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UPDATE FROM THE BCBA’S REAL PROPERTY COMMITTEE – NJ MANSION TAX CHANGES JULY 2025

Author By J.G.Posted on

On June 30, 2025, Governor Murphy signed bill S4666 / A5804 into law, making the seller the responsible party for paying the “Mansion Tax” (N.J.S.A. 46:15-7.2 et seq.), in addition to the Realty Transfer Fee (N.J.S.A. 46:15-5 et seq.). The new law also substantially increases the rates (of said Mansion Tax) on transfers for more than $2,000,000.00. These changes are effective as of July 10, 2025, and are as follows:

1. The new tiered system of “Mansion Tax” is based upon the amount of consideration recited in the deed and will be charged as follows:
a. 1% if the consideration is in excess of $1,000,000 but not in excess of
$2,000,000
b. 2% if the consideration is in excess of $2,000,000 but not in excess of
$2,500,000
c. 2.5% if the consideration is in excess of $2,500,000 but not in excess
of $3,000,000
d. 3% if the consideration is in excess of $3,000,000 but not in excess of
$3,500,000
e. 3.5% if the consideration is in excess of $3,500,000.

2. Deeds with consideration in excess of $2,000,000 will need to be recorded by the county no later than July 9, 2025, for the prior 1% “Mansion Tax” fee to be honored.

3. For deeds recorded beginning on July 10, 2025, and before November 15, 2025, the grantor may apply for a refund with the New Jersey Division of Taxation for the difference in the additional fee that was required by the county to record the deed. The grantor will only be eligible for the refund if the contract of sale for the property was fully executed by July 9, 2025, and the refund request is submitted within one year following the date of the recording of the deed.

Presumably, the Division of Taxation will aim to either eliminate (or replace) the Affidavit of Consideration for Use by Buyer (form RTF-1EE) or potentially revise the Affidavit of Consideration for Use by Seller (form RTF-1) before the July 10 implementation date. I suggest that you closely monitor the Division of Taxation’s website for new forms: https://www.nj.gov/treasury/taxation/realtytransfees.shtml.

Based on the current situation, it is more important than ever to be certain that deeds conveying property within these revised dollar amounts are recorded immediately upon closing as any delay could result in the recording being rejected and additional fees owed.

As we obtain further information, we will keep you updated.

Linda H. Schwager, Chair, Real Property Committee

BERGEN BAR TAX BULLETIN, VOL. 41, NO. 6

Author By J.G.Posted on

Written by: Theodore M. David, Chairman Emeritus

Current Items: Special Summer Edition

1) Anniversary Travel
2) Beach Reading

1) For those of you who are celebrating your 30th Anniversary of whatever, if thinking of giving your special partner some gold or silver trinket or a fabulous dinner at some wonderful restaurant, realize there is a much better alternative. This is, in fact, the 30th anniversary of the IRS tax seminar series. Why not go the distance and make plans to take that partner of yours to Orlando in August, where temperatures can reach 110°. For a measly $319, you can be part of this IRS celebration and get yourself some CLE credits as well as the admiration and love of your dear one. Mention your Bar affiliation and get $10 off. BTW, that’s true.

2) I just got done reading the “Devil in the White City,” it’s the true story of the 1893 World’s Fair in Chicago. It’s got interesting characters and a behind-the-scenes murder plot as well. But I can’t recommend it. Not when the IRS issues its Data Book for fiscal year 2024. Forget curling up on that beach chair with Erik Larson as your reading companion, go instead to IRS.gov and order your Data Book. Imagine how you can impress your friends with all those IRS statistics, both real and imaginary.

If the weather improves and there are no groundbreaking tax developments, you may have to re-read this bulletin for both July and August.

Questions or Comments should be sent to: Tdavidlawyer@gmail.com.

STATEMENT FROM THE BERGEN COUNTY BAR ASSOCIATION’S BOARD OF TRUSTEES

Author By J.G.Posted on

The Bergen County Bar Association issues this statement to reaffirm a simple but vital principle: our system of justice depends on an independent judiciary and a legal profession that is free to represent clients without fear or favor.

We stand in support of the rule of law and the independence of our judiciary, cornerstones of our constitutional democracy. Judges, attorneys, and courts must be free to carry out their duties without intimidation, interference, or retaliation.

Public discourse from any aspect of the political spectrum that targets judges or penalizes attorneys for representing certain clients undermines confidence in our legal system and threatens the integrity of a profession dedicated to justice, fairness, and due process. Our system functions because the public trusts that courts apply the law fairly and that lawyers serve their clients without fear of consequence. That trust is not easily earned, and once lost, not easily restored.

Our association remains committed to advancing relations and understanding between both the courts and counsel, and the legal profession and the general public. Lawyers and judges are certainly not above criticism. But when criticism from any aspect of the political spectrum crosses into coercion, and disagreement by anyone encourages efforts to intimidate, it is the responsibility of the legal community to advocate zealously and ethically to ensure that our system remains impartial, independent, and accessible to all.

We, as members of the Bergen County Bar Association’s Board of Trustees who come from all political spectrums, stand firmly with the legal community and the public in upholding these essential principles.

