Tax Court: Added/Omitted Assessment Law Does Not Apply to Property Which Loses Exemption

by: Allan Zhang
22 Jan 2021

A recent decision by Presiding Tax Court Judge Mala Sundar found that the Added and Omitted Assessment Law did not apply when an exempt property became non-exempt. Instead, the applicable law was the “Exemption Cessation” statute.

The basis of this action stemmed from previously tax-exempt property that Centrastate Healthcare Services Inc. (“CHSI”) (a for-profit entity) came to own in 2008. That CHSI was a “for-profit” entity was known to the Tax Assessor as the 2008 transfer was marked nonusable, however, the tax exemption continued, and no appeal was filed by the Township of Freehold (“Freehold”). In 2015, Freehold petitioned the County Board to impose omitted assessments for tax years 2014 and 2015 on CHSI’s property and subsequently revoked CHSI’s tax exemption.

Upon dismissal, Freehold appealed to the Tax Court on grounds the omitted assessment for 2014 and 2015 should have been imposed. Freehold then moved for partial summary judgment which Judge Sundar granted and denied CHSI’s property tax exemption for tax years 2014 and 2015. CHSI, relying on the holding in Borough of Red Bank v. RMC-Meridian Health, 30 N.J. Tax 551 (Tax 2018), brought action asserting that the Tax Court lacked jurisdiction to deny the tax exemption and should instead dismiss Freehold’s omitted assessment appeals.

Judge Sundar determined that the “general omitted assessment law” (N.J.S.A. 54:4-63.12 to – 63.25 and N.J.S.A. 54:4-63.31 to -63.40) did not apply in this instance. Rather, the “Exemption Cessation” statute (N.J.S.A. 54:4-63.26 to -63.30) should be applied, in line with the RMC matter, which held that the Exemption Cessation statute applied as to when and how a property that was tax-exempt became taxable. The Court properly held the Exemption Cessation statute only allows an omitted assessment in the year the property becomes non-exempt.  As a result of this holding, a municipality will not be able to rely upon the regular Added and Omitted statutes to place added and omitted assessments on property for years prior to the cessation of an exemption.

To view the full Township of Freehold v. Centrastate Healthcare Services, Inc. decision click here.