Opinion
Docket No. 017330-2012
06-25-2013
Re: Marcelino v. Director, Division of Taxation
Jovencio D. Marcelino, Pro-Se Jeremy M. Vaida Deputy Attorney General
NOT FOR PUBLICATION WITHOUT APPROVAL OF
THE TAX COURT COMMITTEE ON OPINIONS
Mala Sundar
judge
6/25/2013 spelling correction - page 8 - footer
BY FIRST-CLASS AND ELECTRONIC MAIL
Jovencio D. Marcelino, Pro-Se
Jeremy M. Vaida
Deputy Attorney General
Dear Mr. Marcelino and DAG Vaida:
This letter constitutes the court's decision in connection with plaintiff's challenge to the defendant's final determination which demanded a repayment of $800 because plaintiff, as a 50% co-owner of his residence, was entitled to only a portion of the 2008 Homeowner's rebate. Plaintiff ("Mr. Marcelino") argues that pursuant to his 2007 divorce judgment, he was required to pay 100% of the property taxes on his residence, and was granted all of the attendant tax benefits therefrom. Therefore, regardless of the fact that the title to the house was held by him as a 50% tenant-in-common, he should receive the entire rebate. This result, per Mr. Marcelino, conforms to the purpose of the rebate law which is to provide relief from property taxes, especially because his ex-spouse is a non-resident and would not be entitled to the remaining portion of the rebate.
Defendant ("Director") contends that the plain language of the applicable statutes mandate an allowance of only a proportionate share of the rebate when title to the property is held by more than one person. Here, it is undisputed that Mr. Marcelino shared title to the residence with his ex-spouse as a 50% tenant-in-common, therefore, he can be granted only a portion of the rebate.
The court finds that the plain language of the statute limits the rebate amongst co-owners to their respective percentages of interest in the homestead. The divorce judgment/agreement did not provide that title to the house was transferred 100% to Mr. Marcelino. To the contrary, it recognized him as a joint tenant with his ex-spouse. Further, the provision in the divorce judgment/agreement that Mr. Marcelino pay all the property taxes until the house is sold, and in return, claim all such taxes on his personal income tax returns, does not equate to a transfer of the ex-spouse's title and interest in the house to Mr. Marcelino. In the absence of any other document showing Mr. Marcelino's ownership interest as greater than 50%, the Director's final determination seeking a refund of the excess rebate paid is proper. FACTS
For tax year 2008, Mr. Marcelino filed a timely Homestead Benefit Application for a rebate or credit for local property taxes of $10,840.50 paid on his home located at the above-captioned address. Per testimony of the Director's representative, the Application recited Mr. Marcelino's Homestead Benefit filing status as "married filing jointly;" his ownership of the home jointly with his spouse; his age as over 65; and his net or taxable income as zero. Based on this information, the Director provided a homestead rebate of $2,050 which included a $50 GIT credit pursuant to N.J.S.A. 54A:3A-20(b).
However, his 2008 New Jersey gross income tax ("GIT") return listed Mr. Marcelino's tax return filing status as single.
For tax year 2009, Mr. Marcelino's Homestead Benefit Application stated that he was over 65 and disabled or blind as of 12/31/2009; his Homestead Benefit filing status as "Head of Household;" and his ownership of the residence as 50% since he "share[d] ownership of [the] property with [someone] other than [his] spouse." The 2010 and 2011 Homestead Benefit Applications continued to aver the 50% ownership but altered the Homestead Benefit filing status to "single."
Due to the 50% ownership claimed in the 2009 Homestead Benefit Application, the Director sought clarification from Mr. Marcelino in this regard. Mr. Marcelino provided a copy of his October 2007 judgment of divorce, and the accompanying property distribution provisions. The provision addressing the residence recited as follows:
The parties recognize that they own as tenants by the entirety real property known as 20 Wilshire Way, Holmdel . . . .Further research showed a March 30, 1999 deed whereby the residence was transferred from Mr. Marcelino and his then spouse, Celia Marcelino, to both of them as tenants-in-common, each owning a 50% interest for consideration of one dollar. The deed was recorded in Monmouth County on May 11, 1999.
