NOT FOR PUBLICATION WITHOUT APPROVAL OF THE TAX COURT COMMITTEE ON OPINIONS **1**
**NEW JERSEY STATE FIREMEN’S ASSOCIATION,**  **Plaintiff,**

**v. DIRECTOR, NEW JERSEY DIVISION OF**  **TAXATION, PHILADELPHIA CONTRIBUTIONSHIP INSURANCE COMPANY,**  **GERMANTOWN INSURANCE COMPANY, and GREATER NEW YORK MUTUAL INSURANCE**  **COMPANY, Defendants** 

**. And** 
**STRATHMORE INSURANCE COMPANY,**  **Intervenor, Counterclaimant, and Cross- claimant.**  **TAX COURT OF NEW JERSEY**
**DOCKET NO. 000151-2019** 

**Decided: January 30, 2023**

**Michael E. Sullivan for plaintiff**  **( Parker McCay, PA,**  **attorney)**

**. Michael J. Duffy**  **for defendant (**  **Matthew J. Platkin , Attorney General of New Jersey, attorney).**  **Michael A. Guariglia; Jamie Zug for remaining defendants and intervenor (McCarter & English, LLP, attorney).** 
**S UNDAR**  **, P.**  **J.T.C. This is the court’s opinion on**  **the motion for partial summary judgment**  **filed by plaintiff, New Jersey State Firemen’s Association**  **(“NJSFA”) and the**  **cross -motion for summary judgment**  **filed by defendant, Director, Division of Taxation ( “Taxation”)** 

**. NJSFA**  **co ntends that**  **Taxation,**
**via a web** 

**- published Notice, improperly extended**  **and applied the**  **statutory c ap**  **on its revenue** 

**1 Hon. Jonathan A. Orsen, J.T.C., did not participate in this matter.**  **Approved for Publication In the New Jersey**  **Tax Court Reports 2** 

**stream which is comprised of a 2% tax on fire insurance premiums**  **. Specifically, NJSFA contends that Taxation improperly altered the calculat**  **ion of the fire insurance premium tax (“FIPT”) payable directly to NJSFA by foreign f**  **i re insurance companies under N.J.S.A. 54:18**  **-1 , by**  **requiring application of the statutory**  **cap used to compute the insurance prem**  **ium tax ( “**  **IPT ”**  **) payable to Taxation by domestic and foreign insurance companies under N.J.S.A. 54:18A**  **-1.**
**NJSFA contends that since the FIPT**  **statute plainly imposes a tax upon all New Jersey sourced fire**  **insurance premiums, Taxation engag ed**  **in impermissibly legislating**  **the FIPT statute ,**  **which caused** 
**NJSFA to inequitably receive**  **far less FIPT than otherwise**  **mandated under**  **the FIPT statute. Taxation argues**  **that the IPT statute plainly states**  **that the FIPT paid to**  **NJSFA i**  **s part of the IPT payable**  **to Taxation under N.J.S.A.**  **54:18A-2, therefore, it stands to reason that the cap**  **imposed for purposes of computing the IPT extends and applies to the FIPT. If the cap i s not**  **imposed in computing the FIPT, Taxation argues, the F**  **IPT statute c**  **ould violate the federal**
**dormant commerce clause**  **and equal protection clause by discriminating against foreign fire**  **insurance companies as**  **noted by the Supreme Court in Am.**  **Fire &**  **Cas. Co. v.**  **Dir., Div.**  **of**
**Taxation , 189**  **N.J. 65, 72 (2006),**  **aff’g 375**  **N.J. Super. 434 (App.**  **Div. 2005).**  **Taxation als o a**  **rgues**

**t hat**  **despite the lack of formal regulations, its**  **N otice is valid since it qualifies as a regulatory**  **guidance document and should continue to apply under the “temporary validity doctrine.”**
**The insu r**  **ance carrier defendants Philadelphia Contribution**  **ship Ins urance**  **Co mpany**  **(“ PCIC**  **” ); Germantown**  **Ins urance**  **Co mpany (**  **“ GIC**  **”); Greater NY Mutual**  **Ins urance**  **Co mpany**  **(“ GNY**  **”); and interveno**  **r Strathmore Insurance Company (**  **“ SIC**  **”), (c**  **ollectively referred to as “Carriers herein”) filed a brief in support of**  **Taxation’s arguments. They also**  **contend ed that**  **the FIPT statute violates the Appropriations C**  **lause of the New Jersey Constitution.** **3**

**For the reasons explained below, the court finds that**  **Taxation’s Notice contradicts the plain**  **language and intent**  **of the FI PT statute** 

**. That**  **the FIPT**  **is considered**  **“a part**  **of” the**  **IPT payable** 
**under N.J.S.A. 54:18A- 2(a)**  **does not change the court’s**  **conclusion. Taxation’s**  **interpretation to** 
**the contrary**  **is unreasonable**  **because ,**  **(a) th**  **e provision in**  **N.J.S.A. 54:18A-**  **2(a) has,**  **since 1945,** 
**been interpreted**  **to simply**  **mean that**  **the IPT**  **statute requires**  **a credit**  **for the**  **FIPT paid**  **so that**  **a foreign**  **insurer does**  **not pay**  **a tax**  **on fire**  **insurance premiums**  **twice, and**  **, (b) it results in NJSFA**  **receiving less than the mandated 2% FIPT on “all of the” fire insurance premi ums earned in New**  **Jersey**

**. The**  **cap on premiums for purposes of computing the IPT need not, and should not ,**  **be extended in computing the FIPT, unless the Legislature**  **acts to amend the respective st**  **atutes. Thus,**  **Taxation’s interpretation is not entitled to any deference**

**. The court therefore grants NJSFA’s**  **motion for partial summary judgment and denies Taxation’s motion for summary judgment.**
FACTS **The following are the undisputed facts as set forth in the pleadings and supporting**  **attachments. NJSFA is a statutorily authorized benevolent association. It funds local firemen’s**  **relief associations (there being 538 such entities) and remains in control of such f unds. N.J.S.A.** 
**43:17- 45. The object of**  **these associations is to maintain a fund “for the relief, support or burial of” among others, local firefighters, their families, and of others engaged in public fi**  **re duty.**
**N.J.S.A. 43:17-3. NJSFA is primarily funded by an annual 2% FIPT imposed only upon foreign insurance**  **companies which sell, among others, fire insurance policies on properties in New Je rsey.**  **N.J.S.A.**
**54:18-1. 2**  **The insurer must**  **pay the FIPT “upon the amount of all of the premiums received” by**

**2 NJSFA is required to file an annual report of all**  **local firemen’s associations which have complied with the law, and “[o]nly associations so reported” are “entitled to the pro r**  **ata share of the moneys arising from the two percent on premiums.” N.J.S.A. 43:17** 

**- 45. The 2% reference is** **4**

**or owed to it, directly to NJSFA’ s**  **Treasur er with**  **a return “**  **showing the amount of all premiums received by or agreed to be paid to the insurer, for insurance underwritten by that insurer aga**  **inst loss or injury by fire upon real or personal property**  **.” Ibid.**  **F ailure to**  **do so will result in a** 

**revoc ation of the foreign insurer’s authority to do business in the State by the Commissione**  **r of the Department of Banking and Insurance (**  **“ DOBI**  **” ).**  **Ibid. The statute imposes an**  **identical obligation upon agent**  **s , broker**  **s , or insurers to file a return and pay the 2% FIPT to the NJSFA**  **“upon the amount of all of the” fire insurance premiums when they directly or indirectly place fire**  **insurance on property in the State. N.J.S.A. 54:18**

