LEGISLATIVE FISCAL ESTIMATE

[First Reprint]

SENATE, No. 3405

STATE OF NEW JERSEY

221st LEGISLATURE

 

DATED: MAY 30, 2025

 

 

SUMMARY

 

Synopsis:

Concerns assessment of farmland for property tax purposes.

Type of Impact:

Annual local government revenue loss; Potential annual local government cost increases.

Agencies Affected:

Local governments.

 

 

Office of Legislative Services Estimate

Fiscal Impact

 

 

Annual Local Revenue Loss

Indeterminate

 

Potential Annual Local Cost Increase

Indeterminate

 

 

·       The Office of Legislative Services (OLS) concludes that the bill will result in an indeterminate annual revenue loss to local governments, specifically counties and municipalities, by limiting the number of farmland properties that would be subject to roll-back taxes when agricultural activity ceases without active conversion to another use.

·       The magnitude and timing of the revenue loss cannot be determined due to a lack of information on the number of properties that would avoid roll-back taxes under the bill's provisions and the uncertainty regarding the number of property owners who would receive hardship exemptions from roll-back taxes under the discretionary authority granted to local tax assessors.

·       Local governments may experience an indeterminate amount of administrative cost increases due to the hardship exemption petition process provided in the bill.

 

BILL DESCRIPTION

 

      The bill prohibits roll-back taxes from being assessed on farmland when agricultural or horticultural activity ceases, unless there is an active conversion of the land to a non-agricultural or non-horticultural use.  Roll-back taxes are additional taxes assessed when land loses its farmland assessment status, calculated as the difference between what was paid under farmland assessment and what would have been paid if the land was assessed as non-farmland for the current tax year and two preceding years.

      The bill also establishes a process through which property owners may petition their local tax assessor for a hardship exemption from roll-back taxes for land that is not actively devoted to agricultural or horticultural use, or that is used for a purpose other than agricultural or horticultural use.  The bill requires tax assessors to provide guidance on petition requirements to property owners and consider multiple factors when evaluating hardship petitions, including: the nature of the hardship, the owner’s intent to return the property to agricultural use, the duration of the hardship, relevant case law, the actual use of the property, and the owner’s agricultural-related actions in recent tax years.  The assessor would have discretion to grant or deny the petition, condition approval on continued document production, and determine the length of any granted exemption.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS concludes that this bill will result in an indeterminate annual loss of local tax revenues, specifically to counties and municipalities, by limiting the number of farmland properties that would be subject to roll-back taxes.  Local governments may also experience an indeterminate amount of administrative cost increases due to the hardship exemption petition process provided in the bill.

      Under current law, farmland properties are assessed based on a preferential standard of value, thereby reducing the property taxes that are imposed on these properties.  However, when a parcel of farmland property is converted to a use other than agricultural or horticultural purposes, roll-back property taxes are assessed on the property.  The bill provides that roll-back taxes may not be assessed solely due to the cessation of agricultural or horticultural activities on a farmland-assessed property, without an active conversion to another use.  Additionally, the bill establishes a process for property owners to petition for hardship exemptions from roll-back taxes based on various factors to be evaluated by the local tax assessor.  However, in general, the bill will reduce the number of farmland properties that are subject to roll-back taxes through both mechanisms, thereby reducing local revenues.

      The magnitude of the anticipated revenue loss will depend on several factors.  Primary considerations include the number of farmland-assessed properties where agricultural activity ceases without land use conversion, the number of properties that receive hardship exemptions from local tax assessors, the difference between farmland assessment rates and regular property tax rates in affected municipalities, the size and assessed value of affected properties, and the timing of agricultural cessation relative to potential future land use changes.

      The OLS notes that information is not readily available to identify the annual number of farmland properties in which agricultural activities have ceased, without an active conversion to another use, and the average roll-back taxes assessed on these properties, as well as the potential number of property owners who may qualify for and receive hardship exemptions from their local tax assessors.  Without this data, the OLS is unable to quantify the magnitude of the total local revenue losses that may result from this bill.

 

 

Section:

Revenue, Finance, and Appropriations

Analyst:

Patrick Walsh

Associate Fiscal Analyst

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.).