Tax Appeals – Recent Cases and How They Can Affect Communities

John Lloyd

The NJMMA Spring Conference ended with a deep dive into recent court decisions regarding taxes for municipalities and what those decisions may mean for administrators and their municipalities. John Lloyd, a member of CSG law’s Real Estate, Development, Land Use and Tax Groups; Martin Allen, the chair of DiFrancesco Bateman’s Real Estate Taxation Department; Michele Hovan, Borough Administrator for Hopewell Township; and Joseph Tauriello, a principal trial counsel in corporate, municipal court, local government, employment, real estate and estate matters, gathered to give their expert views.

“Tax PILOTS, incentives and abatements are in the middle of a political battle,” Lloyd said, “but they still remain very important.” According to Lloyd, municipalities and their administrators are the ones in the trenches, working to maximize their funding for their important programs. “While these PILOTS and other incentives may not be perfect, you don’t want to lose any tools that could potentially help,” he said. 

Allen spoke to the recent tax court decision on Morristown Hospital. In the New Jersey state constitution, exemptions have to be given uniformly and those exempt organizations shall not operate for profit. This is in contrast with hospitals in New Jersey, and a judge recently ruled that Morristown Hospital is taxable under property tax laws. This will undoubtedly have far-reaching effects across the state. This case remains in the appeal process, but the courts have ruled that the municipality is not entitled to back taxes.

With the current precedent on exemption cases, taxes do not have to be paid until the appeal process is over. As a result, formerly exempt organizations are using appeals to delay payment. “Keep pushing the ball forward and be aggressive,” Allen said. “Don’t let them delay it forever.”

Another caveat that Allen provided in this regard is a proposed hospital bed tax, currently on the floor of the New Jersey Assembly, which is even worse than one that had been previously proposed. If passed, a hospital bed tax would not be ideal for municipalities because it could not be tightly audited.

Hovan discussed Hopewell’s current litigation with Verizon, where Verizon came to the township saying that they no longer needed to pay business or property taxes on the basis that they were no longer the main telecommunications provider in the area. The township filed an appeal and fought back at Verizon, arguing that they were clearly the main provider in the region. “Ten years and quite the challenge later,” Hovan said, “we’ve won the case and it’s now under appeal.” Principle was a driving force for the township fighting back, as local governments cannot allow the large companies in town to push them around.

Tauriello has been the attorney working on behalf of Hopewell in these proceedings. His philosophy was to make this case as simple as possible, and to make it clear that Verizon should not be receiving any special treatment. Through litigation, Hopewell focused on Verizon’s service agreements to show that they do constitute a majority of the telecommunications across the local exchange and ultimately, Verizon’s own internal documents contradicted their arguments in court.

“Legal briefs are due in June for Verizon’s appeal and we will see what is next,” Tauriello said. But, he doesn’t see any issues with the original case and expects the appeal process to be wrapped up rather efficiently.