New Jersey-2014-A366-Introduced

An Act clarifying the application of the business personal property tax on local exchange telephone companies that were previously subject to the tax, amending R.S.54:4-1.

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

1. R.S.54:4-1 is amended to read as follows:

54:4-1. All property real and personal within the jurisdiction of this State not expressly exempted from taxation or expressly excluded from the operation of this chapter shall be subject to taxation annually under this chapter. Such property shall be valued and assessed at the taxable value prescribed by law. Land in agricultural or horticultural use which is being taxed under the "Farmland Assessment Act of 1964," P.L.1964, c.48 (C.54:4-23.1 et seq.), shall be valued and assessed as provided by that act. An executory contract for the sale of land, under which the vendee is entitled to or does take possession thereof, shall be deemed, for the purpose of this act, a mortgage of said land for the unpaid balance of purchase price. Personal property taxable under this chapter shall include, however, only the machinery, apparatus or equipment of a petroleum refinery that is directly used to manufacture petroleum products from crude oil in any of the series of petroleum refining processes commencing with the introduction of crude oil and ending with refined petroleum products, but shall exclude items of machinery, apparatus or equipment which are located on the grounds of a petroleum refinery but which are not directly used to refine crude oil into petroleum products and the tangible goods and chattels, exclusive of inventories, used in business of local exchange telephone, telegraph and messenger systems, companies, corporations or associations that were subject to tax as of April 1, 1997 under P.L.1940, c.4 (C.54:30A-16 et seq.) as amended, and shall not include any intangible personal property whatsoever whether or not such personalty is evidenced by a tangible or intangible chose in action except as otherwise provided by R.S.54:4-20. As used in this section, "local exchange telephone company" means a telecommunications carrier that as of April 1, 1997 was providing dial tone and access to 51% of a local telephone exchange. Property omitted from any assessment may be assessed by the county board of taxation, or otherwise, within such time and in such manner as shall be provided by law. Real property taxable under this chapter means all land and improvements thereon and includes personal property affixed to the real property or an appurtenance thereto, unless:

a. (1) The personal property so affixed can be removed or severed without material injury to the real property;

(2) The personal property so affixed can be removed or severed without material injury to the personal property itself; and

(3) The personal property so affixed is not ordinarily intended to be affixed permanently to real property; or

b. The personal property so affixed is machinery, apparatus, or equipment used or held for use in business and is neither a structure nor machinery, apparatus or equipment the primary purpose of which is to enable a structure to support, shelter, contain, enclose or house persons or property. For purposes of this subsection, real property shall include pipe racks, and piping and electrical wiring up to the point of connections with the machinery, apparatus, or equipment of a production process as defined in this section.

c. (Deleted by amendment, P.L.2004, c.42).

Real property, as defined herein, shall not be construed to affect any transaction or security interest provided for under the provisions of chapter 9 of Title 12A of the New Jersey Statutes (N.J.S.12A:9-101 et seq.). The provisions of this section shall not be construed to repeal or in any way alter any exemption from, or any exception to, real property taxation or any definition of personal property otherwise provided by statutory law.

The Director of the Division of Taxation in the Department of the Treasury may adopt rules and regulations pursuant to the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) as may be deemed necessary to implement and administer the provisions of this act.

(cf: P.L.2004, c.42, s.13)

2. This act shall take effect immediately and be retroactive to April 1, 1997.

STATEMENT

This bill clarifies the application of the business personal property tax on local exchange telephone companies that were subject to the tax as of April 1, 1997. This bill clarifies the changes made in 1997 to the business personal property tax that defined local exchange telephone companies that were subject to that tax as of April 1, 1997. The Tax Court in Verizon New Jersey Inc. v. Hopewell Borough, decided June 26, 2012, has incorrectly construed the plain meaning of the language of the statutory change made in 1997. That statutory change was intended to grandfather into the local property tax base the business personal property of all incumbent local exchange companies that were then subject to that tax and were a telecommunications carrier then meeting the one time definition, not an annual redefinition, of providing dial tone and access to 51% of a local telephone exchange.

At least one of the local exchange telephone companies has taken advantage of the incorrect interpretation of the statute and has informed 65 municipalities that it will no longer pay tax on its business personal property, such as equipment, utility poles, cables and more in any given municipality where it claims on an annual basis that it does not provide 51% or more of landline service to its residents. This unintended erosion of the local property tax base will impact all other local property taxpayers in these and possibly more municipalities. The business personal property tax base was not intended to be eroded by annual assertions by taxpayers that the majority of municipal residents provided dial tone and local exchange access services in a municipality might be shifting their service among local exchange carrier competitors that had not been subject to that tax at the time of the 1997 change. This bill will restore the intended local property tax status quo intended to be determined in 1997.