On certification to the Superior Court, Appellate Division, whose opinion is reported at 365 N.J. Super. 472 (2004).
(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 Judge Stern's opinion below.)
A.H. Robins Company, Inc. (Robins II), successor corporation through a merger and bankruptcy reorganization of A.H. Robins, Inc. (Robins I), appeals from the Appellate Division's affirmance of the Tax Court's order granting summary judgment to the Director, Division of Taxation (Director) and dismissing Robins II's claims for the refund of "net operating losses (NOL's) that were transferred to Robins II from the predecessor corporation as part of the bankruptcy reorganization.
In its original holding of February 25, 2002, the Tax Court determined that the taxpayer, Robins II, was not entitled to carryover NOL's because: 1) nowhere in New Jersey law does it state that NOL carryovers may be utilized when they emanate from a merged corporation; 2) there is nothing in the U.S. Bankruptcy Code that indicates legislative intent to preempt state taxing laws concerning post-reorganization income-tax liabilities of a non-debtor entity; 3) this case does not fit under the Bankruptcy Code's exemption provided in 11 U.S.C. §1446(d) that certain transfers made pursuant to a reorganization would be exempt from taxation; and 4) the Director's regulation, N.J.A.C. 18:7-5.13(b), and the New Jersey Supreme Courts' holding in Richard's Auto City, Inc. v. Director, Division of Taxation prohibit the carryover of NOLs for use by a corporation other than the corporation that incurred the losses.
Robins II appealed to the Appellate Division. While the appeal was pending, the Appellate Division granted Robins II's motion to remand the matter to the Tax Court for reconsideration after adoption of the Business Tax Reform Act (BTRA), which was enacted and became effective on July 2, 2002.
On remand, the Tax Court adhered to its original order granting summary judgment and dismissing the complaint. In its remand opinion, the Tax Court additionally held that, because the new statute, N.J.S.A. 54:10A-4.5, merely restates existing law and is not retroactive, its application is not unconstitutional as applied in this case. The court further concluded there was a rational basis to codify existing law and to limit NOL carryovers, even if the statute is retroactive. The Tax Court also concluded the new Act was not directed at Robins II or any other taxpayer and, therefore, is neither "special legislation" nor violative of the "separation of powers" doctrine.
The Appellate Division affirmed the decision of the Tax Court. The appellate panel held that: the new statute providing that NOLs could be carried over and allowed as a deduction only by the corporation that sustained the loss is retroactive; federal law did not preempt the BTRA; the new section of the BTRA is consistent with the prior version of the Corporate Business Tax Act (CBTA) and its regulations; there is no legitimate issue of retroactivity flowing from the adoption and application of the amended statute and, therefore, there is no constitutional or due-process concern; and, the BTRA provision is not special legislation.
The Supreme Court granted certification.
HELD: Judgment of the Appellate Division is AFFIRMED substantially for the reasons expressed in Judge Stern's opinion. The Tax Court properly held that Robins II, the corporate survivor of a merger and bankruptcy reorganization, was not entitled to a net-operating-loss deduction for losses suffered by the merged corporation in previous years.
CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ZAZZALI, ALBIN, WALLACE and RIVERA-SOTO join in this PER CURIAM opinion.
The judgment is affirmed, substantially for the reasons expressed in Judge Stern's opinion of the Appellate Division, ...