TAX EXEMPTIONS REINSTATED FOR GROUP HOMES FOR THE MENTALLY DISABLED

TAX EXEMPTIONS REINSTATED FOR GROUP HOMES

FOR THE MENTALLY DISABLED

 

 

 

In our winter 2010 Legal Update, we reported on a state tax court decision eliminating real property tax exemptions for certain private, not-for-profit companies.

 

In the case of Advance Housing Inc. versus Township of Teaneck, a New Jersey Appellate Court has reversed the State Court determination, finding that a non-profit organization that provides housing and counseling services to people with psychiatric disabilities should be granted property tax exemptions.  The Court reviewed the New Jersey Statutes Section 54:4-3.6 dealing with the definition of a charitable organization that is exempt from property taxation.

 

The lower Tax Court Judge had stated that the company has no “institutional aspect”, has no “hospital purpose”, and he found it significant that the people residing in the housing are not required to undergo counseling.  The Appeals Court addressed the Tax Court ruling by stating “To the extent he meant that the services had to be provided in an ‘institutional setting’ we disagree”, and the Appeals Court was not troubled by the fact that the company also provides counseling and supportive services to others who are not residents of the group home.

 

These cases are always fact sensitive.  The Tax Court ruling that has been reversed was a particularly troublesome ruling.  As we reported in our Legal Update article, the State has incentivized institutions to place more residents in local group home settings, by shutting down many of the institutions!  Bona fide group homes that provide these services cannot exist if they are required to pay real property taxes.  With all due respect to the Tax Court Judge, we think the Appellate Court got this one right.

Stuart D. Liebman, Esq.

Extension of non-residential fee moratorium

Extension of Nonresidential Development Fee Moratorium

 

On August 24, 2011 Acting New Jersey Governor Kim Guadagno signed into law legislation which extends the moratorium on requiring developers to pay a nonresidential development fee to those projects which obtain final approval prior to July 1, 2013 provided a construction permit is issued before January 1, 2015.  As you may recall, this was a state-mandated fee which was meant to provide municipalities with the means to provide affordable housing.  Since the initial moratorium expired on June 30, 2010, the legislation also retroactively applies to those projects which were approved since July 1, 2010.  For those projects which have already paid the nonresidential development fee, a claim for a refund must be submitted, in writing, by December 22, 2011 to the governmental body in which the original payment was made. 

 If you believe that your project is entitled to such a refund it is imperative that you contact our firm immediately.  The reason being that any portion of your development fee already spent on affordable housing projects is not entitled to a return. 

 Please feel free to contact our office to discuss your particular approval in greater detail. 

Andrew S. Kohut, Esq.

Non-residential Fee Act

On June 27, 2011 both the New Jersey Senate (S2974) and Assembly (A4221) unanimoulsy introduced legislation modifying the “Statewide Non-Residential Fee Act”. The bill seeks to extend a moratorium on the requirement of these fees to any projects which obtained final approval prior to July 1, 2013 provided a construction permit is issued before January 1, 2015. A developer is also entited to a refund if the fee has already been paid for a project approved after June 30, 2010. A claim must be submitted, in writing, within 120 days of the effective date of this bill, to the same entity to which the moey was paid. However, if the money was already spent on affodable housing projects a developer ise not entitled to a return!!!

We will continue to monitor this situation as it develops. In the meantime, if you believe you are entitled to a refund, we recommend that you begin to gather any pertinent information with regard to your claim. Once this bill is passed, it will be imperative that you submit your claim immediately in order to avoid any unreasonable delay. Please feel free to contact our office to discuss your partiular approval in greater detail.

Andrew S. Kohut, Esq.

Repeal of the Federal Estate Tax and Carry-Over Basis

Repeal of the Estate Tax for 2010

            Despite our assertion that Congress would never allow a repeal of the estate tax in 2010, we find ourselves in the last quarter of 2010 with just that- no estate tax.  Further, in 2010, there is also no Generation Skipping Tax (“GST”). Unless Congress acts prior to the end of 2010, both the federal estate tax and GST will be reinstated as of January 1, 2011 with an exemption of $1,000,000 per person and a 55% rate of tax.  It should be noted, however, that any applicable state estate tax is still in full force and effect in 2010.  In addition to the major impact of the repeal of the federal estate tax and GST, 2010 brings about several other tax consequences that could impact one’s estate plan.  These will be discussed in greater detail below.

            Although there is still a federal gift tax for gifts exceeding a donor’s $1,000,000 lifetime exemption, the gift tax rate is reduced to 35% in 2010 from 45% in 2009.    

            More significantly, as of January 1, 2010, the “stepped-up basis” rule which applied pre-2010 (property acquired from a decedent through an inheritance was given a new basis of fair market value as of the decedent’s date of death), was replaced with the “carryover basis” rule in 2010.  The new set of rules means that property acquired from a decedent through inheritance will retain the decedent’s tax basis in the hand of the beneficiary, which would most likely result in capital gain when the beneficiary sells the inherited property.  However, there are exceptions to the carryover basis which could help ease the burden of the new set of rules.  First, the new rule permits an increase of up to $1,300,000 in the basis of certain assets owned by the decedent.  Second, there is an increase of up to an additional $3,000,000 in the basis of property passing to the decedent’s surviving spouse. 

            There are certain requirements to the basis adjustment rules outlined in the foregoing.  For example, none of the decedent’s assets may have a basis adjusted above fair market value.  Further, the Executor, in his/her sole discretion, elects which assets are to receive the basis adjustment.  Finally, there is an additional tax return required to be filed for the allocation of the basis adjustment to property acquired from a decedent, if the fair market value of the property exceeds $1,300,000 or if the decedent acquired property by gift, except in certain cases.  This form is due with the decedent’s final income tax return.

            The repeal of the estate tax is not as good as it might have seemed due to the additional filings and taxes.  Moreover, a sunset back to $1,000,000 applicable exclusion amount in 2011 with a 55% tax is even less desirable.  Please feel free to contact us for more information and to talk about addressing these changes.

Nicole E. Russak, Esq.