New Jersey Tax Court Adopts “Predominant Use” Test for Mixed-Use Property Classification

The New Jersey Tax Court granted summary judgment to the taxpayer and reclassified two mixed-use properties from Class 4A commercial property to Class 4C apartments. The properties consisted of six-story buildings with ground-floor retail space and residential rental units on the upper floors. The taxpayer sought reclassification to avoid additional realty transfer fees in connection with a pending sale. In a case of first impression, the court adopted a “predominant use test” to determine classification of mixed-use properties where statutory guidance is lacking. Applying this test, the court found that approximately 86–90% of the properties’ square footage and income were ...