**- 2. Once paid, the NJSFA must distribute the** 

**same to a local firemen’s association or the Firemen’s Home.**  **Ibid. See also**  **N.J.S.A. 54:18 -8;**  **N.J.A.C. 11:1-5.4; 11-38.5. 3**  **Both foreign and domestic insurance companies are subject to the IPT. N.J.S.A. 54:18A**

  ** 1(a). The IPT is paid to and administered by Taxation pursuant to the** **“ State Tax Uniform** 
**Procedure law .”**  **N.J.S.A. 54:18A**

**- 1.2; 18A** 

**- 1.3. Taxation and DOBI “oversee[] the taxation of**  **insurance companies operating in this State.” Am.**  **Fire &**  **Cas. Co., 189**  **N.J. at**  **72. The IPT is “based on net premiums on contracts of insurance covering property and**  **risks located” in New Jersey “written during” the preceding calendar year. N.J.S.A. 54:18A-1(**  **a). The**

**to “the tax levied on non-**  **New Jersey insurance companies respecting policies they write on property located in this state [under] . . . N.J.S.A. 54:18-1, and its allocation and use are governe**  **d by that statute together with**  **N.J.S.A. 54:17-4 .”**  **Szabo v. N.J. State Firemen ’**  **s Ass ’n**  **, 230 N.J. Super. 265, 272 (Ch. Div. 1988).** 

**3 Foreign insurers who sell surplus lines insurance in New Jersey are also subject to t**  **he FIPT at a rate of 3%.**  **See N.J.S.A. 17:22-6.59**  **(of the 5%**  **premium receipts**  **tax, a surplus**  **lines agent**  **pay s**  **3% to**  **the N JSFA,**  **and 2%**  **to DOBI,**  **if the**  **policies cover**  **fire insurance**  **in a taxing**  **district which**  **has or**  **may have**  **“ a duly incorporated firemen’s relief association**  **”). 5** 

**tax rate is 2.1% and is computed on the “taxable premiums.” N.J.S.A. 54:18A**

**- 2(a).**  **4 “A**  **ny taxes paid to the tr**  **easurer of any firemen’s relief association of this State pursuant to [N.J.S.A.] 54:18-**  **1 shall be considered a part of the tax payable under this act. ”**  **Ibid. Based**  **on this**  **provision, foreign insurance carriers receive a credit**  **for the 2% FIPT paid agains t their**  **2.1% IPT**  **due**

**. See** 
**Governor’s Veto Statement**  **to S. 240 (Aug. 8, 1955) (“Concurrently with the 2%” FIPT, “there is also imposed” an IPT “of 2% applicable to premiums received for all lines of insur**  **ance, including fire risk premiums” and “to avoid a double tax on fire risk premiums,” N.J.S.A. 54:18A**  **-2 “provides**  **for a credit against the general . . . [IPT] for any monies paid into the local fireman’ s**  **relief associations”). The credit also means that both foreign and domesti c insurance carriers pay** 
**2.1% IPT to Taxation.**  **If premiums collected by an insurance company on policies sold in New Jersey**  **exceed 12.5% of the premiums**  **collected globally , then, the taxable premiums for purposes of the IPT are**  **capped at 12.5% of the global premiums. Thus, and as enacted in 1945, the statute provided:** 

Maximum amount of taxab le premiums **In the**  **event that**  **the taxable premiums**  **collected by**  **any company**  **as specified**  **in sections**  **two and**  **three of**  **this act**  **[N.J.S.A. 54:18A-2; 18A-**  **3], during**  **any year**  **ending December**  **thirty**

**- first**  **, exceed**  **twelve and**  **one- half** 

**per centum**  **(121⁄2%) of**  **the total**  **premiums collected**  **by the company**  **during the same**  **year on**  **all policies**  **and contracts**  **of insurance, whenever**  **and wherever**  **issued, the taxable**  **premiums of**  **such company**  **shall not**  **exceed a**  **sum equal**  **to twelve**  **and one-**  **half per**  **centum (121⁄2%) of**  **such total**  **premiums collected** 
**as specified**  **in sections four**  **and five**  **of this**  **act. [**  **N.J.S.A. 54:18A-6.] 5** 

**4 “Taxable premiums” is defined to include “all gross premiums, policy fees, premium de**  **posits and assessments provided for by the respective policies or contracts” minus cert**  **ain amounts ( such** 
**as returned premiums). N.J.S.A. 54:18A-4.** 

**5 In 1985, N.J.S.A. 54:18A**  **-6 , as quoted was**  **amended to (1) make certain stylistic changes, and**  **(2) include**  **premiums earned by all affiliates of any insurance carriers barring those**  **licensed before June 30, 1984, when computing the cap.**  **L. 1985,**  **c. 294,**  **§ 1. In 2005, it was renumbered as subsection a.**  **L. 2005,**  **c. 128.** **6**

**The intent of the cap is**  **to benefit carriers “domestic and foreign, which made a substantial commitment to New Jersey and contribution to its economy as evidenced by the percentage of**  **overall business written in this State compared to everywhere else.” Sponsor’s Statement, Senate** 
**No. 2995 2 (**  **L. 1985,**  **c. 294).**  **See also Am.**  **Fire &**  **Cas. Co., 189**  **N.J. at**  **70, 81-82 (the**  **cap statute** 

**“ encourages insurance companies to conduct more business in New Jersey because, once the**  **12.5% threshold is met, an insurer pays premium tax on only 12.5% of its worldwide premiums,**  **regardless of any premiums that it writes in this State in excess of that amount ” and while the** 
**“State loses a source of tax revenue through application of the cap, the Legislature’s goal . . .**  **is to enable the State to receive the long** 

**- term benefit of increased investment” and the “**  **the tax revenue that such investments generate**  **”). The loss of revenue by application of the cap is exemplified thus**  **ly : if a foreign carrier earns**  **$500,000 in premiums in New Jersey, the IPT at**  **2.1% would be**  **$10,500. Id** 

**. at**  **73. However,**  **if**
**the carrier’s**  **everywhere premiums**  **are $1,000,000,**  **then it**  **qualifies for**  **the cap**  **since the**  **New Jersey** 

**- sourced**  **premiums exceed**  **12.5% of $1,000,000, or $125,000 (12.5% x $1,000,000), and** 
**the IPT**  **at 2.1%**  **of**

**the capped**  **premiums would be $2,625 (2.1% of $125,000).**  **Ibid. “Accordingly,**  **through operation of the premium tax cap statute, the insurer saves $ 7,875 --**  **the difference between the uncapped tax of $10,500 and the capped tax of $2,625.**  **” Ibid.** 
**As a result of the 12.5% cap and the statutory FIPT credit, Taxation, since 1945,**  **refund ed** 
**IPT to an insurance carrier if it had paid**  **FIPT in**  **exce ss of**  **its IPT liability. However, f**  **or tax year 2011 onwards, Taxation decided not to**  **issue such refunds . NJSFA pr**  **ovided extensive e**

**- mail**  **exchanges between itself and Taxation, or by Taxation, in this regard. In its October 19, 2012, e**  **mail summarizing a discussion of the cap issue with DOBI, Taxation noted that prior to t he** 
**decision in Am.**  **Fire &**  **Cas. Co.,**  **“monies w**  **ere recouped**  **in retaliation,**  **but after**  **losing the case** **7**

