Full Opinion

TAX COURT OF NEW JERSEY JOSHUA D. NOVIN Dr. Martin Luther King, Jr. Justice Building Judge 495 Dr. Martin Luther King, Jr. Blvd., 4th Floor Newark, New Jersey 07102 Tel: (609) 815-2922, Ext. 54680 NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE TAX COURT COMMITTEE ON OPINIONS October 23, 2026 Mr. and Mrs. Sylvester L. Tuohy 138 Twelfth Street Cresskill, New Jersey 07626 Deputy Attorney General Jonathan Linzhi Wang New Jersey Division of Law R.J. Hughes Justice Complex P.O. Box 106 Trenton, New Jersey 08625-0106 Re: Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Dear Mr. and Mrs. Tuohy and Deputy Attorney General Wang: This letter shall constitute the court’s opinion on the Director, Division of Taxation’s (“Director”), motions for summary judgment. At issue are: (i) the Director’s formula and methodology used to calculate the tax credit afforded New Jersey residents for taxes paid to another state under N.J.S.A. 54A:4-1; (ii) the Director’s inclusion of I.R.C. § 403(b) contributions, dividend income, capital gains, and a life insurance policy cash surrender distribution in determining plaintiffs’ New Jersey gross income; (iii) the Director’s assessment of gross income tax deficiencies for the 2015, 2016, 2017, and 2018 tax years; (iv) the Director’s determination that plaintiffs were not eligible for the 2017 homestead benefit rebate that they received, and application of an offset against the plaintiffs’ 2018 homestead rebate; and (v) the application of the doctrine of collateral estoppel. For the reasons explained below, the court grants the Director’s motions for summary Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -2- judgment. I. Introduction Pursuant to R. 1:7-4, the court makes the following factual findings based on the submissions of the parties, a review of the court record, and the pleadings. During all tax periods at issue, plaintiffs, Sylvester L. Tuohy and Yongjie Tuohy (“plaintiffs”), were: (i) a married couple and filed joint tax returns; (ii) New Jersey resident taxpayers; (iii) plaintiff, Sylvester L. Tuohy (“Mr. Tuohy”), derived W-2 wage income from employment at Pace University in New York; and (iv) Mr. Tuohy made alimony payments to his former spouse. A. Procedural history For the 2004 tax year, the plaintiffs filed a joint New Jersey Resident Income Tax Return (“2004 NJ Return”). Following an audit of plaintiffs’ 2004 NJ Return, the Director determined that plaintiffs improperly calculated the credit afforded New Jersey residents under N.J.S.A. 54A:4-1. Specifically, the Director found that plaintiffs overstated the income in the numerator of the credit fraction. The Director determined that the numerator should reflect plaintiffs’ gross income in New York State excluding the alimony payments made to Mr. Tuohy’s former spouse. The plaintiffs challenged the Director’s findings before the Tax Court (“Tuohy I”). 1 On August 18, 2008, following cross-motions for summary judgment, Hon. Patrick DeAlmeida, J.T.C. issued an unpublished letter opinion in Tuohy I upholding the Director’s methodology for “calculating the credit for New Jersey resident taxpayers who are subject to income tax in New York State and make alimony payments.” The court found that plaintiffs 1 Captioned Sylvester L. and Yongjie Tuohy v. Dir., Div. of Tax’n, and assigned docket number 000033-2008. Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -3- “overstated the numerator of the credit fraction” under N.J.S.A. 54A:4-1, by including Mr. Tuohy’s alimony payments to his former spouse. 2 The court further concluded that the “claims raised by plaintiffs were squarely rejected by the Appellate Division in Ambrose v. Dir[.], Div. of Taxation, 198 N.J. Super. 