Allows certain municipalities to establish lower property tax rate on improvements than land.

A1473

ASSEMBLY, No. 1473

STATE OF NEW JERSEY

222nd LEGISLATURE

�

PRE-FILED FOR INTRODUCTION IN THE 2026 SESSION

Sponsored by:

Assemblyman ANTWAN L. MCCLELLAN

District 1 (Atlantic, Cape May and Cumberland)

SYNOPSIS

���� Allows certain municipalities to establish lower
property tax rate on improvements than land.

CURRENT VERSION OF TEXT

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

��

An Act

concerning the assessment of real property and
supplementing Title 54 of the Revised Statutes.

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

���� 1.��� The Legislature finds
and declares that:

���� a.���� A land-based property
tax system is a system under which taxable improvements are taxed at a lower
property tax rate than taxable land

���� b.��� Although not currently
in use in New Jersey, land-based property tax systems have been employed by
municipalities in several other states in order to discourage land speculation,
while encouraging the redevelopment of vacant land in urban areas;

���� c.���� While a land-based
system of property taxation should not be perceived as the sole answer to
reviving decayed urban municipalities, or under-developed municipalities in
this State, it should be a tool available for any municipality looking to
encourage the development or redevelopment of vacant land;

���� d.��� Neighboring Pennsylvania
has multiple examples of success under a land-based property tax system;

���� (1)�� In Harrisburg, that
state�s capital city, in the first12 years after adopting a land-based property
tax system, over $1.2 billion of investment occurred, and in the first 20
years, nearly 4,000 vacant structures became fit for occupation and the number
of businesses on the tax rolls increased by nearly 7,000;

���� (2)�� In Allentown,
Pennsylvania, property taxes were reduced for 70 percent of properties, and
nearly 90 percent in the most at-risk neighborhoods, and the number of building
permits increased by 32 percent;

���� (3)�� In Pittsburgh, the
issuance of building permits increased by over 70 percent in the decade after
implementation, while 15 comparable rust belt cities experienced an average
14.4 percent decline in the issuance of building permits;

���� e.���� Taxing taxable
improvements at a lower rate than taxable land will make it more profitable for
owners to make improvements, or perform basic maintenance, to deteriorating
property;

���� f.���� Incentivizing
development leads to more housing, more jobs, and greater economic development
in the State, which is� particularly needed in New Jersey�s urban areas;

���� g.��� With more development,
New Jersey�s cities will enjoy more affordable housing options and greater
economic opportunity for disadvantaged populations; and

���� h.��� Addressing underlying
social determinants such as a lack of affordable housing and vibrant local
economies is critical to reducing inequality and inequity in society, and a
land-based property tax system can be an effective tool to address these
issues.

���� 2.��� a.� As used in this
section:

���� �Director� means the Director
of the Division of Taxation in the Department of the Treasury.�

���� �Land-based property tax
system� means
a property tax system, as
permitted by this section, under which taxable improvements are taxed at a
lower rate than taxable land.�

���� �Municipality in need of
infrastructure investment� means a municipality in which an urban enterprise
zone was designated pursuant to the "New Jersey Urban Enterprise Zones
Act," P.L.1983, c.303 (C.52:27H-60 et seq.), regardless of whether that
designation has expired.

���� b.��� Beginning on the
operative date of this subsection,
a
municipality in need of infrastructure investment may adopt an ordinance
providing for a land-based property tax system, without applying to the
director pursuant to subsection c. of this section.�

���� c.���� (1)�
Beginning on the first day of the 84
th
month next following the
operative date of this subsection, a municipality, other than a municipality in
need of infrastructure investment, may apply to the director for approval to
adopt an ordinance to implement a land-based property tax system.�

���� (2)�� The
director shall adopt rules and regulations to guide the application process and
establish appropriate standards for approval.� Such standards shall prohibit
approval of an application if the municipality�s developable lands are used
substantially for the preservation of open space, farmland, or environmentally
sensitive land.� The director shall establish, manage, and maintain a system
for the review and approval of applications submitted pursuant to this
subsection.�

���� d.��� A
land-based property tax system shall provide for the taxation of taxable
improvements at a lower rate than the tax rate established for taxable land.�

���� (1)�� An
ordinance adopted to create a land-based property tax system shall establish
the difference between the rate on taxable land and the lower rate on taxable
improvements, and may phase in the adjusted tax rates such that the difference
between the rates grows gradually over a period of years.�

���� (2)�� A
municipality that employs a land-based property tax system may return to a
single-rate property tax system if the municipal governing body adopts an
ordinance directing this return.� This ordinance may phase in the adjusted tax
rates such that the difference between the rates narrows gradually over a
period of years.

���� e.���� The
director shall provide guidance to municipalities both in the implementation of
a land-based property tax system and in the transition to and from the system.�

���� 3.��� This act shall take
effect immediately, but shall remain inoperative until the adoption by the
voters of the State of an amendment to the State Constitution authorizing
municipalities, by ordinance, to adopt a property tax system under which
taxable improvements are taxed at a lower rate than taxable land.

STATEMENT

���� This bill would direct the
Legislature to allow certain municipalities to establish
a �
land-based property tax system,� in which a
lower property tax rate is set for improvements than
for land.�
An improvement refers to a building or other man-made
condition located on a parcel of real property.�
Historically,
New Jersey municipalities have been
required to apply a single
value-based tax rate to both land and improvements.� Land-based property tax
systems have been employed by municipalities in several other states in order
to discourage land speculation, while encouraging the redevelopment of vacant
land in urban areas.�

���� The bill allows current and
former urban enterprise zone municipalities to
adopt
an ordinance providing for a land-based property tax system upon the bill�s
operative date, without any application process

���� Beginning seven years later,
the bill allows municipalities, other than current and former UEZ
municipalities, to
apply to the Director of the
Division of Taxation in the Department of the Treasury (�director�) for
approval to adopt an ordinance to implement a land-based property tax system.�
The bill requires the director to adopt rules and regulations to establish
appropriate standards for approval.� These standards must prohibit approval of
a municipality if its developable and re-developable lands are used
substantially for the preservation of open space, farmland, or environmentally
sensitive land.�

���� The
bill permits the adjusted tax rates of a land-based property tax system to be
phased in such that the difference between the rates grows only gradually each
year.� The bill also directs that a municipality employing a land-based
property tax system may return to a single-rate property tax system if the
governing body adopts an ordinance directing this return.� This ordinance may
also phase in these adjusted tax rates such that the difference between the
rates narrows only gradually in any given year.

���� The bill would become
operative upon the adoption by the voters of the State of an amendment to the
State Constitution authorizing municipalities, by ordinance, to adopt a
property tax system under which taxable improvements are taxed at a lower rate
than taxable land.