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In Re Petition of the University Cottage Club of Princeton New Jersey Corp.

A-2391-08T2 (N.J. Super. App. Div. 2010) (Unpublished)

TAXATION; HISTORIC SITES — The 2007 legislative amendments to the 2004 amendments of the law governing historic site tax exemptions were curative legislation to make clear the intent of the 2004 amendment and such curative legislation is permitted as retroactive tax legislation.

A club that was accessible to the public for limited hours, twelve days a year, filed a petition with the New Jersey Department of Environmental Protection for historic site tax-exempt status pursuant to statute. After months of correspondence, the DEP Commissioner denied the application, finding the club did not provide sufficient public access to its property to warrant a tax exemption under the statute. He indicated that until pending legislation to amend the governing statutes was in effect, he was going to deny all applications due to the public accessibility requirement in the statute. The club appealed to the Appellate Division which affirmed. The New Jersey Supreme Court agreed to hear the case, and reversed, holding that the more rigorous requirements for tax-exempt status in the 2004 amendments were not intended to apply to the club because it had filed its petition for tax-exempt status in 2001. The 2004 amendments required a tax-exempt status seeker to be open to the public at least ninety-six days out of the year. The Supreme Court found the DEP’s rejection was arbitrary and unreasonable, pointing out the club was entitled to an adjudication based on the law at the time, which it satisfied based upon twelve days of public access. The Court remanded the matter to the DEP for action consistent with principles stated.

Three weeks after the Court’s decision, the New Jersey legislature acted to amend the 2004 amendments, indicating the 2004 amendments were applicable to properties designated as historic sites any time after July 1, 1999, and that jurisdiction over the exemptions was to be transferred from the DEP to the Division of Taxation, Department of Treasury. The DEP, not having yet acted on the club’s application, informed the club that it no longer had jurisdiction to grant tax-exempt status.

The club appealed the DEP’s refusal to certify its historic-site tax exemption. It asserted that the Supreme Court’s decision automatically entitled it to certification, and the DEP was not obliged to undertake any further review. The DEP argued the opinion permitted it to consider additional evidence on remand. The Appellate Division held that even if the DEP had certified the club, the effect of the 2007 amendments would declare such action null and void, as the club petitioned for certification after July 1, 1999 and did not meet the public access requirement of ninety-six days.

The club argued the retroactive application of the 2007 legislative amendments to post- July 1, 1999 certifications effectively reversed the Supreme Court’s decision, and so violated the separation of powers provision in the New Jersey Constitution. The Appellate Court answered that the judgment for certification had not been made final by the Supreme Court and the Court did not order the DEP to issue the certificate. Therefore, the club did not have a vested right, and a statutory provision could be constitutionally applied as there was no final disposition. The Court held the legislature had the exclusive authority under the State Constitution in the area of tax regulation, and the public interest in taxation overrode the unvested right of the club to a grant of its petition.

The Court also held that the 2007 amendments were curative legislation to make clear the intent of the 2004 amendments, the adoption of which predated the Supreme Court’s ruling. The Court said such curative legislation is permitted as retroactive tax legislation. The Court remarked that the standards for tax-exempt status had not materially changed between the 2004 and 2007 amendments. Lastly, the Court dismissed the club’s alternative argument that the retroactive provisions, and applicability of the 2007 amendments, were manifestly unjust. The Court responded that the club’s limited hours of access to the public, twelve days a year, represented a pittance while the taxpayers of the municipality in which the club sits would in effect be helping to subsidize a private dining club if the tax-exempt status were granted. The Court concluded that manifest injustice would be visited upon the municipality were it not for the retroactive application of the 2007 amendments.

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