New Jersey Supreme Court Declares Tax Sale Certificate to be Tax Liens

In a decision resolving years of conflicting New Jersey opinions, the New Jersey Supreme Court decided this week that a tax sale certificate purchaser holds a tax lien, and is thus entitled to a statutory rate of 18% interest.  See In re Princeton Office Park v. Plymouth Park Tax Services, LLC (June 25, 2014).  In the case, the debtor entered bankruptcy and submitted a reorganization plan that would only pay the tax sale certificate purchaser 6% interest.  The purchaser objected and argued that, because a tax sale certificate is a tax claim under 11 U.S.C. § 511, the interest rate could not be reduced below 18%.  The United States Court of Appeals for the Third Circuit certified the question of whether a tax sale certificate is a tax claim to the New Jersey Supreme Court to be answered.  The Supreme Court held that multiple provisions of the Tax Sale Law, including N.J.S.A. 54:5-6 (which refers to a tax lien as “continuous”) and N.J.S.A. 54:4-67 (which provides that a tax delinquency survives the issuance of a certificate), demonstrate that a tax sale certificate is a tax claim.  The Court further held that this statutory interpretation “furthers the Tax Sale Law’s fundamental objective of making tax sale certificates an attractive investment for third parties, thereby assisting municipalities in raising revenues.”  For an earlier analysis of these issues, please click here to see the blog post.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.