LEGISLATIVE FISCAL ESTIMATE
ASSEMBLY COMMITTEE SUBSTITUTE FOR
ASSEMBLY, Nos. 1327 and 2873
STATE OF NEW JERSEY
220th LEGISLATURE
DATED: JULY 18, 2022
SUMMARY
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Synopsis: |
Revises criteria to establish base year for homestead property tax reimbursement after relocation. |
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Type of Impact: |
Increased State cost to Property Tax Relief Fund. |
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Agencies Affected: |
Department of the Treasury, Division of Taxation. |
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Fiscal Impact |
FY 2023 |
FY 2024 |
FY 2025 |
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State Cost Increase |
$0 |
$15,400 to $77,000 |
$31,400 to $156,800 |
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· The Office of Legislative Services (OLS) estimates that the bill will not have any fiscal impact in Fiscal Year (FY) 2023. The projected additional State costs are $15,400 to $77,000 in FY 2024 and $31,400 to $156,800 in FY 2025 and annually thereafter.
· Data provided by the Division of Taxation indicates that approximately 100 homeowners in each year from calendar year 2015 through calendar year 2017 regained their eligibility for the homestead property tax reimbursement following a change in residence. The OLS assumes that 100 to 500 homeowners will be affected by the bill.
· The timing of homestead property tax reimbursement payments precludes the bill from having any fiscal impact in FY 2023.
BILL DESCRIPTION
The bill revises the criteria for re-establishing a claimant’s base year under the homestead property tax reimbursement program. Under current law, when an eligible claimant moves from one homestead to another, the base year changes to the first full tax year during which the person resides in the new homestead. The claimant must wait an additional tax year in order to qualify for the homestead property tax reimbursement.
The bill allows a claimant to retain their eligibility following a move to another homestead in New Jersey. Thus, a claimant would be able to qualify as an eligible claimant immediately following such a move and would not be required to wait an additional tax year in order to claim a reimbursement. In this circumstance the homestead property tax reimbursement payment would be based on the property taxes assessed on the current homestead for the tax year prior to which the claimant resides in the current homestead. If the homestead is new construction, the base year would be the first full tax year following completion of the new construction.
Established in 1997, the homestead property tax reimbursement program is popularly known as the “Senior Freeze.”
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS concludes that bill will not have any fiscal impact in FY 2023. The OLS estimates that this legislation will result in additional State costs of approximately $15,400 to $77,000 in FY 2024 and $31,400 to $156,800 in FY 2025 and annually thereafter. The projected additional State cost for FY 2025 includes the value of homestead property tax reimbursements provided to repeat program participants who initially requalify in FY 2024 and claimants who regain their eligibility in FY 2025.
To calculate the number of property owners affected by this bill, the OLS used data from the Division of Taxation on the number of eligible claimants for the homestead property tax reimbursement who become ineligible to participate in the property due to a change in residence and then regained their eligibility at a new residence. According to the Division of Taxation, approximately 100 homeowners in each year from calendar year 2015 through calendar year 2017 regained their eligibility for the homestead property tax reimbursement following a change in residence. For purposes of this estimate, the OLS estimates that 100 to 500 homeowners will be affected by the bill. It is reasonable to expect a relatively small applicant pool, since members of this segment of the population have a lower mobility rate.
The OLS notes that the provisions of this bill would allow eligible claimants to receive a homestead property tax reimbursement two years earlier than currently allowed following their relocation to another homestead. Under current law, a homeowner who moves in to a new homestead in calendar year 2022 would have their base year reset to calendar year 2023 (the first full tax year they reside in the new homestead). Assuming they pay all of their property taxes in calendar years 2023 and 2024, they would apply for a homestead property tax reimbursement in 2025 and receive a payment later that year. Because homestead property tax payments are usually mailed in the fall, the State would not incur any new costs until FY 2026. A homeowner who moves to a new homestead in calendar year 2022 would have their base year reset to calendar year 2021. If they pay all of their property taxes in calendar year 2022, they would apply for and receive a homestead property tax reimbursement in 2023 (or FY 2024).
According to property tax data available through the Division of Local Government Services, the Statewide average residential property tax bill in calendar year 2021 was $9,284. The data also indicate that the average residential property tax bill has increased by 1.66 percent per year since calendar year 2016. Based on these data, the OLS estimates that the average residential property tax bill will be $9,438 in calendar year 2022. The homestead property tax reimbursement is equal to the difference between a claimant’s property taxes in their base year and that claimant’s property taxes in the current year. This amount ($154) was multiplied by the estimated number of claimants that would be affected by the bill to determine the total State costs for FY 2024 ($15,400 to $77,000). This process was duplicated to determine an estimate for first-time qualifiers in FY 2025 ($15,700 to $78,400). Extrapolation of this data was performed to obtain the second year cost for eligible claimants who requalify for a homestead property tax reimbursement in FY 2024.
The timing of homestead property tax reimbursement payments precludes the bill from having a fiscal impact in FY 2023. In calendar year 2022, a new eligible claimant will receive a homestead property tax reimbursement equal to the difference between their property taxes in calendar year 2021 and their property taxes in calendar year 2020. The bill provides that when an eligible claimant moves to a new homestead, their new base year is the first full tax year prior to the year in which they moved to the new homestead. An eligible claimant that moves in calendar year 2021 would have their base year reset to calendar year 2020. However, the bill provides that immediate eligibility for a homestead property tax reimbursement does not apply to tax years commencing prior to January 1, 2021. Since homestead property tax reimbursement payments are usually mailed to eligible claimants in the fall, the calendar year 2022 homestead property tax reimbursement will be mailed in FY 2023. Because the new base year is prior to January 1, 2021, immediate re-eligibility would not apply to an otherwise eligible claimant who moved to a new homestead in calendar year 2021.
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Section: |
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Analyst: |
Principal Fiscal Analyst |
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Approved: |
Thomas Koenig Legislative Budget and Finance Officer |
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).