**no one addressed** 

**the impact**  **on revenue that**  **was occurring**  **because of**  **it.” DOBI’s opinion was**  **that the cap statute “prevents adding both taxes together in arriving at Total Tax” but this is**  **problematic “when these two taxes are in play within a taxpayer.” Taxation stated that f**  **or tax**  **year 2011,**  **it was**  **implementing one**  **“revenue scenario”**  **where the**  **total tax**  **cannot “go**  **below the” FIPT** 
**when an**  **insurance carrier**  **takes a**  **credit for**  **the FIPT** 

**. Thus,**  **where th**  **e cap**  **is used**  **by an**  **insurer,**
**and the**  **IPT “amount**  **is less**  **than the**  **tax calculated**  **on Fire**  **Premiums paid**  **to” the NJSFA,**  **then the** 
**“Total Tax**  **liability indicated**  **on Line**  **16 [Premiums**  **Tax] cannot go**  **below the**  **tax on**  **Fire**
**Premiums.” For tax years 2011 through 2013, Taxation denied refunds to PCIC and GIC**  **whe n the**  **ir IPT liability**  **was reduced to a negative because it was lower than the FIPT payment**  **to NJSFA.**
**Taxation also im posed an increased assessment for the IPT. Each carrier**  **sued in the Tax Court (Docket N**  **umb ers**  **006481- 2014; 006482**  **-2014) . Each settled with refunds (plus interest) being**  **issued by Taxation. 6**  **Until 2017, NJSFA received 2% FIPT from the**  **foreign fire carriers. As GNY alleged, prior to tax year 2017, “Taxation issued refunds to foreign fire insurance companies for Fir**  **e Tax in excess of 12.5%, if the ratio of New Jersey fire** 

**- insured premiums to total fire** 

**- insured premiums**  **during the tax period was greater than 12.5%.” Sometime in early 2017, NJSFA discovered that it received less than the 2% FIPT from**  **certain carriers. This was apparently due to a n**  **otice Taxation**  **published on its website**  **on June 16, 2016 (**  **the “ Notice**  **”) which read as follo ws:** 

**6 For each tax year 2012 and 2013,**  **Taxation refunded $250,439.85**  **; $252,613.71 to**  **P CIC, and**  **$109,571.95 ;**  **$110,831.18 to GIC. Taxation also gave up its claim for a return of refunds which it had previously issued for tax year 2011 ($244,017.09 to PCIC; $109,125.14**  **to GIC).** **8** Notice - Insurance Premium Tax (IPT), N.J.S.A. 54:18A-1, et seq ., and New Jersey Foreign Fire Insurance Company Tax (NJFT), N.J.S.A. 54:18-1, et seq . **Under N.J.S.A. 54:18A- 2, foreign and domestic insurance**  **companies are required to pay an Insurance Pr emiums Tax (IPT)**  **equal to 2.1% on the taxable premiums sold that cover property and risks on property located in this State. The IPT is paid into the State**  **General Fund. If the amount of the taxable premiums collected by a company for coverage in this State exceeds 12.5% of the total**  **premiums the company collected worldwide, then the taxable premiums are limited to (or “capped” at) 12.5% of those total**  **premiums collected worldwide. N.J.S.A. 54:18A-6.**
**Under N.J.S.A. 54:18- 1, foreign fire insurance**  **companies are required to pay a New Jersey Foreign Fire Insurance Company tax**  **(NJFT) equal to 2% on fire insurance premiums collected. The NJFT is paid directly to the New Jersey Firemen’s Relief**  **Association (FRA). Domestic insurance companies do not pay the N**  **JFT. Under N.J.S.A. 54:18A-**  **2, the NJFT is credited against a foreign insurance company’s IPT because NJFT is considered part**  **of IPT. The law does not specify a cap on premiums for NJFT as it does for IPT.**  **Without a cap for NJFT, a foreign fire insurance company may be subject to more total tax than an insurance company only doing**  **business in New Jersey if the foreign company sells more fire insurance policies in New Jersey than other types of insurance**  **policies, or if the company’s NJFT exceeds its IPT (because of the**  **cap). For that reason, [Taxation] will apply the 12.5% cap to the premiums on which the NJFT is calculated.**  **T[axation] is in the process of revising the Insurance Premiums Tax return and instructions and is currently drafting regulatio**  **ns to reflect the above position. Information regarding these changes will be**  **posted to this website as it becomes available. 7** 

**7 An earlier version**  **of the Notice contained a prefatory sentence that Taxation “seeks to clarify**  **the relationship between the [IPT], N.J.S.A. 54:18A-1,**  **et seq. , and the [FIPT],**  **N.J.S.A. 54:18-1, et seq.**  **” and a concluding sentence that “[q]uestions or concerns regarding the new rules c an be**  **emailed to xxxx@ treas.state.nj.us.” Both sentences did not appear in the posted version.**  **The Notice appears to be the third revenue scenario pos i**  **ted by Taxation in its October 19, 2012,**  **e- mail**  **, that a**  **carrier would**  **compute the FIPT**  **credit “on**  **their ‘applicable**  **premiums tax’**  **by taxing the 12.5% of N**  **ew Jersey**  **Fire Premiums,**  **which is**  **that portion of the**  **limitation tax**  **liability directly**  **related to**  **the NJ**  **Fire Premiums.”**  **Taxation and**  **DOBI agreed**  **to meet**  **and “create**  **a policy . . . to**  **address this**  **situation.” 9** 

**Thereafter, and for tax year 2016 onwards, Taxation made changes to the IPT return for foreign insurance companies. Schedule A, “Calculation of Taxable Fire Premiums,” of t**  **he 2016 IPT return noted that Taxation “will cap” the “taxable fire premiums in the s**  **ame manner” as the cap for taxable premiums “determined as per**  **” N.J.S.A.**  **54:18A- 6. The instructions to Schedule C**  **of the 2016 IPT return (where the cap is computed), notes:**

**If calculating Taxable Premiums as per N.J.S.A. 54:18A-**  **6, New Jersey Taxable Fire Premiums are calculated applying the 12.5%**  **limitation cap as follows: Total Worldwide New Jersey Fire Premiums x 12**  **.5% = New Jersey Taxable Fire Premiums. . . . See Notice on the Division of Taxation website at**  **http://www.state.nj.us/treasury/taxation/pdf /IPTNotice.pdf. On the 2017 IPT return, new Schedule C** 

**- 1 states that a “taxpayer must apply the 12.5%**  **premium ta x cap in the same manner to their worldwide fire premiums, in arriving at the New**  **Jersey taxable fire premiums.” The instructions to this Schedule state:** 

**In the event a taxpayer is eligible for and chooses to calculate their New Jersey Taxable Premiums ap**  **plying the 12.5% Premium Tax Cap as per**  **N.J.S.A. 54:18A- 6 and is subject to the New Jersey**  **Foreign Fire Tax as per N.J.S.A. 54:18-**  **1, the taxpayer must apply the 12.5% Premium Tax Cap in this same manner, in arriving at New**  **Jersey Taxable Fire Premiums. Th e taxpayer must complete**  Schedule C -1- Companies Other than Life Calculation of NJ Taxable Fire Premiums As Provided in N.J.S.A. 54:18A -6. Enter the capped premiums amount on Schedule A (Page 2), Column 3, Line 17 to calculate the capped premium tax liability. **For additional information see IPT Notice at http://www.state.nj.us/treasury/taxation/pdf/lPTNotice.pdf.**  **Thus, the credit for the FIPT paid by a carrier to the NJSFA is the FIPT after applying the cap**  **on the insurer’s worldwide fire insurance p**  **remiums**

