Court Opinion

ID: 9900273
Source: CourtListenerOpinion
Date Created: 2023-11-18 22:08:27.945465+00
Date Added: 2024-06-11T09:21:03.361413
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF
                   THE TAX COURT COMMITTEE ON OPINIONS

Options Imagined,                            :            TAX COURT OF NEW JERSEY
A NJ Nonprofit Corporation,                  :            DOCKET NOS.: 010456-2020;
                                             :            009577-2021; 007910-2022
                      Plaintiff,             :
                                             :
                      v.                     :                   Approved for Publication
                                             :                      In the New Jersey
                                                                   Tax Court Reports
Parsippany-Troy Hills Township,              :
                                             :
                      Defendant.             :
                                             :

               Decided: October 31, 2022
               Robert B. McBriar for plaintiff (Schneck, Price, Smith, & King, LLP.,
               attorneys).
               Richard P. DeAngelis for defendant (Connell Foley LLP., attorneys).
BIANCO, J.T.C.

       This is the court’s formal opinion concerning property tax exemption

eligibility pursuant to N.J.S.A. 54:4-3.6, for tax years 2020, 2021, and 2022, 1 of

property owned by plaintiff, Options Imagined, a NJ Nonprofit Corporation

(Options), located at 2467 Route 10, Apt. 18-A1, Parsippany-Troy Hills Township,

1
 When the Township filed its motion in March 2022, it included tax years 2020 and 2021 as those
were the only appeals then pending in the Tax Court. On June 8, Options timely filed its complaint
challenging the denial of the exemption for the current tax year. Thereafter, on July 12, Options
filed its opposition to the Township’s Motion for Summary Judgement and Cross-Motions for
Summary Judgement that included tax year 2022. In filing its reply brief and opposition to Options’
Cross Motion on August 15, the Township failed to include reference to tax year 2022. Both parties
have confirmed in writing that the Court’s consideration of the pending Motion for Summary
Judgement and Cross-Motion for Summary Judgement should be for all years under appeal as the
material facts pertaining to all years are the same.
and designated by the taxing district as Lot 18.01 in Block 15.25 (Subject Property).

Specifically at issue is whether the Subject Property is actually used in furtherance

of Options’ charitable purpose, and whether Options is operating in furtherance of

its organizational purpose set forth in its bylaws. Defendant Parsippany-Troy Hills

Township (Township) moved for summary judgment to dismiss Options’ appeals of

the Morris County Tax Board’s denial of the Subject Property’s charitable property

tax exemption for all the years at issue. Options filed cross-motions for summary

judgment entreating the court to grant the exemption.

          For the reasons stated more specifically set forth herein, the court: (1) grants

Options’ cross-motions for summary judgment, finding that Options has met its

burden of satisfying the elements of N.J.S.A. 54:4-3.6; (2) denies the Township’s

motion to dismiss Options’ appeals; and (3) finds that Options is organized in

furtherance of its Certificate of Incorporation.

                                Statement of Undisputed Facts

         The facts are not in dispute.2 Options is a nonprofit New Jersey corporation

and a Federal 501(c)(3) organization created in 2015 by Joseph DeSimone to provide

support services to adults with intellectual and developmental disabilities. Options

is managed by its five-member Board of Trustees. Mr. DeSimone serves as the

President of the Board of Trustees.

2
    At argument, both counsel reaffirmed that no facts were in dispute in these matters.
                                                  2
       In furtherance of its charitable purposes, Options provides various New Jersey

Department of Human Services, Division of Development Disabilities (DDD)

recognized services 3 to aid the moral and mental improvement of men, women, and

children, as set forth in N.J.S.A. 54:4-36. Pursuant to Options’ amended Certificate

of Incorporation, upon its dissolution, its assets will be distributed for tax exempt

purposes within the meaning of Section 501(c)(3) or be distributed by federal, local,

or state government for a public purpose.

