NJ Tax Abatement Laws
The New Jersey Long Term Tax Exemption statute permits municipalities to grant tax exemptions to limited dividend entities that undertake redevelopment projects, and low and moderate-income housing projects in Urban Enterprise Zones or other areas in need of redevelopment. The technical term for an abatement tax is “Payment In Lieu Of Taxes” or “PILOT.” Obtaining a tax abatement can be essential to the financial success of a proposed development, particularly when competitors have already obtained such abatements. Moreover, the decision of whether or not to grant an abatement is a legislative act by the governing body.
Abatements also have cash flow benefits, with payments graduated to provide the greatest relief upfront, and cash flow predictability, with taxes set at a fixed percentage after substantial completion of the project. Additional programs provide qualified projects an exemption from sales tax on capital improvements, adding 7% directly to their bottom line of any project.