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Seventy Five P-B Corporation v. Town of Phillipsburg

18 N.J. Tax 71 (1999)

TAXATION; ASSESSMENTS—The five year exemption from real estate taxes, where applicable, begins with the January following the completion of improvements and added assessments may be applied between completion of construction and the following January 1.

An improvement to a commercial building was completed on March 21. An added assessment was then attributed to the construction. The property owner did not dispute the amount of the assessment, but contended that the assessment was improper because the improvement qualified for exemption, commencing on April 1 of that year, under the Five-Year Exemption and Abatement Law, N.J.S. 40A:21-1 to -21, and under the applicable municipal ordinance adopted pursuant to that State statute. The municipality acknowledged that the improvement qualified for exemption under the State statute, but contended that, as a matter of law, the exemption did not commence until the following January 1. The State statute provided that when a municipal ordinance is adopted pursuant to it, “the municipality shall regard up to the assessor’s full and true value of the improvements as not increasing the value of the property for a period of five years. ” and “[d]uring the exemption period, the assessment on the property shall not be less than the assessment thereon existing immediately prior to the improvements… .” The property owner argued that this language was consistent with the municipal ordinance that provided for the exemption or abatement of property taxes to be “for a five year term commencing with the completion of an improvement or construction of a commercial or industrial structure… .” The municipal ordinance also stated that “[i]mprovements to existing structures shall be exempt from assessment for a period of five years following completion of the improvement.” Lastly, the municipal ordinance stated that “[a]ll tax abatement and exemption agreements shall be for no more than five (5) years following completion of the project.” On the other hand, the municipality asserted that the law neither provides for, “nor contemplates the granting of, an exemption other than for full tax years and, therefore,” contended that imposition of an added assessment for the nine remaining months of the year in which the construction was completed was entirely consistent with, and permitted by, the State statute.

N.J.S. 40A:21-11(a) provides: “All tax agreements entered into by municipalities pursuant to [the statute] shall be in effect for no more than the five full tax years next following the date of completion of the project.” This language differed from a predecessor statute which provided that abatement (and exemption agreements) “shall be in effect for a period of 5 years starting with the date of completion of the project.” Other provisions of the State statute were consistent with the “five full tax years” concept set forth in the quoted language above. Here, the portions of the municipal ordinance which provide for the exemption to commence upon completion of the improvements were consistent with the repealed provisions of the prior statute but were inconsistent with the revised State statute. Under case law, a “municipality may not contradict a policy of the Legislature, either by permitting what a state statute forbids or by forbidding what a state statute permits. If a municipal ordinance conflicts with state law, either because of conflicting policies or operational effect, state law preempts the municipal ordinance.” Consequently, the Court resolved the conflict between the ordinance and the State statute in accordance with the provisions of the State statute. A “tax year” is a calendar year because N.J.S. 1:1-2 defines the term “year” as used in any statute as “a calendar year.” Consequently, the exemption under the State statute commenced on January 1 next following completion of the improvement. Having rejected the property owner’s contention that the exemption period commenced with the first day of the month next following completion of the improvement, the Court went on to determine that the added assessment could be imposed for the time period between completion of the improvement and the beginning of the next full tax year. “Precluding assessment of the improvements for the time period between its completion and the commencement of the next full tax year would be, in effect, to extend the exemption period for more than five years in violation of both the [New Jersey] Constitution and the [State statute].”


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