      The Subject Property is a residential two-bedroom condominium unit

containing approximately 1,021 square feet of livable area; it was assessed for

$150,000 for all years under appeal. 4 In September 2019, Options purchased the

Subject Property from its President Mr. DeSimone for $220,000. The entirety of the

Subject Property is exclusively used for independent living and rehabilitative

services.5 Since Options purchased the Subject Property in 2019, Mr. DeSimone’s

autistic adult son was the only resident and lessee of one of the bedrooms. 6

However, it is anticipated that an additional DDD participant will occupy the second

3
  Options provides services within the Subject Property and outside the Subject Property. The
services include Community Based Supports (Supports Program), Community Inclusion Services,
Day Habilitation, Individual Supports (Community Care Program), Prevocational Training,
Respite, Support Coordination, Supported Employment, Support Brokerage, and Transportation.
4
  The property tax for the Subject Property for the relevant years is as follows: $4,626.00 in 2020,
$4,756.50 in 2021, $4,894.50 in 2022.
5
  The Subject Property has operated at a loss for the preceding three years.
6
  The rent for the Subject Property for the relevant years is as follows: $1,390 in 2020, $1,483 in
2019.
                                                 3
bedroom at the Subject Property once his/her transition plans7 are complete.

Additionally, Options has the intention of acquiring and operating five group homes

by 2025 in furtherance of its charitable purpose.

         Before Options acquired the Subject Property, the current resident lived

alone at the Subject Property and received Section 8 subsidies. 8 After the sale to

Options, Mr. DeSimone transferred the Section 8 housing contract to Options.

Additionally, Options receives in-home and service funding from various sources

such as Medicaid Waiver Programs. The Subject Property’s home expenses are

derived from resident funds and state funded housing programs.9 Options receives

in-home and service funding from various sources such as Medicaid Waiver

Programs. While the Subject Property itself is not yet approved by the DDD, the

DDD has issued a Notice of Intent to License. 10

       Options, however, is approved and recognized by the DDD to provide services

and support to adults with intellectual and developmental disabilities enrolled in

7
   The DDD’s Planning for Adult Life Project assists students with intellectual and developmental
disabilities and their families in transitioning into adulthood. Transition plans are created when a
student moves from the school system into the adult service system. A transition plan identifies
services that aids youth in achieving their ideal future life goals.
8
   The Division of Housing and Community Resources (DHCR) Section 8 Housing Program is a
Housing Voucher program that assists low-income households in paying rent by reducing housing
costs through direct subsidy payments to landlords.
9
    Supportive Housing Vouchers from NJ Supportive Housing Alliance, and State Rental
Assistance Programs (SRAP). SRAP is a state funded program that provides housing subsidies to
very low-income New Jersey Residents. From September 2019 through December 2019, Options
received SRAP subsidies totaling to $31,293.
10
     Once the Subject Property is licensed by DDD, funding will be received in the form of
Supportive Housing Vouchers from the Supportive Housing Alliance.
                                                 4
various Medicaid Waiver programs. Options provides twenty-four-hour support

services at the Subject Property to enable DDD participants to live in the community.

The current resident is enrolled in CCP and receives funding through programs

administered by the DDD.11 The current resident is cared for fulltime by four trained

Options individual support employees at the Subject Property as outlined in his

approved New Jersey Individual Service Plan (ISP).12 Individual support services

are direct aid to individuals in achieving an independent lifestyle. These services

include assistance in performing everyday tasks, such as the development of social

skills and basic self-care. Options provides individual support services only to CCP

participants in the Subject Property as well as other locations within twenty-one

counties in New Jersey. The DDD listed Options as a Support Coordination (SC)

agency, specifically as a released agency. 13 Support Coordination is a DDD funded

service that assists DDD participants in gaining access to needed programs and State

plan services.

