Sarlo Legislation Allows Prepaid Property Taxes

TRENTON – The Senate Budget and Appropriations Committee today approved legislation sponsored by Senator Paul Sarlo that permits taxpayers to make dedicated prepayment toward anticipated property taxes, allowing homeowners to prepay any quarterly property tax installment prior to the issuance of the tax bill for that installment.

“New Jersey homeowners who took what they considered the necessary step of prepaying their property taxes before the end of 2017 to counter the adverse federal tax changes should not be punished,” said Senator Sarlo. “These federal tax changes are bad enough. The state must be flexible and find ways to assist New Jersey homeowners being unfairly and directly impacted, and this is a common sense step that can help.”

The bill would allow for early property tax payments to be made through dedicated prepayments, defined in the bill as a payment toward an anticipated quarterly installment.

The new federal tax law limits individual’s maximum state and local property tax deductions to $10,000.

In anticipation, many New Jersey residents prepaid some or all of their 2018 property taxes. These prepayments were made to deduct those amounts on their federal income tax returns and reduce their federal income tax liability before the new federal income tax rules took effect.

Under current law, a municipal tax collector is only required to receive prepayments toward any property tax or assessment if the governing body of a municipality has passed a resolution to that effect. The bill would amend current law to permit property taxpayers to make prepayments toward property tax and assessments at any time during the year without prior authorization from the governing body of the municipality.

Upon receiving a dedicated prepayment, the tax collector would be required to issue a receipt of payment. If the amount paid exceeds the total property tax, the bill would require the tax collector to refund the excess amount within 30 days. If the amount paid is insufficient the difference would be collected or paid as other taxes are collected. In addition, when a mortgage company pays a property tax and the property owner has made a dedicated prepayment toward that tax, the tax collector is to refund the property owner the amount in excess of the tax and assessment levied.

The bill, S-1971, would take effect immediately and be retroactive to July 1, 2017.  The provisions of this bill are to apply to any property taxpayer who attempted to prepay a third or fourth quarter property tax installment for tax year 2018 in calendar year 2017.

The committee also endorsed a Senate resolution, SR-66, also sponsored by Senator Sarlo, urging Congress to address the accounting of mortgage escrow prepayments through requirements on federally-chartered financial institutions.