Throughout the United States, taxpayers can expect to bear the burden of proof in property tax appeals. Standards vary by jurisdiction, but owners who seek to change a municipality’s assessment must convince a board or court that the property owner is correct in challenging the assessor’s conclusion. If they fail in that argument, the assessment remains unchanged.

Commercial taxpayers and their tax professionals often review decisions by local courts to glean direction and weigh prospects of a favorable outcome in their own cases. These stakeholders tend to only view complex commercial property cases for insight, ignoring residential and small commercial cases. But seemingly insignificant residential and small commercial cases are rich in detail that may aid taxpayers with a more sophisticated case when preparing to meet the standard of proof.

Some of these smaller cases shine a light on changing expectations of the court. For example, courts may begin to deem evidence that once would have been acceptable to meet the court’s threshold is no longer adequate. Thus, while the court does not change the law or create new standards, its interpretation of “sufficient competent evidence” may well move the goal post. The education obtained from these cases is not a guiding light to win a case, but rather a reminder of how not to lose one.

In New Jersey, law presumes that any property assessment is correct. Based on this presumption, any taxpayer appealing that valuation has the burden of proving the assessment is erroneous. The presumption is more than an allocation of which party carries the burden of proof. Rather, it expresses that in tax matters, the law presumes that the assessor correctly exercised their governmental authority. In a 1998 decision, MSGW Real Estate Fund vs. the Borough of Mountain Lak, the court stated that the presumption of correctness stands until sufficient competent evidence to the contrary is presented.

Courts must decide whether the evidence presented is sufficient to counter the assessor’s conclusion. To meet that standard, the evidence presented must be sufficient to determine the value of the property under appeal, thereby establishing the existence of a debatable question as to the correctness of the assessment.

This language is common in most jurisdictions. In New Jersey, it is also increasingly more common to see a change in the trial court’s interpretation of what meets the level of proof to question the assessor’s assumptions. The danger to taxpayers occurs when a court of special expertise establishes case law that, in effect, raises the standard of proof by simply increasing the evidence barrier to attain a reduction.

For example, in January of this year a New Jersey tax court decided Arteaga vs. Township of Wyckoff, where the taxpayer challenged the assessment of a single-family home assessed at approximately $900,000. The property owner offered an expert and an appraisal report for the years under appeal, while the municipality did not complete an appraisal, instead relying on the presumption of correctness.

The taxpayer’s expert cited three sales in a sales comparison and concluded a value of approximately $775,000. In a 10-page opinion, the court rejected the expert’s conclusions, finding fault with his adjustments to the comparable sales.

The court stated that an expert’s testimony must have a proper foundation to be of any value in an appeal. Citing earlier cases, the court stated that an expert must offer specific underlying reasons for their opinions, not mere conclusions. An expert witness is required to “give the why and wherefore of his expert opinion, not just a mere conclusion.” In this case, the court found that the plaintiff’s expert provided no substantive factual evidence to support the adjustments made.

The trend toward requiring a higher level of evidence has been growing over a number of years. As the court noted in a 1996 case, Hull function Holding Corp. vs. Princeton Borough, expert opinion unsupported by adequate facts has consistently been rejected by the tax court. Other rulings have stated that while the court has an obligation to apply its own judgment to valuation data submitted by experts in order to arrive at a true value and find an assessment for the years in question, the court must receive credible and competent evidence to make an independent finding of true value.

In the recent case, the court stated it was not provided with credible and competent evidence. As a result, the court had insufficient information from which to determine valuation. The court concluded that in general the expert provided no market analysis for any of the adjustments he made to his comparable sales.

The lesson to be learned: be aware of the potential of a new, heightened level of proof to establish a reduction. The case law has not been changed or altered. However, while most jurisdictions have case law suggesting that a court be mindful of the expense and reasonableness of data it should expect from a taxpayer to prove its case, trends have started to appear that swing the decisions toward a more difficult and expensive standard.

A number of recently decided residential tax appeals have followed this path to a find of no-change to the assessment. While the courts may be correct in the conclusions that evidence was lacking, they set a disturbing tone as to the level of expectation required for data to prove a value reduction.

The answer for taxpayers seeking a solution to this issue cannot be detailed so as to follow a definitive path to victory. For taxpayers seeking reductions in assessments, they must be aware and wary of not only the law, but the court’s most recent expectations.

