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New Jersey PILOT and Tax Abatement Programs

Dec 4, 2023
Justin Weinberg

New Jersey’s Payment in Lieu of Taxes (“PILOT”) program is a tax incentive and tools utilized by developers in New Jersey who are structured as “Urban Renewal Entities” working in areas in need of redevelopment or rehabilitation to pay a calculated tax fee based on a low percent of revenue or a set percentage of construction costs, rather than the traditional property tax bill, to ultimately reduce their overall tax burden.

Types of PILOT Program Plans 

The structure of the PILOT program includes many types of plans, including the Five-Year Exemption and Abatement Law and long-term tax exemption plans. The Five-Year Exemption and Abatement Law plan will have a maximum duration of five years and the long-term tax exemption plans generally range from 10 to 30 years upon official completion of the redevelopment project.

How to Participate in New Jersey’s PILOT Program

PILOT is offered as financial assistance for a mutual goal between City and developer in efforts to make a project work. Municipalities have the discretion to tailor the program to fit its needs, or not to adopt it at all. As such, the PILOT is adopted per project by ordinance. To participate in the program, redevelopers must choose to work in areas that municipalities have officially established as “blighted or “in need of rehabilitation.”

Municipalities have sole discretion over which redeveloper is ultimately accepted into the program and may deny submissions for reasons they deem necessary. Additionally, the developer will need to obtain pro-forma financial statements which include stated construction costs, estimates and other various priority line items. It is highly recommended to engage with an experienced attorney or tax specialist to assist in the application process as it is crucial to remain in line with all the requirements imposed to be accepted into the program.

Why Participate in New Jersey’s PILOT Program

Overall, the PILOT program can be highly beneficial for developers operating in New Jersey who fit the criteria and the municipalities that the developers will work in. It will result in substantial lessening of tax burdens for years to come for developers and municipalities will reap the benefits of improving their communities.  

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