BERGEN BAR TAX BULLETIN, VOL. 41, NO. 4

Author By J.G.Posted on

Written by: Theodore M. David, Chair, Tax Law Committee

  1. The Sleep Test
  2. Estate Tax Going?
1.

They say if you become a teacher by your students, you will be taught. I subscribe to that homily. I spent 32 years teaching at the University ending up a tenured full professor in law and taxation. One of the most satisfying parts of being a tax professor and tax practitioner was having the opportunity to mentor a new tax lawyer. I had such an opportunity in the early 1980s when I encountered in my class Scott Novak. Many years later I think he would agree I helped him get on the path of practicing tax law. So it is with much pride that I cite for this bar bulletin a chunk of his recent article which appeared in the Bloomberg publication called Tax Management Memorandum dated April 28, 2025. The Article is entitled: Businesses are facing financial headwinds – a Practical Guide. The article is a long one and extremely helpful but one part of it draws my attention. Scott asked the question that many lawyers, accountants and I am sure clients as well probably have had over the years: When do you hire a tax lawyer? Needless to say, there are many intricate and complicated issues which suggest the answer but a simple version Scott has set forth in his article: “it often occurs to me that the best service that I can provide to a client is to help the client sleep better at night. When speaking to accountants, I will sometimes get asked the question, how do we know when it’s time to refer a client to a tax attorney. There are several answers to that question, but first and foremost, send them to an attorney when their tax issues keep them up at night.” Easy to use and on point. But this is a tax bulletin, and the rest of the Article I here summarize and excerpt:

Many of my clients make decisions when faced with tough times that haunt them for years to come. What follows are some thoughts from experience in the trenches. One caveat – neither my firm nor I condone the nonpayment of taxes, or unfiled returns. But we do understand the realities that businesses might face in the difficult times ahead and would like to help you make the best decisions possible.

Trust Fund Taxes — Always Pay These! There is a reason why this comes first, ahead of the topics that follow. The moment that you collect sales tax, you are personally responsible to turn that sales tax over to the state.

Filing Tax Returns Late or Not Filing Them at All — Federal. Your business is struggling, maybe you’ve fallen behind a bit and you’re very distracted with the minute-to-minute issues that you are faced with. Wouldn’t it be simple to just not file your tax returns right now, especially if paying the tax might be impossible at the moment or might force some hard decisions that you would prefer to put off? When a client comes to me with the question of whether or not to file, here is what I tell them. The penalties for failure to file a tax return on time are far greater than the penalties for failure to pay on time.

Annual Business Registration Fees Many smaller entities neglect to register and pay the annual fees required by the state that they were organized in. While the annual fees are not onerous, if you ever want to terminate that business, and those fees have not been paid along the way, it is likely that all of those fees will all have to be paid, in addition to a penalty in some states. Better to stay on top of those fees and to terminate a business as soon as possible when it no longer serves a purpose.

W-2 or 1099? Some business owners opt to treat certain workers as independent contractors (1099) rather than employees (W-2). Why might they do that when facing financial hardships? Two primary reasons. First, the burden of state and federal employment taxes is fully shifted from the employer to the worker. Second, the employer’s workers’ compensation burden may be reduced if the individual is not the employee of the employer. What some may not realize is that the question of employee vs. independent contractor is not a simple matter of choice or preference. There are tests at both the state and federal level that are used to determine the status of a worker. There also exists an entire body of law generally called “employee misclassification.” If reading that title leaves you with the impression that there is a bias towards classifying workers as employees, you are correct. And the states are much more invested in this than the IRS. Almost no one comes out of a state employment tax audit unscathed.

I am sure if you ask, Scott would be glad to send you the complete article that you may want to share with your business clients. He’s at a Scarinci Hollenbeck. PS He got straight A’s in my class.

2.

From Martin Shenkman this note: US representative Randy Feenstra, a Republican from Iowa introduced a bill called the Death Tax Repeal Act. It was introduced February 13, 2025 with more than 170 representative signing on. Senator John Thune introduced companion legislation in the United States Senate. Marty comments: “Tax seers have a batting average well below that of local weather forecasters and that it’s just not possible to predict what this Congress may do.” I add or anyone else in this current government.

Questions or comments should be emailed to Tdavidlawyer@gmail.com.

BERGEN BAR TAX BULLETIN, VOL. 41, NO. 3

Author By J.G.Posted on

Written by: Theodore M. David, Chair, Tax Law Committee

Current Items:

  1. What is the Matter Alice?
  2. Just Do It
  3. New NSA Man at IRS

1. I’m late, I’m late, for a very important date! No time to say Hello, Goodbye, I’m late, I’m late, I’m late. If you care to remember your childhood, somewhere in your gray matter you will recall the White Rabbit in Alice in Wonderland whose obsession with time is a prominent symbol in the story. Read More

BENCH-BAR COMMITTEE MEETING – MARCH 11, 2025

Author By J.G.Posted on

Dear Members,

The Bergen County Bar Association leadership meets with the Bergen County Assignment Judge quarterly to discuss issues of mutual interest to the judiciary and our membership. For matters of general importance that you believe should be raised at our next meeting, please email the BCBA.

