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Crusader Servicing Corporation v. Port Authority of New York and New Jersey

386 N.J. Super. 494, 902 A.2d 272 (App. Div. 2006)

TAXATION; EXEMPTION — When an interstate agency purchases property that is not exempt from taxation, it is liable for taxes due and owing for the tax year during which it acquired the property, but not for subsequent tax years even if it does not file notice of its acquisition of the property with the local assessor as would otherwise be required by New Jersey law.

An interstate public agency acquired title to property on June 13, 2000 for use in connection with its operation of a tunnel. It did not file notice of its acquisition with the local assessor prior to January 10, 2001, as required by New Jersey law.

On June 21, 2001, the municipality where the property was located sold a tax title lien on the property for the balance of the calendar year 2000 taxes and for the first two quarters of 2001. The purchaser of the lien brought a declaratory judgment action against the agency and the municipality seeking a determination of the validity of the assessment and tax sale.

Acknowledging the agency’s tax-exempt status, the lower court determined that by the terms of New Jersey statutory law, the agency enjoyed no exemption for the balance of 2000, and that because it did not file the notice required it was not entitled to exemption for 2001. The lower court thus entered judgment in the purchaser’s favor, determining that the taxes for 2000 and 2001 were lawfully assessed and the property was not exempt for those years. The agency appealed.

On appeal, the agency argued that the lower court erred by failing to consider the unique tax exemption statute controlling its status as a bi-state agency, and instead subjecting it to statutory provisions applicable to New Jersey, its agencies, and authorities New Jersey alone had created. The Court explained that the interstate agency derived its tax-exempt status not from the New Jersey’s taxation provisions, but from the Interstate and Port Authorities and Commissions provisions in the pertinent New Jersey statute. Additionally, New York enacted concurrent legislation in identical form as part of its statutes governing the interstate agency.

The agency argued that the plain language of these concurrent laws exempted its property from taxation from the moment of purchase. The Court reasoned that when the agency took title, the tax levy for the entire year was already in place, and the agency took title subject to the lien. Thus, the Court held that the Port Authority took title subject to existing liens and encumbrances. The Court noted that its conclusion did not run afoul of the prohibition of one state exercising unilateral control over a bi-state agency because the tax exemption provision pertaining to the agency in the concurrent laws enacted by New Jersey and New York did not expressly establish the effective date of the exempt status.

While the Court concluded that the balance of the 2000 taxes remained payable, the Court also concluded that the same reasoning did not apply to the balance of the 2001 taxes which were assessed after the agency took title. The Court explained that the exemption for 2001 was statutorily mandated by the concurrent laws of New Jersey and New York pertaining to the compact and was not subject to unilateral control by New Jersey. Thus, the Court explained that the consequence of this was that the tax sale certificate was based upon some taxes that were validly assessed and some that were not. Accordingly, the Court determined the appropriate remedy. Guided by New Jersey Tax Sale Law, the Court concluded that the certificate had to be reformed to remove the charges attributable to 2001 taxes, the assessment for which was invalid. The Court also concluded that to the extent the certificate and sale were properly assessed and were justly due, they would remain valid and would not be set aside.

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