                                      Applicable Law

11
   The DDD developed and operates two Medicaid waiver programs: (1) The Supports Program
(SP) and (2) The Community Care Program (CCP). The CCP is a DDD initiative that permits New
Jersey to receive a federal match on a variety of approved waiver programs and supports Medicaid
beneficiaries to live in the community and avoid institutionalization.
12
   Each CCP participant must have an Individualized Service Plan (ISP) developed according to
the standards specified in the CCP policy manual and the Support Coordination Orientation.
13
   Released agencies are agencies authorized to have their SC approve their own service plans
because they met a minimum standard of delivering quality service plans. Therefore, released
agencies do not have to submit service plans to the DDD for review and approval.
                                               5
       A motion for summary judgment should be granted in the absence of genuine

issues of material facts. R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142

N.J. 520, 528-29 (1995) (summary judgment will be granted “if the pleadings,

depositions, answers to interrogatories and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any material fact

challenged and that the moving party is entitled to a judgment or order as a matter

of law”). Denial is appropriate only where the evidence is such that reasonable

minds could return a finding favorable to the party opposing the motion. Id. at 534,

540.

       “In a proceeding in the Tax Court there is a presumption of correctness in

favor of the County Board judgment which must be overcome by plaintiff’s

introduction of sufficient competent evidence.” Glen Wall Assoc. v. Wall Twp., 6

N.J. Tax 24, 28 (Tax 1983), rev’d on other grounds, 99 N.J. 265 (1985).

       “Exemption [from taxation] is justly sustained only upon the principle that the

concession is due as quid pro quo for the performance of a service essentially public,

and which the state there-by is relieved pro tanto from the necessity of performing.”

Roman Catholic Archdiocese of Newark v. East Orange City, 17 N.J. Tax 298 (Tax

1998). When making charitable exemption decisions, “it is the use of the property,

not the status or character of its owner, that determines exemption.” Emanuel

Missionary Baptist Church v. City of Newark, 1 N.J. Tax 264, 268 (Tax 1980).

                                          6
      N.J.S.A. 54:4-3.6 provides in pertinent part that:

             The following property shall be exempt from
             taxation . . . all buildings actually used in the work
             of associations and corporations organized
             exclusively for the moral and mental improvement
             of men, women and children, provided that if any
             portion of a building used for that purpose is leased
             to profit-making organizations or is otherwise used
             for purposes which are not themselves exempt from
             taxation, that portion shall be subject to taxation and
             the remaining portion only shall be exempt.

             [N.J.S.A. 54:4-3.6]

      While value determinations by County Boards generally enjoy a presumption

of validity, MSGW Real Estate Fund, LLC v. Borough of Mountain Lakes, 18 N.J.

Tax 364, 373 (Tax 1998), “the determination of an exemption is more properly one

of statutory and case law interpretation than one requiring any special expertise

possessed of an assessor[;] . . . ‘statutory construction is ultimately a judicial

function.’” Hertz v. Borough of Lincoln Park, 31 N.J. Tax 1, 12 (Tax 2019) (quoting

O’Rourke v. Fredon, 25 N.J. Tax 443, 450 (Tax 2010)). “[T]ax exemption cases . .

. are necessarily limited to their facts and are not controlling.” AHS Hosp. Corp. v.

Town of Morristown, 28 N.J. Tax 456, 499 (Tax 2015) (citing Int’l Schs. Servs., Inc.

v. West Windsor Twp., 207 N.J. 3, 22 (2011)).

      “The Supreme Court of New Jersey has set forth three criteria for whether a

property qualifies for exemption under N.J.S.A. 54:4-3.6: (1) the owner of the

property must be organized exclusively for the tax-exempt purpose; (2) the property
                                           7
must be actually used for the exempt purpose; and (3) the operation and use of the

property must not be conducted for profit.” Borough of Hamburg v. Trs. of

Presbytery of Newton, 28 N.J. Tax 311, 318 (Tax 2015) (citing Paper Mill Playhouse

v. Millburn Twp., 95 N.J. 503, 506 (1984)).

