Opinion
Block 179, Lot 3 Docket No. 018879-2011
12-21-2012
Re: Green Hill, Inc. v. West Orange Township
BY E-MAIL AND FIRST-CLASS MAIL Christopher John Stracco, Esq. Day Pitney, L.L.P. Robert Blau, Esq. Blau & Blau
NOT FOR PUBLICATION WITHOUT APPROVAL OF
THE TAX COURT COMMITTEE ON OPINIONS
Mala Narayanan
JUDGE
BY E-MAIL AND FIRST-CLASS MAIL
Christopher John Stracco, Esq.
Day Pitney, L.L.P.
Robert Blau, Esq.
Blau & Blau
Dear Counsel,
This is the court's opinion with respect to plaintiff's summary judgment motion. Plaintiff argues that the defendant's four-month prorated added assessment on improvements completed in April 2011, and its 2011 omitted assessment on the 15 acres of land upon which the improvements were erected, are erroneous as a matter of law because they are entitled to the "continued use" tax exemption permitted by our courts. Defendant maintains that the 15 acres of land upon which the new improvements were being built has always been taxed, therefore, the "continued use" exemption does not apply. Additionally, defendant argues that since neither the land nor the new improvements were actually being used for tax-exempt purposes until April 2011, its assessments are proper.
Based on the undisputed and stipulated facts, and for the reasons more fully explained below, the court finds the "continued use" exemption does not apply because the vacant 15 acres of land upon which the new improvements were being built were never tax-exempt until 2012. Further, the land should not be exempt for any portion of tax year 2011 because it was not actually used for exempt purposes as of October 1, 2010, the assessment date for tax year 2011. Therefore, plaintiff's motion for exemption based on "continued use" is denied.
However, based upon the language of the added assessment statute, and precedent in this regard, the court cannot determine West Orange's method of prorating the assessment upon the improvements, or the propriety of the same. Therefore, the parties will be directed to brief this issue. FACTS
Plaintiff, Green Hill, Inc. ("Green Hill"), is a New Jersey not-for-profit corporation. It is organized to "support and assist aged men and women . . . to maintain a home or homes for the relief and care of aged men and women . . . and to provide facilities for the care . . . of the aged." In this connection, it employs services of the medical profession, such as registered nurses/nurse assistants, a physical therapist, a dietitian/nutritionist, a psychotherapist, a psychologist and a medical director who is a doctor. The doctor and nurses specialize in geriatric medicine. Originally founded in 1867 as the Society for the Relief of Respectable Aged Women, the organization merged with the Memorial Center for Women to form what is today known as Green Hill.
Any revenue generated from Green Hill's activities is applied back into the operation of Green Hill.
In 1965, Green Hill purchased property located at Block 179, Lot 3, also known as 103 Pleasant Valley Way ("Subject"), consisting of about 20 acres, in defendant Township of West Orange ("West Orange"). It was improved by a building which was used for the statutorily tax exempt purposes listed above. The land upon which the improvements lay was also tax-exempt for up to five acres. This exemption has continued from the date of the Subject's purchase in 1965. Prior to, and until April 2011, the remaining 15 acres of land remained vacant, and until tax year 2012, have never been exempt from property taxation.
The parties stipulated that although the 20-acre Subject is listed as Block 179, Lot 3, the 5-acre exempt portion is listed as a separate line item on West Orange's tax rolls as "Block 179, Lot 3, Qx" with "Qx" meaning "Qualified Exempt Portion."
In December 2009, Green Hill began constructing six additional buildings, called "Green House Homes" ("Homes") on the Subject to house the aged men and women in Green Hill's care. It is undisputed that the Homes were built on the non-tax exempt, 15-acre vacant portion of the Subject. The Homes provide a new method of nursing care that provides patients with a residence, complete with "a private room and bath, an open kitchen, a backyard with garden, hearth area with fireplace, and a common area." Smaller than an institutional setting, patients can enjoy the privacy of their own room but can also feel free to socialize with others in the residence, backyard or the front porch. The smaller setting and shorter distances allow the elders more mobility and independence. The land areas surrounding the Homes are used as any other residential backyard, namely, for exercise, enjoyment and health of the residents.
