Example of the Ratio
Say Directors Ratio is 85%
Common level range would be 72.25% – 97.75 (85% x .85 and 85% x 1.15)
If True Market Value was 95,000 and Assessment was 90,000, then the Assessment divided
by the Value would be 94.74%.
- Thus within the Chapter 123 range, so no reduction would be granted
In 1973, the New Jersey Legislature adopted a formula known as Chapter 123 to test the fairness of an assessment. Once the Tax Board has determined the true market value of a property during an appeal, they are required to use this formula and automatically compare the true market value to the assessment.
If the ratio of the assessment to true value exceeds the average ratio by 15%, then the assessment is automatically reduced to the common level.
However, if the assessment falls within a common level range, + or – 15%, of the average ratio, no adjustment will be made.
If the assessment to true value falls below the common level range, the Tax Board may increase the assessment to the common level!
This test can only be conducted when the taxpayer supplies sufficient evidence to enable the Morris County Board of Taxation to determine the true market value of the property subject to the appeal.
You should inquire into your district’s average ratio before filing a tax appeal. This ratio changes annually on October 1, for use in the subsequent tax year.
Director’s Ratio = 85%
Common Level Range = 72.25% - 97.75%
True Value = $95,000
Assessments = $90,000
Ratio = 94.74% ($90,000/$95,000)
Judgment = No Change