Philip Giannuario is a partner at the Montclair, N.J. law firm Garippa, Lotz & Giannuario, the New Jersey and Eastern Pennsylvania member of American Property Taxc Counsel (APTC), the national affiliation of property tax attorneys.  Contact Philip at Ryan at This email address is being protected from spambots. You need JavaScript enabled to view it. or Jason at This email address is being protected from spambots. You need JavaScript enabled to view it.. 

"While the case law and appraisal science continue to evolve, the framework for valuing properties subject to environmental contamination remains relatively unchanged..."

The legal and appraisal communities have embraced the notion that environmental contamination can impair real estate value. After all, a property's potential uses or limitations on those uses have a direct bearing on the asset's marketability and profit potential.

An investor seeking to rein-in the tax burden on a contaminated property must navigate a legislative and regulatory framework that imposes liability on the property owner for environmental cleanup costs and remediation. In addition to the value lost when a property is directly contaminated, properties in proximity to the contaminated site can also lose value because they are subject to contamination.The devil is in the details, however, and uantifying the direct or proximate impact on value can prove problematic.

The State of New Jersey is a leader in attempting to define the impact of contamination on property value, and its highest court discussed this perplexing problem in the 1980s case of Inmar Associates Inc. vs. Carlstadt.

The New Jersey Supreme Court recognized that the costs associated with cleaning up environmentally contaminated properties would have a depreciating effect upon the properties' true value. The court also noted that deducting those costs dollar-for-dollar from the true value of the property is an unacceptable methodology, and deferred to the appraisal community to arrive at an appropriate valuation method.

Years later, in the case of Metuchen vs. Borough of Metuchen, the court identified a procedure it found acceptable. Without question, uncontaminated land is worth more than contaminated land, the court reasoned. Therefore, as contaminated land is cleaned up, its value increases. The legal question is, how should this capitalization of the cleanup costs affect the market value of the subject property?

In Metuchen, the tax court used the principles established in Inmar to form a foundation or core principles for assessing the value of unused, contaminated property that is subject to mandatory cleanup at the owner's expense, at an estimated but undetermined cost. Those are: cleanup cost, the effect on market value, calculating the impact and treating the cost of cleanup as a depreciable capital improvement.

Taking the lead from the New Jersey Supreme Court's ruling in Inmar, the tax court in Metuchen deferred to the appraisers to determine the costs of cleanup and appropriate capitalization time period. The parties essentially agreed upon the unimpaired value of the property and the court easily reconciled the difference in opinion on cleanup costs.

While the case law and appraisal science continue to evolve, the framework for valuing properties subject to environmental contamination remains relatively unchanged since Metuchen. That formula entails discounting the present value of cleanup costs and subtracting that from the property's clean value.
Most recently, the tax court used the Metuchen formula to find value in an unreported decision.

While courts, property owners and assessors use the Metuchen formula to determine the value of contaminated land, this method fails to deal with other factors associated with contaminated sites. One of those factors is environmental stigma, a term the appraisal community uses in attempting to quantify the adverse effect on property value produced by the market's perception of increased risk. Even after environmental cleanup and remediation, environmental stigma may still lower the otherwise unimpaired property's value.

Philip J. Giannuario is a partner in the Montclair, NJ law firm Garippa, Lotz & Giannuario, the New Jersey and Eastern Pennsylvania member of American Property Tax Counsel. He may be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it..

"In many cases, taxing jurisdictions cannot support or defend the values that are placed on those properties under appeal..."

By Philip J. Giannuario, as published by Commercial Property Executive Blog, August 2010

With real estate values down in all sectors across the nation, tax appeals are climbing to record numbers. In many cases, taxing jurisdictions cannot support or defend the values that are placed on those properties under appeal.

As municipal revenues run thin and state governments cut programs to balance their budgets, those governments understandably want to avoid returning significant amounts of money as tax refunds.

As a result, many taxing authorities are exploiting technicalities in state laws to seek dismissals of valid appeals. That makes it critically important that property owners stay abreast of all state requirements that may bear on tax appeals, and rigorously follow required procedures.

New Jersey's Chapter 91 statute provides a clear example of the kinds of technicalities state's employ. The statute requires the assessor to send a request to the owner of income-producing properties and ask for financial data related to the asset. The owner then has 45 days to respond to the demand. If the owner fails to respond in that time, he or she forfeits the right to challenge that year's assessment.

In a recent New Jersey case, a municipality moved to dismiss an appeal for a failure to respond to the income and expense request. The property owner had designated an agent to receive property tax notices and correspondence. Although the agent received the request, the agent failed to file the form with the municipality.