The Homes were completed in April 2011. The assessor placed an added assessment on the improvements, but prorated it for four months only. The tax bill in this regard reflected the assessed value for the new improvements as $2,680,700, which prorated for four months was $893,567. No part of the assessment was for the exempt improvement located on the exempt 5-acre portion of the Subject.
In its opposition to Green Hill's motion, West Orange stated that the 15-acre portion of the Subject "was not actually used for an exempt purpose until April 2011."
As to the assessment on the land, the assessor provided a certification stating that the revaluation firm retained by West Orange to conduct a municipal wide revaluation in 2011 mistakenly listed the entire Subject as tax exempt. The assessor "corrected the mistake, in October 2011, by way of a Notice of Omitted Assessment." The Tax Collector's undated cover letter to Green Hill, enclosing the tax bills for both the land and the newly constructed Homes stated that "[d]ue to a technical error in the assessment of your property in the town wide[] revaluation an incorrect calculation of your tax assessment was generated. This is the adjusted billing for the corrected assessment of your property."
The omitted assessment for the land was $3,925,000. No portion of it was prorated. However, the assessment was only for the 15-acre portion of erstwhile vacant land. No portion of the previously exempt 5 acres was included in this assessment.
On November 30, 2011, Green Hill filed a complaint with the Tax Court appealing the added and omitted assessments. It claimed an exemption under N.J.S.A. 54:4-3.6 on grounds that the Subject was used for exempt "hospital and health care purposes." It alleged that the assessments were inappropriate because they "related to additions to previously exempt property." The complaint also alleged that the assessments were in excess of the true value of the Subject and was discriminatory. West Orange did not file a complaint or counterclaim.
For tax year 2012, the assessor exempted the entire Subject. FINDINGS
A motion for summary judgment should be granted in the absence of genuine issues of material facts. R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 528-29 (1995) (summary judgment will be granted "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law"). Denial is appropriate only where the evidence is such that reasonable minds could return a finding favorable to the party opposing the motion. Id. at 534, 540.
The material facts are undisputed. The only legal issue Green Hill presents is whether the 15-acre portion of the Subject and the Homes thereon qualify for the precedential "continued use" exemption. This can be decided by summary judgment.
Our courts have consistently recognized that "all property should bear its just and equal share of the tax burden" and therefore, the claimant bears the burden of proving its entitlement to the tax exemption. Chester Theatre Group of the Black River Playhouse v. Borough of Chester. 115 N.J. Super. 360, 364 (App. Div. 1971). Statutes granting exemptions from taxation represent a departure, consequently, they are strictly applied against those claiming the exemption. City of Long Branch v. Monmouth Med. Ctr., 138 N.J. Super. 524 (App. Div. 1976). Thus, even if the taxing authority initiates an action to overturn a County Board judgment, the burden of proof remains on the taxpayer. City of Long Branch v. Ohel Yaacob Congregation. 20 N.J. Tax 51 i (Tax 2003).
N.J.S.A. 54:4-3.6 exempts from property tax "buildings actually used in the work of associations and corporations organized exclusively for hospital purposes . . . ." In this connection the term "hospital purposes" include "health care facilities for the elderly, such as nursing homes; residential health care facilities; assisted living residences" and "similar facilities that provide medical, nursing or personal care services to their residents . . . ." Ibid. Further, "the land whereon any of the buildings . . . are erected, and which may be necessary for the fair enjoyment thereof is also exempt provided such land is "devoted to the" exclusively to tax-exempt purposes "and does not exceed five acres in extent." Ibid.
