Advance Hous., Inc. v. Twp. of Teaneck

• Decision Date: 25 September 2013
• Citation: 74 A.3d 876,215 N.J. 549
• Parties: ADVANCE HOUSING, INC. and Advance Housing 2000, Plaintiffs–Respondents, v. TOWNSHIP OF TEANECK, Borough of Bergenfield, Borough of Little Ferry, Borough of Ramsey, Borough of Ridgefield Park, Borough of Lodi, Borough of Fairview, Borough of Leonia, City of Hackensack, Defendants–Appellants.
• Court: New Jersey Supreme Court

215 N.J. 549

74 A.3d 876

ADVANCE HOUSING, INC. and Advance Housing 2000, Plaintiffs–Respondents,

v.TOWNSHIP OF TEANECK, Borough of Bergenfield, Borough of Little Ferry, Borough of Ramsey, Borough of Ridgefield Park, Borough of Lodi, Borough of Fairview, Borough of Leonia, City of Hackensack, Defendants–Appellants.

Supreme Court of New Jersey.

Argued Jan. 15, 2013.

Decided Sept. 25, 2013.

William F. Rupp, Hackensack, argued the cause for appellant Township of Teaneck (Ferrara, Turitz, Harraka & Goldberg, attorneys).

Paul M. Elias argued the cause for appellant Borough of Fairview (Bittiger Triolo, attorneys; Jason L. Bittiger, Garfield, of counsel and on the brief).

William R. Betesh, Ridgefield Park, argued the cause for appellants Village of Ridgefield Park and Borough of Bergenfield (Boggia & Boggia, attorneys).

Harry D. Norton, Jr., argued the cause for appellant Borough of Ramsey (Norton, Sheehy, Higgins & Rosa, attorneys; Mr. Norton and Neil A. Tortora, Woodland Park, on the brief).

Joel M. Ellis argued the cause for respondents (Kates Nussman Rapone Ellis & Farhi, attorneys; Mr. Ellis, Michael B. Kates, and Bruce L. Nussman, Hackensack, on the brief).

Thomas S. Dolan, Roseland, argued the cause for amici curiae the Judge David L. Bazelon Center for Mental Health Law, Disability Rights New Jersey, New Jersey Department of the Public Advocate, Alliance for the Betterment of Citizens with Disabilities, American Association of People with Disabilities, Mental Health America, Mental Health Association in New Jersey, National Alliance on Mental Illness, National Alliance on Mental Illness of New Jersey, and Supportive Housing Association of New Jersey.

Donald J. Lenner submitted a letter in lieu of brief on behalf of appellant City of Hackensack.

Joseph G. Monaghan submitted a letter in lieu of brief on behalf of appellant Borough of Little Ferry.

Marcel R. Wurms, Lodi, submitted a letter in lieu of brief on behalf of appellant Borough of Lodi.

Justice ALBIN delivered the opinion of the Court.

Many of our citizens suffering from mental disabilities, who are presently institutionalized, can live independent and productive lives in supportive housing in our communities. The challenge has been to find sufficient housing with accompanying services for the mentally disabled. In 2005, the Governor's Task Force on Mental Health reported that many persons institutionalized with mental illness could not be discharged from New Jersey hospitals because of the dearth of affordable housing that offered comprehensive support services. Governor's Task Force on Mental Health, Final Report, New Jersey's Long and Winding Road to Treatment, Wellness and Recovery 6 (Mar. 31, 2005) [hereinafter 2005 Task Force Report ], available at http:// www. state. nj. us/ humanservices/ dmhs/ recovery/ Governor_ final_ report. pdf. In response to the 2005 Task Force Report, Governor Richard Codey issued Executive Order No. 78 stating that “[t]he financing of the State of New Jersey's mental health system should be changed to promote state-of-the-art treatment alternatives,” such as “permanent supportive housing.” 38 N.J.R. 1109(b) (Jan. 13, 2006).

Plaintiffs Advance Housing and its subsidiary, Advance Housing 2000, ¹ both not-for-profit corporations, provide supportive housing and services for mentally disabled individuals in Bergen County. To fulfill its mission, Advance Housing purchased properties with the assistance of funding from the United States Department of Housing and Urban Development (HUD), the Division of Mental Health Services in the New Jersey Department of Health and Senior Services (DMHS), county-run programs, and private donations. Advance Housing's clients with mental disabilities live independently in residences where they receive various mental-health, occupational, and other support services.

Defendants, nine Bergen County municipalities, denied Advance Housing property tax exemptions for charitable purposes under N.J.S.A. 54:4–3.6. The Tax Court denied Advance Housing's appeal. The court found an insufficient nexus between the housing provided and the services offered by Advance Housing to justify a charitable property tax exemption.

