Court Opinion

ID: 9749359
Source: CourtListenerOpinion
Date Created: 2023-08-27 16:40:09.366512+00
Date Added: 2024-06-11T07:25:47.395375
License: Public Domain

CLIFFORD, J.,
dissenting.
Like the majority, I appreciate full well the obvious public benefit derived from historic preservation. And like the majority, I accept the proposition that “ ‘[s]tate and local tax laws *621may be used to provide inducements for preserving [historic] structures as a form of indirect public subsidy.’ ” Ante at 618, 592 A.2d at 223 (quoting Wilson & Winkler, The Response of State Legislation to Historic Preservation, 36 Law & Contemp.Probs. 329, 341 (1971)). Nevertheless, our constitution provides that “[exemption from taxation may be granted only by general laws.” N.J. Const. art. VIII, § 1, para. 2. Thus, when exemption from taxation is the inducement for achieving the laudable goal of promoting historic preservation, that exemption must be provided through general laws. Because I believe the majority improvidently rewrites that requirement to preserve a flawed statute, I dissent.
I
Incorrect analysis generally produces an incorrect result. The Court’s approach here demonstrates that truism. Its two-step analysis, see ante at 614, 592 A.2d at 221, for determining the constitutionality of N.J.S.A. 54:4-3.52 is just wrong. The correct approach requires three steps: we examine (1) the purpose of the enactment and the subject matter with which it is concerned; (2) whether the statute excludes from its operation properties similarly situated to those embraced by the act; and, if so, (3) whether the limitation of the classification rests on any rational or reasonable basis relevant to the identified purpose of the act. See Newark Superior Officers Ass’n v. City of Newark, 98 N.J. 212, 223, 486 A.2d 305 (1985); Vreeland v. Byrne, 72 N.J. 292, 300-01, 370 A.2d 825 (1977).
I agree with the majority’s implicit conclusion in respect of the first step: the purpose of N.J.S.A. 54:4-3.52 is to promote the preservation of historic sites and, thereby, New Jersey’s heritage. See ante at 618, 620, 592 A.2d at 223, 224. Turning to the second and third steps, I am mindful of the basic rule that classifications of real property, in order to comply with the “general laws” requirement, must be based on “features that inhere[ ] in the property itself, or in the purpose to *622which it or its usufruct [is] devoted.” Tippett v. McGrath, 70 N.J.L. 110, 113, 56 A. 134 (Sup.Ct.1903), aff'd, 71 N.J.L. 338, 59 A. 1118 (E. & A.1904); accord New Jersey Turnpike Auth. v. Township of Washington, 16 N.J. 38, 45, 106 A.2d 4 (1954) (affirming principle under current constitution). The statute at issue is clear: it exempts a property from taxation if that property is (1) “certified to be an historic site” and (2) “owned by a nonprofit corporation.” N.J.S.A. 54:4-3.52.
The first criterion, the certified-historic-site requirement, is obviously based on a feature of the property, does not exclude similarly situated property, and rests on a rational basis relevant to the statute’s purpose, namely, to promote preservation of New Jersey’s heritage.
The nonprofit-ownership requirement, on the other hand, is plainly not based on any feature of the property. Moreover, it excludes members of the natural class composed of certified historic sites, and, as is evidenced by this case, is not necessarily grounded in the purpose to which the underlying property is devoted. Town of Morristown contends that the nonprofit-ownership limitation is arbitrary in the absence of a requirement that the exempt property be devoted to use for historic purposes. It argues that without a “use” requirement, the classification fails to advance the purposes of the statute and grants an exemption to a class arbitrarily limited on the sole basis of the status of the owner. The Town is exactly right. The statute violates the general-laws mandate of our constitution and fails to come within the narrow protection accorded exemptions from taxation of property “used exclusively for religious, educational, charitable or cemetery purposes.” N.J.Const. art. VIII, § 1, para. 2.
The concept of special, as opposed to general, legislation has been well established in this state for almost a century:
A law is special in a constitutional sense when, by force of an inherent limitation, it arbitrarily separates some persons, places or things from others upon which, but for such limitation, it would operate. The test of a special law is the appropriateness of its provisions to the objects that it excludes. It is not, *623therefore, what a law includes that makes it special, but what it excludes. * * * Within this distinction between a special and a general law the question in every case is whether any appropriate object is excluded to which the law, but for its limitation, would apply. [Budd v. Hancock, 66 N.J.L. 133, 135-36, 48 A. 1023 (Sup.Ct.1901).]
