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Thomas v. Department of Treasury

Decided: December 20, 1972.

THOMAS, LTD., A LIMITED PARTNERSHIP ASSOCIATION, RESPONDENT,
v.
DEPARTMENT OF THE TREASURY, STATE OF NEW JERSEY, APPELLANT



Lewis, Carton and Mintz. The opinion of the court was delivered by Carton, J.A.D.

Carton

The issue on this appeal is whether a limited partnership association is subject to the New Jersey Business Corporation Tax Act, N.J.S.A. 54:10A-4(c).

Thomas, Ltd. is a limited partnership association created by a certificate of partnership association filed pursuant to the Limited Partnership Association Act, N.J.S.A. 42:3-1 et seq. The certificate, dated May 8, 1958 and providing for a duration of the association for 20 years, recited that the character of the business to be conducted is "real estate ownership, operation and management."

Thomas started business in May 1958. In October 1961 it acquired title to certain premises in Newark, which it held until December 31, 1965. The association continued to transact business until December 30, 1966, when it no longer held title to any real estate and ceased to operate.

Early in 1969 the Newark Housing Authority was about to acquire the Newark property from a subsequent grantee of Thomas. In connection with the acquisition it caused a franchise tax search to be made as to Thomas, Ltd. When the search disclosed that the Department of the Treasury was asserting a lien for corporate taxes due from Thomas, Ltd., the Housing Authority so informed Thomas. Thomas paid the amount of the lien ($1517.11) in order to secure franchise tax clearance and then filed claim for refund. The Division ruled that the Tax Act did not apply to limited partnership associations and directed that refund be made. The Department has appealed.

The Tax Act imposes a tax upon

The Division took the position that the words "or association" as used in the statute lacked any independent significance and must be construed in conjunction with the words "joint stock company" which immediately precede it; that the statute was concerned with specifically described classes of business, and that the Legislature, by designating such categories, evidenced an intention of limiting its application to those so described. On this basis the Division held that limited partnership associations were not subject to the tax imposed by the act.

In our view, this interpretation unduly emphasizes certain phases in the act without giving proper regard to its broader language and underlying purpose of subjecting any entity possessing the essential characteristics of a corporation to the tax. Viewed in this light, the critical issue is whether the inherent characteristics of limited partnership associations are such that they must be considered as corporations within the meaning of the statute.

This approach makes it unnecessary to determine whether the words "or association" should be construed in conjunction with the phrase "joint stock company" or be deemed to have independent significance which encompasses limited partnership associations. Parenthetically, we note that the term "joint stock company" is often used interchangeably with "joint stock corporation." See 46 Am. Jur. 2 d, Joint Stock Companies , § 1 at 2 (1969); and see Edgeworth v. Wood , 58 N.J.L. 463 (Sup. Ct. 1896).

What are the essential characteristics or attributes of a limited partnership association? A limited partnership association is a sui generis creation of the Legislature (L. 1880, c. 204). N.J.S.A. 42:3-1 et seq. Three other jurisdictions presently have similar enactments: Pennsylvania (Pa. Stat. Ann. 15, § 12701 et seq.), Michigan (Mich. Stat. Ann. , § 2091 et seq. M.C.L.A. § 449.201 et seq.), and Ohio (Ohio Rev. Code Ann. , § 1783.01 et seq.).

The court in Carle v. Carle Tool & Engineering Co. , 36 N.J. Super. 36 (App. Div. 1955), examined the structure of limited partnership associations in some detail and concluded that it ...


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