**. NJSFA then reached out to DOBI in early 2017 expressing its concern**  **that it was receiving reduced revenues (about $55,000 and $22,000 in 2016 as compared to $400,000**  **-$500,000 and**  **$200,000 in prior years from each P**  **CIC and GIC respectively**  **), provided a memorandum in this** **10**

**regard, and sought a meeting with Taxation and the Attorney General’s office. NJSFA also**  **advised DOBI that another insurance company was seeking a refund of about $44,000 based on the 12.5% cap being applied to the FIPT. DOBI then**  **sought information from Taxation as to the posting of the Notice and**  **the status of the proposed regulations.** 
**NJSFA continued to s**  **eek advice/clarification from DOBI, especially since the IPT returns were changed to apply the cap to compute the FIPT without regulations.**  **NJSFA’s counsel also e**

  ** mailed T** **axation that it is inappropriate to compute the FIPT based on the 2016 Notice absent any regulation, legislative change**  **, or precedent**  **. In response, Taxation stated**  **that the New Jersey Attorney General’s office had reviewed and approved the Notice “and application of the**  **worldwide cap to the” FIPT, and further that**  **“as evidenced in N.J.S.A. 54:18A-**  **2(a) ,**  **” its**  **Notice was proper and “an accurate application of the law.”**  **In January 2019, Taxation claimed that it had finalized a draft of the proposed regulations. They have yet to be publicly promulgated.**  **NJSFA then filed this complaint in January 2019 alleging that Taxation improperly extended the cap to fire insurance premiums**  **without statutory or regulatory authority which also reduced NJSFA’s funding without s**  **uch authority. NJFSA asked the court to void Taxation’s** 
**Notice and require the**  **balance FIPT be paid by the**  **Carriers herein**

**. 8**  **NJSFA then moved for partial**  **summary judgment on grounds Taxation’s Notice is invalid rulemaking, and th**  **at th e controlling**  **statutes do not allow for such an expansive reading.**

**8 By consent, parties agreed that the NJSFA’s second amended complaint (which included ta**  **x years 2016 through 2018) is amended to include tax years 2019** 

**- 2021 since the cause of action was**  **identical for each tax year. 11** 

**Taxation cross**  **- moved for summary judgment arguing that its Notice**  **complies with the** 

**statutes and the ruling in**  **Am. Fire & Cas. Co. ,**  **and that**  **if this court fi nds**  **the Notice to be valid,** 
**then the case ends.**  **Taxation contend ed**  **that the Notice, as a regulatory guidance document, should remain valid under the “temporary validity doctrine” until it publishes the proposed and fi**  **nal regulations.**  **If**

**the court were to**  **find the Notice invalid,**  **Taxation note d, then**  **it should be allowed to address the consequent unconstitutionality that would be implicated by such ruling.** 
**The Ca rriers**  **herein filed a brief in support of Taxation’s summary judgment motion and**  **in opposition to NJSFA’s partial summary judgment motion noting**  **that applicabilit y of the cap to**  **fire insurance premiums would avoid violation of the equal protection clause. They**  **also argued that the FIPT statute violates the Appropriations Clause of the New Jersey Con**  **stitution**

**.** ANALYSIS **The p arties agree that the issue before this court is one of legal interpretation**  **, specifically**  **the interplay between N.J.S.A. 54:18** 

**- 1; 18**  **A-2, and 18A** 

**- 6(a). As such, the court**  **finds that the**  **issue can be decided by way of summary judgment. See**  **R. 4:46-**  **2(c) (s**  **ummary judgment is**  **appropriate “if the pl**  **eadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any materia**  **l fact challenged and that the moving party is entitled to a judgment or order as a matter o**  **f law”). 9** 

**9 The court notes**  **it has subject matter jurisdiction . The**  **Notice at issue here**  **is unquestionably a n**  **action of Taxation**  **since it amended the IPT returns to conform to the Notice** 

**. See**  **N.J.S.A. 2B:13**

**- 2(a)(1) (Tax Court “shall have jurisdiction to review actions or regulations with re**  **spect to a tax matter**  **of . . . [a]**  **ny State agency or official ”)** 

**. See also**  **R. 8:2(a) (T**  **ax Court “**  **shall have initial review jurisdiction of all final decisions including any act, action, . . .**  **decision ” of Taxation)**  **; Rutgers Univ. Legislative Affairs Council, Inc. v.**  **Thompson , 12 N.J. Tax 642, 647 n.2 (Tax 1992)**  **(court had subject matter jurisdiction to review plaintiff’s complaint which challen ged Taxation’s**  **letter ruling**  **because the complaint sought**  **a “ review of an action, ruling or decision of**  **” Taxation). 12** 

**The primary**  **issue here is whether the changed methodology of computing the FIPT is supported by the language and intent of the FIPT and IPT statutes. NJSFA argues that under**  **the plain language of each statute, the cap cannot apply in computing the FIPT. The correct**  **methodology of imposing the FIPT and the IPT, it argues, is what has been followed since 1945 without legislative intervention or regulatory implementation,**  **which is that a foreign**  **carrier (1) computes and pay**  **s NJSFA 2% FIPT o**  **n all of the**  **fire insurance p remiums**  **earned in New Jersey**
**under N.J.S.A. 54:18 -1,**  **in the year following the tax year at issue; (2) separately**  **computes the IPT on all types of net taxable premiums at the cap, if the cap is applicable; and (3) p**  **ays the IPT due to Taxation after taking a**  **credit for the 2% FIPT paid to the**  **NJSFA. If the foreign**  **carrier paid**
**more in FIPT than the IPT due**  **, then Taxation should, as it aways has since 1945,**  **refund the excess. Taxation cannot, without legislation, decide that**  **NJSFA is entitled to**  **less monies by applying the**  **cap to compute the FIPT, so that Taxation**  **can get more by**  **retain ing**  **monies which would otherwise be refunded to the carriers if the cap was not applied**  **in computing the FIPT.**
**Taxation maintains that the last sentence in N.J.S.A. 54:18A-**  **2(a) ,**  **which provides that “[a]ny**  **taxes paid to the treasurer of any firemen’s relief association” under “[N.J.S.A.] 54:18-**  **1 shall be considered a part of the tax payable under**  **” the IPT statute , means that the FIPT is part of**  **the IPT, therefore, it s hould**  **also be calculated using the cap**  **like the IPT . It notes that the IPT’s**  **“tax base” is larger ( since it includes**  **all premiums on any type of insurance) than the FIPT’s tax base (only fire insurance premiums),**  **therefore, it stands to reason that an ins**  **urer’s IPT liability should also be larger than (or at least equal to) the FIPT liability. This means re**  **funds ,**  **if any, cannot be generated because the credit for the FIPT paid**  **will never exceed the IPT due.**  **Moreover,**
**T axation**  **argues , the Legislature has explicitly provided that “monies paid to” NJSFA “are not** **13**

**refundable by the State” (citing N.J.S.A. 54:18A**

**- 1(d); 18A** 

**- 1(e)).**  **10 Thus,**  **per Taxation, its**  **solution, which is applying the cap in computing the FIPT due, conforms to the legis lative intent**  **explicated in the IPT statute and avoids having foreign insurers “pay a higher tax on fire premiums**  **than domestic companies” contrary to the goal of a credit for FIPT (avoid double tax), and the ruling in**  **Am. Fire**  **& Cas.**  **Co. The court finds NJSFA’s arguments more persuasive. N.J.S.A. 54:18-1 plainly states that**  **a 2% FIPT is imposed “upon the amount of all of the**  **” fire insurance premiums received by or owed to a foreign insurance carrier (emphasis added). There are no limitations, ca**  **veats, or exceptions to this requirement other than that the insured property be in this State.**  **Ibid. Cf.** 
**N.J.S.A. 54:18A- 2 (IPT**  **is imposed on “taxable” premiums, which is defined in N.J.S.A. 54:18A**  **4 as gross premiums less certain items such as returns made or d ividends paid, and then subject to**  **the cap ). There is no cap on the amount of fire insurance premiums subject to the 2%**  **FIPT under**  **either the FIPT statute or the IPT statute. There is no requirement that NJSFA**  **repay or refund any**
**monies it receives from the foreign fire insurance carriers. Indeed, this cannot be since the statute**  **plainly requires that a 2% tax on fire insurance premiums received during a tax yea r be paid**  **to**
**NJSFA in March of the year following a tax year, thus, the one** 