546 (App. Div. 1985), [and] the holding in that case controls the outcome here.” Accordingly, the court entered judgment affirming the Director’s final determination and dismissing the plaintiffs’ complaint. Plaintiffs took no appeal from Tuohy I. For the 2014 tax year, the plaintiffs filed a joint New Jersey Resident Income Tax Return (“2014 NJ Return”). Plaintiffs excluded dividend income, capital gain income from the sale of stock, and Mr. Tuohy’s I.R.C. § 403(b) contributions from their New Jersey gross income and applied a credit for taxes paid to New York State. Again, following an audit of plaintiffs’ 2014 NJ Return, the Director determined that plaintiffs improperly calculated the tax credit afforded to New Jersey residents under N.J.S.A. 54A:4-1, by including Mr. Tuohy’s alimony payments to his former spouse in the numerator of the credit fraction. In addition, the Director found that under New Jersey law, plaintiffs’ New Jersey gross income should include dividend income earned, capital gain income from the sale of stock, and Mr. Tuohy’s I.R.C. § 403(b) retirement plan contributions. The plaintiffs again challenged the Director’s findings before the Tax Court (“Tuohy II”). On March 1, 2022, following the Director’s motion for summary judgment, Hon. Joan Bedrin Murray, J.T.C. issued a published opinion in Tuohy II. Sylvester and Yongjie Tuohy v. 2 Under R. 1:36-3, “[n]o unpublished opinion shall constitute precedent or be binding upon any court . . . except to the extent required by res judicata, collateral estoppel, the single controversy doctrine or any other similar principle of law. . . .” R. 1:36-3 (emphasis added). Accordingly, the court recites the facts and issues presented under Tuohy I and Tuohy II (as herein defined) to comprehensively address the Director’s collateral estoppel arguments in the instant motions. Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -4- Dir., Div. of Tax’n, 32 N.J. Tax 561 (Tax 2022). After analyzing plaintiffs’ claims, Judge Murray observed that the “plaintiffs advance nearly the identical arguments they relied on in Tuohy I in seeking to relitigate the issue of their resident tax credit for tax year 2014.” Id. at 573. Judge Murray highlighted that N.J.A.C. 18:35-4.1(a)(10) prohibits a New Jersey resident taxpayer from “including in the numerator in the fraction ‘any income that has been excluded or deducted from taxable gross income of another jurisdiction,’” and that exclusion applies to alimony payments. Ibid. Emphasizing the binding legal jurisprudence established under Ambrose, the court observed that “plaintiffs have offered nothing to disturb the precedential nature of the Ambrose court’s interpretation of how the numerator of the resident credit fraction should be calculated.” Id. at 575. The court found that the legal issues raised in Tuohy II “with regard to plaintiffs’ tax credit has already been fully and fairly adjudicated” by the court under Tuohy I. Ibid. Accordingly, the court concluded that the doctrine of collateral estoppel “precludes re[-]litigation of the issues enunciated above pertaining to plaintiffs' dispute with the Director's computation of the resident tax credit.” Id. at 576. In addition, under Tuohy II, plaintiffs asserted that the Director improperly included dividend income earned, capital gain on the sale of stock, and Mr. Tuohy’s contributions to his I.R.C. § 403(b) retirement plan, in determining the plaintiffs’ New Jersey gross income. Although the plaintiffs reported the dividend income earned on their 2014 federal tax return, they claimed that it should be excluded from their 2014 NJ Return because it would be “‛simpler’ without the inclusion of dividend income” and unfair for New Jersey to tax the dividends because they “are already taxed at the corporate level and then taxed again by the federal government when distributed to the shareholder.” Id. 576-577. The court concluded that a plain reading of N.J.S.A. 54A:5-1(f) supports the Director’s conclusion that the dividend income earned should be included Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -5- in computing plaintiffs’ New Jersey gross income and upheld the Director’s findings. The plaintiffs also reported $13,528 of capital gain income from the sale of stock on their 2014 federal tax return, however, they excluded the capital gain income on their 2014 NJ Return. Under Tuohy II, plaintiffs asserted that New Jersey should permit them to offset capital “gains with losses incurred during twenty years of stock ownership.” Id. at 577. The court emphasized that N.J.S.A. 54A:5-2 permits taxpayers to only use losses to offset “gross income within the same category of gross income during the taxable year.” Ibid. (emphasis in the