New Jersey Supreme Court Year in Review Tax Cases

As of June 30, 2018, the New Jersey Supreme Court addressed one tax case that originated in the Tax Court during the 2017-2018 court year.

REAL PROPERTY TAX

In EQR-LPC Urban Renewal North Pier, LLC v. City of Jersey City, 231 N.J. 157 (2017), the New Jersey Supreme Court affirmed the judgment of the Appellate Division substantially for the reasons expressed in that Court’s per curiam opinion, and did not write a plenary opinion.

Plaintiffs had appealed from the Appellate Division’s reversal of the Tax Court’s grant of partial summary judgment to plaintiffs on their claim seeking a declaratory judgment that financial agreements that they had entered into with the defendant in 2000 and 2001 incorporated 2003 amendments to the Long Term Tax Exemption Law, N.J.S.A. 40A:20-1 to 22 (“LTTE”).

The underlying facts were as follows:  Plaintiffs qualified as urban renewal entities under the LTTE law.  To obtain property tax exemptions for their urban renewal projects involving the construction of an apartment building, plaintiffs entered into financial agreements with the defendant.  The agreements obligated plaintiffs to pay an annual service charge equal to 15 percent of the annual gross revenue, and to pay any excess net profits to defendant.

Plaintiffs submitted an excess net profits calculation for 2013, calculating their allowable profits using the profit calculator formula rate provided by the 2003 amendments to the LTTE law, rather than the formula rate contained in the version of the LTTE law in effect when the parties entered into their agreements with the defendant in 2000 and 2001.  Under the 2003 amendment rate, plaintiffs did not have any excess profits and consequently, didn’t owe any excess net profit payments to the defendant.

The defendant sent a default notice, contending that plaintiffs did have an excess profit because it should have used the profit calculation formula contained in the version of the LTTE law in effect at the time the subject agreements were executed.

The Tax Court granted summary judgment in favor of the plaintiffs and held that the phrase “as amended and supplemented” in the agreements demonstrated the parties’ intent to incorporate future amendments to the LTTE law in their agreements.

The Appellate Division reversed the Tax Court’s grant of summary judgment – it ruled instead that the word – for – word copying of the profit calculation formula contained is the version of the LTTE law in effect at the time the agreements were written (as it existed in 2000 before the 2003 amendments) evidenced the parties’ intent to specifically adopt that formula.  The Appellate Division further held that the phrase “as amended and supplemented” was intended to incorporate amendments to the LTTE law from its initial adoption in 1991, up to the date the agreements were executed, not future amendments.

In reaching its decision, the Appellate Division panel found support for its interpretation in noting that it is contrary to fundamental public financing concepts for the Legislature to adjust the terms of municipal tax abatement contracts after the fact.