The opinion of the court was delivered by: Pizzuto
Plaintiff Mega Care, Inc. ("Mega Care") contests the assessments on property designated Block 905, Lots 13 and 14, in Union Township for years 1986 through 1992. The complaints seek reduction of the assessments and alternatively claim entitlement to exemption under N.J.S.A. 54:4-3.6. The particular exemption claimed is that for property "used in the work of associations and corporations organized exclusively for hospital purposes," and the property in question was utilized on the assessment dates for the subject tax years as a skilled nursing facility or nursing home, known as Cornell Hall.
Defendant taxing district has moved for partial summary judgment denying the exemption claim on the ground that the certificate of incorporation of Mega Care, which is both the owner of the property and the operator of the nursing home, does not specifically include hospital operations among its stated corporate purposes. Mega Care acknowledges that hospital purposes are not recited in the certificate. It maintains, however, that incorporation for hospital purposes is not a condition of exemption where the nursing home operations are integrated with those of a hospital operated under common ownership and control with the nursing home. It further maintains that it can demonstrate such integration of Cornell Hall's operations with those of Union Hospital, located opposite the nursing home.
A similar claim of a hospital purposes exemption for a nursing home was presented in Intercare Health Systems v. Cedar Grove Tp., 11 N.J. Tax 423 (Tax 1990) aff'd, 12 N.J. Tax. 273 (App. Div. 1991), certif. denied, 127 N.J. 558 (1992). The nursing home at issue in Intercare was owned and operated by a nonprofit corporation that was in turn controlled by another nonprofit corporation. The controlling or parent corporation also controlled other nonprofit corporations that engaged in various health care activities, including the operation of a hospital. Exemption for the nursing home was claimed on the basis of the corporate relationship with the hospital and agreements respecting transfer of patients between the nursing home and both the affiliated hospital and nine unaffiliated hospitals. 11 N.J. Tax at 428.
In the Tax Court opinion in Intercare, Judge Hopkins observed that the entity that operated the nursing home was neither authorized to operate, nor did it operate, a hospital. Accordingly, its property did not qualify for exemption "on that basis." 11 N.J. Tax at 430. In other words, the exemption could not be claimed by the entity as a hospital. Rather, the claim was that the nursing home was used for hospital purposes because of the coordination of its operations with those of the affiliated hospital and the other hospitals with which it had transfer agreements. In this regard, Judge Hopkins articulated the test as "whether [the nursing home's] operation was sufficiently integrated with a hospital so that its building's use was an integral part of operating a functioning hospital." 11 N.J. Tax at 431. He found as a matter of fact that the nursing home's relationships with the hospitals were "cooperative, rather than integral." 11 N.J. Tax at 432.
The Appellate Division affirmed per curiam. It recited and evidently approved Judge Hopkins's formulation of the integrated operations test, and accepted his Conclusion that the test was not satisfied. The Appellate Division opinion also included the following language, on which the taxing district essentially bases its partial summary judgment motion:
Furthermore, according to [the nursing home operator's] certificate of incorporation, it was incorporated "to create a private corporation to construct or to acquire a housing project or projects, nursing home or homes, and to operate the same." Therefore, [the operator] fails to satisfy the statutory requirement that the corporation claiming the exemption must have been incorporated for hospital purposes.
The taxing district contends that this paragraph absolutely precludes the allowance of a hospital purposes exemption for a nursing home, unless the entity that owns the nursing home is itself incorporated for hospital purposes.
The significance of the language quoted from the Appellate Division decision is not immediately apparent, given its juxtaposition with the expression of an affirmance of the Tax Court judgment substantially for the reasons stated in Judge Hopkins's opinion. The language of the certificate of incorporation was not dispositive in Judge Hopkins's analysis. Had it been, there would have been no necessity to formulate the integrated operations test and to conduct a factual inquiry into the nursing home's operations. It is precisely the point of the taxing district's argument, however, that no inquiry beyond that concerning the language of the certificate of incorporation is necessary here.
The Appellate Division did not indicate that its Discussion of the claimant's corporate purposes was either a substitute for, or an alternative to, the reasoning of the trial court, and the strict force of that Discussion may be dictum. It nevertheless commands respect in the instant proceeding. It reflects, moreover, the conventional understanding of N.J.S.A. 54:4-3.6. Judge Hopkins, in Intercare, considered the statutory requirement that the exemption claimant be "organized exclusively" for the qualifying purpose to address the actual operation of the claimant, rather than its stated corporate purposes. More recent Tax Court decisions, however, employ an organization test that looks, at least in part, to the purposes recited in the claimant's certificate of incorporation. Fountain House of New Jersey v. Montague Tp., 13 N.J. Tax 387, 397-402, (Tax 1993); Planned Parenthood of Bergen County v. Hackensack, 12 N.J. Tax 598, 609-610 (Tax 1992) aff'd, 14 N.J. Tax 171 (App. Div. 1993).
There is, therefore, as the Appellate Division decision expressed it, a "statutory requirement that the corporation claiming the exemption must have been incorporated for hospital purposes." This is not to say, however, that Mega Care must itself be a hospital. The exemption is claimed for property utilized as a nursing home by a nonprofit corporation that is operated under common control with a hospital corporation whose own property is exempt when used for hospital purposes. Plaintiff maintains that it can at trial demonstrate the integration of the nursing home's operations with those of the hospital. The matter to be determined on this motion is the threshold demonstration that the exemption statute requires concerning Mega Care's own corporate organization before an inquiry into the integration of its nursing home operations with those of the affiliated hospital may proceed.
For the years in question, *fn1 N.J.S.A. 54:4-3.6 provided in pertinent part:
The following property shall be exempt from taxation under this chapter: . . . all buildings actually used in the work of associations and corporations organized exclusively for hospital purposes, provided that if any portion of a building used for hospital purposes is leased to profit-making organizations or otherwise used for purposes which are not themselves exempt from taxation, that portion shall be the subject to taxation and the remaining portion only shall be exempt; . . . the land whereon any of the buildings hereinbefore mentioned are erected, and which may be necessary for the fair employment thereof, and which does not exceed five acres in extent; . . . provided, in case of all the foregoing, the buildings, or the lands on which they stand, or the associations, corporations or institutions using and occupying them as aforesaid, are not conducted for profit. . . The foregoing ...