      Because “all property shall bear its just and equal share of the public burden

of taxation[,]” “[s]tatutes granting exemption from taxation represent a departure

and consequently they are most strongly construed against those claiming

exemption.” Princeton Univ. Press v. Borough of Princeton, 35 N.J. 209, 214

(1961). Accordingly, “[t]he burden of proving a tax-exempt status is upon the

claimant.” Ibid. However, “[t]he rule of strict construction must never be allowed

to defeat the evident legislative design.” Soc’y of the Holy Child Jesus v. City of

Summit, 418 N.J. Super. 365, 373 (App. Div. 2011) (quoting N.J. Carpenters

Apprentice Training & Educ. Fund v. Borough of Kenilworth, 147 N.J. 171, 177-78

(1996)).

      When determining whether a property is actually used for a tax-exempt

purpose, the Tax Court evaluates whether the property is “reasonably necessary” for

such tax-exempt purposes. See Roman Catholic Archdiocese of Newark v. East

Orange City, 18 N.J. Tax 649, 653 (App. Div. 2000) (citing City of Long Branch v.

Monmouth Med. Ctr., 138 N.J. Super. 524, 532 (App. Div. 1976), aff’d, 73 N.J. 179

(1977)). When applying this test, the Court has held that “necessary” is not

                                         8
interpreted to mean “absolutely indispensable.” Boys’ Club of Clifton, Inc. v. Twp.

of Jefferson, 72 N.J. 389, 401 (1977). Eligibility for exemption is determined as of

October 1 of the prior tax year. See Catholic Relief Servs., U.S.C.C. v. South

Brunswick Twp., 9 N.J. Tax 25, 26-7 (Tax 1987), aff’d, 9 N.J. Tax 650 (App. Div.

1987).

                                       Analysis

      While property tax exemption determinations pursuant to N.J.S.A. 54:4-3.6

are inherently and typically fact sensitive, see AHS Hosp. Corp., 28 N.J. Tax at 499

(citing Int’l Schs. Servs., Inc., 207 N.J. at 22), the court finds that summary judgment

is appropriate in the present matters as there are no genuine disputes of material

facts. Both parties agree that Options is using the property to care for the current

resident and that Options is a nonprofit corporation organized for the moral and

mental improvement of individuals in accordance with N.J.S.A. 54:4-3.6.

Furthermore, the parties are in accord that Options is not using the Subject Property

for profit. At issue, is the second prong of the Paper Mill test, i.e., whether the

Subject Property is actually used in furtherance of its organizational purpose.

Additionally, despite the parties having stipulated to Options organizational

elements, the Township focused its argument on whether Options satisfied its

charitable purpose by providing services to the public, given that Mr. Desimone’s

son was the only former and current resident of the Subject Property.

                                           9
      1. The Use Test

      For Options to meet the requirements under the use test, it must demonstrate

that the Subject Property is “reasonably necessary for the accomplishment, and an

integral part, of the taxpayer’s activities in pursuit of a function forming the basis of

an exemption under N.J.SA. 54:4-3.6.” Fountain House of New Jersey v. Montague

Twp, 13 N.J. Tax 387, 402 (Tax 1993) (citing Long Branch v. Monmouth Med. Ctr.,

138 N.J. Super. 524, 532 (App. Div. 1976), aff’d, 73 N.J. 179 (1977)).

      Options contends that the Subject Property is entitled to tax exempt status

because it is used in providing Mr. DeSimone’s son with DDD approved services

and support, which use is consistent with Options’ charitable purpose.              The

Township disputes whether Options actually used the Subject Property in

furtherance of its charitable purpose as of the relevant assessing dates. To that

argument the Township asserts that because the Subject Property is not available to

the public but rather, available only to the son of Options’ President, Options does

not render a charitable benefit to the public. Accordingly, in the Township’s view,

exemption of the Subject Property is inappropriate.

      The court finds that Options satisfied all the requirements for tax exemption.

It is clear the Subject Property was used to provide the current resident with housing

and DDD approved support services. This court has previously recognized that

property used to house and provide substantial supportive services that encourage an

                                           10
independent lifestyle meets the standard for property tax exemption under N.J.SA.

