At trial in the Tax Court, Judge Kuskin held that the DSM Nutritional expert’s sole reliance on the cost approach was appropriate due to the fact that “other market data,” such as “comparable sales or leases, [were] scarce or nonexistent.” In addition, at trial, the question of depreciation became a major issue. Addressing this issue, Judge Kuskin noted that “the analysis by plaintiff’s appraiser was not error free” but that “defendant presented no depreciation analysis,” or other proofs to challenge the conclusions or adjustments of plaintiff’s appraiser. As such, Judge Kuskin evaluated in detail DSM Nutritional expert’s testimony and after noting the need to make corrections and adjustments, Judge Kuskin concluded that the “original assessment [was] unreliable,” and therefore not entitled to “its presumptive correctness.” In so doing, Judge Kuskin ruled that DSM Nutritional overcame the presumption of correctness that normally attaches to a municipality’s assessment. Since the presumption of correctness of the assessment no longer attached to DSM Nutritional’s assessment, Judge Kuskin was under a duty to find the true value of the property. In so doing, Judge Kuskin lowered the assessment of the property by $77 million for the 2004 tax year and by $74 million for the 2005 tax year.

The Appellate Division affirmed Judge Kuskin’s decision. Some sources say that this case will be appealed to the New Jersey Supreme Court.

As it stands now, in order to refund the $2.5 million dollars to DSM Nutritional, the property taxes in White Township are going to be raised by 5 cents per 100 dollars in assessed valuation.

To read about this decision from LehighValleyLive.com, click Property Tax.

To read about this decision from the NJ.com, click Property Tax.

The New Jersey Supreme Court stated in part:

“In our view, the analysis for ‘hospital purposes’ must take into consideration the many medical pursuits permitted to the ‘modern’ hospital in New Jersey. A hospital can no longer be restrictively equated with a nineteenth, or even twentieth, century vision of a monolithic building, in which is offered continuous inpatient care or emergency treatment, twenty-four hours per day, to the sick, disabled, and infirm. Licensing authorities have allowed hospital activities to evolve as inpatient stays have diminished. Today, treatment often is delivered on an outpatient basis at a hospital’s main facility, as well as at off-site facilities, backed up by the promise of ready inpatient care from the general, acute-care hospital when necessary. Thus, a fair definition of core “hospital purposes” must acknowledge the variety of activities that a modern hospital can be expected to perform for patients, be they inpatients or outpatients. That said, a hospital’s expansive view of its mission does not necessarily equate with ‘hospital purposes’ in the tax exemption analysis.”

Ultimately, the Supreme Court affirmed the majority of the Tax Court’s and Appellate Division’s holdings, which affirmed the denial of the Hospital’s tax exemption application, and remanded the case back to the Tax Court for further fact-finding on one narrow issue. (The New Jersey Supreme Court remanded the case to the Tax Court for further fact-finding on the sole and precise issue as to whether the PT Service on the second floor of the hospital should be tax exempt.)

The full text of the New Jersey Supreme Court’s opinion may be found HERE.