New Jersey Governor: Prepaid Property Tax Bill Needs Tweaks

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By Leslie A. Pappas

New Jersey Gov. Phil Murphy (D) conditionally vetoed a measure that would permit state residents to prepay 2018 property taxes to get a deduction in 2017.

Murphy sent the bill back to the Legislature for “minor amendments” to address “technical concerns.”

“I fully support efforts to protect New Jersey taxpayers,” Murphy said in the conditional veto filed April 5, “but certain aspects of this bill could be improved with minor amendments.”

A.B. 3382, which both houses approved unanimously, was written to ease tax burdens created by the 2017 federal tax act ( Pub. L. No. 115-97). The new federal law, among other changes, caps the state and local tax (SALT) deduction at $10,000 and lowers the amount of mortgage interest that can be deducted.

Residents in many high-tax states started prepaying their 2018 taxes in late 2017 in the hope that they would be deductible. However, the Internal Revenue Service said in late December that taxpayers could only deduct 2018 property taxes on their 2017 tax returns if the levy had been assessed by local officials in 2017.

Eliminating Confusion

Former New Jersey Gov. Chris Christie (R) had issued an executive order directing municipalities to accept payments for 2018 property taxes and credit them to the 2017 tax year if payments were submitted by Dec. 31, 2017.

The New Jersey bill attempts to eliminate confusion by explicitly clarifying that New Jersey taxpayers may prepay property taxes regardless of whether the municipality issued quarterly tax bills prior to prepayment.

The Assembly on April 5 concurred with the governor’s recommendations on second reading. The Senate and the Assembly will reconvene April 12.

To contact the reporter on this story: Leslie A. Pappas in Philadelphia at lpappas@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

For More Information

Text of A.B. 3382 is at http://src.bna.com/xHp.Text of the conditional veto is at http://src.bna.com/xHn.

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