Imposes annual State tax on investment ownership of single family residences in this State by certain entities for purposes other than single family ownership, providing revenue for down payment assistance for family ownership.

A4104

ASSEMBLY, No. 4104

STATE OF NEW JERSEY

222nd LEGISLATURE

�

INTRODUCED FEBRUARY 19, 2026

Sponsored by:

Assemblywoman� KATIE BRENNAN

District 32 (Hudson)

Assemblywoman� SHAMA A. HAIDER

District 37 (Bergen)

SYNOPSIS

���� Imposes annual State tax on investment ownership of
single family residences in this State by certain entities for purposes other
than single family ownership, providing revenue for down payment assistance for
family ownership.

CURRENT VERSION OF TEXT

���� As introduced.

��

An Act
imposing a State tax on the investment ownership of
single family residences in this State by certain entities for purposes other
than single family ownership, providing for down payment assistance for family
ownership of such residences, and supplementing Title 54 of the New Jersey
Statutes.

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

���� 1.� As used in P.L.��� , c.���
(C.������� ) (pending before the Legislature as this bill):

���� "Controlled group"
means one or more chains of corporations connected through stock ownership with
a common parent corporation if stock possessing at least 50 percent of the
voting power of all classes of stock of each of the corporations is owned
directly or indirectly by one or more of the corporations; and the common
parent owns directly stock possessing at least 50 percent of the voting power
of all classes of stock of at least one of the other corporations.

���� �Covered taxpayer� means any
business, including but not limited to, a hedge fund, private equity investor
or private equity group, real estate investment trust, individual, partnership,
corporation, a controlled group of corporations, limited liability company, or
any other form of business entity; or, as applicable, an affiliate, subsidiary,
or holding company of a hedge fund, private equity investor or private equity
group, real estate investment trust, individual, partnership, corporation, a
controlled group of corporations, limited liability company, or any other form
of business entity, that with respect to a tax year owns more than 20
single-family residences in this State as determined on the first day of the
tax year.� �Covered taxpayer� shall not include a mortgage note holder that
owns a single-family residence through foreclosure, a nonprofit organization,
corporation, or association that is qualified for exemption from federal
taxation pursuant to section 501 (c)(3) of the federal Internal Revenue Code,
26 U.S.C.s.501(c)(3), a person primarily engaged in the construction or
rehabilitation of single-family residence, or a person who owns federally
subsidized housing.

���� �Hedge fund� means a firm,
foreign or domestic, that provides investment management services to third
parties, pursues an absolute return strategy, may use leverage as part of its
investment strategy, does not offer the placement of investments in the hedge
fund to the general public, and charges performance-based fees as part of its
remuneration.� �Hedge fund� includes a domestic �investment company,� as
defined in Section 3(a)(1) of the �Investment Company Act of 1940,� Pub.L.
76-768 (15 U.S.C. s.80a-3), that claims an exemption under Section 3(c)(1) or
Section 3(c)(7) of that act and whose offering of securities is deemed to be
transactions not involving any public offering under Section 230.506 of title
17, Code of Federal Regulations and Section (4)(2) of the �Securities Act of
1933,� Pub.L. 73-22 (15 U.S.C. s.77d).

���� �Own� means, with respect to a
single-family residence, having a direct majority ownership in the
single-family residence, regardless of the percentage of that ownership
interest.

���� �Single-family residence�
means a residential property consisting of one to four dwelling units.

���� �Tax year� means the calendar
year in which a single family residence is owned by a covered taxpayer.

���� 2.� a.� There shall be imposed
an annual State tax on a covered taxpayer that owns over 20 single-family
residences in this State as of the last day of a tax year in an amount equal to
the product of

���� (1)� $20,000, and

���� (2)� the number of
single-family residences owned by the covered taxpayer as of the last day of
the tax year that are in excess of 20 single-family residences;

���� b.� (1)� Provided however,
that a covered taxpayer shall not be liable for the tax for any tax year if the
number of single-family residences owned by the covered taxpayer as of the last
day of the tax year is equal to or less than 90 percent of the number of
single-family residences owned by the covered taxpayer as of the first day of
the tax year,

���� (2)� Except, further that
sales or transfers by a covered taxpayer to a corporation or entity engaged in
a trade or business, to a group of more than two individuals, or to a person
who owns any other single-family residence at the time of such sale, shall not
count toward this end of tax year percentage reduction in ownership that may
exempt the covered taxpayer from the tax for the tax year.