original). Accordingly, the court rejected plaintiffs’ claims and upheld the Director’s finding that $13,528 of capital gain income from the sale of stock should have been included on plaintiffs’ 2014 NJ Return and in the determination of plaintiffs’ New Jersey gross income. In Tuohy II, the plaintiffs further challenged the Director’s inclusion of wages paid to Mr. Tuohy to fund his I.R.C. § 403(b) retirement plan, in plaintiffs’ New Jersey gross income. The plaintiffs conceded that New Jersey law permits only contributions to I.R.C. § 401(k) retirement plans to be excluded from New Jersey gross income. See N.J.S.A. 54A:6-21. However, the plaintiffs posited that because the New Jersey Legislature had considered expanding the exclusion to other retirement plans, it would be better public policy for these contributions to be excluded from gross income. The court rejected plaintiffs’ arguments finding that “the law is clear,” N.J.S.A. 54A:6-21 excludes from gross income only qualified arrangements satisfying I.R.C. § 401(k) requirements. Because Mr. Tuohy’s retirement plan contributions were to an I.R.C. § 403(b) retirement plan, and do not satisfy I.R.C. § 401(k) requirements, the court found his contributions are includable in plaintiffs’ New Jersey gross income. Id. at 578. The plaintiffs appealed the court’s decision in Tuohy II to the Superior Court of New Jersey, Appellate Division. After reviewing the motion record, the Appellate Division affirmed Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -6- the Tax Court’s grant of summary judgment in favor of the Director. See Tuohy v. Dir., Div. of Tax’n, 2023 N.J. Super. Unpub. LEXIS 1053 (App. Div. 2023). The court concluded that “the Tax Court properly affirmed the Director’s reformulation of plaintiffs’ miscalculated GIT return[,] and plaintiffs’ have failed to produce any evidence or legal authority to lead to a different result.” Tuohy, at *6. The court found plaintiffs “are collaterally estopped from arguing the methodology they used in calculating the resident tax credit should prevail over the Director’s determination. The doctrine of collateral estoppel precludes a litigant from relitigating issues that had been resolved in a prior suit.” Ibid. Notably, the court concluded that “[t]he operative facts [in Tuohy II] are identical to Tuohy I, save for the specific dollar amounts involved and the calendar year, and plaintiffs raise the identical claims with respect to calculation of the resident income tax credit.” Ibid. The court further explained that “[c]ontrary to plaintiffs’ claims, prior year capital losses may not be applied to offset current year capital gains.” Tuohy, at *8. Finally, the court expressed that “[i]t is well-established I.R.C. § 401(k) deductions are the only retirement contributions exempt from [New Jersey] gross income tax.” Ibid. On July 11, 2024, plaintiffs’ petition for certification to the New Jersey Supreme Court was denied. Tuohy v. Dir., Div. of Tax’n, 258 N.J. 143 (2024). B. Factual findings applicable to the instant motions On or about April 11, 2016, plaintiffs filed a joint New Jersey Resident Income Tax Return for the tax year ending 2015 (“2015 NJ Return”). Plaintiffs’ 2015 NJ Return reported wage income of $111,513, and gross income of $111,686. 3 However, plaintiffs excluded $17,081 of dividend 3 Plaintiffs filed a joint United States Individual Income Tax Return for the tax year ending 2015 reporting $111,513 in wage income, $17,254 of interest and dividend income, $54,010 of net long- term capital loss, and $49,401 of long-term capital loss carryforward. Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -7- income earned from their New Jersey gross income. In addition, plaintiffs excluded $7,899 of distributions received from Mr. Tuohy’s cash surrender of a life insurance policy from their New Jersey gross income, despite having received a Form 1099-R from Liberty Life Assurance Company reflecting it as a “taxable amount.” Finally, the plaintiffs excluded $11,572.55 of wage income from their New Jersey gross income representing wages earned by Mr. Tuohy from Pace University and reported on his W-2 as contributions to fund his I.R.C. § 403(b) retirement plan. 4 On or about April 3, 