Richard Kennel v. Director, Division of Taxation

NOT FOR PUBLICATION WITHOUT APPROVAL OF

THE TAX COURT COMMITTEE ON OPINIONS

TAX COURT OF NEW JERSEY

Mary Siobhan Brennan 153 Halsey Street

Judge Gibralter Building 12thFloor

Newark, New Jersey 07101

(973) 645-4280 Fax: (973) 645-4283

August 1, 2013

Richard Kennel

319 William Street

Harrison, New Jersey 07029-1313

Carl A. Wohlleben

Deputy Attorney General

Division of Law

R.J. Hughes Justice Complex

P.O. Box 106

25 Market Street

Trenton, New Jersey 08625-0106

RE: Richard Kennel v. Director, Division of Taxation

Docket No. 001061-2013

Dear Mr. Kennel and DAG Wohlleben:

This letter constitutes the court s opinion after trial for the above mentioned matter in which plaintiff challenges the final determination of the Director, Division of Taxation denying his application for a homestead property tax reimbursement for tax year 2010. For the reasons stated more fully below, the Director s final determination is affirmed.

I. FINDINGS OF FACT

Based on the evidence gathered during the June 7, 2013 trial and the documents submitted by the parties, the court makes the following findings of fact.

Plaintiff is a senior citizen1 who owns the property he resides in at 319 William Street, Harrison, New Jersey. Plaintiff states that due to news stories he heard on the radio and read, he believed that the homestead property tax reimbursement program (commonly known as PTR or senior freeze ) had been cancelled for tax year 2010. In November 2011, Plaintiff learned that he was mistaken about the PTR program being cancelled.2 Consequently, he filed the PTR application on December 20, 2011. The filing deadline for the 2010 rebate was November 7, 2011. Plaintiff did not submit evidence that he had a medical condition that prevented him from filing the application on time, nor did he claim he attempted to timely file the application.

The Division of Taxation denied plaintiff s application on February 14, 2012. Plaintiff protested the denial of his PTR application. Upon review of the Division s records, plaintiff s written correspondence, and a telephone conference between the parties, the Director issued a final determination letter on November 27, 2012 denying plaintiff s appeal for tax year 2010. In its final determination letter, the Director acknowledged that plaintiff believes he had a hardship case because there were conflicting stories in the media regarding whether the 2010 PTR program was cancelled, but stated that plaintiff does not have a hardship case. The 2010 Property Tax Reimbursement Program was neither cancelled nor was there an abbreviated time given within which the application had to be filed. Additionally, the taxpayers did not provide any medical or other evidence for the Division s consideration. Plaintiff thereafter timely filed the present appeal with the Tax Court.

To fully understand the legal issues before this court, a brief summary of the homestead property tax reimbursement program is warranted.

The New Jersey Constitution was amended in 1975 to permit the enactment of laws to allow homeowners and residential tenants a rebate or a credit of a sum of money related to property taxes paid by or allocable to them at such rates and subject to such limits as may be provided by law. N.J. Const. art. VIII, 1, 5. Since 1975, the Legislature has enacted a series of homestead rebate programs for homeowners and residential tenants. Vavoulakis v. Director, Division of Taxation, 12 N.J. Tax 318, 323-324 (Tax 1992), aff d, 13 N.J. Tax 322 (App. Div. 1993). While the names and eligibility requirements have changed over the years, the purpose of these programs has been the beneficent purpose of alleviating the heavy realty tax burden. Rubin v. Glaser, 83 N.J. 299, 307, appeal dismissed, 449 U.S. 977 (1980).

The Legislature has enacted two programs intended to alleviate the realty tax burden for particular New Jersey residents: the homestead rebate program, N.J.S.A. 54:4-8.57 to 54:4-8.66e, and the PTR program, N.J.S.A. 54:4-8.67 to 54:4-8.75. While these programs may be similar in nature, they are separate and distinct.