���� c.� The tax year liability for
the tax imposed in this section shall be reported and paid by a covered
taxpayer on or before the first day of the first calendar quarter after the end
of a tax year in a manner prescribed by the Director of the Division of
Taxation in the Department of the Treasury.� The director shall collect and
administer the tax imposed pursuant to this section.� The tax imposed pursuant
to this section shall be governed by the provisions of the State Uniform Tax
Procedure Law, R.S.54:48-1 et seq.�

���� d.� (1)� The director shall
require the reporting of information as the director deems necessary and
appropriate to carry out the purposes of this section, including reporting with
respect to whether any person acquiring a single-family residence from a covered
taxpayer owns any other single family residences at the time of the
acquisition.

���� (2)� A person who fails to
timely report information that the director requires under this subsection or
who fails to include complete and accurate information shall be subject to
interest and penalties that are provided for under the provisions of the State
Uniform Tax Procedure Law, R.S.54:48-1 et seq., and an additional penalty of
$20,000 per report.� The director may waive penalties and interest if the
person demonstrates to the director by clear and convincing evidence that the
failure is due to reasonable cause and not to willful neglect.

���� (3)� The reporting
requirements pursuant to this section shall include a certification from each
individual to whom a single �family residence is sold or transferred from a
covered taxpayer that states:

���� (a)�� The name and address of
the purchaser or transferee;

���� (b)� That the sales is not a
sale described in paragraph (2) of subsection b. of this section; and

���� (c)�� That the purchaser or
transferee will be subject to the penalties imposed under paragraph (2) of
subsection d. of this section for any false certification.

���� e.� The State tax revenue
collected pursuant to this section, and any penalties and interest collected
thereon, shall be annually credited by the State Treasurer to the New Jersey
Housing and Mortgage Finance Agency to establish new programs or supplement
existing programs that award grants to provide down payment assistance to
families purchasing homes within the State.� Grants awarded pursuant to this
section by the agency shall give priority to families seeking assistance to
purchase any single-family residence that is sold or transferred by a covered
taxpayer.

���� f.� Notwithstanding any
provision of P.L.1968, c.410 (C.52:14B-1 et seq.) to the contrary, the director
may adopt immediately upon filing with the Office of Administrative Law such
regulations as the director deems necessary to implement the provisions of
P.L.��� , c.��� (C.������� ) (pending before the Legislature as this bill),
which shall be effective for a period not to exceed 180 days following
enactment of this section.

���� 3.� This act shall take effect
immediately and shall apply to tax years beginning on and after January 1 next
following enactment.

STATEMENT

���� This bill imposes an annual
State tax on investment ownership of more than 20 single family residences in
this State by certain entities for purposes other than for single family
ownership.� The revenue from the tax will be credited to the New Jersey Housing
and Mortgage Assistance Agency to provide for down payment assistance for
single family home ownership.

���� The tax will serve as an
economic disincentive to hedge funds and other investors from owning large
portfolios of homes in this State, often obtained by large cash offers, and
motivated primarily by long-term returns on investment.� The holding of these homes
in many developing, stable residential neighborhoods keeps them off of
traditional residential markets that are accessible to family purchasers who
must pursue standard down payments and purchase money mortgage financing during
a tightening residential real estate market.

���� Hedge funds are likely to hold
a portfolio of residential properties for 5 to 10 years, but when they decide
to sell, it is unlikely that those homes will show up on family accessible
local real estate service platforms.� Because the homes have been bundled, the
hedge funds more likely will sell to other funds.� This transforms residential
properties into an asset class to be traded among institutional investors.�
Similar bundling is happening in cities to multi-family rental units, as
private equity has been buying market-rate properties and raising rents.

���� Once homes get bundled into a
fungible asset, families are not going to be able to buy individual properties
from that bundle.� Some of those homes may become part of the rental market and
will be unavailable to prospective homebuyers.� To allow for an orderly exit
from the housing investment market, this bill allows hedge funds and other
investors to sell the homes they own for single family home ownership over a
period of time, reducing their portfolio annually by at least 10 percent of the
20 or more homes they own at the start of a year, in order to avoid the annual
tax at the end of the year.� To ensure the tax focuses on problematic actors,
the bill excludes nonprofit organizations, public government subsidized
housing, as well as home builders.� The bill includes a certification process
for a purchaser to confirm that they do not own a majority interest in any
other single family residential real estate.

���� Grants provided by the New
Jersey Housing and Mortgage Assistance Agency to provide for down payment
assistance for single family home ownership from the tax revenue will
prioritize support to families purchasing single-family residences from any
taxpayer subject to the State tax.