Eliminates supplemental realty transfer fee and one percent fee on transfers of certain commercial real estate and tax on sale of controlling interests in certain commercial real property.

A1217

ASSEMBLY, No. 1217

STATE OF NEW JERSEY

222nd LEGISLATURE

�

PRE-FILED FOR INTRODUCTION IN THE 2026 SESSION

Sponsored by:

Assemblyman MICHAEL INGANAMORT

District 24 (Morris, Sussex and Warren)

Assemblywoman DAWN FANTASIA

District 24 (Morris, Sussex and Warren)

SYNOPSIS

���� Eliminates supplemental realty transfer fee and one
percent fee on transfers of certain commercial real estate and tax on sale of
controlling interests in certain commercial real property.

CURRENT VERSION OF TEXT

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

��

An Act
eliminating the supplemental realty transfer fee, the
one percent fee on the sale of certain commercial real property, and the tax on
the sale of controlling interests in certain commercial real property, amending
P.L.1968, c.49 and P.L.2004, c.66 and repealing various sections of statutory
law.

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

���� 1.��� Section 1 of P.L.1968,
c.49 (C.46:15-5) is amended to read as follows:

���� 1.��� As used in this act:

���� (a)�� "Deed" means a
written instrument entitled to be recorded in the office of a county recording
officer which purports to convey or transfer title to a freehold interest in
any lands, tenements or other realty in this State by way of grant or bargain
and sale thereof from the named grantor to the named grantee.� A leasehold
interest for 99 years or more or a proprietary lease of a cooperative unit and
any assignment of a proprietary lease of a cooperative unit, shall be treated
as a "freehold" for the purpose of this act.� Instruments providing
for common driveways, for exchanges of easements or rights-of-way, for
revocable licenses to use, to adjust or to clear defects of or clouds on title,
to provide for utility service lines such as drainage, sewerage, water,
electric, telephone or other such service lines, or to quitclaim possible
outstanding interests, shall not be "deeds" for the purposes of this
act.

���� (b)�� The terms "county
recording officer" and "office of the county recording officer"
mean the register of deeds and mortgages in counties having such an officer and
office, and the county clerk and his office in the other counties.

���� (c)�� "Consideration"
means in the case of any deed, the actual amount of money and the monetary
value of any other thing of value constituting the entire compensation paid or
to be paid for the transfer of title to the lands, tenements or other realty,
including the remaining amount of any prior mortgage to which the transfer is
subject or which is to be assumed and agreed to be paid by the grantee and any
other lien or encumbrance thereon not paid, satisfied or removed in connection
with the transfer of title.� The amount of liens for real property taxes, water
or sewerage charges for the current or any subsequent year, or by way of added
assessment or other adjustment, as well as of other like liens or encumbrances
of a current and continuing nature ordinarily adjusted between the parties
according to the period of ownership shall be excluded as an element in
determining the consideration, notwithstanding that such amount is to be paid
by the grantee.

���� In the case of a leasehold
interest for 99 years or more as defined in subsection (a) of this section, the
consideration shall be in the amount of the assessed value of the property at
the date of the transaction for the purpose of levying local real property
taxes adjusted to reflect the true value in accordance with the county
percentage level established for the current year.

���� In the case of a proprietary
lease of a cooperative unit or assignment thereof as defined in subsection (a)
of this section, the consideration is the total price paid for the ownership
interest held in conjunction with a cooperative unit, including the pro rata
amount of any underlying mortgage or other obligation of the cooperative.

���� (d)�� "Blind person"
means a person whose vision in his better eye with proper correction does not
exceed 20/200 as measured by the Snellen chart or a person who has a field
defect in his better eye with proper correction in which the peripheral field
has contracted to such an extent that the widest diameter of visual field
subtends an angular distance no greater than 20�.

���� (e)�� "Disabled
person" means any resident of this State who is permanently and totally
disabled, unable to engage in gainful employment, and receiving disability
benefits or any other compensation under any federal or State law.

���� (f)�� "Senior
citizen" means any resident of this State of the age of 62 years or over.

���� (g)�� "New
construction" means any conveyance or transfer of property upon which
there is an entirely new improvement not previously occupied or used for any
purpose.

���� (h)�� "Low and moderate
income housing" means any residential premises, or part thereof,
affordable according to federal Department of Housing and Urban Development or
other recognized standards for home ownership and rental costs and occupied or
reserved for occupancy by households with a gross income equal to 80% or less
of the median gross household income for households of the same size within the
housing region in which the housing is located, but shall include only those
residential premises subject to resale controls pursuant to contractual
guarantees.

���� (i)��� "Basic fee"
means the fee established by paragraph (1) of subsection a. of section 3 of
P.L.1968, c.49 (C.46:15-7), which fee shall consist of a State portion and a
county portion as prescribed under that paragraph.

