This is the court’s opinion with respect to cross-motions for summary judgment. The tax year in question is 2000. Defendant (“municipality”) notified plaintiff (“taxpayer”) that a certain improvement under construction, but not yet complete as of October 1, 1999, was subject to an assessment of $1,250,000. Taxpayer filed its complaint, appealing this partial assessment.
All of the land on the five acre tract in question is owned and operated by taxpayer in pursuit of its corporate mission to provide care for the elderly. Taxpayer’s property consists of approximately five acres of land upon which three different facilities currently exist: (1) the skilled nursing facility, (2) the residential health care facility, and (3) the assisted living facility.
As of October 1,1999, the relevant assessing date, the property was licensed to hold thirty residents in its skilled nursing facility, and thirty five residents in its residential health care facility. At that time, the improvement under review herein (assisted living facility) was unoccupied and under construction, with about 80% of the work completed. The 74 additional units comprising the assisted care facility were completed on April 1, 2000, with actual occupancy occurring around April 12, 2000 Upon completion of said construction, all three facilities were interconnected.
This court must determine whether a structure, which is partially erected as of October 1 of the pre-tax year, can be assessed if said structure is an addition to a previously tax exempt structure.
I. LAW AND ANALYSIS.
A. Summary Judgment Standard.
Summary judgment should be granted where “the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law.” R. 4:46-2(c). In Brill v. Guardian Life Insurance Co. of America, 142 N.J. 520,
[W]hen deciding a motion for summary judgment under Rule 4:46-2, the determination whether there exists a genuine issue with respect to a material fact challenged requires the motion judge to consider whether the competent evidential material presented, when viewed in the light most favorable to the non-moving party in consideration of the applicable evidentiary standard, are sufficient to permit a rational factfinder to resolve the alleged disputed issue m favor of the non-moving party.
[142 N.J, at 523,606 A.2d 140 .]
Furthermore, “ ‘the court must accept as true all the evidence which supports the position of the party defending against the motion and must accord ... [them] the benefit of all legitimate inferences which can be deduced therefrom, and if reasonable minds could differ, the motion must be denied.’ ”
B. Taxable Status.
In order to grant summary judgment in favor of the municipality, this court must first find that taxpayer’s facility, was, as a matter of law, a taxable structure as of October 1, 1999. The controlling statute is N.J.S.A. 54:4-3.6, which exempts all buildings actually used in the work of associations and corporations organized exclusively for hospital purposes from property tax. N.J.S.A. 54:4-3.6. The statutory definition of “hospital purposes” includes health care facilities for the elderly, such as nursing homes, residential health care facilities, and assisted living facilities. See ibid.
To qualify for an exemption under the aforementioned statute, courts have traditionally applied the following three part test, promulgated by the New Jersey Supreme Court in Paper Mill Playhouse v. Millbum Tp., 95 N.J. 503, 506,
In order to do so, taxpayer must first show that it is organized exclusively for a tax exempt purpose. N.J.S.A. 54:4-3.6. The definition of exempt purposes under N.J.S.A. 54:4-3.6 includes “all buildings actually used in the work of associations and corporations organized exclusively for hospital purposes.” N.J.S.A. 54:4-36. Moreover, “hospital purposes” is further defined to include “health care facilities for the elderly, such as nursing homes; residential health care facilities; assisted living residences; ... [and] similar facilities that provide medical, nursing, or personal care services to their residents ....” Id. Thus, in order to fulfill the first requirement of the test, taxpayer’s organizational documents must specify that its purpose is to provide hospital services as defined by the aforementioned statute.
In the present case, taxpayer’s Articles of Incorporation specifically state that it is incorporated pursuant to an act of which, “sole and exclusive object of is the relief of poor and aged persons of both sexes, who shall by sickness, casualty or other cause be rendered incapable of or attending to their usual occupation or calling.” Similarly, taxpayer’s amended by-laws state that it “is organized exclusively for charitable, religious, educational, and scientific purposes, [it] ... may solicit contributions and other financial assistance to support its programs including, without limitation, assistance to aged persons of limited means.... ” Moreover, those by-laws also indicate that taxpayer is organized as a not for profit corporation organized under N.J.S.A. 15A:1-1 to:14-25, et seq., as amended. In light of these facts, this court finds that taxpayer is organized exclusively for hospital purposes as defined by N.J.S.A. 54:4-3.6.
In the present case, taxpayer charges residents fees for room and board and medical expenses.
Generally, exemptions are granted in recognition of the benefit conferred upon the public in fulfillment of the exempt organization’s objectives. See Grace & Peace Fellowship Church, Inc. v. Cranford Tp., 4 N.J.Tax 391, 399 (Tax 1982). In order to justify an exemption, there must be a quid pro quo for the performance of a service that is essentially public. See Roman Catholic Archdiocese of Newark v. City of East Orange, 17 N.J.Tax 298, 312 (Tax 1998), aff'd, 18 N.J.Tax 649 (App.Div.2000). As Judge Andrew pointed out in Grace & Peace Fellowship Church, supra, “[t]he single thread that runs through the cases ... is that there must be actual use made of the buildings in accordance with the exemption statute.”
