Enhances transparency and accountability of online tax sales.

S3253

SENATE, No. 3253

STATE OF NEW JERSEY

222nd LEGISLATURE

�

INTRODUCED FEBRUARY 2, 2026

Sponsored by:

Senator� SHIRLEY K. TURNER

District 15 (Hunterdon and Mercer)

SYNOPSIS

���� Enhances transparency and accountability of online
tax sales.

CURRENT VERSION OF TEXT

���� As introduced.

��

An Act

concerning online tax sales, supplementing
P.L.2001, c.160 (C.54:5-19.1), and amending various parts of the statutory law.

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

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

���� a.���� Each of New Jersey�s
565 municipalities is required to conduct a sale at least once every year in an
effort to recoup the value of liens filed for delinquent property taxes and for
unpaid fees involving municipal services, such as water and sewer services and
garbage collection.

���� b.��� Tax sales involve the
auction of tax liens.� Tax lien auctions have generated controversy in recent
years because the interest rates associated with liens from unpaid residential
taxes and municipal fees are sometimes exorbitant and unfairly burdensome.�
Moreover, online tax sales authorized under a 2001 pilot program have been
criticized because they lack oversight, transparency, and accountability and
are therefore vulnerable to bid rigging and other forms of manipulation.

���� c.���� Concerns over
improprieties in the administration of tax lien auctions, particularly with
regard to online tax sales, prompted the State of New Jersey Commission of
Investigation (�SCI�) to investigate the integrity of the process.

���� d.��� The SCI�s investigation
discovered that the Department of Community Affairs never publicly sought any
applications, issued any requests for proposals, or sought any competitive bids
to select a vendor to conduct online tax sales.� A lone vendor received State
approval to conduct online tax sales and the department�s rules allowed
municipalities to contract with that vendor without being subject to the public
bidding requirements of the �Local Public Contracts Law,� P.L.1971, c.198
(C.40A:11-1 et seq.).� The department approved the vendor, its partner, and
subcontractors without checking the firms� professional references and
inquiring into the firms� ownership structure.

���� e.���� Loose administration
and oversight by the State, a lack of competition, and limited monitoring and
control over the fees charged by the vendor has left local governments
vulnerable to unreasonable cost escalations and abuse.

���� f.���� The SCI recommended
significant reforms in order to ensure the integrity of the online tax sale
system and to safeguard the best interests of the State, its local government
units, and the taxpayers at large.

���� 2.��� (New section)� a.�
Within 30 days of the effective date of P.L.���� , c.��� (C.������� ) (pending
before the Legislature as this bill), the Department of Community Affairs shall
solicit proposals from nationally recognized electronic municipal tax lien
services in order to create a list of qualified vendors from which
municipalities may select a vendor to conduct electronic tax lien sales
pursuant to section 1 of P.L.2001, c.160 (C.54:5-19.1).� The department shall
select at least five nationally recognized electronic municipal tax lien
services to conduct electronic tax lien sales.� The department may periodically
select additional nationally recognized electronic municipal tax lien services to
conduct electronic tax lien sales, in accordance with this section, as the
department determines to be necessary or desirable.

���� b.��� The Department of
Community Affairs shall solicit quotations from nationally recognized
electronic municipal tax lien services in the following manner:

���� (1)�� A notice requesting
quotations shall be published on the Internet website of the department.� In
its request for quotations, the department shall require vendors to demonstrate
experience providing some form of tax lien-related services within New Jersey
and nationwide experience in the electronic publication of tax lien sale
notices, electronic auctions, electronic payment for purchased liens, and digital
signature validation.� Vendors shall have at least 20 days to respond to the
department�s request.

���� (2)�� Each interested vendor
shall submit a quotation, which shall include all the information required by
the request for quotations.� Failure to meet the requirements of the request
may result in the department disqualifying the vendor from further consideration.�

���� (3)� Each interested vendor
shall submit a statement of corporate ownership pursuant to section 1 of
P.L.1977, c.33 (C.52:25-24.2) at the time specified by the department for the
receipt of quotations.� If the department selects a vendor, then that vendor
shall continue to provide the department with updated corporate ownership
statements for as long as the vendor remains on the department�s qualified list
of vendors established pursuant to this section.

���� (4)�� The department shall
evaluate all quotations in accordance with the methodology described in the
request.� After the department has evaluated all quotations, the department
shall prepare a report evaluating and recommending a list of qualified vendors
suitable to conduct electronic tax lien sales pursuant to section 1 of
P.L.2001, c.160 (C.54:5-19.1).� The report shall list the names of all
potential vendors with the requisite experience who submitted a quotation and
shall summarize the quotation and corporate ownership of each vendor.� The report
shall rank vendors in order of evaluation, shall select all qualified vendors,
and shall be clear in the reasons why the department selected the vendors.� The
report shall be made available to each municipality in the State and shall be
published on the department�s Internet website.