[Mr. Marcelino] shall continue to reside in the marital home and shall be solely liable for the normal expenses related to the property, including but not limited to: property taxes . . . [Mr. Marcelino] shall have the right to claim all taxes and expenses related to the property on his Federal and State Income Tax Returns for the tax year 2007 and for any year thereafter if the property has not been sold and he is continuing to pay the taxes associated with the property . . . .
Based on all of this information, the Director determined that Mr. Marcelino was entitled to a $1,250 homestead rebate for 2008, and not the $2,050 previously granted. He thereafter issued a final determination dated October 18, 2012 demanding a repayment of $800.
Mr. Marcelino timely appealed the final determination. He noted that the Director's website instructed taxpayers who were divorced prior to 2010 to file a 2011 Homestead Benefit Application in the applicant's "name only" and reporting the applicant's "appropriate percentage of ownership" which was "50% unless otherwise specified on the property deed or the divorce decree." Mr. Marcelino argued that since his divorce judgment was in 2007, and granted him the sole right to the benefits of the property taxes he paid, he is entitled to the entire rebate amount. He also contended that as the payor of the entire amount of property taxes, it is unfair and against the statutory intent of granting relief or rebate against the property taxes, especially because the ex-spouse, as a nonresident of New Jersey, would not be entitled to the rebate. FINDINGS
N.J.S.A. 54:4-8.59(a), the statute under which the Director granted Mr. Marcelino a rebate, allows a rebate or credit for property taxes for senior citizens of a certain dollar amount depending on certain income limitations. That statute, however, allocates the rebate where title to the property is owned by more than one person. Specifically, the law provides as follows:
The Director also provided a $50 credit under N.J.S.A. 54A:3A-20(b). He is not seeking a repayment of this amount from Mr. Marcelino.
If title to a homestead is held by more than one individual as joint tenants or tenants in common, each individual shall be allowed a homestead rebate or credit . . . only in relation to the individual's proportionate share of the property taxes assessed and levied against the homestead. The individual's proportionate share of the property taxes on that homestead
shall be equal to the share of that individual's interest in the title. Title shall be presumed to be held in equal shares among all co-owners, but if the claimant satisfactorily demonstrates to the director that the title provides for unequal interests, either under the conveyance under which the title is held, or as otherwise may be demonstrated, that claimant's share of the property taxes paid on that homestead shall be in proportion to the claimant's interest in the title.
[N.J.S.A. 54:4-8.59(c) (emphasis added).]
Thus, for instance, if there are two persons who are listed as the owners on the property deed (which deed conveys title to the property), then each person is presumed to own a 50% interest in the property and is liable for 50% of the property taxes assessed on the house. Consequently, that co-owner is entitled to the portion of the homestead rebate or credit calculated under the statute on this 50% portion of the taxes. However, if a co-owner can show that the property deed or any other document reflects his or her ownership interest at greater than 50%, he or she would be entitled to greater rebate or credit.
Here, it is undisputed that pursuant to the 1999 property deed, Mr. Marcelino held a 50% title to the house, thus, his ownership interest was 50%. Under the plain language of N.J.S.A. 54:4-8.59(c), he would be entitled to the rebate calculated on 50% of the property taxes paid.
See N.J.S.A. 46:3-17.3 ("[n]o instrument creating a property interest on the part of a husband and wife shall be construed to create a tenancy in common or a joint tenancy unless it is expressed therein . . . ").
Mr. Marcelino points out that the divorce judgment/agreement requires him to pay 100% of the property taxes upon the house, and as quid pro quo, he has the "right to claim" all of the taxes on his income tax returns. He argues that this ruling by the New Jersey Superior Court must be interpreted as granting him 100% entitlement to the homestead rebate or credit and must be complied with regardless of the allocation of the rebate in N.J.S.A. 54:4-8.59(c).
