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Town of Morristown v. Woman''s Club of Morristown

Decided: July 15, 1991.


On certification to the Superior Court, Appellate Division, whose opinion is reported at 242 N.J. Super. 654 (1990).

Chief Justice Wilentz and Justices O'Hern, and Stein join in this opinion. Justice Clifford has filed a separate dissenting opinion in which Justice Handler joins. Justice Pollock did not participate.


This appeal concerns a statutory exemption from New Jersey real-estate taxes by New Jersey for buildings owned by nonprofit corporations and officially certified as historic sites. N.J.S.A. 54:4-3.52. Plaintiff, Town of Morristown, urges that the statute on its face violates the requirement under the tax article of the New Jersey constitution that "property shall be assessed for taxation under general laws and by uniform rules." N.J. Const. art. VIII, § 1, para. 1(a). More specifically, it urges that the Dr. Condit House, a certified historic site owned by defendant Woman's Club of Morristown, is not exempt from taxes under N.J.S.A. 54:4-3.52.

Woman's Club, a nonprofit corporation, was organized in 1931 for the "promotion of higher social and moral conditions and to study civic, social and cultural subjects." Among its members' charitable nonprofit activities are conducting social services for hospitalized patients and persons in nursing homes,

raising and awarding of scholarship funds, serving as hospital and church volunteers, and organizing holiday drives to collect and distribute food and toys for needy families. Since 1939, Woman's Club has held tax-exempt status under what is now section 501(c)(3) of the Internal Revenue Code, on the basis that "the sponsorship of civic activities are the predominant purpose of the organization." As a 501(c)(3) organization, none of Woman's Club income "is credited to surplus or inures to the benefit of any private individual."

In 1971, the Commissioner of the Department of Environmental Protection (DEP) certified the Dr. Condit House as a State Historic Site. The Commissioner described the site as a "fine example of New Jersey's historic heritage." He awarded the Certificate of Historic Site in recognition of "the historic value of this site to the history and government of . . . New Jersey and to transmit the same unimpaired to succeeding generations." At the time the site first received local tax exemption in 1972, Woman's Club had leased part of the building for commercial purposes. That year, despite the certification, Morristown issued a standard tax assessment of the property. Following an appeal by Woman's Club, the Morris County Board of Taxation (Tax Board) reduced the assessment to zero. Since 1972, the Dr. Condit House has remained tax exempt under N.J.S.A. 54:4-3.52 as a historic site. In 1987, Morristown again challenged the grant of the tax exemption for the property.

The Dr. Condit house contains three stories and a basement. At the time of the 1987 contested assessment, Woman's Club members and local church groups held pro bono activities such as fund-raising lunches for charities in the building, and local senior citizens used the auditorium for their lunches. In addition, to provide financial support for its nonprofit programs and its maintenance and preservation of the property, the Woman's Club leased a portion of the building to various commercial tenants. The basement of the older portion of the building was unfinished except for a small office area leased by a real-estate broker; Woman's Club used the remainder of the basement as

a storage area. The real-estate broker also occupied approximately one-half of the first floor area. Woman's Club used the other part of the first floor as an office, a library, a sitting area, and a kitchen. The auditorium provided space for certain Woman's Club functions but was also used by a tenant for a dance and performing-arts studio. That tenant also occupied the basement area located below the stage. Woman's Club leased the second and third floors for private business use as physicians', attorneys' and business offices. In 1989, Woman's Club received approximately $60,000 in rent from its commercial clients. The parties have stipulated that projected operating expenses for 1987-88 totalled roughly $41,600.

Morristown challenged the property's exemption for the 1987 tax year. The Tax Board affirmed the original assessment following Morristown's appeal. Morristown then filed a complaint against the Woman's Club in the Tax Court, arguing that the statute was unconstitutional because it links property-tax exemptions to the owner's status and not the property's use, or, alternatively, that a historical-use requirement should form part of the statutory interpretation. It argued, therefore, that the property did not qualify for an exemption and should be subject to an assessment for 1987 pursuant to N.J.S.A. 54:4-27. Because the complaint challenged the statute's constitutionality, the court permitted the Attorney General to intervene as a party-defendant.

In upholding the constitutionality of N.J.S.A. 54:4-3.52, the Tax Court found a legislative intent that "an historic site owned by a nonprofit corporation must have a public purpose use." Town of Morristown v. Woman's Club, 10 N.J. Tax 309, 321 (1989). The court determined that without such a use requirement, the legislation would violate the constitutional requirement that exemptions be granted by general laws. Id. at 319. The court then concluded that the use of the Dr. Condit House for commercial purposes did not accord with that public-purpose-use requirement; therefore the property was not exempt from taxation. Id. at 321.