Thus, to enjoy this exemption, the improvements must be "actually used" for, and the land upon which the improvement are located must be "exclusively] devoted" to hospital purposes. Additionally, an entity claiming the exemption must (1) be organized exclusively for the tax exempt purposes under New Jersey laws; (2) own the property; and (3) not use, occupy or operate the property for profit. There is no dispute that Green Hill satisfies all the above requirements as to the Homes and the 15-acre portion of the Subject, with one exception: their actual use.
An exemption is available only where the real property is owned and actually used on the assessment date. Bethany Baptist Church v. Township of Deptford, 225 N.J. Super. 355, 359-60 (App. Div. 1988) ("[b]y enacting N.J.S.A. 54:4-23, our Legislature has made it crystal clear that the use of the property on the October 1 assessment date determines whether or not it is to receive an exemption from taxation for the succeeding year" thus the property's "tax exempt status depends on the confluence of use and ownership as of the assessment date"). Because the assessment date for added assessments, i.e., for improvements erected after the October 1 assessing date and "completed between January 1 and October 1 following," is the "the first of the month following the date of . . . such completion," N.J.S.A. 54:4-63.3, the tax-exempt status is also determined at the same time as the assessment. Catholic Relief Services, U.S.C.C. v. Township of South Brunswick, 9 N.J. Tax 25, 27-28 (Tax), aff'd, 9 N.J. Tax 650 (App. Div. 1987).
Green Hill contends that although the Homes were not completed and therefore not in actual use as of the assessment date, the Subject is nonetheless entitled to an exemption as a "continuous character" exception to the "actual use" requirement under Paper Mill Playhouse v. Township of Millburn, 7 N.J. Tax 78 (Tax 1984). West Orange argues that this case is inapplicable.
Neither party addressed the assessment or valuation date for purposes of an added assessment under N.J.S.A. 54:4-63.3.
In Paper Mill, the court held that reconstruction of a fire-damaged theater building which was previously tax-exempt continued its exempt status during the period of its reconstruction. The taxpayer's property had been exempt under N.J.S.A. 54:4-3.6 but because of an arsonist's fire, the theater building became unusable. The executive activities of the taxpayer continued in a trailer placed on the subject property, and children's shows/plays continued while other programs were conducted at different sites until the theater completed reconstruction in 1982. However, production, casting efforts, business negotiations, set designs, prop construction, and the like were held at the site from 1981 onwards and throughout 1982 until the theater opened to the public.
Couching the issue as involving the "exemption of a theater building in the course of reconstruction on property which had been exempt prior to its destruction by fire" the court ruled that:
a continued exempt character exists where property had previously been exempt. This principle is fully consistent with the underlying philosophy of N.J.S.A. 54:4-3.6 which requires an exempt use to exist on the October 1 assessing date in order to permit taxing districts to prepare budgets based upon the current tax assessment rolls.The court concluded that the taxpayer was entitled to an exemption because it continued its activities on-site and off-site, and made prompt efforts to reconstruct the theater. Id. at 86. Indeed, "the basic reason for exemptions would be undermined if N.J.S.A. 54:4-3.6 was construed to" aggravate a "calamitous condition" by assessing a tax exempt property which was unusable due to "a man-made disaster or by an act of God." Id. at 87.
[Paper Mill, supra, 7 N.J. Tax at 84]
Here, as West Orange correctly notes, the 15-acre vacant portion of the Subject upon which the Homes were built had never been exempt from property taxation prior to tax year 2012. Indeed, the construction began sometime in 2009, and no exemption was provided at any time then or in 2010. Therefore, Paper Mill does not apply to exempt the 15-acre portion of the Subject.
Green Hill relies upon Job Haines Home for the Aged v. Township of Bloomfield, 19 N.J. Tax 408 (Tax 2001) as a basis for its "continued use" exemption claim. There, the taxpayer was in the process of constructing, as of the relevant assessing date, an additional improvement to be connected to their nursing facility. The addition was not completed until April of the following year. The court held that since "the taxpayer merely constructed an addition to an already tax exempt structure," it was entitled to the "continued exempt character" exception and therefore would not lose the tax exempt status. Id. at 418 (emphasis added).