The issue is whether, by requiring Mr. Marcelino to become solely liable for the property taxes, and thereby, solely entitled to tax benefits therefrom, the divorce judgment/agreement modified Mr. Marcelino's ownership interest to 100% for purposes of the application of N.J.S.A. 54:4-8.59(c). Mr. Marcelino argues in favor of this position on grounds the purpose of the homestead rebate is to provide some respite to property owners from the heavy burden of local property taxes. He contends that providing only a portion of the rebate is unfair and invalid, not only because his ex-wife would be denied her portion of the rebate under the laws due to her non-residency, but also because she would not be so entitled under the divorce judgment/agreement.
It is true that the "beneficent" purpose of the homestead rebate or property tax credit laws is to "alleviat[e] the heavy realty tax burden." Rubin v. Glaser, 83 N.J. 299, 307, appeal dismissed, 449 U.S. 977 (1980). It is equally true that the rebate laws are to benefit the payors of property taxes, whether such taxes are paid directly or indirectly. See e.g., Rutgers Univ. Legislative Affairs Council, Inc. v. Thompson, 12 N.J. Tax 642, 653 (Tax 1992) (denying rebates to students of Rutgers University who lived on-campus, and noting that the rebate laws were meant "to provide property tax relief to those property taxpayers who were becoming overburdened by the continually escalating property tax. To provide property tax rebates to those who neither pay property taxes nor pay rent which is used in part to pay property taxes clearly does not further the essential purpose of the property tax rebate legislation" and "runs counter to the stated purpose and legislative scheme").
However, these basic principles should not be read in a vacuum to provide a result that the determinative factor in grant of a rebate is the percentage or amount of taxes paid by a co-owner. Our Constitution permitted the Legislature to enact laws granting a rebate "related to property taxes" which are either "paid by or allocable to" home owners, and "at such rates and subject to such limits as may be provided by law." See N.J. Const. (1947) Art. VIII, §1, par. 5 (emphasis added). The Legislature chose to limit the rebate in situations where the house is owned by more than one person. The Legislature also provided a mechanism of computing that allocable portion (namely, with reference to the percentage of ownership interest). Under these circumstances, providing the full rebate to one co-owner would negate the plain language in N.J.S.A. 54:4-8.59(c) that when title to property is co-owned, each co-owner is entitled only to a portion of the rebate.
The various statutes providing for the rebates or credits have similar allocation of the rebate amongst co-owners. See e.g., N.J.S.A. 54:4-8.46 (where the property is held by two or more persons, "either as tenants in common or as joint tenants" then the $250 property tax deduction amount is limited to the co-owner's "proportionate share of' property taxes, "which proportionate share" is presumed to be "equal to that of each of the other tenants, unless it is shown that the interests in question are not equal, in which event claimant's proportionate share shall be as shown"); N.J.S.A. 54:4-8.72 (same, for property tax reimbursement purposes). The difference is that both these statutes provide that where the house is "held by husband and wife, as tenants by the entirety," then that homestead "shall be deemed wholly owned by each tenant, but no more than one deduction in regard to such property shall be allowed in any year." N.J.S.A. 54:4-8.46. See also N.J.S.A. 54:4-8.72 (same, except references the "homestead property tax reimbursement"). Further, these two statutes also allow each co-owner to file separate claims for the rebate, however, the claims cannot exceed the statutorily allowable amount of rebate. Ibid. They also provide that if the co-owners cannot agree to their respective shares of ownership in the house, then, the property tax deduction or reimbursement will be apportioned "in proportion to their interest." Ibid.
Although the Legislature limits the rebate to a co-owner based on his or her percentage of ownership interest, it also provides a mechanism whereby the co-owner could prove his ownership interest is greater than the other co-owner or co-owners "either under the conveyance under which the title is held, or as otherwise may be demonstrated." Here, such "other" proof would be the 2007 divorce judgment. If that document established Mr. Marcelino as the 100% owner of the house, the Director would have to consider the same as proof of Mr. Marcelino's ownership interest being greater than the 50% shown in the 1999 recorded deed.
The court was not provided with any other document showing that the 1999 deed was reformed, or replaced with a subsequent deed whereby title to the house was transferred solely to Mr. Marcelino.