To qualify for the PTR program, an applicant must be at least sixty-five years of age or must be disabled, meet certain income limits and who, as a homeowner, has made a long-term contribution to the fabric, social structure and finances of one or more communities in this State, as demonstrated through the payment of property taxes on any homestead used as a principal residence in this State for at least 10 consecutive years at least three of which as owner of the homestead for which a homestead property tax reimbursement is sought prior to the date than an initial application for a homestead property tax reimbursement is filed. N.J.S.A. 54:4-8.67. The amount the program reimburses to the homeowner is the difference between the amount of property tax due in the year the reimbursement is claimed and the amount due in the base year. Ibid. The base year is either tax year 1997 or the first year in which a claimant becomes eligible for a reimbursement after December 31, 1997. Ibid.

To qualify for the PTR program, an eligible taxpayer must also timely file the PTR application. N.J.S.A. 54:4-8.70. The statute does not permit for relaxation of the filing deadline. The homestead rebate program contains a good cause provision that allows the Director discretion in permitting an applicant to apply after the filing deadline. N.J.S.A. 54:4-8.62a. The PTR program contains no such good cause provision. However, because the two programs derive from the same constitutional provision, the Director has read N.J.S.A. 54:4-8.62a in pari material with N.J.S.A. 54:4-8.70 to incorporate good cause to extend to the filing requirement of the PTR statute. This good cause provision provides two circumstances where the Director may extend the deadline to file an application.

[I]n order to establish good cause to extend the time of any applicant to file a claim for a homestead rebate or credit the applicant shall provide to the director either medical evidence, such as a doctor's certification, that the claimant was unable to file the claim by the date prescribed by the director because of illness or hospitalization, or evidence that the applicant attempted to file a timely application. Except as may be established by medical evidence of inability to file a claim, good cause shall not be established due to a claimant not having received an application from the director.

[N.J.S.A. 54:4-8.62(a).]

Although not required to do so, the Director mails PTR application forms as a courtesy. The applications are due June 1 of the year following the tax year being applied for. N.J.S.A. 54:4-8.70. However, the Director has the authority to extend this deadline for all participants. Ibid.

Plaintiff argues two alternative issues before this court. Plaintiff claims that the statutory requirement mandating that property taxes be paid in full when due is unconstitutional when applied to the PTR program because applicants are required to pay taxes above their base rate and the State utilizes this money as a free loan until it returns the excess amount paid to the taxpayer. Plaintiff argues that this system is in violation of the Fifth Amendment of the United States Constitution and analogous protections provided by the New Jersey Constitution because it constitutes an unlawful taking of property without just compensation.

The second argument plaintiff raises relates to his compliance with the PTR filing requirements. Plaintiff argues that his 2010 application should be accepted because the extension periods for the PTR program are not adequate, there were news reports that the 2010 PTR program was cancelled, and he had not received a 2010 PTR application booklet by mail.

In defense of his decision denying plaintiff s PTR application, the Director argues that applying the statute of limitations to the facts in this case does not violate the Takings Clause of the Fifth Amendment of the United States Constitution or equivalent protections provided by the New Jersey State Constitution. Second, the Director argues that he and this court lack the authority to award a homestead property tax reimbursement that is filed after the application deadline, unless the applicant meets one of the two statutory exceptions.

III. CONCLUSIONS OF LAW

The Director s interpretation of tax statutes is entitled to a presumption of validity. Courts have recognized the Director s expertise in the highly specialized and technical area of taxation. Aetna Burglar & Fire Alarm Co. v. Director, Division of Taxation, 16 N.J. Tax 584, 589 (Tax 1997) (citing Metromedia, Inc. v. Director, Division of Taxation, 97 N.J. 313, 327 (1984)). Our Supreme Court has instructed courts to accord great respect to the Director s application of tax statutes, so long as it is not plainly unreasonable. Metromedia, supra, 97 N.J. at 327.

Constitutionality of the PTR Program

Plaintiff argues that the requirement to pay his property taxes in full, when a portion of this amount will be refunded to him under the PTR program, constitutes an unconstitutional taking under the United States and New Jersey Constitutions. In relevant part, the Takings Clause of the Fifth Amendment of the United States Constitution states nor shall private property be taken for public use without just compensation. U.S. Const. amend. V. The New Jersey Constitution states that [p]rivate property shall not be taken for public use without just compensation. N.J. Const. art. I, 20. [P]rotection from governmental takings under the New Jersey Constitution is coextensive with protection under the Federal Constitution. Mansoldo v. State, 187 N.J. 50, 58 (2006).

