Tax Court Reaffirms the Inapplicability of Freeze Act Relief in a Reval Year

by: Anthony F. Della Pelle
4 Jan 2016

Back in July, we summarized the Tax Court’s decision following the trial in Seaboard Landing, LLC v. Borough of Penns Grove, which can be read here.  It was a peculiar case where despite the fallacies in the taxpayer’s appraisal report, the Borough still proceeded to present its expert witness who testified that the assessment did in fact warrant a reduction.  In the end, the omitted added assessments for tax years 2007, and 2008 were lowered, as well as the original assessments for tax years 2011 and 2012.

In the aftermath of the Seaboard trial, taxpayers sought to invoke the Freeze Act for the subsequent tax years.  Generally, a judgment as a result of a successful appeal binds the municipal assessor from raising the assessment for two succeeding years.  It is commonly referred to as the Freeze Act protection and Seaboard sought the same in order to “freeze” the assessments for tax years 2009, 2010, and 2013.  However, the Freeze Act explicitly precludes its application in a tax year in which a district-wide revaluation was implemented and any subsequent year thereafter.  Penns Grove underwent a revaluation for tax year 2009.  Nonetheless, Seaboard argued that justice and fairness required the Freeze Act relief to be applied for 2009, and 2010.

Seaboard’s main contention was that the Freeze Act ordinarily would not apply to a year in which a revaluation was implemented because it is presumed that all property will be assessed at 100% of value following the revaluation.  In this particular case, however, evidence presented at trial in July convinced the court that the property was over-assessed for the years immediately preceding and subsequent to the revaluation year (2009).  Therefore, Seaboard argued, the limitation to the Freeze Act protection under these facts would be unfair to the plaintiff and also unconstitutional.

The Tax Court judge rejected Seaboard’s argument noting that “while Seaboard’s argument has surface appeal, a careful analysis reveals that it is not supported by law.”  There were several glaring holes in Seaboard’s argument.  First, the Legislature could not have intended the statute to be applied in the way Seaboard suggested.  The Freeze Act protection is inapplicable in a revaluation year given that it is presumed that the property would be assessed at 100% market value.  Even if the revaluation is erroneous as to the value of the property, the recourse for correcting the assessment in a revaluation year is by filing an appeal, which Seaboard failed to do in tax year 2009 and 2010.  The court indicated that had the Legislature intended, it could have easily included in the Freeze Act statute that Freeze Act relief terminate only when a revaluation results in an assessment accurately reflecting true market value but the Legislature did not do so.

Also problematic is the fact that the 2008 judgement accounted for the omitted added assessment as to improvements only.  Absent from the 2008 judgment is the assessable land value.  Moreover, the 2008 judgment reflects “not the true market value of the added improvements, but the figure resulting from application of the 54.00 average ratio for the municipality for tax year 2008 to the true market value of the improvements.”  In light of these circumstances, there would be no avenue for the court to apply the 2008 judgment to tax year 2009 or 2010 without exercising any judicial discretion (i.e., determining the land value).  The Tax Court was “not willing to contort the plain language of the Freeze Act in the manner necessary to accomplish this result.”

Seaboard did however overcome the Borough’s objection in obtaining the Freeze Act relief for tax year 2013.  The Borough argued that despite the 2012 judgment lowering the original assessment for tax year 2012, Seaboard was not entitled to the freeze for tax year 2013 because its complaint filed for that particular year was dismissed for failure to pay taxes.  The Tax Court rejected the Borough’s argument stating that the Freeze Act “contains no express limitation on the availability of relief in a year in which a taxpayer’s Complaint is dismissed for failure to pay taxes. . .”

The importance of filing an appeal on an annual basis for which a reduction is warranted cannot be overstated.  Had Seaboard filed and sustained appeals for tax years 2009, and 2010, it may have arguably received a reduction in the assessments given that it had successfully challenged the 2011 and 2012 assessment which were based on the 2009 revaluation.  Fortunately, Seaboard will at the least receive a reduction in the assessments for tax years 2013, and 2014.

A copy of the Tax Court’s published opinion can be found here.