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Todd Shipyards Corp. v. Township of Weehawken

Decided: July 6, 1965.

TODD SHIPYARDS CORPORATION, PETITIONER-APPELLANT,
v.
TOWNSHIP OF WEEHAWKEN, RESPONDENT-RESPONDENT. TODD SHIPYARDS CORPORATION, PETITIONER-APPELLANT, V. CITY OF HOBOKEN, RESPONDENT-RESPONDENT



For affirmance -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For reversal -- None. The opinion of the court was delivered by Weintraub, C.J.

Weintraub

These cases involve municipal taxes levied upon leasehold interests of Todd Shipyards Corporation (herein Todd) in real property owned by the United States of America. The assessments were sustained by the Division of Tax Appeals and we certified the appeals before the Appellate Division acted upon them.

The demised premises are used by Todd in its business of ship repair. Todd's operations are concededly private; government work is only a minor part of total work done. The assessments were made under the Leasehold Taxing Act, L. 1949, c. 177; N.J.S.A. 54:4-2.3 et seq., and the sole issue is whether that statute unconstitutionally discriminates against the federal government. The statute was held invalid on that account in Thiokol Chemical Corp. v. Morris County Board of Taxation, 76 N.J. Super. 232 (Law Div. 1962),

but on appeal we did not reach the constitutional question since we found a leasehold was not involved and hence the statute did not apply. 41 N.J. 405 (1964). In the case now before us, Todd holds a lease within the ambit of the statute and accordingly the constitutional issue must be met.

Section 1 (N.J.S.A. 54:4-2.3) provides:

"When real estate exempt from taxation is leased to another whose property is not exempt, and the leasing of which does not make the real estate taxable, the leasehold estate and the appurtenances shall be listed as the property of the lessee thereof, or his assignee, and assessed as real estate."

The statute does not create a lien on the property interest of the owner, but rather the lien is upon the leasehold estate and the lessee or his assignee is personally liable for the tax. Section 6 (N.J.S.A. 54:4-2.8).

Although property of the United States may not be taxed by the State or its political subdivisions, it is settled that, absent some other expression by the Congress, the interest of private parties in such property may be taxed. This rule rests upon the proposition that private interests which benefit from local government should contribute fairly to its costs and ought not to have the competitive advantage a tax immunity would give. United States v. City of Detroit, 355 U.S. 466, 473-474, 78 S. Ct. 474, 2 L. Ed. 2 d 424, 429 (1958). Although the impact of a tax may be felt indirectly by the federal treasury in terms of lesser rentals or increased costs, the rule results in a reasonable adjustment between federal taxpayers and local taxpayers, an adjustment especially required by the range and tempo of federal activity. The limitation upon this power to tax is that there may be no discrimination against the federal government or those with whom it deals. Moses Lake Homes, Inc. v. Grant County, 365 U.S. 744, 81 S. Ct. 870, 6 L. Ed. 2 d 66 (1961); Phillips Chemical Co. v. Dumas Independent School District, 361 U.S. 376, 80 S. Ct. 474, 4 L. Ed. 2 d 384 (1960); United States v. City of Detroit, supra (355 U.S. 466, 78 S. Ct. 474,

2 L. Ed. 2 d 424); United States v. Township of Muskegon, 355 U.S. 484, 78 S. Ct. 483, 2 L. Ed. 2 d 436 (1958); City of Detroit v. Murray Corp., 355 U.S. 489, 78 S. Ct. 458, 2 L. Ed. 2 d 441 (1958).

Todd asserts an invidious purpose to discriminate against the United States is revealed in the statement annexed to the bill which became the statute in question. The statement reads:

"The purpose of this bill is to permit municipalities to levy and assess taxes on exempt property when the same is leased for private use. In many municipalities the Federal Government leases its exempt property to business ...


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