���� c.���� (1)� Within 60 days of
the effective date of P.L.� �, c.��� (C.�� ) (pending before the Legislature as
this bill), the Director of the Division of Local Government Services in the department
shall release a Local Finance Notice providing guidance to municipalities
related to contracting with vendors to conduct electronic tax lien sales,
including, but not limited to, suggested contract terms and durations,
permissibility of assignment to another vendor, fees, indemnification,
warranties, disclosure of any subcontractors, and language assuring that
vendors and their principals do not participate as bidders in tax lien sales
conducted by the vendor or any related entity.�

���� (2)�� The director shall
release, as the director deems appropriate, Local Finance Notices providing
recommendations related to general bidding rules that should be enforced during
actual online tax sales, including, but not limited to, protocols to ensure only
legitimate bidders register; obtaining non-collusion affidavits that are
consistent with federal and State antitrust laws; prohibitions against bidders
actually or effectively bidding against themselves; and the actual operation of
the sale, such as the process for selecting winners, sale duration, and whether
bidding should be transparent or blind.

���� d.��� The department shall
adopt additional rules and regulations, in accordance with the
"Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.),
as may be necessary to effectuate the provisions of this section.

���� 3.��� (New section)� a.� A
municipality may, without advertising for bids, contract with a vendor selected
and approved by the Department of Community Affairs pursuant to section 2 of
P.L. , c. (C. ) (pending
before the Legislature as this bill) to conduct electronic tax lien sales
pursuant to section 1 of P.L.2001, c.160 (C.54:5-19.1).

���� b.��� A municipality shall
receive a statement of corporate or partnership ownership pursuant to section 1
of P.L.1977, c.33 (C.52:25-24.2) for each of the vendor�s significant
subcontractors.� For the purpose of this subsection, �significant
subcontractor� means an entity expected to receive 50 percent or more of
estimated contract revenue.

���� 4.��� (New section)� Within 90
days of the effective date of P.L. , c. (C. ) (pending
before the Legislature as this bill), the Director of the Division of Local
Government Services in the Department of Community Affairs, in consultation
with the Director of the Division of Taxation, shall report to the Governor and
the Legislature, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1),
on the efficacy of online tax lien sales.� The report shall include:

���� a.���� an assessment of the
pilot program established in subsection c. of section 1 of P.L.2001, c.160
(C.54:5-19.1), including an evaluation of the performance of any vendor
receiving approval from the department to conduct online tax sales under the
pilot program;

���� b.��� a determination of
whether tax sales should be carried out at the county level rather than the
municipal level;

���� c.���� a determination of
whether the State should adopt a mandatory minimum amount for which
delinquencies would lead to a lien being sold at a tax sale; and

���� d.��� a determination of
whether the State should adopt a maximum tax delinquency interest rate indexed
to prevailing market rates.

���� 5.��� Section 1 of P.L.2001,
c.160 (C.54:5-19.1) is amended to read as follows:

���� 1.��� a.� Any provision of law
to the contrary notwithstanding, a municipality may satisfy requirements of the
"tax sale law," R.S.54:5-1 et seq., electronically through the use of
any nationally recognized electronic municipal tax lien service, including, but
not limited to, electronic publication of tax lien sale notices, electronic
auctions, electronic payment for purchased liens, digital signature validation,
or any other matters necessary for the conduct of electronic tax lien sales in
accordance with rules, regulations and procedures promulgated by the Director
of the Division of Local Government Services in the Department of Community
Affairs in accordance with the "Administrative Procedure Act,"
P.L.1968, c.410 (C.52:14B-1 et seq.).

���� b.��� Any tax sale notices
required to be sent to a property owner or lienholder shall continue to be made
by mail pursuant to the "tax sale law," R.S.54:5-1 et seq.

���� c.����
[
The director
may authorize "electronic tax lien sale" pilot programs on a
case-by-case basis upon application of individual municipalities prior to the
director's promulgation of rules, regulations and procedures pursuant to
subsection a. of this section.
]
�

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

(cf: P.L.2001, c.160, s.1)

���� 6.��� R.S.54:5-25 is amended
to read as follows:

���� 54:5-25.�����
a.
�After
completing the list or sections thereof the collector shall give public notice
of the time and
[
place
]

physical
or electronic location
of sale, stating the description of the several lots
and parcels of land and the owner's name as contained in the list, together
with the total amount due thereon respectively as computed to the date of tax
sale and stating in substance that the respective lands will be sold to make
the amounts severally chargeable against them on said date as computed in the
list, together with interest to the date of sale, and the costs of sale.� No
other statements need be included in the notice.

