For the prosecutor, Frankland Briggs, Leonard A. Sweeney, J. Henry Harrison and Robert F. Darby.
For the respondent, Frank A. Boettner and John A. Matthews.
Before Justices Bodine, Heher and Perskie.
The opinion of the court was delivered by
PERSKIE, J. The basic issue upon the return of this writ of certiorari concerns the proper method of determining the true value of the tangible and intangible personalty of the New Jersey Bell Telephone Company for the purposes of taxation under Pamph. L. 1918, ch. 236, p. 847, as amended.
The taxing authority for the city of Newark, the board of assessment and revision of taxes, fixed the value of the telephone company's personal property including tangibles and intangibles, for the year 1935, at $24,000,000. On appeal this
figure was reduced to $22,265,000 by the Essex county board of taxation, and prosecutor sought a further reduction from the state board of tax appeals so that its property would be valued at $14,612,845. The state board, however, refused any further reduction and entered judgment affirming the assessment made by the Essex county board of taxation. This court granted certiorari.
The parties have stipulated that, exclusive of cash on hand, prosecutor's intangible personalty had a value on the assessing date, October 1st, 1934, of $1,393,485, which item was admittedly subject to taxation. It is also stipulated that the total cash on hand amounts to $1,626,024, but prosecutor challenges the right to tax this item alleging that it is entitled to an exemption under Pamph. L. 1933, ch. 165, p. 346. This is not so. The cash is subject to taxation. Newark v. New Jersey State Board of Tax Appeals and Broadbank Corp., 118 N.J.L. 131; 191 A. 843. It is, therefore, apparent that at least so far as the intangible personalty is concerned, the county board of taxation committed no error. The assessment of intangibles should include the stipulated sum of $1,393,485 plus the total cash of $1,626,024, making a grand total of assessable intangibles of $3,019,509.
The tangible personalty of the company consisted of a telephone plant located in Newark including materials and supplies therein located, poles, wires, equipment, conduits, office furniture and fixtures, &c. This property the board apparently valued at $19,245,491. Prosecutor seeks to reduce this figure to $13,219,000 and to that end produced an expert who testified that in his opinion the latter figure was the true value of the tangible property in question. The expert arrived at his conclusion after approaching the problem by three different methods and then combining all three. The first method was through a study of the book cost of the company and the depreciation reserves. The book cost of the company amounted to $24,657,214. From this figure were subtracted two items -- (1) $702,863 which represented the cost of paving underground conduits and which was subtracted since it was not considered in the nature of an asset;
(2) $720,000 was also deducted as representing unproductive labor due to time lost because of bad weather, holidays, vacations, company schools and for plant inspection. This left an adjusted book cost of $23,234,351. Working on a basis of twenty-six per cent. as the proper depreciation, the expert then applied this percentage to the adjusted book costs leaving a total of $17,193,420. To this figure he added the depreciated value of material and supplies thus getting a total depreciated book cost as adjusted of $18,245,233. The expert found that for the five years ending 1935 the company realized a return of 4.907 per cent. on its depreciated book value. Treating six per cent. as a fair return, he found that the return actually realized was 81.8 per cent. of a fair return. He, therefore, took ...