For years, municipal tax officials have received letters from Verizon with a simple message: The company would no longer pay property taxes on telephone poles, lines, and other infrastructure.
In its letters, the telecom giant says because it no longer provides landline phone service to more than 51% of a municipality — a threshold set by state law in 1997, before cellphones became ubiquitous — it is no longer subject to taxation on its infrastructure, known as business personal property.
Lawmakers and municipal officials have claimed that threshold was meant to be applied only when the law was enacted, and now Sen. Holly Schepisi (R-Bergen) has introduced a bill that would eliminate the threshold altogether to continue the flow of tax revenue from Verizon to New Jersey towns.
“It’s an unintended erosion of the local property tax base that impacts all of the other local property taxpayers in these and a whole host of other municipalities,” Schepisi said in an interview.
The result is the loss of a relatively small source of revenue for each individual town, but statewide, the cost climbs into the millions.
Schepisi’s bill — a new version of legislation that has failed to advance in the past — would also subject small cell network nodes to the state’s business personal property tax, which since 1993 has only been levied on telecom and petroleum refining firms.
Another lawmaker, Sen. Shirley Turner (D-Mercer), has proffered a similar piece of legislation that would remove the 51% threshold but limit the tax to telephone companies that held a regional monopoly before the enactment of the federal Telecommunications Act of 1996, or their corporate successors. In New Jersey, Verizon is the only firm that fits that definition and has a presence in most parts of the state.
“It makes a lot of sense to me,” Turner said. “It’s one way we can help reduce the property taxes that are so onerous here in New Jersey because companies like Verizon — they should be paying their fair share and not expect the local taxpayers to pay their tax responsibility.”
The fight over telecom taxes is longstanding. Verizon first told towns it was no longer responsible for paying property taxes in 2008, and a court fight over that declaration has yet to be resolved.
Though a tax court judge in 2019 ruled Verizon was required to pay taxes on its poles and cable to Hopewell Borough, it did so after finding Verizon still met the 51% threshold and without weighing in on whether, as Schepisi argues, that standard was meant to only be applied once (a 2012 tax court decision found the 51% test must be performed annually).
The 2019 ruling allowed the firm to continue objecting to payments in other towns, and Verizon has appealed the tax court decision, but that case has languished in the courts amid staggering backlogs accumulated during the pandemic.
“We had oral arguments on the appeal this time two years ago. We still don’t have an appellate court decision, which is beyond ridiculous in my mind,” said Hopewell Mayor Paul Anzano.
It’s not clear how Verizon will respond to attempts to solidify its tax obligations. The firm hasn’t reported lobbying against past versions of either bill, but it had little reason to intervene since none of those bills made it as far as a committee hearing.
“The validity of New Jersey’s (business) personal property tax is currently in litigation, so we are waiting for a formal court decision,” said Rich Young, a Verizon spokesperson. “In the meantime, we were just made aware of the senator’s proposal. We will reach out to her to discuss the current tax, her proposed changes, and the impact to the state.”
Anzano said he fears Schepisi’s bill could extend the tax burden to cable providers who don’t pay it under existing law, thus drawing industrywide opposition likely to doom the bill. The senator said that isn’t the intent.
“It’s something that they have historically paid, and now, because of this misinterpretation in that tax court case, they went from paying this as everybody else has for decades to now paying zero,” she said. “It’s trying to remedy that.”
A cash crunch for towns
The fight over telecom taxes comes amid a time of upheaval for municipal budgets.
New Jersey towns and cities face difficult budgeting questions as they decide how to deal with voluminous increases to health premiums, stark jumps in the price of natural gas, and persistent inflation.
“Municipalities are getting kicked in the head from multiple angles,” Schepisi said.
The business personal property taxes paid by Verizon aren’t a major source of revenue for any given municipality.
Anzano said Hopewell receives roughly $50,000 in taxes from the firm annually. The borough’s total anticipated revenue for fiscal year 2022 was $4 million.
Schepisi said Emerson, whose receipt of a letter from Verizon spurred her introduction of the bill, got about $23,000. Emerson budgeted about $14.5 million in revenue for the 2022 fiscal year.
But statewide, those taxes account for millions of dollars of revenue each year, and that doesn’t include litigation costs faced by Hopewell, which has spent more than $300,000 on its court fights, and by other towns that want to force Verizon to pay the tax.
“Our litigation’s about one tax year. In the interim, there’ve been 12, 13 other tax years. Do we have to litigate each tax year? And these other hundred towns that have lawsuits pending, are they going to have litigate every tax year?” Anzano said. “It’s a mess, and that’s why it cries out for a legislative solution.”
Turner’s bill would require companies to pay attorney’s fees for a municipality if the town wins in a business personal property tax case.
“It costs the taxpayers even more money every time they go to court,” she said. “Verizon, of course, they have deep pockets.”
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