Court Opinion

ID: 4528529
Source: CourtListenerOpinion
Date Created: 2020-04-24 14:00:19.783786+00
Date Added: 2024-06-11T12:19:36.346375
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-2481-18T1

OCEAN COUNTY BOARD
OF SOCIAL SERVICES,
DEPARTMENT OF HUMAN
SERVICES,

          Petitioner-Respondent,

v.

A.H. and Z.H.,

          Respondents-Appellants.

                   Argued telephonically March 24, 2020 –
                   Decided April 24, 2020

                   Before Judges Gilson and Rose.

                   On appeal from the New Jersey Department of Human
                   Services, Ocean County Board of Social Services,
                   Agency Docket No. C14080515.

                   Mordechai Gross argued the cause for appellants.

                   James A. Mc Ghee, Deputy Attorney General, argued
                   the cause for respondent (Gurbir S. Grewal, Attorney
            General, attorney; Melissa H. Raksa, Assistant
            Attorney General, of counsel; James A. Mc Ghee, on
            the brief).

PER CURIAM

      A.H. and Z.H. (together, the spouses) appeal a final decision of the

Department of Human Services, Division of Family Development (DFD),

finding they committed an intentional program violation of the Supplemental

Nutrition Assistance Program (SNAP), 1 administered by the Ocean County

Board of Social Services (CWA). 2     The CWA had contended the spouses

intentionally failed to properly disclose sources of income while they were

receiving SNAP benefits. The Director of the DFD upheld the initial decision

by an Administrative Law Judge (ALJ), who agreed with the CWA and

disqualified the spouses for benefits for a twelve-month period, and required

them to return the overissuance. We affirm.

      At the hearing, Investigator Steven Hernandez testified on behalf of the

CWA; A.H. testified on behalf of the spouses; and the parties presented

1
   SNAP benefits are administered through the Work First New Jersey Food
Stamp Program, N.J.A.C. 10:87-1.1 to -12.7.
2
 A county welfare agency investigates intentional program violations. N.J.A.C.
10:87-11.1(a).
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documentary evidence, including the SNAP reporting forms and federal income

tax returns at issue. The facts are not complicated.

      According to Hernandez, the spouses were overpaid $12,700.69 in SNAP

benefits for the three-year period between January 2014 and December 2016.

Hernandez attributed the overpayment to the spouses' failure to accurately report

A.H.'s income from Madison Tristate Management, Inc., a corporation wholly-

owned by A.H., and their failure to report any income from The Fro Pro, Inc., a

partnership in which A.H. had an interest. Hernandez explained that the spouses

reported much higher income on Madison's federal tax returns than had been

reported to the CWA, and they reported income for The Fro Pro that had not

been disclosed to the CWA.

      Hernandez further testified that the spouses only reported to the CWA

A.H.'s income from MTSM Realty, Inc., a subsidiary of Madison that also was

wholly-owned by A.H. Notably, by handwritten correspondence submitted to

the CWA in January 2015, A.H. denied he was self-employed and stated he

received "a paycheck from MTSM Realty."

      A.H. acknowledged he was the "one-hundred percent shareholder[]" of

Madison and MTSM Realty. Relying upon the advice of his accountant, A.H.

testified to his understanding of the income he failed to report:

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            if the corporation earns money it gets flowed down onto
            the personal returns. So the person if he loses money
            he could write off the expense, the loss on his personal
            return. But it's not actual income an individual actually
            receives. It's the company's income but the individual
            pays that income - pays the tax on the corporation on
            his personal return.

      Switching gears from the January 2015 correspondence, A.H. said he did

not believe he was self-employed because he "was always told by [his]

accountant" that he would "have to file [a Form] Schedule C or C EZ" if he were

"self-employed" but he "never filed" either schedule to his federal income tax

returns "per [his] accountant." A.H. said he reported to the CWA all income

earned "[t]o the best of [his] knowledge." He maintained any failure to report

was unintentional.

      Because the crux of the dispute before him concerned the legal definition

of income received under the SNAP regulations, at the conclusion of the hearing,

the ALJ requested written submissions from the parties regarding their

interpretation of the relevant regulations. Pertinent to this appeal, Hernandez

thereafter submitted a five-page "legal brief" on behalf of the CWA. That brief

was "reviewed and edited by" the CWA's counsel.

      In his written decision, the ALJ squarely addressed the issues raised in

view of the applicable legal principles and the SNAP regulations. Commencing

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his analysis with the regulation governing the reporting of income, N.J.A.C.

