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State Overpays $1.6 Million in Property-Tax Relief, Looks to Recoup Its Money

Inflated payments mostly tracked to homeowners who took full credit for multi-tenant properties

2-family house

Thousands of New Jersey residents have collected inflated property-tax relief credits from state programs that provide a combined $1 billion in relief each year, an investigation by the Office of the State Comptroller has determined.

The state is now trying to recover as much as $1.6 million, the comptroller’s office said in a report released yesterday.

The inflated credits are the result of homeowners who live in multiunit properties taking the full credit for the property for themselves, instead of only a portion as the relief-program rules dictate.

The review of the relief programs, including the popular Homestead program, recommends that local tax assessors share information about multiunit properties with the state Division of Taxation. It also recommends changing the application for the Homestead program to make it clear that residents of multiunit dwellings are only eligible for the credit for their unit, not the entire property.

“Our report identifies a gap in the oversight of property-tax relief programs and it offers a clear solution for closing that gap,” said Marc Larkins, the state’s acting comptroller. “The state can save millions of dollars a year by requiring local tax assessors to report already known information.”

The Division of Taxation is already working to recoup funds from those who received the inflated credits, according to the report, with letters going out to 3,771 residents who received full credits under the Homestead program for multiunit properties. As much as $1.6 million is expected to be collected, the report said.

The comptroller’s office focused on Homestead credits for the 2011 tax year, which were paid out in 2013 due to delays caused by state budget problems. There were no credits at all paid out in 2014, again due to budget problems, with the next payments related to the 2012 tax year now scheduled for next month. Credits for qualified seniors are expected to average $515, and $404 for other qualified homeowners.

“We look forward to continuing to work with the state Division of Taxation to ensure that dollars set aside for property-tax relief are spent appropriately and as the law intended,” Larkins said.

In all, the current state budget allocates just over $1 billion to direct property-tax relief programs. They include the Homestead program, which provides a direct credit on property-tax bills to senior homeowners making up to $150,000 annually and other homeowners making up to $75,000 annually, and the Property Tax Reimbursement program also known as “Senior Freeze.” That program provides a rebate to seniors who meet income and residency requirements.

The state also administers another relief program that generally allows homeowners to deduct up to $10,000 in property taxes from their gross income.

All three programs have rules that link the size of the credit or reimbursement homeowners are eligible to receive to the percentage of the property they live in, the comptroller’s report said. For example, a homeowner living in a duplex is entitled to 50 percent of the credit for that property, assuming both units are the same size.

The investigation was launched in response to a tip the comptroller’s office received about homeowners in Kearny who were receiving full credits for shared properties. After checking out the information, the comptroller’s office found seven homeowners received nearly $3,000 more than they should have.

The comptroller’s office then worked with the Division of Taxation and came up with 65,000 cases in which homeowners received full property-tax relief credits for addresses that showed up on more than one state tax return.

Joseph Perone, a spokesman for the state Department of Treasury, which includes the Division of Taxation, thanked the comptroller’s office “for its diligent work on this report.”

“The state is always vigilant in pursuing cases of abuse, fraud, and duplication while ensuring that all eligible New Jerseyans get property-tax relief,” Perone said. “The Division of Taxation has already begun implementing the OSC’s recommendations, and it has sent letters seeking adjustments from the taxpayers who were cited.”

New Jersey residents can report other examples of waste, fraud or misconduct in local or state government to the comptroller’s office by calling 1-855-OSC-TIPS or emailing tips to .

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