���� (j)��� "Additional
fee" means the fee established by paragraph (2) of subsection a. of
section 3 of P.L.1968, c.49.

���� (k)�� "General purpose
fee" means the fee established by paragraph (3) of subsection a. of
section 3 of P.L.1968, c.49.

����
[
(l)� "Supplemental fee"
means the fee established by subsection a. of section 2 of P.L.2003, c.113
(C.46:15-7.1).
]

(cf: P.L.2004, c.66, s.1)

���� 2.��� Section 2 of P.L.1968,
c.49 (C.46:15-6) is amended to read as follows:

���� 2.��� In addition to other
prerequisites for recording, no deed evidencing transfer of title to real
property shall be recorded in the office of any county recording officer unless
it satisfies the following requirements:

���� a.���� If the transfer is
subject to any fee established under section 3 of P.L.1968, c.49 (C.46:15-7)
[
or section 2
of P.L.2003, c.113 (C.46:15-7.1)
]
,
a statement of the true consideration for the transfer shall be contained in
the deed, the acknowledgment, the proof of the execution, or an appended
affidavit by one of the parties to the deed or that party's legal
representative.

���� b.��� If the transfer is
exempt from any fee established under section 3 of P.L.1968, c.49 (C.46:15-7)
[
or section 2
of P.L.2003, c.113 (C.46:15-7.1)
]
,
an affidavit stating the basis for the exemption shall be appended to the deed.

���� c.���� If the transfer is of
real property upon which there is new construction, the words "NEW
CONSTRUCTION" in upper case lettering shall be printed clearly at the top
of the first page of the deed, and an affidavit by the grantor stating that the
transfer is of property upon which there is new construction shall be appended
to the deed.

(cf: P.L.2004, c.66, s.2)

���� 3.��� Section 8 of P.L.2004,
c.66 (C.46:15-7.2) is amended to read as follows:

���� 8.��� a.� In addition to all
other fees imposed under P.L.1968, c.49 (C.46:15-5 et seq.), there is imposed a
fee upon the grantee of a deed for the transfer of real property:

���� (1)�� that is classified
pursuant to the requirements of N.J.A.C.18:12-2.2 as Class 2
"residential";

���� (2)�� (a) that includes
property classified pursuant to the requirements of N.J.A.C.18:12-2.2 as Class
3A: "farm property (regular)" but only if the property includes a
building or structure intended or suited for residential use, and

���� (b)�� any other real property,
regardless of class, that is effectively transferred to the same grantee in
conjunction with the property described in subparagraph (a) of this paragraph;
or

���� (3)�� that is a cooperative
unit as defined in section 3 of P.L.1987, c.381 (C.46:8D-3)
[
; or

���� (4)�� that is classified
pursuant to the requirements of N.J.A.C.18:12-2.2 as Class 4A "commercial
properties"
]

that is transferred for
consideration in excess of $1,000,000 recited in the deed, which fee shall be
an amount equal to 1 percent of the entire amount of such consideration, which
fee shall be collected by the county recording officer at the time the deed is
offered for recording and remitted to the State Treasurer not later than the
10th day of the month following the month of collection for deposit into the
General Fund.

���� b.��� (1)� The fee imposed by
subsection a. of this section shall not apply to a deed if the grantee of the
deed for the transfer of real property is an organization determined by the
federal Internal Revenue Service to be exempt from federal income taxation pursuant
to paragraph (3) of subsection (c) of section 501 of the federal Internal
Revenue Code of 1986, 26 U.S.C. s.501.

���� (2)��
[
The fee
imposed by subsection a. of this section shall not apply to a deed if the
transfer of real property is incidental to a corporate merger or acquisition
and the equalized assessed value of the real property transferred is less than
20% of the total value of all assets exchanged in the merger or acquisition.� A
grantee shall claim this exemption from imposition of the fee at the time the
deed is offered for recording by filing with the county recording officer such
information, in addition to the affidavit of consideration filed by one or more
of the grantee parties named in the deed or by the grantee's legal
representative pursuant to subsection d. of this section, as the Director of
the Division of Taxation in the Department of the Treasury may prescribe as to
constitute a filing of a protest of the assessment of the fee and by paying any
other recording fees not exempted pursuant to this paragraph.� This additional
information shall be forwarded by the county recording officer to the director
along with the grantee's affidavit of consideration, and shall be deemed to be
and have the effect of a protest of a finding by the director of a deficiency
of payment of the fee filed on the date on which the deed is recorded.
]

(Deleted by amendment, P.L. ���, c. ��)
(pending before the Legislature as this bill)

���� c.���� The fee imposed by
subsection a. of this section shall be subject to the provisions of the State
Uniform Tax Procedure Law, R.S.54:48-1 et seq.; provided however, that
notwithstanding the provisions of subsection a. of R.S.54:49-14, a taxpayer may
file a claim under oath for refund at any time within 90 days after the payment
of any original fee and that subsection b. of R.S.54:49-14 shall not apply to
any additional fee assessed.

