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New Jersey State League of Municipalities v. Kimmelman

Decided: July 12, 1984.


Evers, J.t.c. (temporarily assigned).


[197 NJSuper Page 91] Plaintiffs, the New Jersey State League of Municipalities and Richard B. Nashel and Susan B. Nashel have moved for summary judgment declaring that L. 1982, c. 220 as amended by L. 1983,

c. 155, violates Art. VIII, of the New Jersey Constitution.*fn1

Chapter 220 (N.J.S.A. 54:4-23a) provides:

Any other law to the contrary notwithstanding, no building or other structure newly constructed on any parcel of real property and intended for occupancy and use for residential purposes as a single family dwelling shall be added to the assessment list as real property subject to taxation until a certificate of occupancy or temporary certificate of occupancy has been issued and unless the building or other structure is actually occupied and used for such purposes; provided, however, that such building or structure shall be omitted from taxation for a period not to exceed 24 months. At the termination of the 24 month period or following the granting of a certificate of occupancy or temporary certificate of occupancy and the occupation and use of the building for residential purposes, the building or structure shall be assessed and taxed as of the first day of the month following the date of such use for the proportionate part of said year then remaining.

Nothing in this act shall be construed as applicable to any addition to, or improvement or alteration of, any existing buildings or structure. Nothing in this act shall be construed to omit from taxation any building or structure or portion of a building or structure subject to taxation prior to the effective date of this act.

Chapter 155 amended c. 220 and provided that the term "newly constructed" refers to construction which was commenced on or after December 29, 1982 and further that "construction" is deemed to be commenced on the date of the footing inspection.

Article VIII, § 1, pars. 1(a) and 2 of the New Jersey Constitution states:

1. (a) Property shall be assessed for taxation under general laws and by uniform rules. All real property assessed and taxed locally or by the State for allotment and payment to taxing districts shall be assessed according to the same standard of value, except as otherwise permitted herein, and such real property shall be taxed at the general tax rate of the taxing district in which the property is situated, for the use of such taxing district.

2. Exemption from taxation may be granted only by general laws. Until otherwise provided by law all exemptions from taxation validly granted and now in existence shall be continued. Exemptions from taxation may be altered or repealed, except those exempting real and personal property used exclusively for religious, education, charitable or cemetery purposes, as defined by law, and owned by any corporation or association organized and conducted exclusively for one or more of such purposes and not operating for profit.

Plaintiffs claim that any attempt to classify c. 220 as an exemption statute, which classification would subject it to the requirements of New Jersey Constitution, Art. VIII, § 1, par. 2, is altogether devoid of merit. As such they argue that Art. VIII, § 1, par. 1(a), which requires that all property be taxed according to the same standard of value, applies. They therefore contend that c. 220 must fall because to overcome the constitutional impediments posed by par. 1(a) a constitutional amendment is required. Centex Homes of N.J. v. Manalapan Tp., 4 N.J. Tax. 599 (Tax Ct.1982). Alternatively they argue that if c. 220 is determined to be an exemption statute it is repugnant to par. 2 because it constitutes special legislation in contravention thereof. In order to address these arguments an understanding of the legislative history of c. 220 is required.

The enactment of c. 220 came about as a result of recommendations by the Housing Emergency Action Team (HEAT), a committee of the New Jersey State Assembly which was formed in March 1981 in an attempt to seek solutions to a severe housing shortage in this State. A report issued by HEAT in June 1981 noted that, "Not only is there a housing shortage in terms of sheer volume, there is also a tremendous need for new types of housing in our state." The report made various recommendations to alleviate the housing shortage, including specific recommendations reducing the cost of building homes such as development of reasonable model off-site improvement standards, the exemption of building materials

from sales and use taxes, the exemption of unsold newly constructed homes from local property taxes until they are occupied and the encouragement of the establishment of maximum square footage zones in municipalities. The report further stated that:

Unsold housing units should not be taxed as real property. These housing units place no burden on the municipality yet they are taxed as real property. This unfair taxation leads to increased housing prices with no commensurate increase in the value of the home.

HEAT recommends that only the land upon which unsold and unoccupied housing units are located be taxed. This would be most important to maintaining housing prices during periods of extreme market fluctuations when housing inventory could remain unsold for extended periods of time. [at 19]

Following the release of the HEAT report Assembly Bill 855 (1982) was introduced in the General Assembly which bill was amended by the Assembly Municipal Government Committee at the sponsor's request "to grant the tax exemption to all single family dwellings, not just detached structures." As amended the bill passed both houses but was conditionally vetoed for reasons not pertinent here.

Assembly Bill 855 (1982) was reintroduced incorporating the Governor's suggested changes, and was enacted as L. 1982, c. 220. Upon signing said legislation into law, the Governor's office released the following statement relating to the purpose of c. 220.

A-855, sponsored by Assemblyman John P. Doyle, D-Ocean, exempts newly constructed single family homes from property taxes until a certificate of occupancy is issued and the home is actually being occupied. By exempting the price of the structure, but not the land, from property taxes prior to occupancy, costs to the building which are passed along to the buyer are reduced.

In urging the court to declare that c. 220 is not an exemption statute, plaintiffs stress the fact that the key word "exemption" is employed in neither the title nor body of the act and that it was not codified as part of N.J.S.A. 54:4-3.6 et seq. which defines the ...

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