**- time payment is a**  **fixed and certain amount. It follows then that the 2% FIPT cannot be diminished or diverted by Taxation.** 

**10 N.J.S.A. 54:18A-1(d) provides as follows:**  **Nothing in**  **this section**  **requiring a partial**  **payment of tax**  **shall be**  **deemed to**  **apply to**  **premiums for**  **fire insurance**  **risks on**  **properties in**  **this State**  **paid to**  **an insurer**  **which is**  **not organized**  **under the laws**  **of this**  **State or**  **to premiums**  **for marine**  **insurance risks.**  **N.J.S.A. 54:18A- 1(e)**  **provides as**  **follows: In**  **the calculation**  **of the tax**  **due in**  **accordance with**  **subsection (a)**  **hereof, every**  **insurance company shall**  **be entitled**  **to a**  **credit in**  **the amount of the tax**  **paid as**  **a partial**  **payment in**  **the preceding**  **calendar year**  **and shall**  **be entitled**  **to the**  **return of**  **any amount**  **so paid**  **which shall**  **be found to**  **be in**  **excess of the**  **total amount payable**  **in accordance**  **with this**  **section. 14** 

**Taxation’s contention that it is incredible for the Legislature to require foreign ca rriers to** 
**“fund” NJSFA but then intend “to reimburse the carriers indirectly and surreptitiously with the** 
**State fisc ”**  **(sic) is**  **thus illogical. Indeed, this contention**  **, albeit in the context of computing the**  **retaliatory tax ,**  **was soundly rejected. See**  **Am. Fire**  **& Cas.**  **Co., 375 N.J.**  **Super. at**  **449, 451 (rejecting**  **the lower**  **court’s finding that**  **“t he Legislature reasonably could have believed that the**  **[retaliatory] tax, as** 

**. . . calculated**  **[by Taxation], could achieve**  **[its] . . . purpose**  **” by noting that**

**t here**  **was nothing**  **to suggest**  **that “the**  **Legislature was**  **apprised of [Taxation’s] position**  **as to**  **the**

**manner of**  **interaction of the [cap and retaliatory tax] . . . s tatutes**  **” and that even the insurers first** 
**knew of the “ effects of that position**  **” only after Taxation rejected their refund requests which were made “several years after the last amendments to the statutes at issue,” or that the**  **Legislature was**  **notified of Taxation’s “position ”).**  **The Supreme Court in agreeing stated that while the Legislature is “pre**  **sumed” to know the laws it enacted, “it is incongruous to find, as [Taxation] . . . that the**  **Legislature enacted the premium tax cap statute in 1945, but only five years later sile ntly rendered**  **it useless to foreign insurers when it enacted the retaliatory tax statute in 1950.**  **If the Legislature intended such a result, then it could have amended the**  **” the cap statute either in 1950 “**  **or, for that matter, at any point in the intervening half-**  **century.” Am.**  **Fire &**  **Cas. Co., 189**  **N.J. at**  **82-83.**
**Here also,**  **and in**  **keeping with the plain language of the FIPT statute, the last sentence in**
**N.J.S.A. 54:18A**

**- 2(a)**  **h as**  **historically been interpreted and understood as simply being the statutory authority for crediting the 2% FIPT paid to NJSFA against the 2.1% IPT**  **payable to**  **Taxation by the foreign insurance carriers. 11**  **See also Governor’s Veto**  **Statement to S**  **. 240**

**11 The language of this last sentence has remained unchanged since its enactment in 1945** 

**. See**  **L. 1945,**  **c. 132, § 2, last sentence (“Any taxes p**  **aid to the treasurer of any firemen ’**  **s relief association of this State pursuant to section 54:18** 

**- 1 of the Revised Statutes shall be considered a**  **part of the tax payable under this act.”). The language of the cap statute, N.J.S.A. 54:18A** 

**- 6(a) has remained**  **unchanged since its enactment in 1945. See**  **L. 1945,**  **c. 132, § 6.**  **See also n.5.** **15**

**(N.J.S.A. 54:18A**

**- 2 “provides for a credit against the general . . . [IPT] for any monies paid into**  **the local fireman’s relief associations”). As Taxation and the Carriers herein concede,**  **up until**
**2011- 2012, Taxation refunded any monies to the insurers if the credit for FIPT paid by the insurer**  **s to NJSFA exceeded the IPT payable to Taxation**  **pursuant to this interpretation. Thus, historically,**  **Taxation never considered it wrong to refund foreign insurers excess IPT due to the FIPT credit,**  **or that the cap should apply to the fire insurance premiums earned by the carrier . Neither Taxation**  **nor the foreign carriers ever**  **complained about, or sought a change**  **to the FIPT computation,**  **legislatively or otherwise. 12**  **O nly after the litigation loss in Am. Fire & Cas.**  **Co., did Taxation**  **decide that it would change the FIPT computation, avoid paying refunds to insurers , and**  **thereby**
**alleviate the impact of the revenue lost by “recoup[ing]” monies through the retaliatory tax.**  **Even**
**after two of the Carriers herein challenge**  **d Taxation’s refund denials which were based on the same theory**  **underlying the Notice ,**  **Taxation did not seek legislative change**  **n or**  **alert the**  **Legislature of Taxation’s**  **desired interplay between the FIPT and the IPT. Rather,**  **Taxation issued**  **the Notice, whe rein it r**  **eformulated the computation of the FIPT and shifted the burden of the**  **change upon NJSFA.**

**12 An April 22, 1985, memorandum from the Commissioner of DOBI to, among others, the counsel**  **for the Governor, addressed a Senator’s concern “to take action to prevent further reductions in**  **the tax revenues utilized to fund” NJSFA and “recoup past revenue loss to the Fireme n’s**  **Association due to insurers use of the tax laws to avoid the full 2% premium tax.” One of the tw o**  **recommendations but through “legislative action,” was to amend the cap statute “to take into**  **consideration the total premium volume of all the companies in a holding company group.” The other was to phase out and eliminate the cap. Options were also suggested to increase**  **funding to the Firemen’s Association**  **but through legislative action. In finding Taxation’s computation of retaliatory taxes was bereft of legislative not**  **ice or approval, the Appellate Division in Am. Fire & Cas. Co., referenced this above me**  **morandum to point out that this document had nothing to “suggest that any insurer raised the issue of the**  **interaction between the premium tax cap and the retaliatory tax statutes.” 375 N.J. Super. at 451-**  **52. That observation fu**  **lly applies here. 16** 

**In this connection, the court is unpersuaded by the argument advanced by**  **Taxation that it**  **is obligated to refund only excess IPT estimated payments under**  **N.J.S.A. 54:18A**