The United States Supreme Court has held that although the Takings Clause of the Fifth Amendment limits the taking of private property, Congress s collection of taxes is not so limited. Brushaber v. Union P. R. Co., 240 U.S. 1, 24 (1916) ( the Constitution does not conflict with itself by conferring, upon the one hand, a taxing power, and taking the same power away, on the other, by the limitations of the due process clause. ); Billings v. United States, 232 U.S. 261, 282 (1914) ("It is also settled beyond dispute that the Constitution is not self-destructive. In other words, that the powers which it confers on the one hand it does not immediately take away on the other; that is to say, that the authority to tax which is given in express terms is not limited or restricted by the subsequent provisions of the Constitution or the Amendments thereto, especially by the due process clause of the Fifth Amendment.").

The PTR program confers a monetary tax benefit to qualified taxpayers. Therefore, denial of a PTR application does not involve an unlawful governmental taking because it is a denial of a tax benefit, not a taking of private property. This court holds that requiring taxpayers to fully pay their property tax bills before being able to request relief under the PTR program is not a violation of the Fifth Amendment Takings Clause nor the analogous provision provided in the New Jersey State Constitution.

Filing Requirement of the PTR Program

The Appellate Division has instructed the tax court to read statutes defining eligibility for homestead rebates narrowly. Macmillan v. Director, Division of Taxation, 180 N.J. Super. 175, 178 (App. Div. 1981), aff d, 89 N.J. 216 (1982). [T]ax preference provisions are strictly construed against those claiming exemption. This is so with regard to local property taxes. It is also true with respect to state taxes. Ibid. (citations removed). When the homestead statute is outspoken and unambiguous its terms must be strictly applied. Id. at 179.

There is no question that plaintiff satisfied the age, residential and income requirements for the 2010 tax year PTR program. The issue is whether plaintiff s mistaken belief that the PTR program was cancelled for 2010 is an exception recognized by the statute, or, alternatively, whether the Director has discretion under the statute to accept plaintiff s defense.

At trial, the issue was raised regarding whether the Director has ever made an exception for an untimely filing that was not related to either a medical issue or an attempt to timely file the application. After the close of trial, the Director submitted a Certification of a Supervising Auditor employed in the Division of Taxation s Conference and Appeals Branch. The Certification states that twenty-two appeals arose from the denial of PTR applications for tax year 2010. Of these appeals, eleven were granted because sufficient documentation established that the applicant had a medical inability to timely file the PTR application. Three appeals were granted after the applicants sufficiently proved that they attempted to file a timely PTR application. The remaining eight appeals were denied based on statutory requirements because they did not fit into either of the accepted categories.

This court finds that there are only two limited exceptions to timely filing a PTR application: (1) unable to timely file due to medical issues and (2) evidence that the applicant attempted to timely file. Plaintiff s defenses do not fit into either of these circumstances and the Director has no statutory discretion to make an exception for plaintiff. Plaintiff s contentions that he mistakenly believed the PTR program to be cancelled and that he did not receive a 2010 PTR application in the mail are not valid reasons to excuse compliance with the statutory filing requirement.

For the above mentioned reasons, the Director s final determination is upheld. The court will enter Judgment affirming the Director s final determination.

______________________________

Hon. Mary Siobhan Brennan, J.T.C.

1 65 years of age or older.

2 Upon learning the 2010 PTR program was not cancelled, plaintiff emailed the New Jersey Division of Taxation on December 2, 2011 to inquire whether he had filed an application for either the homestead rebate program or the PTR program. He received an email back on December 9, 2011, which provided that there was no record of plaintiff s application for either program. The email notified plaintiff that he was past the filing deadline for the PTR program. The email encouraged late-filers to complete an application in order to establish eligibility for benefits in future years and to establish/maintain the applicant s base year. The email also provided a link to access the 2010 PTR application online. At oral argument, upon questioning by the court, the Supervising Auditor employed at the Division of Taxation s Conference and Appeals Branch and assigned to assist the Director s counsel with the defense of the Director s determination reiterated that applicants are encouraged to apply even after the deadline to ensure access to the benefits of the program in the future. Information about the PTR program is accessible at all times by calling, emailing or checking the Division s website for the program.

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