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Firm obtains partial summary judgment for Freehold Township in appeal of hospital’s property tax exemption

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The firm’s Municipal Tax Appeals group, including partner Martin Allen, Esq. and associates Kevin McDonald, Esq., and Edward Purcell Esq., succeeded in revoking the property tax exemption granted to CentraState Healthcare Services, Inc. (“CentraState”) in Freehold Township v. CentraState Healthcare Services, Inc., Docket Nos.: 000047-2016; 000048-2016; and 002998-2016.

CentraState had been historically granted a property tax exemption of certain hospital property pursuant to N.J.S.A. 54:4-3.6, which provides for property tax exemptions for certain uses of property by non-profit entities, including those organized for hospital purposes.

The firm successfully argued on behalf of the Township that CentraState, a subsidiary of CentraState Medical Center, was organized as a for-profit entity pursuant to Title 14A, and, therefore, was precluded from receiving a property tax exemption based upon N.J.S.A. 54:4-3.6.

When determining eligibility for property tax exemptions under N.J.S.A. 54:4-3.6, the Tax Court utilizes the Paper Mill Playhouse Test, as set forth by our Supreme Court in Paper Mill Playhouse v. Township of Millburn, 95 N.J. 503 (1984), and as applied to hospital properties in Monmouth Medical Center v. Township of Readington, 195 N.J. 549 (2008). The Paper Mill Playhouse Test employs a three-prong criteria: first, the claimant “must be organized exclusively for” the statutorily stated purpose; second, the property must be actually used for the tax-exempt purpose; and third, the “operation and use of its property must not be conducted for profit.” Paper Mill Playhouse, supra., 95 N.J. at 506.

In this case, the Court initially denied partial summary judgment to the Township based upon the theory that the for-profit subsidiary that owned the property may be entitled to a “derivative tax exemption” pursuant to Intercare Health Systems, Inc. v. Township of Cedar Grove, 11 N.J. Tax 423 (Tax 1990), aff’d, 12 N.J. Tax 273 (App. Div. 1991) and Mega Care, Inc. v. Township of Union, 15 N.J. Tax 566 (Tax 1996). However, the Township moved for Reconsideration and the firm argued persuasively that neither case cited by the Court was applicable to for-profit entities, as all of the entities involved in the aforementioned cases were non-profit entities, organized under Title 15A.

On the Township’s Motion for Reconsideration, the Court reconsidered its prior Order denying summary judgment, granted partially summary judgment to the Township, and revoked CentraState’s property tax exemption. In doing so, the Court agreed with the firm that a Title 14A for-profit entity can never prove its entitlement to a property tax exemption because N.J.S.A. 54:4-3.6, as interpreted by the courts of New Jersey, requires the property owner to be incorporated as a non-profit, under Title 15A.

The decision, issued by the Honorable Mala Sundar, J.T.C., is an unreported decision. For more information on the case, or for a copy of the decision, please contact Mr. Allen. Here is a link to the case: http://www.judiciary.state.nj.us/attorneys/assets/opinions/tax/000047-2016opn.pdf

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum PC (http://www.dbnjlawblog.com) is a full service law firm in New Jersey which provides a broad range of legal services.

The information contained in this blog is intended solely for informational purposes; it is a advertising publication of DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum P.C.This publication is intended to alert recipients of developments in the law and is not intended to provide legal counsel, advice or opinion on any specific facts or circumstances. The contents are intended as general information only. You are urged to consult a member of this firm or your own attorney concerning your particular situation and any specific legal questio.