**- 1(d); 18A** 

**- 1(e),**  **therefore, it cannot be obligated**  **to refund foreign**  **insurers where the FIPT paid to NJSFA exceeds the IPT payable to Taxation.**  **Presumably , the basis for this contention**  **is that Taxation**  **(i.e., the Treasury or the**  **Sta te)**  **cannot refund what it did not receive**  **. In other words, Taxation appears to be positing that since**  **the FIPT**  **is paid to NJSFA ,**  **there is no addition to the State’s taxes**  **. T h**  **erefore,**
**the State c**  **annot re**  **fund any portion**  **of the same ( when the refund arises**  **due to the IPT liability being lower than the FIPT paid)**  **even if t hat burden is borne by, here,**  **NJSFA. However, the FIPT is undoubtedly a State** 

**- imposed tax, thus, a part of the State**  **’s revenues**
**derived from taxation.**  **It is the State agencies, DOBI and Ta xation, which “enforce the provisions”** 
**of the FIPT. N.J.S.A. 54:18**

**- 7. The monies from the FIPT are used for and to further a public** 

**purpose. See**  **Paff**

**v. N.J.**  **State Firemen**  **’s Ass**  **’n, 431 N.J.**  **Super. 278, 290-93 (App. Div.**  **2013) (NJSFA**  **“ as an**  **independent State instrumentality, is a public agency ” because it is created by law,** 
**it is “the direct recipient of substantial revenues generated from specific taxes impos**  **ed on insurance premiums**  **” which it must use “in accord with statutory strictures ,” a**  **nd it “se rves**  **numerous governmental functions” in addition to managing “ tax revenues**  **” such as providing**

**“ welfare benefits to a significant number of public servants**  **- paid and volunteer firefighters**  **”**
**similar to “o ther governmental relief and benefit progra**  **ms .” Thus, NJSFA is a vehicle to**  **“achieve” the State’s public purpose, as recognized by DOBI’s regulations). Similar to**  **the credit**  **for taxes paid to other States on the same income under**  **the personal income tax regime so that there is no double or multiple taxation,**  **see N.J.S.A. 54A:4** 

**- 1(a);**  **Beljakovic v. Dir.,**  **Div. of** 
**Taxation , 26**  **N.J. Tax**  **455, 464 (Tax**  **2012), the Legislature provided a credit for the FIPT paid**  **against the IPT so as to avoid double taxation. The Legislature**  **’s deci**  **sion that**  **the FIPT should be 17** 

**directly payable to NJSFA for the specific purpose of supporting our firefighters, does not make**  **the FIPT any less a part of the State tax revenues**

**. 13**  **In sum, Taxation’s interpretation of N.J.S.A.** 
**54:18A- 1(d) and (e) support of its decision to apply**  **the cap to the FIPT is flawed and unpersuasive** 

**. In any event, the decision**  **and ability to shift the burden of refunding the FIPT to NJSFA,** 
**or the decision to avoid paying**  **refund s**  **to foreign insurers by applying the IPT cap when computing**
**the FIPT ,**  **requires legislative action. I t is the sole prerogative of the Legislature**  **, not Taxation, to** 
**decide w hether**  **NJSFA can**  **or should receive**  **less funding by reducing the amount of the**  **tax base.**  **Since 1945, t he**  **Legislature has**  **clearly required**  **foreign carrier**  **s to**  **directly pay**  **the NJSFA**  **2% of** 
**all fire**  **insurance premiums,**  **the quid pro**  **quo being**  **a full**  **credit against**  **the payable**  **IPT. Up**  **until Taxation’s litigation loss in**  **Am. Fire**  **& Cas.**  **Co., it**  **consistently refunded**  **taxes in**  **excess of the** 
**IPT due (**  **IPT payable**  **l ess**  **credit for**  **the 2% FIPT**  **paid to**  **NJSFA ),**  **based on**  **the language of the**
**FI PT**  **and IPT**  **statutes which**  **has remained**  **unchanged to**  **date . E**  **ven if**  **it is**  **proper for**  **Taxation to** 
**determine that**  **there is an alleged loss to the State’s tax revenues because it is requ**  **ired to refund**
**excess IPT to the foreign**  **carriers by applying the credit for FIPT paid, it is for the Legislature to decide whether the 2% FIPT should apply to something less**  **than “all of the” fire insurance**  **premiums as currently provided in N.J.S.A. 54:18 -1**  **. Funding decisions and changes to the same are entirely legislative functions.**  **Indeed, the Legislature has acted when there was a revenue loss due to the cap. See**  **, e.g. ,**  **Sponsor’s Statement to**  **S. 2995 ( L.**  **1985 c.**  **294) (proposed law “will close loopholes in the law which generate revenue to the New Jersey Fireman’s Relief Associations (C. 54**  **:17**

**- 4 and C. 54:18** 

**-**

**13 Cf.**  **S ponsors’ Statement to**  **Concurrent Resolution 27**  **(2022) (“Firefighters play a vital role in protecting the citizens of this State. It is imperative that the [FIPT] continues to be p**  **aid” to NJSFA “to assist firefighters and their families in times of need and that the funds not be**  **diverted for other**  **State purposes”). The resolution proposed an amendment to the New Jersey Constitution that the**  **FIPT be paid directly to NJSFA and cannot be diverted by the Legislature for any other purpose**

**. 18** 

**1 et seq.) and the insurance premium tax law (C. 54:18A**

**- 1 et seq.)” by requiring th**  **at th e worldwide**  **premiums include those earned by not ju**  **st the carrier**  **, but also all of its affiliates**  **, since insurance**  **companies were changing their corporate structures to take advantage of the cap, thus causing “a**  **loss of revenue to the relief associations”); Office of the Governor, New s**  **Release , A. 3561**  **/S. 2995 (Aug. 15, 1985) (S. 2995**  **w as**  **signed into law “to close a loophole in the State’s” IPT law “which**  **had permitted” foreign entities “to avoid” the tax “by establishing subsidiaries in Ne w Jersey”**  **which loophole had resulted in “a decrease to revenue to” NJSFA “which pays death be nefits to**  **families of volunteer and paid firemen and maintains a nursing home for retired fir emen”).**  **14 Taxation argues that its decision to apply the cap to fire insurance premiums for computi**  **ng**
**the FIPT is**  **consistent with the ruling in**  **Am. Fire**  **& Cas.**  **Co. which**  **held that**  **th e**  **cap should apply** 

**to insurance**  **premiums for**  **purposes of the retaliatory**  **tax imposed only on**  **foreign carriers.**  **There,**
**instead of computing the**  **retaliatory tax**  **at the**  **difference in**  **the IPT**  **rates between**  **New Jersey**  **(2.1%) and** 

**the foreign carrier’s**  **home state,**  **Taxation taxed**  **the gross premiums**  **earned in**  **New Jersey**  **at the**  **sister state’s**  **IPT rate,**  **then gave**  **credit for**  **the IPT**  **computed at**  **New Jersey’s**  **2.1%**
**on the capped**  **premiums. 15**  **The justification**  **was that “**  **[n] either**  **” New Jersey’s cap statute “ nor the**  **retaliatory tax statute refers to the other and neither statute indicates that its purp ose is secondary** 

**14 See also**  **n.12.**

**15 The**  **retaliatory tax**  **is an additional**  **tax paid**  **by foreign**  **insurers on**  **all insurance**  **premiums at**  **a rate**  **which is**  **the difference**  **between a**  **carrier ’s home**  **state ’s**  **tax rate**  **and New**  **Jersey’s 2.1%**  **IPT**