The statute excludes those certified historic sites that are not owned by nonprofit organizations. Not only does that exclusion not advance the statute’s intended purpose of promoting historic preservation, it hampers it.
As a result of that exclusion, N.J.S.A. 54:4-3.52 limits the entitlement to a tax exemption on property to a class determined by the status of the owner. As the majority recognizes, ante at 612-613, 592 A.2d 220, this Court, in New Jersey State League of Municipalities v. Kimmelman, 105 N.J. 422, 522 A.2d 430 (1987) (League of Municipalities), reaffirmed that for purposes of taxation and exemption of real property, “ ‘classification must be of property, according to its characteristics, or the use to which it is put, and not according to the status of the owner.’ ” Id. at 429, 522 A.2d 430 (quoting 2 Proceedings of the State of New Jersey Constitutional Convention of 1947 1687) (S. Goldman & H. Crystal ed. 1951); accord Tippett v. McGrath, supra, 70 N.J.L. at 113, 56 A. 134 (“it is property with respect to which taxing laws must be general”). The limitation of the scope of the exemption statute to nonprofit corporations violates that long-established rule and, in so doing, violates the unambiguous command of our constitution that “[exemption from taxation may be granted only by general laws.” N.J. Const. art. VIII, § 1, para. 2.
II
The majority seeks to diverge from firmly established special-legislation analysis on the basis of cases that not only do not compel the radical departure taken, they do not even support it. Citing League of Municipalities, the majority states that
we further noted the distinction between exemptions linked to property improvements for a public purpose, such as fallout shelters, pollution control devices, automatic fire systems, and solar heating devices and those authorized *624specifically to aid a depressed industry. We commented that the public-oriented improvements “plainly appear to advance purposes generally beneficial to society as a whole unrelated to a particular industry or the status of the taxpayer,” and accord with the traditional rationale for exemptions. [Ante at 615, 592 A.2d at 221 (quoting League of Municipalities, supra, 105 N.J. at 438-39, 522 A.2d 430).]
The issue now before us, however, was not confronted in League of Municipalities, in which this Court expressly stated that “[w]e therefore do not address the question * * * of whether the act was invalid as special legislation and thus not an exemption granted by general laws.” 105 N.J. at 424, 522 A.2d 430. The language in League of Municipalities, then, recognizing the validity of other exemptions, is not controlling. Moreover, those other exemptions are valid not because of their generally beneficial purposes but rather, as noted (but then overlooked) by the majority, because entitlement to them is “linked to property improvements,” ante at 614, 592 A.2d at 221, or characteristics of the property. See League of Municipalities, supra, 105 N.J. at 429, 522 A.2d 430. Classification is not further limited according to the status of the property owner.
The conclusion for which the majority cites League of Municipalities finds no support in that opinion. Quite the opposite. In League of Municipalities the Court observed that “repeated amendments to the [constitution have been required to grant exemption from taxation for real property.” Id. at 438, 522 A.2d 430 (emphasis added). Amendments were required because the exemptions were “accorded by status, not use,” and the Court characterized that necessity of constitutional provision as “expressive of the limited power of exemption.” Ibid. As noted supra at 609, 592 A.2d at 218, rather than recognize a generally-beneficial-public-purpose exception to the constitution’s general-laws requirement, the Court implicitly reaffirmed the rule that classification of real property must be based on the property’s inherent characteristics or use and not on the status of its owner. Id. at 429, 522 A.2d 430.
*625The majority also relies on General Electric Co. v. City of Passaic, 28 N.J. 499, 147 A.2d 233 (1958), appeal dismissed, 359 U.S. 1006, 79 S.Ct. 1146, 3 L.Ed.2d 987 (1959), for the proposition that there is a generally-beneficial-purpose exception for classification for exemption from real-property taxation. See ante at 614-616, 592 A.2d at 221-222. As pointed out in League of Municipalities, however, the General Electric Co. Court “explained that the exemption from business property taxes of personal property in warehouses could continue to be valid. Obviously, real property was not included within the contemplation of [its] decision.” 105 N.J. at 437-38, 522 A.2d 430 (emphasis added). Unlike the present case, moreover, entitlement to that exemption “[does] not rest on the personal status of the owner as in Tippett.” General Elec. Co., supra, 28 N.J. at 509, 147 A.2d 233. That exemption statute is valid because it “applies to all personal property stored in a warehouse and * * * includes all property within the state so situated, omitting none.” Schwartz v. Essex County Bd. of Taxation, 129 N.J.L. 129, 28 A.2d 482 (Sup.Ct.1942), affd, 130 N.J.L. 177, 32 A.2d 354 (E. & A.1943); see General Elec. Co., supra, 28 N.J. at 510, 147 A.2d 233 (declining to depart from the holding in Schwartz).
