30 N.J.Tax. 448 (N.J.Tax. 2018), 008111-2016, Rockland Electric Co. v. Director, Division of Taxation
| Citation | 30 N.J.Tax. 448 |
| Opinion Judge | BIANCO, J.T.C. |
| Party Name | ROCKLAND ELECTRIC COMPANY, Plaintiff, v. DIRECTOR, DIVISION OF TAXATION, Defendant. |
| Attorney | Alysse McLoughlin, for plaintiff (McDermott Will & Emery LLP, attorneys). Michael J. Duffy for defendant (Gurbir Grewal, Attorney General of New Jersey, attorneys). |
| Case Date | April 30, 2018 |
| Court | New Jersey Tax Court |
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Alysse McLoughlin, for plaintiff (McDermott Will & Emery LLP, attorneys).
Michael J. Duffy for defendant (Gurbir Grewal, Attorney General of New Jersey, attorneys).
OPINION
BIANCO, J.T.C.
This opinion constitutes the courts decision with respect to a motion for summary judgment filed by plaintiff, Rockland Electric Company ("Rockland"), and a Cross-Motion for Summary Judgment filed by defendant, Director, Division of Taxation ("Director").
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Rockland argues that it is not required to add-back the New Jersey Transitional Energy Facility Assessment ("TEFA") in determining its entire net income for New Jersey Corporation Business Tax ("CBT") because, the plain language of N.J.S.A. 54:10A-4.1 ("the TEFA add-back provision") ties the addition of the TEFA to entire net income for CBT purposes under N.J.S.A. 54:10A-4(k)(2)(C), ("the CBT add-back provision") which does not apply to New Jersey taxes other than the CBT. Assuming arguendo that the provision could apply to other New Jersey taxes, Rockland contends that the TEFA is not a tax "on or measured by profits or income, or business presence or business activity." According to Rockland, the TEFA is not required to be added back because (1) it temporarily replaced the tax revenue from the gross receipts tax, which was not subject to add-back, and because (2) doing so would put New Jersey Utilities on an unequal footing with multistate utilities, and (3) Rockland maintains that if there is a doubt as to the interpretation of the statute it should be resolved in favor of the taxpayer.
Conversely, the Director argues that the plain language of the TEFA add-back provision requires Rockland to add-back the TEFA when calculating the entire net income base for CBT purposes; the TEFA add-back provision is a stand-alone provision with its own legislative history; and the TEFA add-back provision is not discriminatory as to both New Jersey and Multistate utilities that are doing business in New Jersey.
For the reasons set forth herein, Rocklands Motion for Summary Judgment is denied, and the Directors Cross-Motion for Summary Judgment is granted.
BACKGROUND, FACTS, AND PROCEDURAL HISTORY
The following facts are not materially in dispute. Rockland is organized as a corporation under the laws of New Jersey, and is engaged in the retail distribution of electrical energy only in New Jersey. During the year in dispute, Rockland was subject to both the CBT and the TEFA. In order to determine its TEFA liability, Rockland multiplied the number of kilowatt-hours of electricity
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sold to New Jersey customers in that year by the applicable TEFA unit rate surcharge. For the taxable period of January 1, 2008 through December 31, 2011, Rockland calculated its CBT by multiplying its entire net income by the applicable tax rate, and then timely filed its CBT return. In order to calculate Rocklands entire net income, Rockland first took the taxable income reported on its United States corporate income tax returns and then added back the CBT and TEFA liability that was deducted on the federal returns. Rockland then alleged that it had made a mistake in adding back the TEFA to its entire net income, and timely filed amended CBT returns to reflect this alleged mistake. The amended CBT returns reflected a refund of $2,258,493, which the Director denied in letters dated February 11, 2015, and March 17, 2015. The Director stated the reason for denying the return is because Rocklands TEFA liability must be added back to determine its entire net income for CBT purposes. In a response to the Directors denial of the refund, Rockland filed written protests and requested a conference with the Division of Taxations Conference and Appeals Branch in letters dated May 7, 2015 and May 12, 2015. This conference was held on October 21, 2015 and the Director notified Rockland in a letter dated February 5, 2016 that its final determination is to deny the refund to Rockland. Rockland timely filed a complaint with the Tax Court of New Jersey, contesting the final determination, and subsequently moved for Summary Judgment. The Director then filed an answer and a cross-motion for Summary Judgment. Oral argument was heard on the cross-motions. The issue here is one of first impression before the Tax Court.