���� d.��� (1)
[
If a transfer
includes property classified pursuant to the requirements of N.J.A.C.18:12-2.2
as Class 4 property of any type, an affidavit of consideration shall be filed
by one or more of the grantor parties named in the deed or by the grantor's
legal representative declaring the consideration and shall be annexed to and
recorded with the deed as a prerequisite for the recording of the deed.� The
filing of an affidavit of consideration pursuant to this paragraph shall be in
addition to the filing, if any, pursuant to paragraph (2) of this subsection.
]
�
(Deleted
by amendment, P.L. ���, c. ��) (pending before the Legislature as this bill)

���� (2)�� Whether or not the
transfer is exempt, pursuant to subsection b. of this section or any other
provision of law, from payment of the fee pursuant to subsection a. of this
section, if a transfer includes property otherwise subject to subsection a. of
this section, then an affidavit of consideration shall be filed by one or more
of the grantee parties named in the deed or by the grantee's legal
representative declaring the consideration and shall be annexed to and recorded
with the deed as a prerequisite for the recording of the deed.�
[
The filing of
an affidavit of consideration pursuant to this paragraph shall be in addition
to the filing, if any, pursuant to paragraph (1) of this subsection.
]

���� (3)�� An affidavit of
consideration filed pursuant to paragraph
[
(1)
or paragraph
]

(2) of this subsection shall clearly and entirely state the consideration, the
county and municipality in which the property is situate, and the block and lot
description of the real property conveyed.

���� (4)�� One copy of each
affidavit of consideration filed and recorded with deeds pursuant to this
subsection shall be forwarded by the county recording officer to the Director
of the Division of Taxation in the Department of the Treasury on the tenth day
of the month following the month of the filing of the deed.

(cf: P.L.2006, c.33, s.1)

���� 4.��� The following sections
are repealed:

���� Section 2 of P.L.2003, c.113
(C.46:15-7.1);

���� Section 2 of P.L.2005, c.19
(C.46:15-7.3);

���� Section 2 of P.L.2006, c.33
(C.46:15-7.4); and

���� Section 3 of P.L.2006, c.33
(C.54:15C-1).

���� 5.��� This act shall take
effect immediately.

STATEMENT

���� This bill eliminates one of
the four realty transfer fees, the supplemental fee.� In addition, it repeals
the one percent assessment on the selling price of commercial property
transacted for more than $1 million,
and the
parallel tax on the sale of controlling interests in certain commercial real
property
.� In so doing, the bill lowers the cost of property
transactions and supports the real estate market.

���� The State capitalized on the
recent real estate boom by creating two new realty transfer fee layers in 2003
and 2004 and by instituting a one percent assessment on residential properties
selling for more than $1 million in 2004 and on commercial properties selling
for more than $1 million in 2006.� Now that the real estate market finds itself
in a downward spiral, these actions drag down the market and dissuade property
transactions.

���� The
bill repeals the supplemental fee, which saves a seller of an existing $250,000
property $300, the seller of a new $250,000 property $600, and a seller of an
existing $350,000 property $580.� The
supplemental
fee, created in 2003, applies to the seller of
non-exempt real property, provided that the seller is neither a senior citizen
nor blind or disabled. �The supplemental fee is a graduated fee that pertains
to the full amount of the property transaction and has the following structure:
$0.25 on each $500 of consideration on the first $150,000 of the value recited in
the deed of transfer; $0.85 on each $500 of consideration between $150,000 and
$200,000; and $1.40 on each $500 of consideration over $200,000. �Of the
revenue generated, counties retain $0.25 on every $500 of consideration, of
which a portion shall be utilized under certain circumstances to finance public
health services under the Public Health Priority Funding Act.� The remaining
revenue accrues to the State Extraordinary Aid Account to fund property tax
relief. �In addition, the supplemental fee effectively voided a partial exemption
of $1.00 per $500 of consideration for the first $150,000 of the transaction
price of property upon which there is new construction.

����
The
bill also repeals the �one percent fee� that buyers of Class 4A �commercial
properties� transacted for more than $1 million pay and the parallel tax on the
purchaser in a non-deed transfer of a controlling interest in an entity that
owns Class 4A �commercial properties�.� The buyer of a $2 million commercial
property thus saves $20,000.� Class 4A �commercial properties� are any kind of
income-producing real property other than property classified as vacant land,
residential property, farm property, industrial properties, and apartments.