Updated december 2018
New Jersey Tax Court Analyzes the Local Property Tax Exemption Cessation Provisions
A recent New Jersey Tax Court opinion analyzed whether, because of the outcome in AHS Hosp. Corp. v. Morristown, the Borough of Red Bank's omitted assessment appeals were proper.
In Borough of Red Bank v. RMC – Meridian Health, the Borough argued that following the decision in AHS Hosp. Corp. v. Morristown, it was entitled to seek to impose omitted assessments on the subject property for the previous two tax years, and to effectively revoke the exemptions previously granted by the Borough's assessor. The taxpayer argued that the Borough had not proffered any evidence, including any action by the assessor, nor any change in use or ownership.
The Tax Court granted summary judgment for the hospital-taxpayer after addressing multiple issues regarding N.J.S.A. 54:4-63.26 – the tax exemption statute. 30 N.J. Tax 551, 552 (N.J. Tax Ct. 2018). N.J.S.A. 54:4-63.26 dictates that a change in use or change in ownership must occur before an exemption can be ceased and an assessment can be imposed by way of omitted assessment. If the exemption cessation statute is triggered, the tax is thereafter imposed on a pro-rated basis.
In addressing what it characterized as the fundamental issue, the Tax Court ruled that the decision in AHS Hosp. Corp., that an unrelated hospital is not entitled to tax exemption because it failed the "profit test", does not satisfy the cessation statute's requirement of a change in use at the subject property. The Tax Court was also unpersuaded by the Borough's argument that a decision on change in use must await the completion of discovery, as doing so would "eviscerate" the exemption cessation statute.
The Borough is currently seeking leave to appeal this decision to the Appellate Division.
Gregory Schaffer, Esq.
Garippa, Lotz & Giannuario P.C.
American Property Tax Counsel (APTC)