**. Am.**  **Fire &**  **Cas. Co., 189**  **N.J. at**  **71. Thus,**  **if a foreign**  **carrier’s home**  **state imposes a 2.5%**  **tax on**  **premiums earned**  **within that**  **state , then the**  **carrier will**  **pay New**  **Jersey a**  **retaliatory tax**  **at 0.4%**  **in addition**  **to the 2.1%**  **IPT. Id.**  **at 73-74.**  **If the New**  **Jersey earned**  **premiums of $500,000 are**  **capped at**  **$125,000 since they**  **exceed the**  **worldwid e amount**  **of $1,000,000, the**  **IPT at**  **2.1% is**  **$2,625, the retaliatory**  **tax at**  **0.4% is**  **$2,000, and**  **the total**  **tax of $4,625.**  **Id**

**. at**  **73-75. Taxation**  **would compute the retaliatory**  **tax at**  **2.5% of $500,000 (New**  **Jersey earned**  **premiums) or $12,500**  **and deduct $2,625**  **IPT for a**  **net retaliatory**  **tax of**  **$9,875. The**  **carrier would**  **pay $12,500**  **in total**  **taxes ($9,875 + $2,625)**  **as compared**  **to $4,625.**  **Id. at**  **74-75. 19** 

**to the purpose of the other. ”**  **Am. Fire**  **& Cas.**  **Co., 189 N.J. at 74. The cap, Taxation argued,** 
**reduced the tax able premiums**  **, th**  **ereby the effective tax rate was much lower than the actual 2.1%** 
**IPT rate which thus produced a revenue loss. Ibid.**  **16 The Court rejected the attempt to recapture the premiums which exceeded the ca**  **pped**

**amount as**  **“ completely eviscerat[ing**  **] the premium tax cap because a foreign insurer**  **’ s tax liability**  **in New Jersey always will be equal to the insurer ’**  **s hypothetical tax liability in its home state ”**  **thus rendering the cap statute “**  **to mere surplusage as applied to such insurers. ”**  **Id. at**  **82. In contrast,**  **the straight**

**- forward computation offered by the carriers (tax**  **ing New Jersey source gross**  **premiums at the difference in the IPT rates between New Jersey and the sister stat e)**  **, “preserves**  **the benefit of the premium cap” and furthers the legisla tive purpose since “**  **the retaliatory tax does not fully**  **recapture the benefits afforded to an insurer by the premium tax cap**  **,” while also furthering the intent of the retaliatory tax which is to deter “other states**  **from enacting discriminatory taxes that ar**  **e above New Jersey ’**  **s stated tax rate of 2.1%.” Id. at 84.**  **Taxation’s reliance on the above case as being a legal validation of its changed posi tion on**  **FIPT computation is misplaced. The instant case does not involve an evisceration of the pre miums** 

**cap. It does not present an attempt to recapture premiums which are not being taxed due to the** 

**cap being applied**  **. It does not involve an attempt to “match” a sister state’s IPT rate. While as in**
**Am. Fire**  **& Cas.**  **Co., Taxation is trying to increase revenue for**  **itself ,**  **here however**  **, it is at the cost to NJSFA not the foreign carriers. Unlike the goal of the**  **retaliatory tax which is to level the**

**16 For instance**  **, if the New Jersey source premiums is $500,000, the carrier is paying IPT not “**  **at a**  **rate of 2.1%, but rather, because it only is taxed on $125,000 of its $500,000 of premiums, its effective rate of taxation is 0.525%.**  **” Am.**  **Fire &**  **Cas. Co., 189**  **N.J. at**  **74. Th**  **us, Taxation argued,**  **t he**  **higher the carrier’s New Jersey business, the l**  **e sser th**  **e premium base when the cap is applied, and thus, the lower the**  **effective tax rate**

**. Ibid.**  **Under this “effective tax rate” theory, Taxation**  **would apply its**  **computation even**  **whe re the**  **sister state’s**  **tax rate**  **was lower**  **than New**  **Jersey’s 2.1%**  **IPT rate,**  **when normally**  **the lower**  **rate means**  **no retaliatory**  **tax. Id.**  **at 76.** **20**

**playing field for insurance business, the goal of the FIPT is to fund welfare and benef its for local**  **fire fighters. U nlike the retaliatory tax scheme, the FIPT tax scheme is specific as to how much is**  **to be paid to NJSFA (2%) and the tax base for this purpose (“all of the” New Jersey source fire** 
**insurance premiums). There**  **being no ambiguity in this regard,**  **there is no n**  **eed to “harmonize” or “reconcile” the FIPT and the cap statutes.**  **Indeed, as**  **in Am.**  **Fire &**  **Cas. Co.,**  **it is**  **Taxation , not**  **NJSFA, which**  **is frustrating**  **the legislative**  **intent and** 

**purpose of the FIPT.**  **The FIPT**  **statute’s goal**  **is entirely**  **benevolent - to** 

**compens ate**  **the firefighters**  **who put**  **their lives**  **to risk**  **for the**  **safety of**  **New Jersey**  **citizens and** 
**residents and** 

**by extension, to**  **the firefighters’**  **famil ies** 

**. Under**  **Taxation’s computation,**  **less**
**monies are**  **available for** 

**this purpose. Similarly,**  **by manipulating**  **the tax**  **base for**  **the FIPT**  **(capped**
**fire insurance**  **premiums), Taxation**  **is indirectly**  **ensuring that**  **it gets**  **more of the**  **premium tax**  **revenue pie akin**  **to it**  **using the “effective**  **tax rate”**  **theory to**  **increase its**  **revenues in**  **Am. Fire**  **&**
**Cas. Co.**  **Taxation’s effort**  **to do**  **so was**  **unsuccessful there**  **and is**  **equally so**  **here ;**  **even more**  **so**
**because its**  **interpretation is**  **at odds**  **with the**  **plain language of N.J.S.A. 54:18-1**  **(a).**
**In this**  **connection, and**  **as noted above, the**  **fact that the**  **IPT statute**  **requires a**  **credit for**  **the**
**FIPT paid** 

**does not make**  **the fire**  **insurance premiums**  **subject to**  **the cap.**  **Since the**  **fire insurance**  **premiums are**  **subject to**  **the IPT**  **( see**  **N.J.S.A. 54:18A- 1(a)),**  **it is**  **included in**  **computing the cap** 
**for purposes of computing the**  **IPT**

**. It**  **simply does not follow**  **that because**  **the FIPT**  **is considered** 
**“a part**  **of” the “payable”**  **IPT under N.J.S.A. 54:18A-**  **2(a), the**  **fire insurance**  **premiums are**  **again,**
**and separately**  **, subject to**  **the cap**  **for purposes of computing the**  **FIPT**

**. Rather,**  **and as**  **explained above,**  **this “part**  **of the”**  **payable IPT**  **simply means**  **that the insurer does not**  **pay a**  **tax on**  **fire**
**insurance premiums**  **twice. 21** 

**The court**  **th us finds**  **that Taxation’s**  **interpretation of the F**  **IPT statute**  **vis-a-vis the cap** 

**statute is**  **im proper**  **and not**  **entitled to**  **any deference** 

**. It**  **therefore follows**  **that the**  **Notice is**  **invalid.**
**See Morgan**  **Stanley & Co.**  **Inc. v.**  **Dir., Div.**  **of Taxation, 28 N.J.**  **Tax 197, 225**  **(Tax 2014)**  **(“ While**  **courts generally accord administrative agencies deference in their interpretation of statutes which**  **they are charged with enforcing, that agency may not, under the guise of interpretation, extend a**  **statute to give it a greater effect than its language permits. ”).**  **Computing the**  **FIPT at**  **2% of “all** 
**of the”**  **fire insurance**  **premiums sourced**  **to New**  **Jersey, and**  **then deducting the**  **same from**  **the**
**carrier’s IPT**  **(as capped**  **if the**  **New Jersey**  **premiums exceed**  **12.5% of**  **its worldwide**  **premiums),**

