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Lowe’s Home Centers, Inc. v. City of Millville

2010 WL 4909581 (N.J. Tax Ct. 2010)

TAXATION —Where a property tax filing is required to be made within a given number of days after a building is completed, then “completed” means when the properly is ready for its intended use, not necessarily when the certificate of occupancy is issued because the issuance of a certificate only means that the premises are constructed properly for occupancy.

A retailer’s property was located within an Urban Enterprise Zone and was also located within an area in need of rehabilitation under the Five-Year Exemption and Abatement Law, N.J.S.A. 40A:21-1, et seq. After considering its property’s location in the Urban Enterprise Zone and the availability of a five-year tax exemption and abatement, the retailer decided that development of its property was commercially feasible. It negotiated a development agreement with the municipality and with a developer who held adjacent property. The project was to be a shopping center that included its retail store. The development agreement provided that any notices to the retailer would go to its corporate offices in North Carolina.

The municipality issued a certificate of occupancy for the completed store on May 27, 2004. On June 4, 2006, the retailer had a “soft opening” for store employees and their families. The store opened to the general public on June 9, 2004. On June 1, 2004, the municipal tax assessor sent a notice to the retailer giving it thirty days from the date of the letter to complete its tax exemption and abatement application. However, the notice was sent to one of retailer’s offices in Spokane, Washington and not to the North Carolina address specified in the development agreement.

The retailer’s Spokane office forwarded the application to the North Carolina office and the retailer submitted its application by overnight courier so that it was received by the municipality on June 30, 2004, within the thirty-day deadline. The retailer’s application indicated that the store had been completed on the date of the soft opening. The tax assessor approved the application and, on February 21, 2006, the municipality ratified the tax assessor’s approval of the application.

Two and a half years later, the municipality determined that the correct completion date for the store was not the soft opening date of June 4, 2004, but rather May 27, 2004, the date the municipal building department issued a certificate of occupancy. Therefore, the municipality concluded that the exemption application was filed four days late and it sought to revoke the tax exemption and bill the retailer for real estate taxes.

The retailer challenged the municipality’s attempt to revoke the exemption. The Tax Court agreed with the retailer, holding that the municipality could not revoke a tax exemption when it was the municipal assessor’s negligence, not the taxpayer’s, that caused the taxpayer to miss the deadline. The Court noted that for one thing, it was the municipal assessor who had advised the retailer that it had thirty days from the June 1, 2004 letter to apply for the exemption. Consequently, the retailer should not have suffered because of an error on the assessor’s part in determining when the clock started. The Court also noted that while the statute requires the application to be filed within thirty days after a building is completed for its intended use, that date is not necessarily the date when certificate of occupancy was issued. Issuance of a certificate of occupancy only means that the premises are constructed properly for occupancy, but not necessarily that it is ready for its intended use. Indeed, a store would still need to be fitted and stocked in order to be ready for its intended use. The Court was also disturbed by the assessor’s failure to abide by the notice requirements in the development agreement which required notices to be sent to the retailer’s North Carolina address. It was not clear to the Court how the tax assessor obtained the Spokane, Washington address or why it elected to use that address instead of the one listed in the agreement.

The Court also found it inequitable for the municipality to attempt to revoke a tax exemption halfway through the five-year exemption period. It noted that the retailer relied on the exemption in agreeing to construct a store on the premises. Further, if a municipality were allowed to revoke a previously approved exemption, it would undermine the purpose of the Five-Year Exemption and Abatement Program which is to spur development. Developers would not redevelop blighted areas if there was uncertainty as to the continued tax benefits which were part of their feasibility analysis when deciding to enter into redevelopment agreements.


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