However, the divorce judgment does not provide anywhere that 100% of the title and ownership to the property is awarded solely to Mr. Marcelino. Nor does it state that Mr. Marcelino's ex-wife transferred or conveyed all of her ownership interest in the house to Mr. Marcelino. To the contrary, the divorce judgment/agreement states that Mr. Marcelino and his ex-wife "recognize that they own" the house "as tenants by the entirety," thus, rendering both Mr. Marcelino and his ex-wife as joint tenants of the house. Thus, the allocation of the rebate or credit under N.J.S.A. 54:4-8.59(c) would still apply because that statute addresses property held either as "joint tenants or tenants in common," and a tenancy by the entirety is one form of joint tenancy. Allocating the obligations and benefits of a particular asset between parties to a divorce, would not, in and of itself, and without more, equate to transfer of ownership title and interest in that asset.
It is unclear whether this recognition of status as tenants by entirety is entirely correct because the pre-divorce 1999 deed designated Mr. Marcelino and his ex-wife as tenants in common. See also N.J.S.A. 46:3-17.2 (defining a tenancy by entirety as being created "when [a] husband and wife together take title to an interest in real property . . . under a written instrument designating both of their names as husband and wife . . . "). Since Mr. Marcelino and his ex-wife were involved in divorce proceedings, they could not have "taken" the house as "husband and wife." Note also that "the dissolution of the marriage results in conversion of the tenancy by the entirety into an equal tenancy in common" although not for purposes of equitable distribution in the divorce. Daeschler v. Daeschler, 214 N.J. Super. 545, 551-52 (App. Div. 1986). Thus, for purposes of the 2008 rebate, Mr. Marcelino was a tenant in common.
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It is well established that in examining the applicability of a particular statute, the court must first consider its plain language, which is to be given its ordinary meaning. Koch v. Director, Div. of Taxation, 157 N.J. 1, 7 (1999). This is because the statute's plain language is the "best indicator" of legislative intent. DiProspero v. Penn, 183 N.J. 477, 492 (2005). Thus, courts will not "presume that the Legislature intended something other than that expressed by way of the plain language." O'Connell v. State, 171 N.J. 484, 488 (2002).
It is plain that N.J.S.A. 54:4-8.59(c) limits the amount of homestead rebate based upon the share of ownership interest in the property. There is nothing ambiguous about the statutory language or intent. Therefore, the court must enforce the statute as it is written.
It is undisputed that Mr. Marcelino is a record owner of 50% of the interest in the house. The 2007 divorce judgment/agreement does not prove otherwise. The provision in that document requiring Mr. Marcelino to pay all property taxes, and in return "claim" such taxes as a deduction on his income tax returns, cannot without more, equate to a transfer of 100% of the title to the house to him. In the absence of any other proof that Mr. Marcelino was a 100% title owner to the house, the pro-ration of the rebate is proper. While it may seem unfair that one who pays all the property taxes receives only a portion of the rebate because of the manner in which the title is held, the court is hard-pressed to carve out an exception (especially where the statute already provides for relief by proof of other-than-equal interests) on these grounds. See e.g., Macmillan v. Director, Div. of Taxation, 180 N.J. Super. 175, 177 (App. Div. 1981) (reversing the Tax Court's decision to provide homestead rebates to certain retirees who had no formal ownership interests in their apartments, and stating that however sympathetic the cause, the courts cannot supplant "legislative design" nor indulge in "the luxury of liberal construction" if the statute "plainly convey[s] the legislative intent"), aff'd, 89 NJ. 216 (1982).
N.J.S.A. 54:4-8.66b permits the Director to recover any homestead rebate or credit paid to a person "in error." The amount paid, plus interest, is recoverable as would any State tax "deficiency." Ibid., N.J.S.A. 54:4-8.66c. Therefore, the Director's demand for recovery of $800 from Mr. Marcelino is proper. CONCLUSION
For the aforementioned reasons, the Director's final determination is upheld. The court will enter a judgment dismissing the complaint.
Very truly yours,
______________________
Mala Sundar, J.T.C.