This is a summary of the March 11, 2025, meeting with the Hon. Carol Novey Catuogno, A.J.S.C.

Judge Catuogno opened the meeting by extending her appreciation for the cooperation between the Judicial Bench and the Bar. Read More

FEBRUARY TAX BAR BULLETIN, VOL. 41, NO. 2

Author By J.G.Posted on

Written by: Theodore M. David, Chair, Tax Law Committee

Current Items:

1) Call the Midwife?
2) The Dirty Dozen, Again?
3) IRS Side Gig

1) Now, I am not going to ask you what you did last week. Heaven knows I didn’t do much myself, but certainly, there has been a swirl of activity affecting our tax administration system and the rest of the world. I’ll take it back: if you are a practicing lawyer, you probably do know what you did last week and at least who you will bill for all that time. The old tired joke goes that the young lawyer dies prematurely, goes to heaven, and meets St. Peter at the pearly gates. St. Peter says to him, “We were expecting a much older person.” The lawyer says, “I’m barely 45.” St. Peter responds, “Oh, we were judging from your billing time records.” If you are one of the hundreds of thousands of federal employees, you may have a tougher time deciding whether you are staying or going and what you did last week. And the IRS is no exception. Apparently, the same offer has been made to the Internal Revenue Service to trim the fat of our bloated government. Helping the trimming, the former Commissioner took off on January 20, 2025. And of course, the question then came up of who would replace him. Now, there is no cause for alarm because we now have an Acting (soon to be fired, retired, let go or downsized) Commissioner. IRS Chief Operating Officer Melanie Krause will become the Acting IRS Commissioner. The deputy commissioner who could have become Commissioner “retired” two weeks ago. What a coincidence. So Krause has moved into the new acting position. She is relatively new to the IRS, having joined in October 2021. But no matter, she spent 12 years in the federal oversight community in the Government Accountability Office.

Now, all of this would be ordinary, except that Krause also maintains an active license as a registered nurse. That is just perfect. Everyone knows these days that nurses are far more important than doctors. If you don’t believe me, catch the PBS series called “Call the Midwife.” It will make you glad that you went to law school instead of medical school. Someone at the IRS has realized that the system is currently sick. So, it’s time to call the midwife or at least a registered nurse. By the way, IRS employees have been prevented from skipping and grabbing eight months of free pay until the end of tax season. Come May 15, I am sure thousands, some with great relief, will find employment elsewhere. What effect this will have long-term on tax administration remains to be seen. Thousands of robots coming?

2) Annually, the Internal Revenue Service publishes the Dirty Dozen list. The IRS warns that these things are common schemes that threaten taxpayers’ tax and financial information. It is not a formal listing of agency enforcement priorities. But it has become somewhat of a tradition. So I list here the notorious dozen: email scams of all varieties; bad social media advice: online account help from scammers; fake charities; false fuel tax credit claims; credits for sick leave and family leave; bogus self-employment tax credits; improper household employment taxes; overstated withholding scam; misleading offers in compromise; ghost tax return preparers and lastly, new client scams where cyber criminals impersonate new potential clients to trick tax professionals into responding to their emails. Be on alert as well for those false emails asking what you did last week. IRS would like taxpayers who have been involved as a victim in any of these to file form 14242 with the Internal Revenue Service at 24000 Avila Rd., Laguna Niguel CA 92677.

3) The US District Court for the Southern District of Florida issued a permanent injunction against a Miami tax return preparer named Jean-Lewis. It appears Mr. Lewis had simply started a side gig involving filing tax returns for taxpayers. It was simple: he would prepare a tax return for the clients and give them a copy. He would then create a phony tax return file it with IRS requesting a larger refund. When the refund was received he would make sure the client got that which was set forth on the return he had provided. The difference was Jean-Louis’ profit. So he has been banned from doing most anything having to do with federal income tax returns and has been ordered to pay up $245,275 in ill-gotten gains from his side gig. He has also declined the position of Acting, Acting Commissioner of Internal Revenue as he said, “it is not my type of gig and besides, it lacks job security.”

Questions or Comments   should be sent to:    Tdavidlawyer@gmail.com

NEW JERSEY SUPREME COURT VACATES ADVISORY COMMITTEE ON PROFESSIONAL ETHICS OPINION 745

Author By J.G.Posted on

In June, the BCBA joined the NJSBA and several other local and affinity bar associations in a Petition for Review of Opinion 745 of the Advisory Committee on Professional Ethics. That opinion addressed the long-standing practices of trial attorneys who are certified pursuant to Court Rule 1:39, et seq. Specifically, Opinion 745 provided that New Jersey-certified attorneys could not pay referral fees to out-of-state attorneys who referred cases for their specific area of expertise.

The Supreme Court of New Jersey agreed with the Petitioners and vacated the Opinion. Thank you to BCBA Past President Michael J. Epstein for representing the BCBA in this matter.

Click below to read the opinion.

OPINION

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