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University Cottage Club of Princeton New Jersey Corp. v. NJDEP

A-1909-03T5 (N.J. Super. App. Div. 2006)

TAXATION; HISTORIC SITES —To earn a real property tax exemption as a historic site, the site must be freely available to all people and now, by statute, that means being open for a minium of ninety-six days each year.

The Historic Preservation Office (HPO) in the Division of Parks and Forestry at the New Jersey Department of Environmental Protection (DEP) implements the tax-exempt historic site certification process. A club organized as a non-profit corporation owned property and a building that offered club members who attended a related college social, recreational, educational and dining facilities. The club was not open to non-members or to the public and was not listed on the New Jersey State Register of Historic Places at the time the club inquired of the petition requirements to obtain tax-exempt historic site status. The club was told that it had to demonstrate that its property was open to the public. The club also had to prove its non-profit status and that it had a policy of non-discrimination, and that it had a commitment to the preservation of the building. After the municipality in which the club was located had an opportunity to comment on the petition, the request would be forwarded to the Commissioner of the DEP for final deliberation.

The club submitted proofs that it was open for public visitation for twelve days or less per year over three calendar years. It also attested to its non-profit status, and to its listing on the New Jersey State Register of Historic Places. The mayor of the municipality strongly urged the HPO to deny the club’s application, stating that the club was exclusive only for members and private guests, and that its non-profit status was repeatedly not recognized by the local municipality tax assessor. The mayor also suggested, through the municipality’s attorney, that a tax-exempt status for an exclusive club would set a precedent for numerous private supper clubs in the municipality to seek similar tax-exempt status that would drain the tax base. In a final determination, the Commissioner denied the club’s application for tax-exempt status because the club was not freely accessible on a regular basis to the public. The club appealed this final decision, claiming the decision was contrary to law, was arbitrary and capricious, and that the matter required a hearing to determine disputed factual issues.

The Legislature subsequently amended the law governing the qualifications necessary to acquire tax exemption as a historic site. The law required that the primary mission of a historical organization had to be to research, preserve, and interpret history and architectural history. It also required the building to be open to the general public for a minimum of ninety-six days each year. These amendments only applied to certifications awarded by the Commissioner after the club’s petition was denied, and so the new legislation could not be applied by the Appellate Division on appeal. However, the Court stated that understanding the amendment could be of assistance in determining original legislative intent in this area.

The Court concluded that the Commissioner’s denial of the club’s application, based upon the limited public access that the club was willing to provide, was reasonable and within its statutory authority. It noted that an appellate court will give substantial deference to an agency’s interpretation of a statute it is charged with enforcing, short of an arbitrary or unreasonable agency decision. The Court stated that the purpose of the original historic sites’ tax exemption statute had been judicially interpreted as one to preserve and maintain historic sites for the sole benefit of the public. Furthermore, the Court noted that upon passage of this statute, the Governor of New Jersey issued a press release stating that the tax exemption would apply to historic sites that are freely available to all people. Consequently, the Court agreed that DEP was authorized to deny the club’s petition based upon the limited public access the club agreed to provide. The Court also denied the club’s request to remand the matter to the Office of Administrative Law for the purpose of conducting a hearing in a contested case, as it found there were no disputed issues of material fact.

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