**as has**  **been the methodology**  **since 1945,**  **is simple**  **, direct**  **, and**  **in conformance**  **with the**  **plain language**  **and**

**intent of**  **the FIPT**  **statute. Changing the**  **formula by**  **reducing the**  **FIPT’s tax**  **base is** 
**the Legislature’s**  **prerogative. Cf.**  **Am. Fire**  **& Cas.**  **Co., 189 N.J.**  **at 85**  **(“ If the Legislature disagrees** 
**with ” the court’s “ha**  **rmonization of the ” retaliatory tax and the cap statute, “**  **then, with appropriate executive branch input, it may examine this issue and amend the statutes as it sees fi**  **t ”)** 

**. Due to the above finding**  **s, the court need**  **not address NJSFA’s c**  **ontention in its partial summary judgment motion that Taxation violated the Administrative Procedures Act (**  **APA) by its**  **failure to promulgate regulations (note**  **however that an agency’s interpretation of a statute, if found**  **to be invalid, does not become valid when it is, as here, subsequently proposed to be formalized into a regulation**  **) . For the same reason, the court need not address Taxation’s contention that its**  **Notice is a regulatory guidance document which does not require regulation s, and**  **even if** 

**regu lations are found to be**  **required , the**  **Notice should**  **remain valid under**  **the “temporary validity** 
**doctrine” until regulations are finalized.**  **17**

**17 Generally, a regulation is required if among others, an agency determination**  **(4) prescribes a legal standard or directive that is not otherwise expressly pr ovided**  **by or clearly and obviously inferable from the enabling statutory authorization; (5) 22** 

CONCLUSION **For the above reasons, the court finds that Taxation’s decision**  **via its web**

**- published Notice**  **changing the FIPT computation by applying the 12.5% cap to the foreign insurers’ fire insurance premiums is**  **contrary to**  **the plain language and intent of N.J.S.A. 54:18-1. Its**  **conclusion that the cap should apply in computing the FIPT because the**  **FIPT is**  **considered “a**  **part of”**  **the “payable”** 
**IPT under**  **N.J.S.A. 54:18A**

**- 2(a)**  **is unreasonable**  **because, (a)**  **since 1945, this provision**  **has been**  **interpreted to**  **simply mean**  **that the**  **IPT statute**  **requires a**  **credit for**  **the FIPT**  **paid so**  **that a**  **foreign**
**insurer does**  **not pay**  **a tax**  **on fire**  **insurance premiums**  **twice, and (b)**  **it result**  **s in NJSFA receiving**  **less than the mandated 2% FIPT on “all of the” fire insurance premiums e**  **arned in New J ersey**  **pursuant to N.J.S.A. 54:18**  **-1. The cap on premiums for purposes of computing the IPT need not,** 
**and should not ,**  **be extended in computing the FIPT unless the Legislature acts to amend**  **the respective statutes**  **. Therefore, Taxation’s interpretation of th e interplay between**  **N.J.S.A. 54:18**

**- 1; 18A-2, and 18A-**  **6(a) is not entitled to any deference. As noted above, the Carriers**  **herein argued, in their brief in support of Taxation’s cross** 

**** **motion for summary judgment, that the FIPT statute violates the Appropriations Clause of the New** 

**reflects an administrative policy that (i) was not previously expressed in any offi cial**  **and explicit agency determination, adjudication or rule, or (ii) constitutes a materia l**  **and significant change from a clear, past agency position on the identical subject matter; and (6) reflects a decision on administrative regulatory policy in the nat**  **ure of the interpretation of law or general policy.**  **[Metromedia, Inc. v. Dir., Div. of Taxation, 97 N.J. 313, 331-32 (1984).] A regulatory guidance document is one “used by a State agency to provide technical or**  **regulatory assistance or direction to the regulated community to facilitate complianc e with State .**  **. . law or a” duly adopted regulation. N.J**  **.S.A. 52:14B- 3a(d). The “temporary validity doctrine”**  **permits an “agency to continue using those current processes during a remand for agency rulemaking in compliance with the APA.” E.B. v. Div. of Med. Assistance & Health Servs**  **., 431 N.J. Super. 183, 209-10 (App. Div. 2013).**  **Here, a regulation would be required because the application of the cap to compute the FIP T**  **comports with all**  **of the instances set forth above in Metromedia**  **. Since the court has found the Notice to be invalid, the lack of regulations and the “temporary validity doctrine” do not apply.** **23**

**Jersey Constitution. However, Taxation did not raise this as an issue in its summary judgme nt** 
**motion. Nor did the Carriers herein**  **file their own**  **summary judgment motion. Therefore, the court**
**will not**  **address the merits of th**  **is claim**  **here . Rather, th**  **ey will be dealt when (and if) parties** 
**address the alleged constitutional**  **violations. After the parties’ respective constitutional allegations are resolved, the court will enter a final Order and Judgment which will also address**  **the refunds, if any, that may be due to the Carriers herein.**  **18 The court will enter an Oder granting NJSFA’s motion for partial summary jud**  **gment, invalidating the Notice, and denying Taxation’s motion for summary judgment.** 

**18 Per the pleadings, the FIPT paid by the Carriers**  **herein for tax years 2016-2018 is as follows:** 

**Carrier Tax Year**  **FIPT due**  **at 2% FIPT**  **paid Difference**  **PCIC 2016**  **$441,641.35 $55,205 (with**  **cap) $386,436.35**  **2017 $411,733.60**  **$51,467 (with cap) $360,266.60**  **2018 $385,817.21**  **$112,906 (with cap) $272,911.21**  **GIC 2016**  **$177,576.34 $22,197 (with cap)**  **$155,379.34 2017**  **$174,379.70 $21,797 (with cap)**  **$152,582.70 2018**  **$170,307.45 $46,780**  **(with cap) $123,527.45**  **GNY*** **2018 $564,301.00**  **$369,952 (with cap) $194,349.00**  **SIC  ** 2017** **PCIC and GIC crossclaimed for indemnification against and refund from Taxat ion should they be**  **deemed liable for the FIPT for tax years 2016 onwards.** ***GNY filed a**  **counterclaim against NJSFA and a cross claim against Taxation. For tax year**  **2017, it paid the FIPT without applying the cap for fire insurance premiums. If it had applied the**  **cap, its refund would have been larger at $193,688. For tax years 2018 and 2019, GNY paid the FIPT applying the cap. It sought excess refunds paid for tax year 2017**  **from NJSFA or**  **alternatively for indemnification against**  **and refund from Taxation for years 2017 through 2019.**

****** **SIC counterclaim ed**  **against NJSFA for the FIPT it paid for tax year 2017, which was without applying the cap to fire insurance premiums.**  **If it had applied the cap, it would be entitled to a refund of $2,607. For tax years 2018 and 2019 it paid the FIPT after applying the cap** 

**. SIC**  **crossclaimed against Taxation for tax years 2018 and 2019. Both PCIC and GIC filed protective refund cla**  **ims with Ta**  **xation on July 18, 2019 ,**  **for tax years 2016 through 2018**  **on Forms A**

**- 3730 noting that the claims were related to the instant pending**  **litigation and “intended to preserve the companies administrative appeal rights.” By letters dated**  **September 3, 2019, T axation**  **responded that it “does not accept protective claims,” and if “facts related to the refund change” each carrier could “file a new claim for refund” but wi**  **thin the four**

  ** year statute of limitations.**