On January 18, the Division of Local Government Services issued Local Finance Notice 2018-04 regarding the refunding of 3rd and 4th Quarter 2018 Property Tax Payments, which were made on or before December 31, 2017. The Division issued the Local Finance Notice after consultation with the Attorney General’s Office.
The Division noted that while there is no statute that specifically authorizes or forbids refunds of 3rd and 4th quarter 2018 taxes paid in December 2017, before billing, N.J.S.A. 54:4-69 requires that “payments made in the ‘current year’ that are in ‘excess of the tax or assessed levied’ must be refunded ‘on or before December first of the current year’. Typically, such a refund does not occur until a determination is made that the tax is not owed in that year and that an actual overpayment was made.
The Division is advising that the municipal tax collector, chief financial officer, and municipal attorney must interpret and provide guidance to the governing body, concerning whether or not the payment of 3rd and 4th quarter 2018 taxes qualifies as a payment “in excess of the tax or assessment levied,” when the assessment has not be levied yet.
The Division advises as a matter of policy, if the municipality wishes to permit refunding payments, then the governing body must adopt a resolution specifically authorizing the refunds on the basis that the payment is “in excess of the tax or assessment levied”. Refunds should only be issued upon written request of the taxpayer.
If there is a contract for sale on a property, the Division has recommended that municipalities authorize refunds of tax quarters not yet billed, when such refunds are requested, as “failure to do so could place an undue burden on the purchasing party”.
If the mortgage company has made a payment on a quarter that has already been paid by the property owner, the municipality should refund the mortgage company their payment.
If the municipality chooses not to issue a refund of unbilled 3rd and 4th quarter 2018 property taxes, the Division advises that the municipality should require the taxpayer to request in writing either:
- Refund of any overpayment once the 3rd and 4th quarters have been billed; or
- Application of the overpayment amount towards their 2019 property taxes
The Division also suggests that municipalities consult with their auditors and municipal attorneys on whether or not to:
- Require taxpayers seeking a refund to file a W-9; and
- Have the municipality issue a 1099 to each taxpayer receiving a refund.
We strongly suggest you review this Local Finance Notice with your chief financial officer, tax collector, municipal auditor, and municipal attorney.
Contact: Lori Buckelew, Senior Legislative Analyst, firstname.lastname@example.org, 609-695-3481 x112.