General Motors Corp. v. City of Linden

CourtUnited States State Supreme Court (New Jersey)
Citation696 A.2d 683,150 N.J. 522
PartiesGENERAL MOTORS CORPORATION, Plaintiff-Respondent, v. CITY OF LINDEN, Defendant-Appellant.
Decision Date21 July 1997

Saul A. Wolfe, Livingston, argued the cause for appellant (Skoloff & Wolfe, attorneys; Mr. Wolfe, Robert F. Giancaterino and Elizabeth D. Abramson, of counsel and on the briefs).

Seth I. Davenport, Montclair, argued the cause for respondent (Garippa & Davenport, attorneys; Mr. Davenport, John E. Garippa and Philip Demetrice R. Miles, Assistant Corporation Counsel, argued the cause for intervenor-respondent City of Newark (Michelle Holler-Gregory, Corporation Counsel, attorney).

J. Giannuario, of counsel; Mr. Davenport, Mr. Garippa, Mr. Giannuario and Kenneth R. Kosco, on the briefs).

Gail L. Menyuk, Deputy Attorney General, argued the cause for intervenor-respondent State of New Jersey (Peter Verniero, Attorney General of New Jersey; attorney Joseph L. Yannotti, Assistant Attorney General, of counsel).

Donald F. Miceli, Roseland, argued the cause for intervenor-respondent NBCP Urban Renewal Partnership (Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein, attorneys; Mr. Miceli and Richard K. Matanle, II, of counsel and on the brief).

John B. Hall, Newark, argued the cause for amici curiae New Jersey Chamber of Commerce, New Jersey Business and Industry Association, Chemical Industry Council, Independent Energy Producers of New Jersey, Association of Graphic Communication, Commerce and Industry Association of New Jersey, New Jersey Laborers'-Employers' Cooperation and Education Trust, National Association of Industrial and Office Properties, New Jersey Chapter and International Brotherhood of Electric Workers, Local Union No. 675 (McManimon & Scotland, attorneys; Mr. Hall and Peter Dickson, on the briefs).

The opinion of the Court was delivered by

O'HERN, J.

In this case, we review again the ebb and flow of legislative and judicial efforts to distinguish between real and personal property for purposes of taxation. We last reviewed that distinction in R.C. Maxwell Co. v. Galloway Township, 145 N.J. 547, 679 A.2d 141 (1996). This appeal presents a facial challenge to the constitutionality of the Business Retention Act of 1992(BRA). L. 1992, c. 24, §§ 1 to 7. We find that the statute is facially constitutional because it may reasonably be interpreted as not to create an unconstitutional exemption for real property from taxation that

would favor business or industry. It is, rather, as the BRA's sponsors stated, an effort to "provide[ ] refinements in the definitions of real and personal property" for purposes of determining whether certain forms of property are subject to taxation. Sponsor's Statement to S. 332 (205th N.J.Leg., 1st Sess.1992).

I FACTS AND PROCEDURAL HISTORY

The case concerns assessments of General Motors' automobile assembly plants made by the City of Linden for the 1983, 1984, and 1985 tax years. General Motors (GM) appealed the assessments on the basis that the Tax Court had incorrectly assessed the property as special purpose property rather than general purpose property. The Appellate Division remanded the case to the Tax Court for consideration in light of our opinion in Ford Motor Co. v. Township of Edison, 127 N.J. 290, 604 A.2d 580 (1992), and for consideration of whether the BRA applied to the case. 13 N.J. Tax 324 (App. Div. 1993). GM's remaining tax appeals, through the 1992 tax year, were consolidated on remand.

In an unreported opinion, the Tax Court held the BRA to be unconstitutional. GM appealed to the Appellate Division, which reversed the Tax Court and concluded that the BRA was constitutional. 293 N.J.Super. 99, 679 A.2d 718 (App.Div.1996). The court held that "because the subject of [the BRA] is not real property, as to which the Uniformity Clause applies, but rather personal property," the proper test was whether the BRA's classifications were reasonable. Id. at 104, 679 A.2d 718. The court reasoned that the Legislature can classify personal property and concluded that its goal through the BRA "to accord the definition of fixtures the most restrictive scope consistent with ... the fundamental distinction between real and personal property" did not violate the State Constitution. Id. at 107, 679 A.2d 718. Linden sought leave to appeal.

The Senate and General Assembly passed concurrent resolutions requesting the Court to expedite its consideration of the constitutionality of the BRA. Senate Committee Substitute for State Concurrent Resolution No. 57 (March 7, 1996). We granted leave to appeal. We permitted the State, the City of Newark, the New Jersey Chamber of Commerce, and NBCP Urban Renewal to intervene and to file briefs as amici curiae.