The owner argued that the strict words of the statute required the assessor to serve the owner directly. The court held that the only address on file was that of the agent, however, and reasoned that the owner was bound by the statute. On those grounds, the court dismissed the case.

The simple lesson to learn from this example is that a number of procedural hurdles exist in each state's tax law. Taxpayers must become knowledgeable about all applicable procedural rules and create failsafe, redundant systems to guard against the needless loss of their tax appeal rights.

Philip J. Giannuario is a partner in the Montclair, New Jersey law firm Garippa Lotz & Giannuario, the New Jersey and eastern Pennsylvania member of American Property Tax Counsel, the national affiliation of property tax attorneys. Phil Giannuario can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

"In point of fact, industrial property owners will save themselves time and trouble if they retain a knowledgeable property tax expert to help sort out the most defensible method for categorizing the various machinery, apparatus and equipment in their plants. At the same time, the New Jersey legislature would serve constituents well by clarifying once and for all the language defining what is and is not industrial machinery and equipment for property taxes purposes."

By Philip J. Giannuario, Esq., as published by Real Estate New Jersey, May 2007

Amazingly, every possibility exists that the major equipment in a New Jersey industrial plant is taxed as real property if the owner's case lands before one judge, but if a different judge hears the case, the equipment is not taxed as real property. How did New Jersey put industrial owners in this kind of dilemma and what can be done about it?

In 1990, the Tax Court heard the case of Texas Eastern v. Director, Div. Of Taxation, a case dealing with Texas Easter's gas pipeline distribution facility in New Jersey. The Court determined that the vast majority of the contested property was real property subject to local taxation. Based on the finding, Tax Eastern appealed.

In 1991, relying in part on Texas Eastern, the New Jersey Tax Court decided in the General Motors case that most of the major equipment in the case was real property subject to local taxation. Both this and the Texas Eastern decisions seemed at odds with legislative history-as far back as 1966, New Jersey sought to exclude business personal property (machinery, apparatus and equipment) from taxation as real property. No real property tax assessment can be levied on business personal property, thus, the more such property is defined as business personal property, to lower the real property tax assessment. As a result of these decision and others, in 1992, the legislature passed the Business Retention Act (BRA) to clarify what industrial equipment should be taxed as business personal property and which as real property. Despite BRA and the Appeals Court remanding the original General Motors case for retrial, the second General Motors trial, decided in 2002, resulted in a new judge ruling the same way the first judge had ruled in the original case.

As the original General Motors case, the Appeals Court remanded the Texas Eastern case to different judge for retrial. BRA, passed after both cases had been appealed, attempted to remind taxing authorities that business machinery, apparatus and equipment should not be taxed as real property but rather as personal business property. The Appeals Court appeared to understand the legislature's intent in BRA and remanded both cases to the original court for reconsideration. The new judge in Texas Eastern reconsidered the original court ruling in 2006 and concluded that none of the property was subject to taxation as real property. Much of the machinery and equipment in he Texas Eastern facility was comparable in size and quality to that in the General Motors plant. Despite the similarity, the Texas Eastern Court rendered a decision diametrically opposed to both decisions of the court in the General Motors case.

In Texas Eastern, the court stated that BRA sought more broadly to exclude from local property taxation personal property used or held for use in business. The Act came as a response to the prior decisions in General Motors and Texas Eastern and to cases like this where business equipment is taxed as real property rather than as personal property. The conflicting opinions in the General Motors case in 2002and Texas Eastern in 2006 create an anomalous situation for industrial taxpayers. Two directly opposite Tax Court decisions regarding BRA put taxpayers in a quandary. Do they account for equipment and machinery as business personal property or as real property? One judge ruled one way and another a different way. Since categorizing these assets as business personal property will reduce real property taxes, many taxpayers will, without too much thought, attempt to argue non-taxability as route to lower taxes. While simple on its face, this alterative could put some taxpayers at risk.

In point of fact, industrial property owners will save themselves time and trouble if they retain a knowledgeable property tax expert to help sort out the most defensible method for categorizing the various machinery, apparatus and equipment in their plants. At the same time, the New Jersey legislature would serve constituents well by clarifying once and for all the language defining what is and is not industrial machinery and equipment for property taxes purposes. The state needs stability in this critical area. Conflicting options on the tax law disadvantage any taxpayer that needs to make cogent decisions about investment and taxes in this state.

Philip J. Giannuario is a partner in the Montclair, NJ law firm Garippa Lotz and Giannuario, the New Jersey and Eastern Pennsylvania member of American Property Tax Counsel, the national affiliation of property tax attorneys. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..