Concerns local taxation of business personal property of local exchange telephone companies.

A1069

ASSEMBLY, No. 1069

STATE OF NEW JERSEY

222nd LEGISLATURE

�

PRE-FILED FOR INTRODUCTION IN THE 2026 SESSION

Sponsored by:

Assemblyman WAYNE P. DEANGELO

District 14 (Mercer and Middlesex)

SYNOPSIS

���� Concerns local taxation of business personal property
of local exchange telephone companies.

CURRENT VERSION OF TEXT

���� Introduced Pending Technical Review by Legislative
Counsel.

��

An Act

concerning the taxation of certain business
personal property, supplementing chapter 4 of Title 54 of the Revised Statutes,
and amending R.S.54:4-1.

����
Be It
Enacted
by the Senate and General Assembly of
the State of New Jersey:

���� 1.��� (New section)� The
Legislature finds and declares:

���� a.��� In 1997, through the
enactment of P.L.1997, c.162 (C.54:10A-3 et al.), the Legislature approved an
amendment to R.S.54:4-1 concerning the taxation of business personal property,
including the property of local exchange telephone companies.� Prior to the amendment
of that statute, local exchange telephone companies were obligated to pay
business personal property taxes on the tangible goods and chattels, exclusive
of inventories, used in the business of local exchange telephone, telegraph,
and messenger systems, companies, corporations, and associations if they were
subject to the gross receipts and franchise tax under P.L.1940, c.4
(C.54:30A-16 et seq.) and provided access to �substantially all� of a local
telephone exchange.� P.L.1997, c.162 (C.54:10A-3 et al.) amended the definition
of �local exchange telephone companies� in R.S.54:4-1 to require that such a
company would be subject to business personal property tax if it were subject
to the gross receipts and franchise tax under P.L.1940, c.4 (C.54:30A-16 et
seq.), as of April 1, 1997, and provided dial tone and access to 51 percent of
a local telephone exchange as of April 1, 1997.� The intended effect of this
requirement was to enshrine, in perpetuity, the business personal property of
telecommunications companies into the property tax base of the municipalities
wherein this business personal property was located, in order to stabilize the
municipal property tax base for those municipalities and provide certainty for
local budgeting purposes.

���� b.���
The Tax Court in
Verizon New Jersey Inc. v. Borough
of

Hopewell
, 26
N.J. Tax
400 (Tax Ct. 2012), incorrectly
construed the statutory changes made in P.L.1997, c.162
(C.54:10A-3 et
al.)
to mean that the language of R.S.54:4-1
required that a telecommunications company has to meet the 51 percent test every
year as of the assessment date in order for the business personal property tax
to be assessed and levied by the municipality in which the business personal
property was located.� Subsequent to that decision, a trial was held in the Tax
Court to establish whether Verizon met the 51 percent test for tax year 2009.�
On January 28, 2019, the Tax Court found in favor of Hopewell Borough that
Verizon did in fact meet that threshold for tax year 2009, and owed Hopewell
Borough the tax.� However, Hopewell Borough is now faced with the cost of
litigating Verizon�s tax appeals filed for every tax year subsequent to 2009 up
to, and including, the current tax year, and the possibility of litigating
annual tax appeals that may be filed by the company in each tax year.� Also,
all of the other municipalities in the State in which the business personal
property of telecommunications companies is located will face the same costs,
and uncertainty, of litigating tax appeals as well.� The taxpayers of these
municipalities will bear the burden of paying legal fees to defend the
assessment of business personal property taxes, and will have to endure
increased property tax burdens if this business personal property tax cannot be
imposed.� This taxpayer burden is not what the Legislature intended.

���� c.��� The
Legislature is greatly concerned that the Tax Court�s interpretation of R.S.54:4-1
is burdensome to the judiciary and the affected municipalities; and imposes
unnecessary fiscal uncertainty on the budgets of those municipalities and the
property taxpayers in those municipalities.� This burden and uncertainty is not
what the Legislature intended to result from the 1997 amendments to
R.S.54:4-1.� Therefore, the Legislature has determined that corrective
legislation clarifying the Legislature�s intent in 1997 to stabilize the
taxation of business personal property in perpetuity is necessary and
appropriate, and shall be accomplished by establishing in R.S.54:4-1 the
responsibility of
a telecommunications carrier which held the regional
monopoly on landline service before the market was opened to competitive local
exchange carriers by the federal Telecommunications Act of 1996, or the
corporate successors of such a local exchange telephone company, to pay
business personal property taxes to the municipalities in which the property is
located.

���� 2.��� (New section)� In any
court proceeding involving a local exchange telephone company and a
municipality concerning the taxation of business personal property pursuant to
R.S.54:4-1 where the municipality is the prevailing party following a court
decision, settlement, or other resolution of that proceeding, the municipality,
and any related amicus entities, shall be awarded attorney�s fees as costs to
the local exchange telephone company.

