New Jersey Carpenters Apprentice Training and Educ. Fund v. Borough of Kenilworth

• Decision Date: 16 October 1995
• Citation: 665 A.2d 1128,284 N.J.Super. 521
• Parties: NEW JERSEY CARPENTERS APPRENTICE TRAINING AND EDUCATION FUND, Plaintiff-Appellant, v. BOROUGH OF KENILWORTH, New Jersey, Defendant-Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 521

284 N.J.Super. 521

665 A.2d 1128

NEW JERSEY CARPENTERS APPRENTICE TRAINING AND EDUCATION

FUND, Plaintiff-Appellant, v. BOROUGH OF KENILWORTH, New Jersey, Defendant-Respondent.

Superior Court of New Jersey,

Appellate Division.

Submitted Sept. 12, 1995.

Decided Oct. 16, 1995.

Oransky, Scaraggi, Borg & Abbamonte, Roseland, for appellant (Andrew D. Borg, on the brief).

Palumbo & Renaud, Cranford, for respondent (Robert F. Renaud, on the brief).

Before Judges PRESSLER, WEFING and ARIEL A. RODRIGUEZ.

The opinion of the court was delivered by

WEFING, J.A.D.

The plaintiff, the New Jersey Carpenters Apprentice Training and Education Fund (Fund), appeals from an Order of the Tax Court entered September 29, 1994 that affirmed the real estate tax assessment for property in Kenilworth owned by the Fund.

The Fund was created under a deed of trust dated November 1, 1969 between the New Jersey State Council of Carpenters, an unincorporated association of trade union and district councils affiliated with the United Brotherhood of Carpenters and Joiners of America, and the Building Contractors Association of New Jersey, an association of employers in the building construction industry.

The trust is managed by a board of trustees, whose membership is composed equally of representatives from labor and from management. The purpose of the trust is to provide free instruction and training to individuals who are working as apprentices and wish to become journeymen carpenters. It provides one hundred sixty hours of instruction in various aspects of the carpentry trade over a four-year period. When a student completes the program, the student receives a journeyman's certificate from the United States Department of Labor and the Union. There is no requirement that students be union members or related to union members although it is expected that those who complete the program will become union members. The program has no restrictions in terms of race, color or sex. Students are recruited from the public at large; they are required only to have either a high school diploma or an equivalency degree.

The program itself is funded primarily through wage deductions. An employer is required, under collective bargaining agreements, to deduct one percent of a union employee's wages and forward that to the Fund. The Fund thus has two sources of income: the funds generated through payroll deductions and any interest income it may generate. The Fund itself is exempt from the payment of federal income tax under § 501 of the Internal Revenue Code.

In April 1990, the Fund purchased property located at 221 South 31st Street in Kenilworth to house its training programs for the northern part of the State. It also operates an instructional training program in Vineland for individuals in the southern part of the State. The Kenilworth premises are used only for the instruction and training programs; no other activities are conducted there. Prior to purchasing the Kenilworth property, the Fund conducted its programs in the evening using the facilities of the Middlesex County vocational schools.

The Fund applied to the tax assessor of Kenilworth for an exemption from real property taxes pursuant to N.J.S.A. 54:4-3.6. When that was denied, the Fund appealed to the Union County Board of Taxation which upheld the assessor. It then filed a complaint with the Tax Court seeking a declaration that its property was exempt from real estate taxes. The Tax Court denied the exemption as well and affirmed the local property tax assessment. Plaintiff has appealed to this court and we reverse.

N.J.S.A. 54:4-3.6 exempts from real estate taxation "all buildings actually used for colleges, schools, academies or seminaries ... or the lands on which they stand." In its oral opinion, the Tax Court noted several factors to support its conclusion that the apprentice training program in Kenilworth did not qualify for tax exemption as a school. It noted that the trust instrument itself was revocable and that it was not free from self-interest since it was designed to provide workers for the building contractors and members for the union. This, it concluded, represented benefits flowing "to a profit-making segment of society." It concluded there was a lack of public benefit that a governmental entity would otherwise have had to provide.

In addition, the Tax Court was clearly troubled by the net assets of the Fund shown on the Fund's 1991 Form 990 ($9,331,441) and by the amount of the salaries of the administrative and instructional staff. It was also dissatisfied with the provisions within the trust instrument for disbursement of trust funds in the event of dissolution.

In reaching its conclusion about a lack of public benefit, the Tax Court judge relied upon Kimberley Sch. v. Town of Montclair, 2 N.J. 28, 65 A.2d 500 (1949). We are satisfied that that case does not lead to the conclusion that plaintiff's property should be subject to real estate taxation.

We recognize, of course, that N.J.S.A. 54:4-3.6 should be strictly construed, for the effect of granting an exemption from property taxes is merely to shift the tax burden onto remaining taxpayers. West Orange Tp. v. Joseph Kushner Hebrew Academy, 13 N.J.Tax 48, 52 (1993). We further recognize as settled that the entity claiming the exemption has the burden of proving it is entitled to it. Presbyterian Homes v. Division of Tax Appeals, 55 N.J. 275, 283, 261 A.2d 143 (1970).

One of the theoretical underpinnings of real property tax exemptions is referred to as the doctrine of quid pro quo. It has been set forth in the following manner:

Exemptions from the burdens of taxation, which the great masses of the people are called upon to sustain, as a requisite of civil government, are only favored in legislation, upon the theory that the concession is due as quid pro quo for the performance of a service essentially public, and which the state thereby is relieved pro tanto from the necessity of performing, such as works of charity and education, freely and charitably bestowed, as evidenced by the legislation under consideration. Without that concurring prerequisite, an exemption becomes essentially a gift of public funds at the expense of the taxpayer, and indefensible both under our public policy of equal taxation and our constitutional safeguard against illegal taxation.

[Carteret Academy v. State Board, 102 N.J.L. 525, 528-529, 133 A. 886 (Sup.Ct.1926), aff'd o.b. 104 N.J.L. 165, 138 A. 919 (E. & A.1927).]

It was to this principle of quid pro quo that the Tax Court was referring when it determined that the Fund was not providing a public benefit that a governmental entity would otherwise have had to supply.

The limitations on this principle, however, were clearly set forth by Chief Justice Vanderbilt in Kimberley School v. Town of Montclair, where he wrote:

The term quid pro quo implies a quantitative exactness that cannot possibly be applied in measuring the benefits to the public from the existence of educational institutions. It erroneously suggests that the benefit is confined to the municipality in which the school is located, whereas in fact the advantages of educational institutions are not confined to the respective localities in which they are situated. Undeniably it is the public benefit resulting from education that justifies granting schools and colleges exemption from taxation, but such benefit cannot be exactly admeasured either on the part of the schools or of the public.

[Kimberley, supra, 2 N.J. at 42, 65 A.2d 500.]

We think it is beyond doubt that the public benefits by the training programs provided by the Fund. It is clearly to the benefit of the public to have a pool of skilled, well-trained carpenters available. Our Legislature has long recognized the benefits that flow to the public from providing adequate vocational training. See, e.g., N.J.S.A. 18A:54-1 et seq.; N.J.S.A. 34:1A-36 et seq.

The training and the courses provided by the Fund are available without cost to the students, who numbered more than 600 in 1994. These students, most of whom...