The facts in the present case are distinguishable in that the Homes were constructed as improvements on the previously taxed 15 acres of vacant land. Additionally, the Homes are physically separate from the pre-existing tax-exempt structure and the five acres of land upon which that structure was built. Therefore, Job Haines is inapplicable. Indeed, that case cautioned that the continued use exception applied to property that "exhibits a 'continued exempt character'" but was "limited . . . to include property which was previously exempt, but, for one reason or another, discontinues actual use of the property during a discrete reconstruction period." Id. at 417 (quoting Paper Mill, supra). See also Hillcrest Health Serv. Sys. v. Hackensack City, 18 N.J. Tax 38, 47 (Tax 1998) (noting that "Paper Mill Playhouse found a very narrow exception to [the actual use requirement] where fire-damaged property was in the course of reconstruction. In those circumstances, it may be considered that use is not interrupted, but continues during the reconstruction period.").
Green Hill argues that the 15-acre portion was always intended to be used for the same hospital purposes as the pre-existing tax exempt structure, and the only reason the 15 acres was taxed was because it exceeded the statutory 5-acre limit. However, mere intended or projected use is not enough to qualify for an exemption. Hillcrest Health, supra, 18 N.J. Tax at 47 ("exemption requires an actual use of property . . . and not merely an intended or projected use"). Thus, "[e]ven where the character of the building under construction and its adaptation to an exempt use are evident, an exemption does not attach until actual use commences." Ibid. Therefore, plaintiff's request for an exemption for the previously taxable portion of the Subject must be denied.
Finally, Green Hill maintains that exemption should be provided for the Homes and the 15-acre land portion, because West Orange never relied upon the same as a source of revenue for its budget. See Job Haines, supra, 19 N.J. Tax at 418 (since the township had "not historically rel[ied] on taxpayer as a ratable in determining its budget, and . . . would not impose an assessment . . . on taxpayer upon completion of the construction," the taxpayer therein was entitled to an exemption pursuant to the "continued exempt character" exception).
Here, however, the 15-acre portion has always been taxed by West Orange. Further, as of October 1, 2010, the valuation date for the land, it was not in actual use for tax-exempt purposes. Therefore, Green Hill's policy justification has no merit.
This brings the court to West Orange's method of pro-rating the added assessment for the Homes. N.J.S.A. 54:4-63.2 addresses valuation of property upon which improvements are erected after the October 1 assessment date but completed before January 1 of the tax year, as to which tax is imposed as of January 1 for the whole of the ensuing taxable year. N.J.S.A. 54:4-63.3 addresses new improvements completed between January 1 and October 1 of the year following the assessment date, such as the Homes (completed April 2011), and as to which the tax is applied pro rata for the balance of the taxable year. This statute states:
When any parcel of real property . . . contains any building or other structure which has been erected, added to or improved after October 1 and completed between January 1 and October 1 following, the assessor shall, after examination and inquiry, determine the taxable value of such parcel of real property as of the first of the month following the date of... such completion, and if such property was not assessed as of October 1 preceding or, if such value so determined exceeds the assessment made as of October 1 preceding, the assessorA court thus must "determine the taxable value of the property as completed (land and improvements combined) and then subtract the existing assessment (making any necessary ratio adjustments)" which is the "procedure required by [N.J.S.A. 54:4-63.3] to reflect the added value as a result of the newly-completed improvements." New Jersey Foreign Trade Zone Venture v. Township of Mount Olive, 10 N.J. Tax 330, 333 (Tax 1989), aff'd, 242 N.J. Super. 190 (App. Div. 1990).
shall enter an assessment, as an added assessment against such parcel of real property, in the "Added Assessment List, 19. . .," which assessment shall be determined as follows: by multiplying the amount of such assessment or such excess by the number of whole months remaining in the calendar year after the date of delivery of such deed, or of such completion, and dividing the result by 12.