The Appellate Division reversed. Although it agreed that tax exemption statutes based solely on a property owner's status would violate the constitution, the court found that a statutory exemption premised on the public purpose and works of a nonprofit corporation was a sufficiently substantial, reasonable, and logical categorization to satisfy constitutional requirements without grafting on a public use requirement as the Tax Court had done. In so deciding, the court identified the issue as "whether N.J.S.A. 54:4-3.52 is constitutional, not whether it would be more faithful to constitutional principles by the addition of a use requirement."

We granted certification. N.J. (1990).


Well-established principles of statutory construction direct us to look first to the statute's plain language to derive its meaning, absent any specific indication of legislative intent to the contrary. Kimmelman v. Henkels & McCoy, Inc., 108 N.J. 123, 128 (1987); Mortimer v. Board of Review, 99 N.J. 393, 398 (1985). To address the challenges to the statute, we must also consider the statute in light of governing constitutional principles of taxation and exemption.

The statute provides that:

Any building and its pertinent contents and the land whereon it is erected and which may be necessary for the fair enjoyment thereof owned by a nonprofit corporation and which has been certified to be an historic site to the Director of the Division of Taxation by the Commissioner of Conservation and Economic Development as hereinafter provided shall be exempt from taxation.

[N.J.S.A. 54:4-3.52.]

Its plain language thus indicates only two requirements for tax exemption: (1) ownership by a nonprofit corporation; and (2) certification of the property as a historic site. Nothing in the statute requires that the property be used in any way with

respect to its historical purpose apart from action necessary to maintain historic-site status.

Nor do any of the related statutes regarding historic sites impose a use requirement. N.J.S.A. 54:4-3.53 requires that the Commissioner of DEP, after consultation with specified authorities, certify a building as a historic site whenever "such building * * * [has] material relevancy to the history of the State and its government warranting its preservation as an historical site." The statute further directs that if a restoration proceeds, the building must be "substantially the same kind, character and description as the original." Ibid. N.J.S.A. 54:4-3.54 provides that if substantial change occurs in a building or premises, the Commissioner may cancel its certification.

No formal legislative history addresses the absence of a use requirement in the statute. However, a legislative memorandum from the acting director of the Division of Taxation to the Deputy State Treasurer contrasted the absence of a use requirement as a prerequisite for exemption with the presence of such an obligation in another statute, N.J.S.A. 54:4-3.6 (tax exemption for properties "actually" and/or "exclusively" used for specified purposes). That indicates that the Legislature made a conscious choice in creating the statute without a use requirement. Moreover, in considering legislative intent, we note the many other exemption statutes that contain use requirements. See, e.g., N.J.S.A. 54:4-3.3, -3.5, -3.6, -3.10, -3.15, -3.24, -3.26, -3.27, all of which were enacted prior to N.J.S.A. 54:4-3.52. The express adoption of use requirements in those statutes strengthens our conclusion that the Legislature would have provided a requirement for "use" had it intended to do so. It did not.


We must therefore address the constitutional challenges in light of the statute's plain language and clear import. To perform that task, we first turn to the guiding principles of

taxation as embodied in the constitution, requiring that taxation of all real property be imposed only by uniform rules and exemption be accomplished only by general laws. The pertinent language provides as follows:

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 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, educational, 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.

[N.J. Const. art. VIII, § 1.]

We last construed the interaction of those provisions in New Jersey State League of Municipalities v. Kimmelman, 105 N.J. 422 (1987). In that case, the plaintiffs challenged a statute that delayed taxation of unoccupied, newly-constructed single-family dwellings. We declared the statute invalid, holding that the constitutional requirement of uniformity would not tolerate such tax exemptions based on the status of the owner and enacted for the special aid of a single industry. Id. at 423-24.

In reaching that conclusion we reviewed the historical development that led to the enactment of the uniformity and exemption clauses in the current constitution. Developments before and during the 1947 Convention involving the Legislature's preferential treatment of the railroad industry informed the debate about real property in taxation. As a result of its dominant position in the 1800s, the railroad industry obtained a virtual exemption from taxation. In 1875, a tax clause imposed the first limited restraint on that industry:

Property shall be assessed for taxes under general laws, and by uniform rules, ...

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