PL1991, c.431 with final retroactive amendments effective August 5, 1992 consolidated, into one more flexible law, the various long-term tax exemption laws under which municipalities can agree with private entities to undertake redevelopment projects in return of tax exemptions.

PL1991, c.441, effective for the first full fiscal year beginning after its enactment on January 18, 1992, consolidated the various five-year tax reduction and exemption laws into one more standardized law to govern all reductions and exemptions. tax breaks, regardless of the type of structure

Long Term Tax Exemption Act

Prior to 1993, which was the first full year of operation governed by the new Long-Term Tax Exemption Act, under the provisions of NJSA40:55C-40, the “Urban Renewal Corporation and Association Act of 1961,” commonly known as Fox-Lance, a qualified municipality (a municipality with “areas in need of rehabilitation”) could reduce the taxes on newly built industrial, commercial, cultural or residential projects of a corporation, with profits that exceed the limit on profits returned to the municipality, or from 30 to 35 years for condominium projects. Condominium projects were given 30 to 35 years to provide a realistic period for permanent financing. In addition, prior to 1993, under the provisions of NJSA55:16-1 et seq., the “Limited Dividend Nonprofit Housing Corporation or Association Act,” a qualified municipality could reduce up to 50 years of taxes on newly built. Additionally, under NJSA55:14I-1 et seq., a qualified municipality could reduce taxes on newly constructed senior housing for up to 50 years. Finally, prior to 1993, under the provisions of NJSA40:55C-77, the “Urban Renewal Nonprofit Corporations Act of 1965,” essentially the same types of properties and projects as the Fox-Lance Act could be reduced during 20 to 25 years with all benefits returned to the municipality. In all cases, under these property tax exemption laws, payments were required in lieu of taxes.

As of 1993, the provisions of NJSA40A:20-1 et seq. allowed a qualified municipality to reduce property and project taxes in the same way that the pre-1993 law did with the following notable exceptions:

A new, flexible formula in lieu of taxes was established with a phase-in of payments in lieu of taxes under both the gross revenue percentage formula and the total project cost percentage formula.

The formulas for calculating payment in lieu of taxes for both office projects and housing projects were changed. The minimum annual service charge for office buildings was reduced from 15 to 10 percent of the annual gross revenue of the project or project units. Municipalities retained the option of computing the payment in lieu of taxes at no less than 2 percent of the total cost of the project or of the total cost of the project units. For housing projects, the annual service charge was changed from a minimum of 15 percent to a maximum of 15 percent of the project’s annual gross revenue or from a minimum of 2 percent to a maximum of 2 percent of the cost total cost of the project or total unit cost of the project.

The payment-in-lieu formula remains basically unchanged for all other types of industrial, commercial, or cultural projects.

Five Year Exemption and Reduction Act

Prior to 1993, which was the first full year of operation under the new Five Year Exemption and Mitigation Act, there were three types of property to which a qualified municipality (a municipality with “areas in need of rehabilitation”) could grant a concession. partial exemption and reduction for a period of five years.

These types of properties include:

Owner improvements (including additions and additions) made to one- or two-unit residential dwellings that were more than 20 years old. As determined by the ordinance, the first $4,000, $10,000, or $15,000 of increase in value due to the improvement of each unit may be tax-exempt (see NJSA 54:4-3.72 to 3.79).

Commercial and industrial improvements and construction projects (with less than 30% increase in building volume) may have the full assessed value of the improvement exempt with payments in lieu of taxes made at 2% of the cost of the project or at 15% of annual gross income or a payment in lieu of tax gradually. (see NJSA 54:4-3.94 to 3.112).

Improvements to multiple dwellings or the conversion of other types of structures to multiple dwellings may be exempt for up to 30% of the total value of the alteration of the improvement or conversion. Payment in lieu of tax was not required (see NJSA 54:4-3.121 to 3.129).

Beginning in 1993, the provisions of NJSA 40A:21-1 et seq., the “Five-Year Exemption and Reduction Act,” which consolidated all provisions of the prior five-year reduction statutes, allowed a qualified municipality to grant exemptions and partial reductions on residential dwellings, non-residential structures, and multiple dwellings in the same manner as the pre-1993 law did, with the following notable exceptions made to the new law:

A new, single definition of “areas in need of rehabilitation” was established to govern all exemptions and reductions that, if chosen, could allow an entire municipality to be designated as an area in need of rehabilitation (thus allowing new structures to facilitate the construction of filling ).

The new five-year law also allowed, for the first time, tax reductions and exemptions for new construction of single-family and multi-family dwelling units and non-residential structures rather than just improvements or additions to such properties.

The new law also increased the maximum tax exemptions allowed for value-added improvement from $4,000, $10,000, and $15,000 to $5,000, $15,000, and $25,000, respectively, as specified by city ordinance.