����
b.��� After completing a
sale, the collector shall notify the owner that a lien on the owner�s property
has been sold.� The notice shall be provided with a description of how the
owner can pay off any outstanding debt and a clear disclosure of the
consequences of the tax lien sale, including any delinquency interest or other
fees the owner may incur.

(cf: P.L.1991, c.75, s.45)

���� 7.��� R.S.54:5-28 is amended
to read as follows:

���� 54:5-28.����� At the time and
[
place
]

physical
or electronic location
fixed for the sale and from time to time thereafter
the collector may adjourn the sale in his discretion, either for want of
bidders or at the request of persons interested, or for any other reason
satisfactory to him, from day to day or from week to week, on making public
announcement thereof, and noting the adjournment on the list. Adjournments
shall not be made for more than eight weeks in all, after which new public
notice shall be given as hereinbefore provided if further sale is to be made.

(cf: R.S.54:5-28)

���� 8.��� Section 1 of P.L.1962,
c.161 (C.54:5-30.1) is amended to read as follows:

���� 1.��� Whenever the governing
body of a municipality shall by resolution determine that a particular parcel
or parcels of real estate, scheduled to be sold at public auction pursuant to
the tax sale law, would be useful for a public purpose, it may authorize and
direct a municipal official to attend the auction
or participate
electronically, as applicable,
and bid for such parcel or parcels at such
sale on behalf of the municipality in the same manner as any other bidder.

(cf: P.L.1962, c.161, s.1)

���� 9.��� R.S.54:5-31 is amended
to read as follows:

���� 54:5-31.����� At the time and
[
place
]

physical
or electronic location
specified in the notice of sale, or adjournment, the
collector shall sell at public auction each parcel of real property which has
been so advertised, upon which the municipal liens remain unpaid, unless an
error is found requiring readvertisement.� The sale shall be made for the
amount for which the parcel was advertised, unless that amount is found to be
in excess of the correct amount, and then for the correct amount together with
the interest thereon unless such interest has already been included in the
notice of sale and the costs of sale.

(cf: P.L.1991, c.75, s.46)

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

STATEMENT

���� This bill is in response to an
investigative report issued by the State Commission of Investigation, dated
June 30, 2015, concerning questionable contracting in online tax sales.� Tax
lien auctions have generated controversy in recent years because the interest
rates associated with liens from unpaid residential taxes and municipal fees
are exorbitant and unfairly burdensome.� Concerns over improprieties in the
administration of tax lien auctions�particularly with regard to online tax
sales�prompted the State of New Jersey Commission of Investigation (�SCI�) to
investigate the integrity of the process.

���� This bill would implement SCI�s
recommendations in order to reform the online tax sale system.� Under the bill,
the Department of Community Affairs (�DCA�) would evaluate and select vendors
to conduct electronic tax lien sales.� The bill requires DCA to publish on its
website a request for quotations from nationally recognized electronic
municipal tax lien services.� Vendors seeking selection would be required to
disclose their corporate or other ownership and to submit other information
required by DCA.� After evaluating the quotations submitted by interested
vendors, DCA would create a list of at least five qualified vendors from which
municipalities may select a vendor to conduct online tax sales.�

���� Under the bill, a municipality
may, without advertising for bids, contract with a vendor selected and approved
by the Department of Community Affairs pursuant to this bill to conduct
electronic tax lien sales.� To contract with a municipality, a vendor must
provide the municipality with a corporate disclosure form for its significant
subcontractors.� The bill defines �significant subcontractor� as any entity
expected to receive 50 percent or more of estimated contract revenue.

���� The bill also requires the
Director of the Division of Local Government Services in the Department of
Community Affairs, in consultation with the Director of the Division of
Taxation to report to the Governor and the Legislature, within 90 days of the
effective date, on the efficacy of online tax lien sales.� The report must
include:

�

an assessment
of the pilot program established in P.L.2001, c.160 (C.54:5-19.1), including an
evaluation of the performance of the lone vendor receiving approval from the
department to conduct online tax sales under the pilot program;

�

a determination
of whether tax sales should be carried out at the county level rather than the
municipal level;

�

a determination
of whether the State should adopt a mandatory minimum for which delinquencies
would lead to a lien being sold at a tax sale; and

�

a determination
of whether the State should adopt a maximum tax delinquency interest rate
indexed to prevailing market rates.

���� The bill also requires tax
collectors, after completing a tax lien sale, to notify the property owner that
the lien on the owner�s property has been sold.� The notice would be provided
with a description of how the owner can pay off any outstanding debt and a
clear disclosure of the consequences of the tax lien sale, including any
delinquency interest or other fees the owner may incur.

���� Lastly, the bill facilitates
the establishment of electronic tax sales by eliminating the pilot program
status of such sales.