2017, plaintiffs filed a joint New Jersey Resident Income Tax Return for the tax year ending 2016 (“2016 NJ Return”). Plaintiffs’ 2016 NJ Return reported wage income of $110,463, and gross income of $110,503. However, plaintiffs excluded $22,868 of dividend income earned from their New Jersey gross income. In addition, the plaintiffs excluded $11,688 of wage income from their New Jersey gross income representing wages earned by Mr. Tuohy from Pace University and reported on his W-2 as contributions to fund his I.R.C. § 403(b) retirement plan. On or about April 5, 2018, plaintiffs filed a joint New Jersey Resident Income Tax Return for the tax year ending 2017 (“2017 NJ Return”). Plaintiffs’ 2017 NJ Return reported wage income of $111,833, and gross income of $111,873. 5 However, plaintiffs excluded $25,400 of dividend income earned from their New Jersey gross income. Plaintiffs also excluded $162,469 of net gains on the sale of stock from their New Jersey gross income. Finally, the plaintiffs excluded $11,923 of wage income from their New Jersey gross income representing wages earned by Mr. Tuohy from Pace University and reported on his W-2, as contributions to fund his I.R.C. § 403(b) 4 On their 2015 federal return, plaintiffs reported: (i) $17,254 of interest and dividend income; (ii) $54,010 of net long-term capital loss; and (iii) and $49,401 of long-term capital loss carryover. 5 No copy of the 2017 W-2 from Pace University was annexed to the Director’s motion. However, the 2017 Notice of Deficiency reflected that $11,923 was added to plaintiffs’ wages. Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -8- retirement plan. On or about April 9, 2019, plaintiffs filed a joint New Jersey Resident Income Tax Return for the tax year ending 2018 (“2018 NJ Return”). Plaintiffs’ 2018 NJ Return reported wage income of $112,478, and gross income of $112,684. However, plaintiffs excluded $19,116 of dividend income earned from their New Jersey gross income. In addition, the plaintiffs excluded $11,982 of wage income from their New Jersey gross income representing wages earned by Mr. Tuohy from Pace University and reported on his W-2 as contributions to fund his I.R.C. § 403(b) retirement plan. On or about April 10, 2019, following an audit of plaintiffs’ 2015 NJ Return, the Director issued plaintiffs a Notice of Deficiency (“2015 Notice of Deficiency”). The 2015 Notice of Deficiency increased plaintiff’s 2015 New Jersey gross income to $148,239, by including: (i) the $11,573 in contributions to Mr. Tuohy’s retirement account; (ii) $17,081 in dividend income; and (iii) $7,899 life insurance cash surrender distribution. The Director then utilized the revised New Jersey gross income of $148,239 to calculate plaintiff’s credit for taxes paid to New York and reduced the fraction’s numerator by the alimony payments paid to Mr. Tuohy’s former spouse. These adjustments resulted in a reduced credit and New Jersey gross income tax deficiency of $820 for the 2015 tax year. Inclusive of taxes, interest, and penalties, $1,074 was due from plaintiffs for the 2015 tax year. On or about June 10, 2019, plaintiffs timely filed a written protest of the 2015 Notice of Deficiency with the Director’s Conference and Appeals Branch (“CAB”). On or about July 23, 2021, following an audit of plaintiffs’ 2016 NJ Return, the Director issued plaintiffs a Notice of Deficiency (“2016 Notice of Deficiency”). The 2016 Notice of Deficiency increased plaintiffs’ 2016 New Jersey gross income to $145,059, by including (i) the Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -9- $11,688 in contributions to Mr. Tuohy’s retirement account; and (ii) $22,868 in dividend income. The Director then utilized the revised New Jersey gross income of $145,059 to calculate plaintiff’s credit for taxes paid to New York and reduced the fraction’s numerator by the alimony payments paid to Mr. Tuohy’s former spouse. These adjustments resulted in a reduced credit and New Jersey gross income tax deficiency of $690 for the 2016 tax year. Inclusive of taxes, interest, and penalties, $969 was due from plaintiffs for the 2016 tax year. On or about July 23, 2021, following an audit of plaintiffs’ 2017 NJ Return, the Director issued plaintiffs