54:4-3.6. See Community Access Unlimited, Inc. v. City of Elizabeth, 21 N.J. Tax

604 (Tax 2003) (where the court granted a charitable tax exemption to Community

Access, an organization that provided housing and supportive services to individuals

with mental disabilities, finding that, similar to Options, its goal was to aid persons

with mental disabilities in leading an independent lifestyle).

      The Subject Property is reasonably necessary and integral to the care and well-

being of the current resident and provides him with the ability to lead an independent

lifestyle within the community. The current resident receives assistance with

community-based activities and aid in performing everyday tasks. Furthermore,

Options is not limited to only housing Mr. DeSimone’s son. An additional DDD

participant is anticipated to reside in the Subject Property and receive similar support

services based on his or her ISP. When Mr. DeSimone’s son is no longer a resident,

the Subject Property will continue to be reasonably necessary and integral to the care

of other DDD participants. Both bedrooms at the Subject Property can continue to

be leased by DDD participants in need of housing and supportive aid. Accordingly,

the Court finds that Options does satisfy the requirements of the use test.

      2. Public Use

      There is nothing in the case law or controlling statutes to suggest that Options’

undisputed use of the property does not satisfy the requirements for exemption.

                                          11
While it is well settled that property tax exemption is an exception that must be

strictly construed against the party seeking exemption, see Soc’y of the Holy Child

Jesus, 418 N.J. Super. at 373, there is no requirement for an organization to be open

to the general public and utilized by more than one individual at any given time. See

Princeton Univ., 35 N.J. at 214. Furthermore, it is not pertinent to the requirements

of either the use test or N.J.S.A. 54:4-3.6 that Mr. DeSimone’s son is the sole

resident.   The Township’s argument that Options is ineligible for tax exemption

because the Subject Property is not adequately used by the public conflates public

use with public purpose.

      It has been held that our courts should not strictly define either public purpose

or public use; “to be serviceable it must expand when necessary to encompass

changing public needs of a modern dynamic society.” Roe v. Kervick, 42 N.J. Super.

191, 207 (1964). “The concept of public purpose is a broad one… it connotes an

activity which serves as a benefit to the community as a whole, and which, at the

same time is directly related to the functions of government. Moreover, it cannot be

static in its implications.” Ibid. “[T]he term “public use” defies absolute definition

because it changes with varying conditions of society and changing conceptions of

the scope and functions of government.” Id. at 226.

      Here, Options is absorbing some costs that the taxpayers would otherwise

have to bear by caring for an individual with developmental disabilities. Current

                                          12
available funding resources do not provide Options with full housing funds; Options

operates at a loss, and resident funds contribute to a portion of the Subject Property’s

expenses. The fact that there has been only one individual living at the Subject

Property does not change the fact that Options is bearing a cost that the State must

otherwise pay for the care of the current resident. Moreover, our jurisprudence has

long established that a quantum of use is not required for a property to be tax exempt;

nor is there any certain amount of benefit or relief from public expenses that must

be met. See Roman Catholic Archdiocese of Newark, 17 N.J. Tax at 311 (reasoning

that “no courts in this state have ever suggested that the quantum, regularity, or

consistency of religious activity are necessary prerequisites to [tax exemption]").

        Options offers housing and supportive services to individuals who might

otherwise be institutionalized at a higher cost to the public and provides them with

a safe setting in which to thrive.14 The Tax Court has found that organizations

similar to Options are “playing a role in fulfilling an articulated State policy of

14
    “The average cost to maintain one state hospital bed is $146,000 per annually. Almost half of
the State’s mental health budget (or $483 million dollars ) pays for the cost of caring for an average
3,300 patients in State and County facilities on any given day. Given that almost half of the State
hospital patients are clinically ready for discharge, housing them in State hospitals is very
expensive. Without a local system of care to coordinate an array of services and supports for
persons who are seriously mentally ill, again, if we do nothing, the Task Force finds a significant
number of State hospital beds (400) would need to be added given current admission, discharge
and average daily population trends. Such a use of institutional care would be unfortunate and
inappropriate. The lost potential in human terms is incalculable. Lives have been lost, spirits
broken and families devastated.” 2005 Task Force on Mental Health Final Report, p. 6, available
at THE FINAL EXEC SUMMARY 3 30 05 B.itb.doc (nj.gov); last visited Oct. 14, 2022.
                                                 13
deinstitutionalizing the mentally disabled.” Advanced Housing, Inc. v. Twp. of

