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General Motors Corporation v. City of Linden

150 N.J. 522, 696 A.2d 683 (1997)

TAX APPEALS—The New Jersey legislature does not violate the New Jersey Constitution when it excludes certain classes of personal property type real estate fixtures from real property taxation.

Real property tax assessments were made on an auto assembly plant by the City of Linden. The auto company claimed the City incorrectly assessed the property as “special purpose” property rather than “general purpose” under the Business Retention Act. When applying the Act’s predecessor, lower courts had been using common law definitions of real and personal property, often reaching inconsistent results. Even after legislative refinement, cases created a distinction between “special purpose” and “general purpose” property, further confusing the issue. The legislature responded by creating the Business Retention Act, which created two tests for determining when personal property is subject to local taxation. The first test describes a general class of affixed personal property which was clearly not intended to remain part of the real property or which may be removed from real property without injury. The second test more specifically describes “machinery, apparatus, or equipment” used in business. The City claimed that the Act created an unconstitutional exemption from real property taxes in an effort to favor businesses. The Appellate Court found the Act to be constitutional since it did not violate the uniformity clause of the state Constitution. While the uniformity clause places limits on the legislature’s ability to classify real property for purposes of taxation, the Court found that the clause did not apply to personal property.

The New Jersey Supreme Court began its analysis by stating that the legislature may classify and tax personal property in any manner, as long as the classifications used are reasonable and the rules for assessments are uniform. However, the uniformity clause of the state Constitution limits the legislature’s ability to classify real property for taxation purposes, requiring that all real property be assessed and taxed according to the same standard of value and at the general rate of the taxing district in which the property is situated. The Supreme Court then stated that a taxing statute is not facially unconstitutional if it operates constitutionally in some instances. The Court held that the exclusion of certain business machinery and equipment from local taxation under one test was not intended to override the other test of whether property is real or personal, and that the two tests are simply an attempt to describe classes of personal property that may or may not be deemed real property for purposes of taxation. The Supreme Court found that one object of the legislation was to restore intent as an element in determining when affixed personal property becomes real property. The Court held that the tests simply provided refinement in the definitions of real and personal property for purposes of determining whether certain property was subject to taxation. The New Jersey Supreme Court concluded that the Act is facially constitutional and does not create an unconstitutional exemption from taxation for real property that favors business or industry.


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