On December 31, 2008 the New Jersey Appellate Division affirmed Chabad of Randolph, Inc. v. Township of Randolph, a case that I have been deeply involved with as counsel for the plaintiff. As a result of this decision, a religious organization will not have to pay property taxes on the property used as a residence by the religious organization’s rabbi.

This matter started on October 1, 2005, after the defendant, the Township of Randolph, denied the plaintiff, the Chabad of Randolph, a parsonage exemption for the residence occupied by the plaintiff’s rabbi. The defendant denied plaintiff’s application due to alleged zoning violations and the belief that the plaintiff did not otherwise qualify for a parsonage exemption.

Subsequently, on appeal, the County Tax Board affirmed the defendant’s decision to deny the plaintiff’s parsonage exemption.

Afterwards, the plaintiff then appealed to the Tax Court of New Jersey where the Tax Court reversed the County Tax Board’s decision. At trial, the Tax Court judge concluded that the plaintiff carried its burden of proving that the rabbi’s Chabad-owned residence was entitled to a parsonage exemption under N.J.S.A. 54:4-3.6, which exempts from taxation “the buildings, not exceeding two, actually occupied as a parsonage by the officiating clergymen of any religious corporation of this State.”

The defendant then appealed the Tax Court’s decision to the Appellate Division. On appeal, the Appellate Division agreed with the Tax Court entirely and held that: “The evidence overwhelmingly supports the conclusion that his residence is a ‘parsonage’ within the meaning of N.J.S.A. 54:4-3.6.” As a result, the plaintiff will not have to pay any property taxes for the property used by the plaintiff’s rabbi as his residence.

To read the full Appellate Division decision, please click the words Property Tax Appeals.

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White Township’s wallet was recently hit by the Appellate Division’s decision in DSM Nutritional Products v. White Township. In that case, the Appellate Division affirmed reducing the assessment on DSM Nutritional’s property by $77 million dollars for the 2004 tax year and by $74 million dollars for the 2005 tax year. Consequently, White Township must now refund more than $2.5 million dollars in property taxes to DSM Nutritional.

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.

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This Blog/Web Site is made available for educational purposes only general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and the Blog/Web Site publisher.

The New Jersey Division of Taxation just released the New Jersey State Tax News for Fall 2008. This eleven page publication covers issues ranging from recent Tax Court opinions, to current legislative laws being considered, to small business workshops. To read the full publication, please click the words Property Tax.

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This Blog/Web Site is made available for educational purposes only general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and the Blog/Web Site publisher.

On July 7, the Appellate Division affirmed the Tax Court of New Jersey’s decision in Wee Love, Inc. v. Township of Maple Shade. In so doing, the Appellate Division agreed with the Tax Court that the day-care facility at issue in that case is a school for purposes of the local property tax exemption under N.J.S.A. 54:4-3.6. The Tax Court found, and the Appellate Division agreed, that due to the fact that virtually all of the plaintiff’s building was used by preschool children, the predominant use of the building was as a school, even though at times some portion of the building was occupied by participants in before- and after-school programs. The Appellate Division also noted that there was substantial credible evidence to support the Tax Court’s conclusion that the entire premise was exempt because the predominant use was as a school.

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This Blog/Web Site is made available for educational purposes only general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and the Blog/Web Site publisher.

On Monday, the New Jersey Supreme Court decided Hunterdon Medical Center v. Township of Readington. In a thirty-five page published opinion, the New Jersey Supreme Court affirmed a new test first put in place by Judge Kuskin of the Tax Court. The Supreme Court used this new test in order to discern whether the hospital at issue was in fact a “hospital” eligible for property tax exemption. In so doing, the New Jersey Supreme Court redefined the term “hospital” itself.

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.

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The Appellate Division recently affirmed ABD Independence, Inc. v. Township of Independence, — A.2d —-, 2008 WL 3982681 (App. Div. 2008) (Real Estate Property Tax).

In this case, Plaintiff, ABD Independence, Inc. (ABD), owned property in Warren County that was governed by the Highlands Water Protection and Planning Act (Highlands Act), N.J.S.A. 13:20-1 to -35. After trial, the Plaintiff appealed the value assigned to the property by Judge Kuskin, judge of the Tax Court, and argued that the value assigned by Judge Kuskin was excessive and alleged that Judge Kuskin misinterpreted statutory exemptions and thereby allowed development and regulations permitting an extension of public water to the site. The Township of Independence (the Township), cross-appealed and alleged that Judge Kuskin committed error when he found that the improvements had no value. The Appellate Division dismissed both appeals and affirmed Judge Kuskin’s findings.

The subject property in question was a 122.86 acre parcel located along Petersburg Road (Warren County Route 614) about 1200 feet north of the intersection of Petersburg Road and State Highway 46 in the Township. A substantial portion of the subject property is wooded with moderate to steep slopes. A large pond is located near Petersburg Road. A 1910 square foot farmhouse is located on the property close to Petersburg Road. The farmhouse is occupied but in disrepair. There are also miscellaneous accessory structures, such as a barn, sheds and a springhouse, on the property, all in disrepair.