II BACKGROUND TO THE CONTROVERSY

There are two benchmarks for our decision. One is that the Legislature has broad discretion "in the classification of personal property for exemption or preferential treatment." Switz v. Kingsley, 37 N.J. 566, 586, 182 A.2d 841 (1962). The Legislature is free to tax personal property in any way so long as the classifications are reasonable and the property is assessed under general laws and by uniform rules. The other is that the Uniformity Clause of the New Jersey Constitution places limits on the Legislature's ability to classify real property for purposes of taxation. The Uniformity Clause requires that all real property be "assessed and taxed ... according to the same standard of value ... [and] at the general tax rate of the taxing district in which the property is situated." N.J. Const., art. VIII, § 1, p 1(a). The clause has been described as a compromise that barred discriminatory burdens on real property taxation, in order to protect the tax revenues of municipalities. New Jersey State League of Municipalities v. Kimmelman, 105 N.J. 422, 433, 522 A.2d 430 (1987).

Historically, both real and personal property were subject to local taxation. In 1966, however, the Legislature passed the Business Personal Property Tax Act. N.J.S.A. 54:11A-1 to -21 (repealed). That Act excluded from taxation at the local level business personal property and substituted a system of taxation at the state level. The Act defined business personal property as In Bayonne City v. Port Jersey Corp., 79 N.J. 367, 399 A.2d 649 (1979), this Court interpreted N.J.S.A. 54:11A-2(b)(2) in the context of three extremely large, movable cranes. The Bayonne Court adopted a "material injury" test to determine whether the items were business personal property. The Court interpreted the exclusion from the definition of business personal property in N.J.S.A. 54:11A-2(b)(2) to refer to "only those chattels the removal of which will do irreparable or serious physical injury or damage" to the property. Bayonne, supra, 79 N.J. at 378, 399 A.2d 649. Bayonne rejected the so-called "institutional doctrine," which focused on whether the removal of a fixture would prevent the realty from being used for its original intended purpose. 2 Id. at 376, 399 A.2d 649; see also H.J. Bradley, Inc. v. Taxation Div. Director, 4 N.J. Tax 213, 219-20 (Tax 1982) (discussing institutional doctrine and its rejection).

"tangible goods and chattels used or held for use in any business" but did not include "goods and chattels so affixed to real property as to become part thereof and not to be severable or removable without material injury thereto." N.J.S.A. 54:11A-2(b)(2) (repealed). Such business personal property, except when "so affixed," was excluded from local taxation. Items so affixed, or "fixtures," were subject to local taxation as real property. 1

Cases following Bayonne questioned the extent of its holding. Some cases gave the "material injury" test sweeping effect, and exempted from taxation many items (such as radiators, toilets, and sinks) previously taxed as real property because they could be removed from the realty without irreparable or serious injury. Other Tax Court decisions, however, applied both the Bayonne "material injury" test and a traditional "fixtures" test, to find certain items to be real property. Several cases interpreted the "without material injury thereto" language of N.J.S.A. 54:11A-2(b)(2) as exempting items from local taxation when their removal would cause material injury neither to the real property nor the personal property itself. See, e.g., Lawrence Assoc. v. Lawrence Township, 5 N.J. Tax 481, 511-12 (Tax 1983).

When the differences remained unresolved, the Legislature responded. In 1986, it amended N.J.S.A. 54:11A-2(b)(2) and N.J.S.A. 54:4-1, which defined property subject to taxation. See L. 1986, c. 117. Specifically, Chapter 117 amended N.J.S.A. 54:4-1 and defined taxable real property to include personal property "affixed" to the real property, unless

a. (1) The personal property so affixed can be removed or severed without material injury to the real property;

(2) The personal property so affixed can be removed or severed without material injury to the personal property itself; and

(3) The personal property so affixed is not ordinarily intended to be affixed permanently to real property;

or

b. The personal property so affixed is machinery, apparatus, or equipment which is neither functionally essential to a structure the personal property is within or to which the personal property is affixed nor constitutes a structure itself. 3

Chapter 117 further amended N.J.S.A. 54:11A-2 to exclude from the definition of business personal property goods and chattels taxable as real property pursuant to the amended N.J.S.A. 54:4-1.

Chapter 117 deleted the former N.J.S.A. 54:11A-2(b)(2). It added N.J.S.A. 54:4-1.12 to define storage tanks of more than 30,000 gallons as real property.

The statements that accompanied Chapter 117 and the Governor's objections and recommendations to the Senate explained that the Legislature was reacting to post-Bayonne case law. Both the Governor and Legislature believed...

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