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Cascade Corp. v. Township of Middle

323 N.J. Super. 184, 732 A.2d 564 (App. Div. 1999)

TAXATION; ASSESSMENTS; EXEMPTIONS—The owner of every income-producing property is required to respond to a tax assessor’s request for income and expense information; failure to do so may cause property that would otherwise be exempt from real property taxation to be taxable.

A nursing home operator sought exemption from real property taxation pursuant to N.J.S. 54:4-3.6. That statute exempts from real estate taxation a nonprofit corporation organized for “hospital purposes.” The statute defines “hospital purposes” as including health care facilities for the elderly, such as nursing homes; residential health care facilities; assisted living residences; and similar facilities. The exemption is, however, not unlimited: “If any portion of a building used for hospital purposes is leased to profit-making organizations or otherwise used for purposes which are not themselves exempt from taxation, that portion shall be subject to taxation and the remaining portion only shall be exempt.” The municipality’s tax assessor requested that the property owner provide income and expense information concerning the properties. The property owner, believing the properties were exempt, did not respond to the request for information; but instead, filed an application with the assessor for an exemption. The tax assessor denied the application for exemption and assessed the property. A tax appeal followed. The applicable law requires every owner of real property in a taxing district to render a full and true account of the income from the property in the case of income-producing property and, if the property owner shall fail or refuse to respond to the written request of an assessor, the assessor shall value the property at such amount as the assessor may reasonably determine to be the full and fair value where the owner has failed or refused to respond to a written request for information within forty-five days of such request. No appeal can be heard from an assessor’s valuation with respect to income-producing property. The Tax Court concluded “as a matter of law that a response by the filing of an application for exemption” is not, under any circumstances, a response to a request for an account of income. It held that the statutes are different and unrelated. The Tax Court went on to observe that the statutory scheme does not afford a property owner an option whether or not to respond to a request on the basis of the owner’s determination that the property is exempt. A property owner is obliged to comply with the request and litigate its entitlement to an exemption by appealing the assessment. The Appellate Division agreed, holding that relevant data must be produced with respect to all “income-producing property,” irrespective of whether it is entitled to exemption from taxation. In fact, an assessor is required to make a valuation of exempt property, irrespective of any assessment, and record the same. Hence, when a property is income-producing, the assessor obviously must have access to income information. Further, disclosure is essential where a portion of a property is being leased to a profit-making entity and is therefore taxable to some extent. Failure to respond to the request for income information statutorily bars an appeal from a valuation. The Court found the Legislature has imposed this bar as the cost of failure to comply. Thus, the Court held that requiring disclosures in respect of all “income-producing property” logically must be interpreted literally to include even tax-exempt property that produces income (as distinguished from profit). The language barring an appeal is jurisdictional (except for the right to a reasonableness hearing). Consequently, for the tax year in question, the property was not exempt from taxation.


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