This court, however, carved out an exception to the rule for property that exhibits a “continued exempt character.” Paper Mill Playhouse v. Millburn Tp., 7 N.J.Tax 78, 86 (Tax 1984). The Paper Mill Playhouse court, limited the exception to include property which was previously exempt, but, for one reason or another, discontinues actual use of the property during a discrete reconstruction period. See id. at 84. There, the court found an
In the present case, taxpayer merely constructed an addition to an already tax exempt structure for which taxpayer filed an initial application for exemption from local property taxation on October 19, 1970, with its most recent Further Statement filed on December 11, 1998. In fact, with the exception of the present appeal, taxpayer has been exempt from local property taxation since at least 1971. Thus, the present facts are similar to those presented in Paper Mill Playhouse, supra, in that the municipality did not historically rely on taxpayer as a ratable in determining its budget, and under the present circumstances, would not impose an assessment on taxpayer upon completion of the construction. For those reasons, this court finds that taxpayer is entitled to the “continued exempt character” exception from the actual use requirement of N.J.S.A. 54:4-3.6.
The municipality contends that (1) the present facts do not fall within the parameters of the exception because it is limited to situations where property is destroyed because of “acts of God;” and (2) the present facts are more similar to those presented to this court in Hillcrest Health Service, supra. There, the Tax Court found a partially constructed, four-story building and parking garage taxable, even though it was owned by a not for profit corporation. See Hillcrest, supra, 18 N.J.Tax at 40, 48. The new facility in question was located across the street from a hospital, which intended to use it in conjunction with charitable hospital work. Id. at 41-42; see also Grace & Peace Fellowship Church, supra, 4 N.J.Tax 391 (holding a partially constructed church being
This court rejects both of the municipality’s arguments. The court in Paper Mill Playhouse, supra, intended to create an exception to the “actual use” requirement where previously exempt property is not in such actual use for a discrete construction period. In those cases, the court will grant a “continued character” exception during the construction period, and where reasonable, assume the previously exempt use will continue upon completion of the aforementioned period.
The municipality’s attempt to narrowly define this exception to construction resulting from acts of God does not take into account the policy considerations of the municipal budget. Generally, a municipality will not incorporate assessments from previously exempt buildings into its budget planning. Thus, once exempt, it does not matter how or why the construction on said property begins, because those considerations have no effect on the budget process.
Moreover, Hillcrest, supra, is clearly distinguishable from the present case, because the exemption there was located across the street from the hospital which was entitled to an exemption and was being built on land that was not exempt when construction commenced.
Thus, pursuant to the Paper Mill Playhouse “continued character exception,” this court holds that property which is previously exempt under N.J.S.A. 54:4-3.6 at the time it com-
It is important to point out that this holding does not prevent the municipality from recapturing tax dollars from taxpayer if, upon completion of said construction, taxpayer no longer qualifies for an exemption under N.J.S.A. 54:4-3.6. While the general rule provides that all taxable real property must be valued as of October 1 of the pre-tax year, the statutory scheme does allow municipalities to recapture lost tax dollars through the added assessment law. See e.g., N.J.S.A. 54:4-63.2.
II. CONCLUSION.
The municipality’s motion for summary judgment is denied. Taxpayer’s cross-motion for summary judgment is granted, there
Notes
Taxpayer's affidavits explain the different functions of the three facilities which compose the Job Haines complex. More specifically, the skilled nursing facility provides twenty-four hour registered nurses to patients in private and semi-private rooms. In addition to the nurses, residents have access to a physical therapist, dietician, and psychologist. The assisted living facility, however, does not provide twenty-four hour nursing. Rather, those residents are primarily supervised by the facility’s staff. Finally, the residential health care facility houses those residents who require the least amount of medical assistance.
Judson v. Peoples Bank and Trust Co of Westfield, 17 N.J. 67, 73-75,
See Snyder v. Bor of South Plainfield, 1 N.J.Tax 3, 7 (Tax 1980) (citing N.J S.A. 54:4-23 for the position that "[a]ll taxable real property must be valued as of October 1 of the pre-tax year").
The opposite construction would place taxpayer in the anomalous position of having to lose money to qualify for an exemption.
Taxpayer certifies that this fee is below the market standard for comparable for-profit corporations which provide similar services.
The court explained that because municipalities generally do not rely on obtaining tax dollars from historically exempt property, continuing an exemption of a previously exempt property for a discrete period of time was not contrary to statutory intent.
There, the court recognized the continuing use exception of Paper Mill Playhouse, supra, but distinguished its facts in two ways. First, the court pointed out that the taxpayer was unable to establish ownership of the property at the time it was previously exempt. See Hillcrest, supra, at 47-48. Second, and more importantly, the court distinguished the Paper Mill Playhouse exception by explaining that it only applies where there is a preexisting exempt building, not oh a vacant parcel Id at 48.
The municipality may also recapture lost tax dollars under N.J.S.A. 54:4-63.26, which provides that, "[wjhenevcr any real property is by law exempt from taxation and the right to such exemption ceases by reason of a change in use or ownership of such property, the same shall be assessable as omitted property as hereinafter provided." See also Boys’ Club of Clifton, Inc. v. Jefferson Tp., 72 N.J. 389,