The Appellate Division reversed and remanded for a judgment granting Advance Housing the charitable property tax exemption. Advance Housing, Inc. v. Twp. of Teaneck, 422 N.J.Super. 317, 335, 28 A.3d 841 (App.Div.2011). It determined that Advance Housing had fully integrated its housing and support services and satisfied the test set forth in Presbyterian Homes of the Synod of N.J. v. Division of Tax Appeals, 55 N.J. 275, 283, 261 A.2d 143 (1970). Ibid. More specifically, the Appellate Division held that Advance Housing used the property for the charitable purpose of deinstitutionalizing the mentally disabled, thus relieving the government of having to provide for their housing and care.

We affirm. Advance Housing's residences are actually used for charitable purposes consonant with N.J.S.A. 54:4–3.6, entitling the property to tax-exempt status. Advance Housing's provision of housing with integrated supportive services to mentally disabled citizens, who otherwise would be dependent on government relief, is in furtherance of this State's express policy. The property—purchased, in large measure, at public expense—serves a vital need that would otherwise be borne by the State at a much greater cost. Accordingly, we hold that Advance Housing has met its burden of showing that the properties are entitled to charitable tax-exempt status under N.J.S.A. 54:4–3.6.

I.

A.

As explained in its certificate of incorporation and bylaws, Advance Housing is a charitable, non-profit corporation formed for the purpose of providing affordable housing and “normalized community living arrangements for psychiatrically disabled individuals” from low- and moderate-income families. To support this mission, Advance Housing applied for funding from HUD to purchase five condominiums under Section 811 of the National Affordable Housing Act. HUD advised Advance Housing to establish a separate non-profit corporation, to account for HUD-sponsored funding. As a result, Advance Housing 2000 was established to purchase and lease properties and “[t]o develop residential services to enhance and secure the mental and moral improvement of persons with chronic mental disabilities.” Other housing units had been purchased with monies from DMHS.

Plaintiff Advance Housing owns fourteen residential properties in nine municipalities in Bergen County: the Township of Teaneck; the Boroughs of Bergenfield, Little Ferry, Ramsey, Ridgefield Park, Lodi, Fairview, and Leonia; and the City of Hackensack.Advance Housing applied for property tax exemptions with these municipalities for the years 2002, 2003, and 2004.² The municipalities rejected the applications, taking the position that Advance Housing's properties were not used for a charitable purpose or some other purpose recognized by N.J.S.A. 54:4–3.6. The Bergen County Board of Taxation affirmed the denial of tax exemption for the properties.

Advance Housing appealed to the Tax Court, and the parties filed cross motions for summary judgment. We summarize here the core facts contained in the summary-judgment record. The material facts are essentially not in dispute. Instead, the parties contest the legal conclusions to be drawn from those facts.

B.

Advance Housing and Advance Housing 2000 are 501(c)(3) corporations ³ and therefore exempt from federal income tax. For operational purposes, Advance Housing receives approximately seventy-five percent of its funding from DMHS, fifteen percent from HUD, and the balance from clients' rents, Medicaid reimbursements, and private donations. The vast majority of funding is allocated to services rather than housing. Advance Housing is not a profit-making entity and its funding is used exclusively to advance its charitable mission.

Advance Housing offers “a supportive housing program to help people with psychiatric disabilities transition to independent living in the community.” To that end, it provides not only housing, but also mental-health, occupational-placement, and life-management support services to low- and moderate-income individuals suffering from mental illness. Without this assistance, these individuals would be unable to live independently. The “supportive housing model” combines “affordable, lease-based housing” with “comprehensive [and] flexible services.” Thirty-three of Advance Housing's clients live and receive services in fourteen residences it owns in the defendant municipalities. The remaining “sixty-three or sixty-four” clients receive services from Advance Housing in other residences not under its control. Advance Housing's residents have experienced periods of institutionalization, psychiatric hospitalization, or homelessness or risk of homelessness due to a psychiatric disability.

Its residents come from places such as homeless shelters, transitional housing facilities, and hospitals that provide services to mentally ill individuals. Both DMHS and HUD place restrictions on the use of their funding. For example, some HUD programs require that a resident living in an Advance Housing unit meet a statutory definition of homelessness, whereas DMHS mandates that a resident come from a state hospital or a group home. According to Advance Housing's President and Chief Executive Officer, Mary Rossettini, many of its clients “would be actually homeless” if not housed in one of its residences.

Advance Housing receives fair market value for its rental units as determined by HUD. However, residents living in Advance Housing's units pay only thirty percent of their adjusted income as rent. The balance comes from various rental-assistance programs run by HUD, such as Section 8,⁴Section 811,⁵ and the Supportive Housing Program.⁶

Advance Housing's residents sign a lease, which provides that failure to pay rent or abide by other...