing a tax appeal.

This reasoning in Thirty Mazel underscores the importance of responding to a tax assessor's request for income and expense information, for even if a property does not produce any income during a relevant year, a tax appeal on such property may be barred by Chapter 91 if the tax assessor’s request is not timely answered.