On certification to the Superior Court, Appellate Division, whose opinion is reported at 351 N.J. Super. 262 (2002).
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
(NOTE: This Court wrote no full opinion in this case. Rather, the Court's affirmance of the judgment of the Appellate Division is based substantially on the reasons expressed in the written opinion below.)
The issue before the Court is whether Southern Jersey Family Medical Centers, Inc. (Southern Jersey) qualifies for an exemption from local property taxes for the 1999 tax year because its property located at 932 South Main Street, Pleasantville, is actually and exclusively used for a tax-exempt charitable purpose.
Southern Jersey is a non-profit, community health-care facility that provides health and dental care regardless of a patient's ability to pay. Its primary patient population is medically underserved or indigent. One of its four centers is located in Pleasantville. Under Southern Jersey's amended certificate of incorporation, Article Eight provides in pertinent part that the purposes in forming the corporation are exclusively charitable. Southern Jersey provides preventative care,treats existing medical conditions, and conducts educational programs to inform the community about various health-care concerns. Southern Jersey's centers treat anyone and charge patients who do not have health care insurance according to a sliding fee scale that is based on each patient's income. The majority of the Pleasantville center's patient population is medically underserved and is either indigent or low income, or has no insurance and is low income.
In 1999, sixty-three percent of Southern Jersey's patient population was at or below poverty level. In the fiscal years ending in 1997, 1998, and 1999, Southern Jersey received a significant percentage of its annual funding from federal and state government and very little from charitable donations.
On a motion for summary judgment before the Tax Court, the judge found in favor of the City of Pleasantville, holding that Southern Jersey was not entitled to a tax exemption from local property taxes for its Pleasantville center. The judge found that Southern Jersey was organized exclusively for a tax-exempt purpose and that the use and operation of the property was not conducted for profit. However, the judge found that the property did not qualify for a tax exemption because it was not actually used for charitable purposes in view of the fact that Southern Jersey received substantial government funding and almost no voluntary charitable contributions.
On appeal, the Appellate Division applied the three-pronged test in Paper Mill Playhouse v. Millburn Tp. in making its determination to reverse the decis ion of the Tax Court. The appellate panel concluded that the Tax Court properly determined that Southern Jersey had met the first and third prongs of the Paper Mill test. Southern Jersey was organized exclusively for a charitable purpose in view of its stated purpose in its amended Certificate of Incorporation and is a non-profit entity because it provides medical and dental care regardless of the patient's ability to pay.
On the issue of whether the property is actually and exclusively used for a tax-exempt charitable purpose (prong two of the Paper Mill test), the Appellate Division found the Tax Court's reliance on Presbyterian Homes of the Synod of New Jersey v. Division of Tax Appeals misplaced. Initially, the Appellate Division concluded that the facts in Presbyterian Homes were distinguishable. In Presbyterian Homes, the tax exemption was sought for an
A-28-02 Southern Jersey Family Medical Centers, Inc. v. City of Pleasantville 2.
upscale housing complex where all residents were required to pay a "founder's fee" for lifetime use of their respective apartments. The facility provided "gracious retirement living" for those who were able to pay and the services provided were readily within the ability of any organization or individuals to perform. Unlike the taxpayer in Presbyterian Homes, Southern Jersey provides vital services that are unique to the area where the property is located. Southern Jersey's Pleasantville center is not located in the vicinity of a hospital. Should Pleasantville residents be unable to afford services offered by for-profit health-care facilities, their only other alternative would be to receive emergency-room care at distantly located hospitals.
The Appellate Division found an even more compelling reason to distinguish this case from Presbyterian Homes. The government funds paid to Southern Jersey in the form of Medicare and Medicaid payments and from "N.J. Uncomp. Care" are qualitatively different from the government funds referred to in Presbyterian Homes. In that case, the builder received an outright federal grant to construct a health-care facility as part of its project. Here, the bulk of government funds received by Southern Jersey are payments for services rendered; they are not grants.
The Appellate Division found the reasoning in Catholic Charities v. City of Pleasantville instructive. In that case, it was determined that a facility exclusively used as a nursing home to care for the aged, ill, and infirm was a charity entitled to a property-tax exemption. The court relied on evidence that the facility generally admitted economically disadvantaged persons, as well as those receiving public assistance and welfare. It was concluded that the facility performed a charitable function that benefited the public at large by obviating the need for the government to build facilities to accommodate the poor. According to the Appellate Division, the same analysis applies here.
The Appellate Division also noted that the bulk of the funds received by Southern Jersey designated by the Tax Court judge as government funds are program-service revenues paid in return for needed health-care services for those who could not afford them. The receipt of these monies does not lessen the charitable nature of the services rendered. Moreover, the Appellate Division could find no ...