a Notice of Deficiency (“2017 Notice of Deficiency”). The 2017 Notice of Deficiency increased plaintiffs’ 2017 New Jersey gross income to $311,664, by including (i) the $11,923 in contributions to Mr. Tuohy’s retirement account; (ii) $25,400 in dividend income; and (iii) $162,469 in net capital gain from the sale of stock. The Director then utilized the revised New Jersey gross income of $311,664 to calculate plaintiffs’ credit for taxes paid to New York and reduced the fraction’s numerator by the alimony payments paid to Mr. Tuohy’s former spouse. These adjustments resulted in a reduced credit and New Jersey gross income tax deficiency of $10,355 for the 2017 tax year. Inclusive of taxes, interest, and penalties, $13,675 was due from plaintiffs for the 2017 tax year. On or about July 23, 2021, following an audit of plaintiffs’ 2018 NJ Return, the Director issued plaintiffs a Notice of Deficiency (“2018 Notice of Deficiency”). The 2018 Notice of Deficiency increased plaintiffs’ 2018 New Jersey gross income to $143,782, by including (i) the $11,982 in contributions to Mr. Tuohy’s retirement account; and (ii) $19,116 in dividend income. The Director then utilized the revised New Jersey gross income of $143,782 to calculate plaintiffs’ credit for taxes paid to New York and reduced the fraction’s numerator by the alimony payments paid to Mr. Tuohy’s former spouse. These adjustments resulted in a reduced credit and New Jersey Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -10- Gross Income Tax deficiency of $596 for the 2018 tax year. Inclusive of taxes, interest, and penalties, $737 was due from plaintiffs for the 2018 tax year. 6 On or about August 19, 2021, plaintiffs timely filed written protests of the 2016 Notice of Deficiency, 2017 Notice of Deficiency, and 2018 Notice of Deficiency with CAB. On or about May 3, 2022, and May 10, 2022, administrative conferences were conducted with plaintiffs and CAB. On June 6, 2022, the Director issued plaintiffs four Final Determination letters upholding the Director’s audit findings for the 2015, 2016, 2017, and 2018 tax years (the “Final Determination letters”). On July 8, 2022, the plaintiffs filed five complaints with the Tax Court. Four of the complaints sought to challenge the Director’s Final Determination letters. 7 The plaintiffs’ fifth complaint sought to challenge the Director’s reduction of plaintiffs’ 2018 homestead rebate benefit in the sum of $400.18. 8 After adjusting plaintiffs’ 2017 New Jersey gross income, the Director determined that plaintiffs were not eligible for the 2017 homestead rebate benefit of $400.18 that they received. Accordingly, instead of billing plaintiffs that sum, 6 On April 14, 2020, Governor Philip Murphy signed the COVID-19 Fiscal Mitigation Act, L. 2020, c. 19 (the “Act”). The Act extended the period for the Director to assess any taxes under N.J.S.A. 54A:9-4 and N.J.S.A. 54:49-6 to “90 days after the conclusion of the state of emergency declared by the Governor pursuant to Executive Order No. 103 of 2020, or any extension thereof.” L. 2020, c. 19, § 2. Our Legislature subsequently amended the Act to provide a final deadline for its previous extension. L. 2022, c. 133. The amendment extended the limitations period “to assess any tax pursuant to N.J.S.A. 54A:9-4 [and N.J.S.A. 54:49-6] . . . until the date of enactment of P.L. 2022, c.133 . . .” which date was December 22, 2022. Thus, the Director was afforded until December 22, 2022, to impose an assessment on plaintiffs’ 2016 NJ Return and 2017 NJ Return. The 2016 Notice of Deficiency and 2017 Notice of Deficiency were issued on July 23, 2021, making them timely. 7 The complaints were assigned docket numbers 008921-2022 (2015 tax year), 008983-2022 (2016 tax year), 009166-2022 (2017 tax year), and 009164-2022 (2018 tax year). 8 This complaint was assigned docket number 009240-2022. Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -11- the Director offset or reduced plaintiffs’ 2018 homestead rebate benefit by $400.18. On April 2, 2026, the court entered an Order consolidating docket number 008921-2022, 008983-2022, 009164-2022, 009166-2022, and 009240-2022. On August 19, 2026, the Director moved for summary judgment seeking the dismissal of plaintiffs’ complaints. The Director charges that the court should apply the doctrine of collateral estoppel to bar plaintiffs from relitigating issues that were previously raised and addressed by the court under their “2014 case to challenge Taxation’s determination regarding their dividends, [I.R.C. §] 403(b) retirement plan contributions, capital gains, and resident tax credit for tax years 2015-2018.” The Director emphasizes that the plaintiffs “advance identical arguments to the arguments they relied on in tax year 2014 regarding dividends, [I.R.C. §] 403(b) retirement plan contributions, capital gains, and their resident tax credits.” The Director argues that the plaintiffs continue to insist that if alimony is excluded from the numerator in the allocation fraction, it should also be excluded from the denominator. However, the Director highlights that these arguments have been previously expressly rejected by the court under Ambrose, Tuohy I, and Tuohy II. Addressing the substance of plaintiffs’ argument that, “‘after being taxed for the third time at the State level,’ there is hardly ‘any dividend left,’ and, ‘besides, it is not ordinary income,’” the Director underscores that in Tuohy II, the court expressly rejected this claim. The court found that plaintiffs’ claims that dividend income earned should be excluded from New Jersey gross income were “unsupported by legal authority.” Tuohy, 32 N.J. Tax at 577. With respect to the Director’s inclusion of capital gain income in plaintiffs’ New Jersey gross income, the Director again underscores that in Tuohy II, the court rejected the plaintiffs’ argument that “until you actually receive the [c]apital [g]ain as cash or check,” it should be excluded. Rather, the court found that “[p]laintiffs’ argument ignores statutory and common law.” Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -12- Ibid. Addressing plaintiffs’ assertions that Mr. Tuohy’s contributions to his I.R.C. § 403(b) retirement plan should be excluded from New Jersey gross income because it is “deferred compensation of certain public school and federal tax[-]exempt organization employees,” the Director again emphasizes that these claims were expressly rejected by the court in Tuohy II. The Director emphasizes that in Tuohy II, the court “distinguish[ed] what the law is and what [p]laintiffs think the law should be.” The court recognized that although the New Jersey Legislature has considered expanding the gross income exception that is afforded to contributions to I.R.C. § 401(k) plans to include other public retirement plans, no statutory change has been approved. Therefore, the Director maintains that application of the doctrine of collateral estoppel is appropriate in these matters because: (i) the legal issues presented here are identical to the issues in Tuohy I and/or Tuohy II; (ii) the issues were actually and finally litigated under Tuohy I and/or Tuohy II; (iii) the court rendered final judgments under Tuohy I and Tuohy II; (iv) resolution of the legal issues was essential and central to the prior final judgments; and (v) the parties are the exact same parties to the prior Tax Court proceedings. In sum, the Director maintains that the criteria for applying the doctrine of collateral estoppel, under In re Estate of Dawson, 136 N.J. 1, 20-21 (1994), have been satisfied warranting entry of summary judgment dismissing plaintiffs’ complaints. Additionally, the Director argues that the $7,899 plaintiffs received in 2015 from Liberty Life Assurance Company, representing a portion of the cash surrender value of Mr. Tuohy’s life insurance policy, is taxable as New Jersey gross income. The Director submits that under N.J.S.A. 54A:5-1(c), the gain from the surrender of a life insurance policy amounts to a “net gain[] or Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -13- income from disposition of property,” and thus, is a category of New Jersey gross income. The Director further emphasizes that the 1099-R issued by Liberty Life Assurance Company to plaintiffs clearly states that of the $8,575.17 “gross distribution” received by plaintiffs, the sum of $7,899 represented the “taxable amount.” Finally, the Director argues that plaintiffs have failed to