APPLICABLE LAW
A. SUMMARY JUDGMENT
The purpose of summary judgment procedure is to "provide a prompt, businesslike and inexpensive method of disposing of any cause which a discriminating search of the merits in the pleadings, depositions and admissions on file, together with the affidavits submitted on the motion clearly shows not to present
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any genuine issue of material fact requiring disposition at trial." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 530, 666 A.2d 146 (1995) (quoting Ledley v. William Penn Life Ins., Co., 138 N.J. 627, 641-42, 651 A.2d 92 (1995) (quoting Judson v. Peoples Bank & Trust Co., of Westfield, 17 N.J. 67, 74, 110 A.2d 24 (1954) ).
When deciding a motion for summary Judgment under R. 4:46-2, courts must determine whether: [T]here exists a genuine issue with respect to a material fact challenged [that] requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party in consideration of the applicable evidentiary standard, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the nonmoving party.
[Brill, 142 N.J. at 523, 666 A.2d 146.]
Moreover, "[t]he judges function is not himself [or herself] to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial. " Id. at 540, 666 A.2d 146 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ).
In Brill, the New Jersey Supreme Court adopted a less stringent summary judgment standard. The Brill Court synthesized the summary judgment standard with the directed verdict standard found in R. 4:40-2. The Court explained that "[t]he essence of the inquiry in each [summary judgment, R. 4:37-2(b), R. 4:40-1 and R. 4:40-2] is the same: whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law. " Id. at 536, 666 A.2d 146 (quoting Anderson, 477 U.S. at 251-52, 106 S.Ct. 2505). In sum, the Brill Court emphasized that the "thrust of [the] decision is to encourage trial courts not to refrain from granting summary judgment when the proper circumstances present themselves." Id. at 541, 666 A.2d 146.
When the movant demonstrates a right to summary judgment, the burden shifts to the opponent of the motion to show by competent evidence that a genuine issue of material fact exists.
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See Robbins v. City of Jersey City, 23 N.J. 229, 241, 128 A.2d 673 (1957); James Talcott, Inc. v. Shulman, 82 N.J.Super. 438, 443, 198 A.2d 98 (App.Div. 1964).
The court finds that the present case is ripe for decision by summary judgment because there is no genuine issue as to a material fact in the matter. The sole question before the court is one of "statutory interpretation which can be determined by application of the law to the undisputed facts." PPL Elec. Utilities Corp. v. Dir., Div. of Taxation, 28 N.J.Tax. 128, 133 (Tax 2014). As a matter of first impression, the court must determine here the interplay between the TEFA add-back provision and the CBT add-back provision in order to determine whether or not the TEFA must be added back to determine entire net income for CBT purposes.
B. STATUTORY CONSTRUCTION
1.
N.J.S.A. 54:10A-4(k)(2)(C)
; CBT Add-Back Provision
In order to determine whether Rockland must add-back TEFA to its entire net income when determining its CBT the court must first look to the CBT add-back provision, N.J.S.A. 54:10A-4(k)(2)(C).
As a starting point, the CBT imposes a tax on each non-exempt domestic corporation and foreign corporation: [F]or the privilege of having or exercising its corporate franchise in this State, or for the privilege of deriving receipts from sources within this State, or for the privilege of engaging in contacts within this State, or for the privilege of doing business, employing or owning capital or property, or maintaining an office in this state.
[N.J.S.A. 54:10A-2]
The tax that is imposed on the corporation is determined by their "entire net income" which is defined as follows: Entire net income shall mean total net income from all sources, whether within or without the United States, and shall include the gain derived from the employment of capital or labor, or from both combined, as well as profit gained through a sale or conversion of capital assets.
[N.J.S.A. 54:10A-4(k).]
Entire net income is then limited to line 28 of the federal income tax return by the subsequent paragraph in N.J.S.A. 54:10A-4(k):
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For the purpose of [the CBT] ... act, the amount of a taxpayers entire net income shall be deemed prima facie to be equal in amount to the taxable income, before net operating loss deduction and special deductions, which the taxpayer is required to report ... to the United States Treasury Department for the purpose of computing its federal income tax ...
[Id. ]
The statute then continues to "add-back" certain "exclusions, deductions, and credits" to entire net income that were allowed...
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