The average property owner in the Garden State pays about $6,000 a year in property taxes, twice the national average.  To make matters worse, New Jersey is facing a projected $3 billion budget deficit for 2008, which will only complicate the legislature’s effort to provide property owners with any meaningful type of property tax reform.  One of the few ways to reduce property taxes is to correct errors in the annual tax assessment, which may be improperly increasing one’s tax burden.   This article will summarize the steps to correct assessment errors.

As a preliminary matter, property owners must understand how property is assessed in New Jersey. Tax assessors are required to mail to each property owner an annual tax assessment notice, which is generally done in late January or early February of each year.  The tax assessment is on a small green card and provides an assessed value for both land and improvements. The assessed value is determined as of October 1 of the pre-tax year.  For example, the tax assessment date for 2008 is October 1, 2007.
The assessment for any particular property must be converted to its imputed true value by dividing the assessment by the average ratio for the municipality where the property is located. For example, the average ratio for Princeton Township in 2008 is 47.45%.  If a home in Princeton Township has an assessment of $600,000, the property owner must divide the assessment by the ratio of 47.45% to determine the “true value” of his or her property (ie., what the town believes your property is worth).  In our example, the imputed true value is $1,264,488.

The municipal assessor is also required to maintain a property record card.  The property record card contains information about the property, including size of the lot, square footage of the improvements, number of rooms, etc.  Most tax assessors will give a property owner a copy of his or her property record card upon request.  It is not uncommon for property record cards to contain errors, and once spotted, need be brought to the tax assessor’s attention immediately for correction.

Tax appeals must be filed by April 1 of the tax year in question. If an error is discovered in a 2008 tax assessment, the property owner’s first step is to file a tax appeal and seek to have the error corrected for that year. Any error can be challenged in the year in question if a complaint is filed by the appeal deadline. However, if the error has been in place for several years and a property owner wants retroactive relief, the property owner must look to the Correction of Errors statute for relief – a law that is very restrictive.

The Correction of Errors law allows a property owner to seek to correct “typographical errors, errors in transposing, and mistakes in tax assessments,” providing that the mistake does not relate to “matters of valuation involving an assessor’s opinion or judgment.”  If an error falls within this definition, a property owner can go back four years to correct an error.

Initially, the New Jersey Tax Court limited the types of errors that could be corrected under the Correction of Errors statute and denied most requests.  However, in 1994 the New Jersey Supreme Court loosened the standard and held that any error that (1) is indisputable and cannot plausibly be explained on the exercise of judgment or discretion by the assessor, and (2) its correction is also self-evident and non-discretionary, can be remedied by the court.  For example, if a parcel of vacant property is assessed with a building on it, both the error and correction are self-evident and, therefore, the error can be corrected.

However, in a recent case, the court denied a request to correct an error where the tax assessor lost an application for farmland assessment  and assessed the property as if it was not a farm.  Although the error was self-evident because losing a farmland application cannot possibly involve an exercise of the assessor’s judgment, the court found that the “correction” was not self-evident based upon the mistake made by the assessor.  This decision is difficult to understand since the correction (ie. reduce the value to the standard farmland assessment) also seems self-evident.

Although the case law interpreting the Correction of Errors statute is ambiguous, it is clear that most types of errors will involve some level of judgment or discretion by the tax assessor and cannot be corrected by the Tax Court.  Once value is determined by the assessor, the exercise of judgment is generally involved taking the issue outside the Correction of Errors statute.  As a result, it is very important for property owners to review their assessments each year and file an appeal by the April 1 deadline.  If there is no plausible explanation for the error, a property owner can look to the Correction of Errors statute for relief providing the relief sought is also self-evident based upon the information placed before the court.