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Davanne Realty v. Edison Township

408 N.J. Super. 16, 972 A.2d 1164 (App. Div. 2009)

TAXATION; ASSESSMENTS — A property owner who fails to timely respond to a tax assessor’s request for rental income information is barred from later using that information in a challenge to the resulting assessment and this rule is neither a punishment nor a violation of the Excessive Fines Clause of the Eighth Amendment to the United States Constitution.

In New Jersey, a tax assessor, in assessing the value of income-producing property, may request information from the owner regarding the property’s rental income. The owner then has forty-five days to provide a full accounting of the property’s income. If the accounting is not furnished, the assessor can assess the property’s value based on the information known to the assessor. In addition, if a property owner fails to provide the information, it can only challenge the reasonableness of the information or methodology used by the assessor. The property owner is not permitted to challenge the assessment based on information it withheld from the tax assessor.

In this case, a commercial property owner did not respond to a request for rental income information. The tax assessor then valued the property based on the information available to him. The owner did not challenge the reasonableness of the information or methodology used by the tax assessor. Instead, the property owner submitted a valuation based on the income derived from the property. The Tax Court rejected the owner’s proposed valuation based on the owner’s failure to have previously supplied the required documentation to the assessor. The property owner appealed, arguing that the statute violated the Excessive Fines Clause of the Eight Amendment to the United States Constitution (as applicable to the states pursuant to the Fourteenth Amendment) which limits a government’s power to extract payments as punishment for an offense.

The Appellate Division disagreed, ruling that a payment imposed by the government can only be characterized as a “punishment” when it can only be explained as serving to punish. If a fine is rationally related to a legitimate governmental interest, then it will not be classified as a punishment even if there is an incidental deterrent impact. Here, the Court found that the statutory sanction for failing to provide the tax assessor with the required information was rationally related to, and justified by, a municipality’s need to efficiently assess and collect property taxes based on a property’s value. It noted that the denial of a property owner’s right to present information beyond the forty-five day deadline furthers the government’s interest in the timely receipt of information by creating an incentive for property owners to comply. The deadline aids in the timely assessment of property values while avoiding additional costs necessitated by a property owner’s delay in providing information.

The Court also held that the statute was not a punishment because a property owner’s compliance or noncompliance with the tax assessor’s request for information is not a factor in setting the property’s value. The tax bill is set based on the property’s value and not on the property owner’s failure to comply with the information request. In addition, a property owner who fails to supply the required information is still afforded an opportunity to challenge the reasonableness of the information and methodology used by the tax assessor. Therefore, the Court concluded that the statute was not a punishment and therefore did not violate the Eighth Amendment


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