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1717 Realty Associates, LLC v. Borough of Fair Lawn

201 N.J. 275, 990 A.2d 636 (2010)

TAXATION; CHAPTER 91 — If a property owner fails to respond to a Chapter 91 request, then the owner can only challenge the reasonableness of the assessor’s valuation based on the data available and the reasonableness of the underlying data; such an outcome does not constitute an “excessive fine” in violation of the Excessive Fines Clause of the Eighth Amendment to the United States Constitution.

A property owner had a multi-tenant office building. The municipality sent the owner a “Chapter 91” request for information about the income the owner derived from its property so that it could calculate a tax assessment for the property. Pursuant to N.J.S.A. 54:4-34, a municipality is authorized to request an accounting of income derived from a property, and the owner’s response must be received within forty-five days. If an owner fails to respond to a Chapter 91 request, then the municipal tax assessor must reasonably determine the property’s value based on the information in his or her possession or available to him or her. Once the valuation is determined, a property owner can only challenge the reasonableness of the assessor’s valuation based on the data available or the reasonableness of the underlying data.

In this case, the property owner did not respond to the municipality’s Chapter 91 request. The owner then challenged the property’s assessment in Tax Court, and the municipality moved to have the complaint dismissed based on the owners’ failure to respond to the Chapter 91 request. The Tax Court found that the owner’s challenge was limited to the reasonableness of the assessor’s valuation based on the data available, and that the owner could also challenge the reasonableness of the underlying data and the reasonableness of the methodology used by the assessor. The Tax Court also required the owner to advise it if it intended to proceed with a reasonableness hearing, otherwise the complaint would be dismissed.

The Tax Court held a reasonableness hearing, after which it determined that the owner did not prove that the tax assessor’s valuation could not have reasonably been arrived at in light of the data available to the assessor at the time. The Tax Court also found that the tax bill was neither a fine nor a punishment. The owner appealed, claiming that the difference between the taxes that would have been due based on its estimated valuation and the taxes due based on the municipality’s valuation constituted an “excessive fine” in violation of the Excessive Fines Clause of the Eighth Amendment to the United States Constitution, applicable to all states through the Fourteenth Amendment. The Appellate Division disagreed, finding that the tax bill was not a punishment. The Appellate Division noted that a tax bill is not a forfeiture or a civil sanction; it is an amount reached by multiplying the municipal tax rate by the valuation made by the tax assessor based on the information available to the tax assessor. Since the valuation process and data relied upon by the assessor were reasonable, the application of the statute did not impose any additional tax on the owner due to its failure to respond to the Chapter 91 request. Therefore, it could not be deemed an excessive fine or punishment in violation of the Excessive Fines Clause.

The Supreme Court affirmed, applying its holding in Davenne Realty v. Edison Township, 200 N.J. 371 (2009) in which the Court found that the statute in question was not a punishment because it was rationally and reasonably related to, and justified by, the municipality’s need to efficiently assess and collect property taxes based on a property’s value. There, the Court noted that the deadline for responding to a Chapter 91 request furthered the government’s interest in getting timely information by creating a reasonable incentive for responding timely. Further, it found that the deadline could not be characterized as a punishment because a property owner is not assessed an additional fine or punishment because of its failure to respond. It is only barred from challenging the assessment.


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