On June 16, 2003, the Township planning board granted preliminary major subdivision approval to plaintiff for a thirty-nine lot clustered residential development. The project also included a single 10.056-acre parcel with the existing house and out-buildings. Each home would be served by public water and individual septic systems. The approval contained several conditions, including issuance of several permits by the New Jersey Department of Environmental Protection (DEP).

The Highlands Act was adopted in August 2004, but major Highlands developments that received certain approvals and/or permits prior to March 29, 2004, were exempt from its provisions. N.J.S.A. 13:20-28a(3); N.J.A.C. 7:38-2.3(a)3. On October 18, 2004, in response to the Highlands Applicability Determination and Water Quality Management Plan Consistency Determination request filed by ABD, DEP advised ABD that the subject property is located in the Highlands Preservation Area. DEP noted that ABD had not received qualifying approvals before March 29, 2004; therefore, ABD’s proposed subdivision fell within the Major Highlands Development category, that it did not meet any of the statutory exemptions, and it would be required to obtain a Highland Preservation Area Approval before it could proceed. The Highlands Act prohibits major Highlands development within 300 feet of any Highlands open waters, i.e., 300-foot buffer, N.J.S.A. 13:20-30b(1), -32a; N.J.A.C. 7:38-3.6(a). The subject property’s existing structures fell within that buffer.

At trial, Judge Kuskin found that an addition to the residence on the property could be constructed even though the residence was within the 300 foot buffer area. Judge Kuskin interpreted N.J.S.A. 13:20-28b, which provides that the enumerated exemptions do not alter or obviate the requirements of other statutes or regulations, as not including Highlands Act requirements. Judge Kuskin reasoned that any other interpretation would render the seventeen enumerated exceptions, N.J.S.A. 13:20-28a(1) to (17), meaningless. Consequently, Judge Kuskin held that the taxpayer could renovate or construct a single family dwelling within the 300 foot buffer mandated by the Highlands Act. In so doing, Judge Kuskin rejected Plaintiff’s contention that an extension of the water line would be prohibited under N.J.A.C. 7:38-2.5(a), which prohibits “the construction of any new public water system and the extension of any existing public water system to serve development in the preservation area,” because N.J.A.C. 7:38-2.5(a) is inapplicable to a development that is “exempt from the Highlands Act pursuant to N.J.A.C. 7:38-2.3.”

The Appellate Division agreed with Judge Kuskin’s logic and affirmed the assessment that Judge Kuskin placed on the property.

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The Tax Court of New Jersey recently issued a published opinion, Thirty Mazel et al v. City of East Orange, in which it reconciled the Appellate Division opinion Alfred Conhagen, Inc. v. Borough of South Plainfield, 16 N.J. Tax 470 (1997), with the recent Appellate Division opinion H.J. Bailey Co. v. Township of Neptune, 399 N.J. Super 381 (App. Div. 2008).

Both of these Appellate Division opinions concerned N.J.S.A. 54:4-34, which is commonly known as “Chapter 91,” and the application of this statute’s sanction limiting a taxpayer’s right to appeal a tax assessment for failure to respond to a tax assessor’s inquiry for income and expense information.

Previously, in Conhagen, the Appellate Division held that Chapter 91’s appeal-preclusion provision applied when a taxpayer failed to respond to an assessor’s request for income and expense information, even though the subject property was not producing income at the time of the request.

Last year, however, the Appellate Division in H.J. Bailey, held that non-income-producing property is not subject to Chapter 91’s appeal limitation provision, even if the assessor’s request for income and expense information pursuant to the statute went unanswered by the taxpayer.

At issue in the recently published Tax Court case Thirty Mazel, was a property owner who did not respond to a tax assessor’s request for income and expense information who owned several apartment buildings that were formerly income-producing, but during the tax year at issue received no income, as the properties were undergoing substantial renovations.

In the published opinion, the Tax Court stated:

The gap in rent collection was occasioned not by a change in the use of the property or by owner occupancy, but because the living units had been vacated while a major renovation, presumably to enhance the future earning potential of the buildings, was undertaken. The court finds that plaintiffs never intended to abandon the income-producing nature of the properties and instead committed resources to enhancing the revenue generating potential of the properties.

As a result of the above, the Tax Court reasoned that the property owner who owned the apartments was barred by Chapter 91 from filing a tax appeal.

This reasoning in Thirty Mazel underscores the importance of responding to a tax assessor’s request for income and expense information, for even if a property does not produce any income during a relevant year, a tax appeal on such property may be barred by Chapter 91 if the tax assessor’s request is not timely answered.

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This Blog/Web Site is made available for educational purposes only general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and the Blog/Web Site publisher.