On appeal from the Tax Court of New Jersey, whose opinion is reported at 19 N.J. Tax 342 (2001).
Before Judges Coburn, Collester and Alley.
The opinion of the court was delivered by: Coburn, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
This real estate tax exemption case concerns property owned by Essex County and formerly occupied by its Geriatric Center, which closed in 1989. In 1995, plaintiff, Center for Molecular Medicine and Immunology ("CMMI"), a nonprofit entity presently engaged in cancer research, leased the property from the county for 115 years. In 1997, defendant, Township of Belleville, assessed the property for $4,231,900 against CMMI. Relying solely on N.J.S.A. 54:4-3.6, which exempts certain nonprofit organizations, CMMI appealed unsuccessfully to the Essex County Board of Taxation and then to the Tax Court, which affirmed the judgment on the ground that the initial appeal was untimely. Molecular Medicine v. Belleville Tp., 18 N.J. Tax 215, 224 (Tax Ct. 1998). We reversed and remanded for trial on the merits for the 1997 tax year. CMMI v. Belleville Tp., 19 N.J. Tax 193, 199 (App. Div.), cert. denied, 165 N.J. 677 (2000). That case remains pending in the Tax Court awaiting our disposition of this appeal, which is limited to the tax years 1998 and 1999. Additional appeals for subsequent years are in the same status.
For the tax years 1998 and 1999, defendant continued the $4,231,900 assessment against CMMI. CMMI filed complaints in the Tax Court, again seeking exemption under N.J.S.A. 54:4- 3.6 ("Section 3.6"), but adding an alternative claim under N.J.S.A. 54:4-3.3 ("Section 3.3"), which exempts property of public entities used for public purposes. The Tax Court did not consider the merits of CMMI's claim to exemption under Section 3.6, holding, instead, that the case was governed by Section 3.3, under which, in its view, CMMI was entitled to exemption from the assessment. Center for Molecular Med. v. Belleville, 19 N.J. Tax Ct. 342, 356 (Tax Ct. 2001). Defendant appeals. We conclude that the Tax Court erred in relying on Section 3.3 and in failing to address CMMI's exemption claim under Section 3.6. Therefore, we reverse and remand to the Tax Court so that it may resolve plaintiff's Section 3.6 claim. However, because of the approach taken by the Tax Court, there is one aspect of plaintiff's Section 3.6 claim which we must determine; namely, whether a lessee under a 115 year lease should be considered an owner entitled to tax exemption if otherwise qualified under the statute.
We limit our statement of facts essentially to those undisputed matters relevant to the issues we resolve. The property, 520 Belleville Avenue (Block 540, Lot 1.01 on the Tax Map), is a 9.13 acre tract containing a 200,000 square foot building. It has been owned by Essex County for many years and was used by the county for a geriatric center until 1989, after which date it became vacant. In 1995, the county decided to transfer the property to CMMI.
CMMI is a nonprofit entity entitled to exemption from federal taxes under the Internal Revenue Code, 26 U.S.C.A. 501(c) (3). In general, its organizational documents indicate that its purpose is to "promote . . . and conduct . . . scientific and educational enterprises, activities and institutions . . . ." Its witnesses described its mission as cancer research coupled with a limited amount of experimental treatment, mostly for terminal cancer patients. The treatment is provided without charge in an outpatient clinic based on referrals from primary care physicians. In 1988, CMMI became a tenant of the University of Medicine & Dentistry in Newark. In 1993, CMMI began to explore moving to the Belleville property. We described the resulting controversy in our opinion in CMMI v. Belleville Tp., 19 N.J. Tax at 195, the case involving CMMI's appeal from the 1997 assessment:
From the outset public controversy over the proposed use centered on the assumption that CMMI would be entitled to a local property tax exemption.
Articles in the local press gave coverage to objectors who lamented that the vacant property owned by the County of Essex and formerly occupied by Essex County Geriatric Hospital would be unavailable as a tax ratable. Comments from the Essex County Executive and Freeholders as well as the Belleville Mayor, Council and Planning Board at various public meetings acknowledged that CMMI would be exempt from taxes. Ultimately, the Township Council supported the project.
The initial transfer of the property was accomplished by a set of documents, which were labeled "deeds," dated July 20, 1995, using the Essex County Improvement Authority as an intermediary. By identical "deeds," one covering the land and the other the building, the property was conveyed first to the Authority and then to CMMI. The consideration for the land was $1.00 and the consideration for the building was $5 million. During the first twenty-five years, the property would automatically revert to the grantor under certain conditions, which may be summarized as follows: CMMI permanently ceasing to use the premises for health care; CMMI losing its "tax exempt status"; or CMMI erecting another structure on the site without the county's consent. Each "deed" also provided that the property would "automatically revert to the Grantor [on July 20, 2020] and on such date the Grantor shall be vested in indefeasible fee simple absolute in and to the property . . . ." However, each "deed" went on to provide that the reverter was "subject to the exclusive right of CMMI and its successors and assigns to have an irrevocable option to lease" the property in accordance with the terms of the attached lease, which was recorded along with the "deeds." The lease provided for an initial term of thirty years, with CMMI having the right to two 30-year extensions. The amount of rent, if the parties could not agree, was specified only as "the fair market rental value as shall be determined [by] arbitration procedures" set forth in the lease. Adjustment could be made every five years. At the end of 115 years, the property would automatically revert to the County.
CMMI began occupying the property in the fall of 1996. By the time of the assessment, it was fully using about 70,000 square feet of the building, which it described as Phase I, and had begun renovating another 45,000 square feet, which it described as Phase II. No evidence was presented with respect to the nature or timing of subsequent phases. After inspection, the tax assessor imposed his levy ...