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The Presbyterian Home at Pennington, Inc. v. The Borough of Pennington

409 N.J. Super. 166, 976 A.2d 413 (App. Div. 2009)

TAXATION; ASSISTED LIVING FACILITIES — New Jersey’s tax exemption statute expressly includes assisted living facilities within its definition of “hospital purposes,” and therefore, for the purpose of entitlement to an exemption for real estate taxes, it doesn’t matter that an assisted living facility does not have a charitable purpose.

On October 1, 2001, a nonprofit corporation purchased a property that was being developed for use as an assisted living facility. The assisted living facility had not yet opened. The buyer applied for a real estate tax exemption for tax year 2002. The municipality rejected the request because the property was not in use on October 1, 2001, which was the valuation date for 2002. The buyer challenged the denial in Tax Court. While the case was pending, the municipality classified the property as exempt for tax years 2003 and 2004. Later, the municipality sought a reversal of those tax exemptions in Tax Court.

The Tax Court found that the buyer was not entitled to claim a tax exemption for tax year 2002 because the property was not its use on October 1, 2001. It also found that the buyer was not entitled to claim a tax exemption for tax years 2003 and 2004. N.J.S.A. 54:4-3.6 grants real estate tax exemptions to facilities that are operated for “hospital purposes.” The statute included assisted living facilities as a qualifying “hospital purpose.” However, the Tax Court found that, based on the statute’s legislative history, nursing homes and assisted living facilities were entitled to the tax exemption only if they provide some measure of charitable care. In reaching that conclusion, the Tax Court noted that, by statute, hospitals are obligated to provide charitable care, and that since this assisted living facility did not provide charitable care it was not entitled to an exemption from real estate taxes.

The buyer appealed and the Appellate Division reversed. With respect to the denial of a tax exemption for tax years 2003 and 2004, the Court found that the plain language of the statute listed assisted living facilities within its definition of “hospital purposes.” The Court found no basis for the Tax Court to look beyond the plain meaning of the statute or look to legislative history to impose an additional obligation on the facility to provide charitable care. It also noted that while the statutory obligation for hospitals to provide charitable care had been in existence since 1993, the “hospital purposes” exemption from real estate taxes had been in place since the early 1900’s.

The Court also rejected the Tax Court’s denial of a tax exemption for tax year 2002. It found that the Tax Court erred when it allowed the municipality to assess the property as if it were substantially complete and operational on October 1, 2001 while denying it a tax exemption on the basis that the assisted living facility was not operational on October 1, 2001. The Court found that the Tax Court was required to make a finding as to whether the building was substantially complete on October 1, 2001 before it upheld the municipality’s assessment. If the building was not ready for its intended use as an assisted living facility until some time later, in this case February 2002, then the valuation dated should have been in February 2002. The Court noted that if the building was substantially complete on October 1, 2001, then the buyer was entitled to a full exemption from real estate taxes. Also, if the building was not substantially complete until February 2002, then the land should have been taxed as nonexempt for 2002, but the improvements should have been valued as of the first day of the month following completion, and then the improvements should have been exempted from real estate tax.


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