���� 3.��� R.S.54:4-1 is amended to
read as follows:

���� 54:4-1.� All property real and
personal within the jurisdiction of this State not expressly exempted from
taxation or expressly excluded from the operation of this chapter shall be
subject to taxation annually under this chapter.� Such property shall be valued
and assessed at the taxable value prescribed by law.� Land in agricultural or
horticultural use which is being taxed under the "Farmland Assessment Act
of 1964," P.L.1964, c.48 (C.54:4-23.1 et seq.), shall be valued and
assessed as provided by that act.� An executory contract for the sale of land,
under which the vendee is entitled to or does take possession thereof, shall be
deemed, for the purpose of this act, a mortgage of said land for the unpaid
balance of purchase price.� Personal property taxable under this chapter shall
include, however, only the machinery, apparatus or equipment of a petroleum
refinery that is directly used to manufacture petroleum products from crude oil
in any of the series of petroleum refining processes commencing with the
introduction of crude oil and ending with refined petroleum products, but shall
exclude items of machinery, apparatus or equipment which are located on the
grounds of a petroleum refinery but which are not directly used to refine crude
oil into petroleum products
;
and the tangible goods and chattels,
exclusive of inventories, used in
the
business of local exchange
telephone, telegraph and messenger systems, companies, corporations or
associations that were subject to tax
[
as
of
]

on

April 1, 1997 under P.L.1940, c.4 (C.54:30A-16 et seq.) as amended, and shall
not include any intangible personal property whatsoever whether or not such
personalty is evidenced by a tangible or intangible chose in action except as
otherwise provided by R.S.54:4-20.� As used in this section, "local
exchange telephone
[
company
]

companies,
corporations, or associations
" means a telecommunications carrier
[
providing dial
tone and access to 51% of a local telephone exchange
]

that held the regional
monopoly on landline service before the market was opened to competitive local
exchange carriers by the federal Telecommunications Act of 1996, Pub. L. No.
104-104, 110 Stat. 56 (47 U.S.C. s.251 et seq.), or the corporate successors of
such a local exchange telephone company
.� Property omitted from any
assessment may be assessed by the county board of taxation, or otherwise,
within such time and in such manner as shall be provided by law.� Real property
taxable under this chapter means all land and improvements thereon and includes
personal property affixed to the real property or an appurtenance thereto,
unless:

���� a.��� (1)� The personal
property so affixed can be removed or severed without material injury to the
real property;

���� (2)� The personal property so
affixed can be removed or severed without material injury to the personal
property itself; and

���� (3)� The personal property so
affixed is not ordinarily intended to be affixed permanently to real property;
or

���� b.��� The personal property so
affixed is machinery, apparatus, or equipment used or held for use in business
and is neither a structure nor machinery, apparatus or equipment the primary
purpose of which is to enable a structure to support, shelter, contain, enclose
or house persons or property.� For purposes of this subsection, real property
shall include pipe racks, and piping and electrical wiring up to the point of
connections with the machinery, apparatus, or equipment of a production process
as defined in this section.

���� c.��� (Deleted by amendment,
P.L.2004, c.42).

���� Real property, as defined
herein, shall not be construed to affect any transaction or security interest
provided for under the provisions of chapter 9 of Title 12A of the New Jersey
Statutes (N.J.S.12A:9-101 et seq.).� The provisions of this section shall not
be construed to repeal or in any way alter any exemption from, or any exception
to, real property taxation or any definition of personal property otherwise
provided by statutory law.

���� The Director of the Division
of Taxation in the Department of the Treasury may adopt rules and regulations
pursuant to the provisions of the "Administrative Procedure Act,"
P.L.1968, c.410 (C.52:14B-1 et seq.) as may be deemed necessary to implement
and administer the provisions of this act.

(cf: P.L.2004, c.42, s.13)

���� 4.��� This act shall take
effect immediately and shall be retroactive to January 1, 2007.

STATEMENT

���� This bill
clarifies the application of the business personal
property tax on local exchange telephone companies that were subject to the tax
as of April 1, 1997.� This bill clarifies the changes made in 1997 to the
business personal property tax that defined local exchange telephone companies
that were subject to that tax on April 1, 1997.� The Tax Court, in
Verizon
New Jersey Inc.
v.
Borough of Hopewell
, which was decided on June
26, 2012, incorrectly construed the plain meaning of the language of the
statutory change made in 1997 in a manner inconsistent with Legislative
intent.� That statutory change was intended to
permanently
make part of
a municipality�s property tax base the business personal property of all
incumbent local exchange companies that were then subject to that tax
and

were a telecommunications carrier then meeting the definition of providing dial
tone and access to 51 percent of a local telephone exchange.� Local exchange
telephone companies have taken advantage of the Tax Court�s interpretation of the
statute and informed municipalities in which their business personal property
is located that it will no longer pay tax on that business personal property,
such as equipment, utility poles, cables and more in any given municipality
where it claims on an annual basis that it does not provide 51 percent or more
of landline service to its residents.� This unintended erosion of the local
property tax base in the affected municipalities impacts all other local
property taxpayers in these municipalities.

���� This
bill will restore the local property tax status quo intended to be determined
in 1997 by revising the definition of
"local exchange telephone
company" to mean a telecommunications carrier which held the regional
monopoly on landline service before the market was opened to competitive local
exchange carriers by the federal Telecommunications Act of 1996, or the
corporate successors of such a local exchange telephone company.� This will
accomplish two important purposes:� first, it will require that the dominant
telecommunications carrier in each region pay the business personal property
tax on its business personal property regardless of the percentage of a local
telephone exchange that it serves, and will permanently enshrine that business
personal property into the tax base of the municipalities in which it is
located.

���� The bill would also require
that if a municipality is the prevailing party in a court proceeding between it
and a local exchange telephone company concerning the taxation of business
personal property pursuant to R.S.54:4-1 following a court decision,
settlement, or other resolution of that proceeding, the municipality, and any
related amicus entities, shall be awarded attorney�s fees as costs to the local
exchange telephone company.