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Davanne Realty v. Edison Township

201 N.J. 280, 990 A.2d 639 (2010)

TAXATION; CHAPTER 91 — Barring a property owner’s appeal rights when it fails to respond to a municipality’s Chapter 91 for income information for a property is not a violation of the Excessive Fines Clause of the Eighth Amendment to the United States Constitution.

A property owner leased a commercial warehouse to a tenant. The municipality sent the owner a “Chapter 91” request for information about the income the owner derived from its property so that the municipality could calculate a tax assessment. Pursuant to N.J.S.A. 54:4-34, a municipality is authorized to request a “full and true account” of income derived from a property, and the 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. In such a case, a property owner cannot appeal the tax assessor’s valuation and assessment, but can challenge only the reasonableness of the underlying data used by the assessor as well as the reasonableness of the methodology used by the assessor in reaching a valuation.

Here, the property owner did not respond to the municipality’s Chapter 91 request and the tax assessor based the assessment on the information otherwise available. The property owner did not challenge the reasonableness of the underlying data or the methodology used by the tax assessor. Instead, it challenged the assessment in Tax Court, and submitted a valuation based on the rental income it derived from the property. It claimed that the municipality’s valuation was overstated and, as a result, its tax bill was higher than it should have been. The property owner characterized the higher amount as a fine, forfeiture or penalty imposed 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 Tax Court rejected the owner’s claim and the Appellate Division affirmed, finding that the statute limits only a property owner’s appeal rights if it fails to respond to a municipality’s request for income information for the property. The Appellate Division noted that the Excessive Fines Clause limits the government’s power to extract payments as punishment for an offense, but that it only limits the government’s exercise of prosecutorial power, including the power to collect fines to punish excessively or arbitrarily. Here, it held that the assessment statute was remedial in nature even though it had a deterrent impact. A statute can only be characterized as punitive if its sole purpose is to deter. This particular statute 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. Setting a New Jersey deadline for responding furthers the government’s interest in getting timely information by creating a reasonable incentive for responding timely. Further, the Court would not characterize the statute as a punishment because the property owner was not being assessed an additional fine or being punished due to its failure to respond; it was only being barred from challenging the assessment. Therefore, according to the Appellate Division, it could not be characterized as an unlawful excessive penalty. On further appeal, the Supreme Court affirmed.

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