[N.J.S.A. 54:4-63.31
Here it is undisputed that the Homes were completed in April 2011. It is also undisputed that after completion in April 2011, the Subject was owned by a non-profit entity. It is further agreed that the Homes, plus the 15-acre area on which they were built, were actually used for hospital purposes after the April 2011 completion. However, West Orange's method of prorating its added assessment is unclear vis-à-vis N.J.S.A. 54:4-63.3. If the building was completed in April 2011, then pursuant to the statute, the added assessment would be for the "number of whole months remaining" in 2011 after April 2011. This would then be eight months remaining in 2011 (May through December 2011). But the added assessment is for four months. Did the four-month period encompass January through April 2011 because West Orange stated that the 15-acre portion of the Subject "was not actually used for an exempt purpose until April 2011"?Or did West Orange deem the first full month after completion as May 31 so that the four-month prorated period covered the period June 1 to October 1, 2011 ? The court has simply no explanation or information as to the proration period and therefore cannot determine the validity of the added assessment.
See supra n.3.
West Orange's tax bill for the improvements clearly denotes the assessment as an added assessment. There is no indication of a "partial assessment" nor does the separate tax bill for the land (the "omitted assessment") indicate any construction value on the partially completed Homes as of the October 1, 2010 valuation date.
Further, in Schizophrenia Found, of New Jersey v. Township of Montgomery, 6 N.J. Tax 439, 441-443 (App. Div. 1984), the court voided an added assessment for a building that qualified for exemption upon its completion, even though it was incomplete and thus, unqualified for exemption as of the October 1 assessment date. The court ruled that for purposes of N.J.S.A. 54:4-63.3, the added assessment statute, the assessor not only determines the value of the property as of the first of the month following completion of the new improvement, but also "whether the property is exempt from taxes." Schizophrenia, supra, 6 N.J. Tax at 442. Therefore, "the tax status of property subject to an added assessment should be ascertained as of the date of the assessment." Ibid. If such exemption is warranted, then, the added assessment could not stand since it would be "difficult[]' to "believ[e] that the Legislature intended to tax structures such as churches which have been completed and used for exempt purposes after the original assessment date." Id. at 443. This is especially because a township's reliance upon an existing rateable for tax revenue does not exist for improvements completed after the assessment date. Id. at 442.
Under the above ruling then, West Orange's prorated added assessment may not be valid. Again, the court cannot make any finding in this regard without any facts and in the absence of legal briefing by the parties.
Finally, West Orange is correct in its position that the 15-acre land remains fully taxable for the entire 2011. See Schizophrenia, supra, 6 N.J. Tax at 443 ("land will not be exempted" although the building is exempt which "inconsistency . . . might seem incongruous" but "is perfectly logical" because as of the October 1 assessing date, the land was not actually used for a tax exempt purposes, and exempting the same "would be unfair to the other property owners") (relying upon City of East Orange v. Palmer, 47 N.J. 307, 320(1966)).
There is no dispute here that the 15-acre portion has always been taxed by West Orange. It is also undisputed that the 15-acre portion was not actually used for tax-exempt hospital purposes as of the October 1 valuation date. However, the court is not ruling whether such assessment is correct as a matter of law. Rather, it is only denying Green Hill's summary judgment motion that the 15-acre portion of the Subject should be tax exempt based upon the "continued use" principle. Therefore, the matter will be set for trial on the valuation issues. CONCLUSION
The court notes that West Orange's basis for an omitted assessment upon the 15-acre land portion was because the assessor deemed the revaluation company's action of exempting the entire Subject as a mistake or "technical error." Thus, although the court will set the matter for valuation trial, Green Hill is free to raise this particular issue by way of a summary judgment or by plenary hearing.
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For the aforementioned reasons, Green Hill's motion for summary judgment is denied. An Order will be entered by this court in accordance with this opinion.
Very truly yours
Mala Narayanan, J.T.C.