Finally, the majority relies on Township of Princeton v. Bardin, 147 N.J.Super. 557, 371 A.2d 776 (App.Div.), certif. denied, 74 N.J. 281, 377 A.2d 685 (1977). After stating that Bardin was “cited approvingly” by this Court in League of Municipalities and that “[i]t identified a ‘substantial distinction’ between organizations limited by their charters to operate in a nonprofit manner * * * and those that are not so limited,” ante at 619, 620, 592 A.2d at 223, 224, the majority concludes that “the classification based on the characteristics of the property and the status of the owner” is constitutionally permissible. Id. at 620, 592 A.2d at 224. That conclusion over-reads the importance of Bardin. The foremost basis for distinction between N.J.S.A. 54:4-3.52 to -3.54 and the statute construed in Bardin, N.J.S.A. 54:4-3.63 to -3.71, is that the *626latter does not merely distinguish nonprofit corporations from other property owners. The nonprofit-ownership requirement operates in conjunction with a use limitation to narrow the application of the exemption statute to only those “organizations and corporations [that] are required by their state charters, and hence by state law, to operate in a nonprofit manner and * * * are authorized by their charters to engage in and do engage in the conservation activities contemplated by the act.” Bardin, supra, 147 N.J.Super. at 564, 371 A.2d 776.
Critical to that court's decision to uphold the statute was the recognition that it “also classified eligible property according to its actual and exclusive use for ‘natural open space areas for public recreation and conservation * * * purposes.’ ” Id. at 564-65, 371 A.2d 776 (quoting N.J.S.A. 54:4-3.63). The distinction made was not merely between nonprofit corporations and other organizations. It was between properties owned by nonprofit organizations authorized by their charters to engage in the purposes for which the legislation was enacted, and devoted actually and exclusively to achieving those purposes, and those properties not so owned and devoted. See id. at 572-73, 371 A.2d 776 (invalidating enacting regulation because it “mechanically granted the exemption” to “nonprofit organizations * * * without inquiry into the purposes in which the applicant is authorized by its charter to engage, and the use to which the land is actually put”). That additional limitation on the use of the property, not present here, renders that statute constitutionally valid. See N.J. Const. art. VIII, § 1, para. 2 (according special protection to those statutes “exempting real and personal property used exclusively for religious, educational, charitable or cemetery purposes” (emphasis added) and owned by a corporation or organization not operated for profit).
The ownership distinction, although substantial in the abstract, fails here because in the context of N.J.S.A. 54:4-3.52 the requirement of ownership by a nonprofit organization is not rationally related to the goal of promoting historic preservation. “Legislation can be unconstitutionally special even where it *627affects groups * * * if its classification of them [bears] no rational relationship to its object.” Meadowlands Regional Redev. Agency v. State, 63 N.J. 35, 48, 304 A.2d 545 (1973) (Conford, P.J.A.D., temporarily assigned, dissenting in part). I do not agree with the majority’s conclusion that “classification based on the characteristics of the property and the status of the owner is necessary to fulfill the public purpose of preserving historic sites.” Ante at 620, 592 A.2d at 224. I note that although the New Jersey Historical Society supported enactment of the statute based on the importance of permitting our young people “to see with their own eyes where the great men lived, and how they lived,” see Letter from New Jersey Historical Society to Governor Richard Hughes (June 10, 1962), Woman’s Club of Morristown does not permit, and has never permitted, public access to see how “the great men lived.” The subject property, the long-time home of a prominent early Assembly speaker, Congressman, industrialist, and trustee of the College of New Jersey (now Princeton University), is private and is used primarily for commercial endeavors. For the purposes of achieving the recognized goal of N.J.S.A. 54:4-3.52, it is no different from a certified historic site owned by an entity that is not a nonprofit organization. Yet property owned by such an entity is arbitrarily excluded from receiving an exemption, not because the property is not dedicated to the activity that the statute seeks to promote but solely because of the status of its owner. Such an exclusion violates the general-laws requirement and renders N.J.S.A. 54:4-3.52 constitutionally infirm.
I would reverse.
Justice Handler joins in this dissenting opinion.
For affirmance — Chief Justice WILENTZ, and Justices GARIBALDI, O’HERN, and STEIN — 4.
For reversal — Justices CLIFFORD and HANDLER — 2.