Teaneck, 215 N.J. 549, 554 (2013) (citing Community Access Unlimited Inc., 21

N.J. Tax at 617). The Governor’s 2005 Task Force on Mental Health Final report 15

revealed that the cost of institutionalizing one individual is far more exuberant than

providing services in a residence. Ibid. Consequently, Options’ existence relieves

the state’s financial burden of institutionalizing individuals.

       This court rejects the Township’s arguments that there is a specific public use

requirement and refuses to find such in the penumbra of the jurisprudence

concerning property tax exemption. Because Options is bearing a cost that the State

would otherwise pay, this court is satisfied that Options is operating in satisfaction

of the requisite public purpose.

       3. Operating in Furtherance of Options’ Organizational Purpose

          While the parties have stipulated to the organizational elements, the

Township’s contention that Options was not created to provide residential services,16

nevertheless suggests that Options is not acting within its organizational purpose.

The court finds such a claim to be unfounded. While Options’ Certificate of

15
   In 2005, the cost of maintaining one patient in a State psychiatric hospital was $146,000 per
year, and in a group home $60,000 per year.
16
   The Township asserts as an undisputed fact that Options was not organized to provide residential
services.
                                                14
Incorporation does not explicitly state that its creation is to provide residential

services, it broadly outlines that Options’ primary purpose is to provide services and

support to persons with intellectual and developmental disabilities as well as

conducting any other activity necessary in achieving its charitable purpose.

      The court is satisfied that the support services Options provides at the Subject

Property are necessary in achieving its charitable purpose. The current resident, and

potentially future residents, receive the daily supportive aid necessary to lead an

independent lifestyle. The Court rejects the Township’s argument and finds that

Options is operating according to its organizational purpose.

      4. Public Policy Argument

      As this court has discussed at length in Life With Joy v. Twp. of Green, 32

N.J. Tax 580, 599-603 (Tax 2022), the legislature set forth an extensive statutory

scheme through the DDD to provide for the caretaking of individuals with

developmental disabilities. These elaborate government programs that are set up to

fund the care and development of individuals with developmental disabilities proves

the public benefit. When individuals and nonprofits act in accordance with state law

and policy to care for individuals with developmental disabilities, they help relieve

the state, and more importantly, the tax-paying public, from the financial cost of their

care. The Supreme Court endorsed such reasoning when it cited a 2005 Task Force

on Mental Health commissioned by Acting Governor Codey outlining the “dearth of

                                          15
affordable housing that offer[s] comprehensive support services.”           Advanced

Housing, Inc., 215 N.J. Super. at 554. The Court found that caring for “mentally

disabled citizens, who otherwise would be dependent on government relief, is in

furtherance of this State’s express policy.” Ibid.

      This court is empowered to find coexistence amongst promulgated statutes

and thus finds that if the Subject Property is used in furtherance of an organization’s

charitable goals and in furtherance of a public purpose such property will be exempt

from taxation. Here, the court is satisfied that Options is actually using the Subject

Property in furtherance of their charitable purpose in accordance with N.J.S.A. 54:4-

3.6 and is thus exempt from taxation.

                                     Conclusion

      Accordingly, the court finds that the Subject Property is actually used in

furtherance of Options’ charitable purpose and is thus exempt from taxation pursuant

to N.J.S.A. 54:4-3.6 for the tax years at issue. The Township’s motions for summary

judgment are denied and Options’ cross motions for summary judgment are granted.

The Tax Court’s judgment and Final Order consistent with this opinion will be

uploaded to eCourts.

                                          16