10:87-5.2(a)(1), the ALJ noted the "general requirement that applicants and

recipients of SNAP benefits must complete applications in which there is full

reporting of all income currently being received." The ALJ further recognized

N.J.A.C. 10:87-5.3 defines household income as "all income from whatever

source unless such income is specifically excluded under N.J.A.C. 10:87 -5.9."3

And, pursuant to N.J.A.C. 10:87-5.4(a)(3), net income and earned income

includes "gross income from a self-employment enterprise . . . ."

      Recognizing "neither New Jersey nor Federal SNAP regulations define

'self-employment,'" the ALJ observed "A.H. has agreed that he was and is a 100

percent shareholder in Madison and its subsidiary MTSM [Realty]."

Accordingly, the ALJ concluded A.H. "is in effect, Madison, the business." The

ALJ elaborated:

            [A.H.] owns the business, runs the business, makes
            decisions for the business, is the president of the
            business, has dominion and control over the disposition
            of funds for the business, and he signs the tax returns
            for the business. SNAP regulations do not distinguish
            between the income of a business owner and the income
            of a self-employed applicant. Both types of income
            should be counted as income for SNAP eligibility
            determination purposes. Pursuant to SNAP regulations,

3
  N.J.A.C. 10:87-5.9 sets forth twenty categories of exclusions. The spouses do
not contend any of those exclusions apply here.
                                                                       A-2481-18T1
                                       5
            the household income of A.H. and Z.H. was derived
            from a business owner's self-employment. As such,
            A.H. was not and is not an employee of Madison.
            Rather, A.H. was and is a business owner of Madison,
            and he was and is self-employed by Madison.

      The ALJ also recognized the applicable Internal Revenue Service

regulations, noting a taxpayer's constructive receipt of income, which is "not

actually reduced to a taxpayer's possession" includes income that

            is credited to his account, set apart for him, or otherwise
            made available so that he may draw upon it at any time,
            or so that he could have drawn upon it during the
            taxable year if notice of intention to withdraw had been
            given. However, income is not constructively received
            if the taxpayer's control of its receipt is subject to
            substantial limitations or restrictions.

            [26 C.F.R. § 1.451-2(a).]

      Accordingly, the ALJ concluded Madison's income "was either actually

or constructively received in the year it was reported." Similarly, because The

Fro Pro's federal income tax returns reflected income that was credited to A.H.'s

account, the ALJ found A.H. constructively received that income. Noting A.H.

"did not demonstrate any substantial limitation or restriction on his abil ity to

access or exercise control over this partnership income," the ALJ determined

The Fro Pro's income was "received by the household and should have been

reported on the [spouses'] application."

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                                           6
      Finally, the ALJ rejected the spouses' argument that their failure to report

the earnings of Madison and The Fro Pro – as reflected on the companies' federal

income tax returns – was not intentional. To support his decision, the ALJ

recognized the record was devoid of proof "that respondents were advised by

any accountant, lawyer, CWA employee, or other such professional, that they

were not expected to report the earnings of Madison and/or [The] Fro Pro for

SNAP purposes." According to the ALJ: "Absent such advice, [the spouses]

were charged with disclosing all past, present, and potential future income that

might be derived as a result of the ownership interests in Madison and [The] Fro

Pro, to [the CWA] and its agents at the time of the application and/or

recertification." This appeal followed.

      On appeal, the spouses raise four challenges to the ALJ's decision,

claiming he erred by: (1) finding they intentionally submitted false statements;

(2) failing to follow Internal Revenue Service and New Jersey Treasury

guidelines concerning S corporations; (3) forcing A.H. to use an accounting

method that did not properly calculate his income; and (4) permitting the

agency's investigator to submit a brief on behalf of the agency.

      We have considered these contentions in light of the record and the

applicable legal principles, and conclude they are without sufficient merit to

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                                          7
warrant discussion in our written opinion. R. 2:11-3(e)(1)(E). Pursuant to our

limited standard of review, In re Stallworth, 208 N.J. 182, 194 (2011), we affirm

– as did the Board – substantially for the reasons expressed in the ALJ's cogent

written decision, which "is supported by sufficient credible evidence o n the

record as a whole," R. 2:11-3(e)(1)(D); and is not arbitrary or capricious or

inconsistent with legislative policy. See Brady v. Bd. of Review, 152 N.J. 197,

210-11 (1997). We add the following brief remarks concerning the spouses'

fourth argument.

         Rule 1:21-1(f)(3) and N.J.A.C. 1:1-5.4(a)(3), expressly permit a non-

lawyer CWA employee with special expertise in the matter at issue to represent

the agency. Because the spouses have not challenged Hernandez's expertise or

have otherwise argued how his written submission – which was revised by the

CWA's attorney – otherwise exceeded his authority under the Court Rules or

SNAP regulations, we discern no basis to disturb the Board's decision on that

basis.

         Affirmed.

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