demonstrate that they were eligible for a 2017 homestead rebate benefit. The Director underscores that eligibility for a homestead rebate benefit is premised upon a “tiered rebate structure based on the claimant’s gross income.” N.J.S.A. 54:4-8.59. Importantly, under the program gross income eligibility limits can be altered from year-to-year by our Legislature based on available funding and policy priorities. N.J.S.A. 54:4-8.67. For the 2017 tax year, New Jersey residents who were 65 years of age or older and who had gross income exceeding $150,000 were not eligible for a 2017 homestead rebate benefit. See L. 2019, c. 150, p. 178. Following the audit, the Director determined that plaintiffs failed to meet the 2017 homestead rebate benefit gross income eligibility requirements. Therefore, the plaintiffs should not have received the $400.18 rebate for the 2017 tax year that they received, and it was appropriate for the Director to offset the plaintiffs 2018 homestead rebate benefit by the overpayment. In response to the Director’s motions, plaintiffs contend that there were “major differences between the 2004 and 2014 cases,” warranting the collateral estoppel doctrine to not be applied. Plaintiffs contend that in Tuohy I, the issue raised was whether alimony was “wrongly” included by plaintiffs in the numerator of the credit fraction in calculating the tax allocation to New York State. However, plaintiffs assert that under Tuohy II, the issue raised was that if alimony is excluded from the numerator of the credit fraction, it should also be excluded from the denominator of the credit fraction. In sum, plaintiffs argue here, that “alimony should not be taxed anywhere Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -14- on the NJ 1040 tax form” in calculating the tax credit. The plaintiffs further attempt to distinguish the facts in the present matter from the facts in Ambrose by emphasizing that in that matter the taxpayer earned wage income from a for-profit law firm, whereas Mr. Tuohy’s W-2 wage income was derived from a non-profit educational institution. Thus, plaintiffs posit that the legal status of the payor of the wage income should result in the exclusion from New Jersey gross income of Mr. Tuohy’s contributions to his I.R.C. § 403(b) retirement plan. In response to the Director’s arguments that plaintiffs’ New Jersey gross income includes dividend income earned and capital gain income from the sale of stock, the plaintiffs argue that they are “already being taxed 2 times (Fed 1040, NYS IT-203) on Dividend [income], Interest [income] and Capital Gain [income]. Another NJ tax would be a third tax on Dividend [income], Interest [income] and Capital Gain [income].” Moreover, the plaintiffs emphasize that they presently have an action pending before the Third Circuit Court of Appeals challenging New Jersey’s imposition of gross income tax, penalties, and interest for the 2014 tax year. 9 In response to the Director’s arguments that the $7,899 received by plaintiffs from the cash surrender of Mr. Tuohy’s Liberty Life Assurance Company policy constitutes New Jersey gross income under N.J.S.A. 54A:5-1(c), the plaintiffs assert that “the Tuohy’s disagree on the cash surrender of a life insurance policy.” Instead, plaintiffs contend that the cash surrender value of the life insurance policy should be “considered a gift to me from my father,” because Mr. Tuohy’s father purportedly made initial payments on the policy. 9 Captioned Sylvester Tuohy; Yongjie Tuohy v. Dept. of Taxation, State of New Jersey, United States Court of Appeals for the Third Circuit, docket number 25-2060. However, attached to the Director’s reply brief is an October 15, 2026 opinion issued by the Third Circuit Court of Appeals dismissing plaintiffs’ complaint for lack of subject matter jurisdiction. Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -15- In response to the Director’s arguments that Mr. Tuohy’s wage contributions to his I.R.C. § 403(b) retirement plan are includable as New Jersey gross income; the plaintiffs argue that those contributions should not be taxed as income because I.R.C. § 401(k) plans are like I.R.C. §403(b) plans. Plaintiffs submit that because these monies will be distributed upon retirement, it should not be subject to “state income tax until it’s distributed.” Moreover, Mr. Tuohy asserts that because his employer, Pace University, is a non-profit educational institution under I.R.C. § 501(c)(3), the deferral of his wage income into an I.R.C. § 403(b) plan should be exempt from state income tax. Finally, in response to the Director’s argument that plaintiffs have failed to demonstrate their eligibility for the 2017 homestead rebate benefit, plaintiffs claim that the rebate should not have been taken away because their challenges to the Director’s audit were pending in court. II. Conclusions of Law A. Summary judgment standard Summary judgment “‘serve[s] two competing jurisprudential philosophies’: first, ‘the desire to afford every litigant who has a bona fide cause of action or defense the opportunity to fully expose his case,’ and second, to guard ‘against groundless claims and frivolous defenses,’ thus saving the resources of the parties and the court.” Globe Motor Co. v. Igdalev, 225 N.J. 469, 479 (2016) (quoting Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 541-42 (1995) (emphasis in original)). New Jersey Court Rule 4:46-2 outlines the circumstances under which summary judgment should 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. Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -16- [R. 4:46-2.] In Brill, our Supreme Court adopted the federal approach to resolving motions for summary judgment, in which the “essence of the inquiry [is] 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.” 142 N.J. at 536 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)). In conducting this inquiry, the trial court must engage in a “kind of weighing that involves a type of evaluation, analysis and sifting of evidential materials.” Ibid. The standard established by our Supreme Court in Brill is as follows: when deciding a motion for summary judgment under R. 4:46-2, the determination of whether there exists a genuine issue with respect to a material fact challenged requires the motion judge to consider whether the competent evidential material presented, when viewed in the light most favorable to the non-moving party in consideration of the most applicable evidentiary standard, are sufficient to permit a rational fact finder to resolve the alleged disputed issue in favor of the non-moving party. [Id. at 536.] In considering all the material evidence before it with which to determine if there is a genuine issue of material fact, the court must view most favorably those items presented to it by the party opposing the motion and all doubts are to be resolved against the movant. Ruvolo v. American Casualty Co., 39 N.J. 490, 491 (1963). A court charged with “deciding a summary judgment motion does not draw inferences from the factual record as does the factfinder in a trial, . . . [i]nstead, the motion court draws all legitimate inferences from the facts in favor of the non- moving party.” Globe Motor Co., 225 N.J. at 480 (internal citations omitted). See also Meade v. Twp. of Livingston, 249 N.J. 310, 327 (2021). Thus, the moving party bears the burden “to exclude any reasonable doubt as to the existence of any genuine issue of material fact” with respect to the Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -17- claims being asserted. United Advertising Corp. v. Borough of Metuchen, 35 N.J. 193, 196 (1961). “By its plain language, R. 4:46-2 dictates that a court should deny a summary judgment motion only where a party opposing the motion has come forward with evidence that creates a ‘genuine issue as to any material fact challenged.’” Brill, 142 N.J. at 529. However, when the party opposing the motion merely presents “facts which are immaterial or of an insubstantial nature, a mere scintilla, fanciful, frivolous, gauzy or merely suspicious,” then an otherwise meritorious application for summary judgment should not be defeated. Judson v. Peoples Bank and Trust Co., 17 N.J. 67, 75 (1954). Hence, “when the evidence is so one-sided that one party must prevail as a matter of law . . . the trial court should not hesitate to grant summary judgment.” Brill, 142 N.J. at 540 (quoting Liberty Lobby, Inc., 477 U.S. at 252). Having reviewed the pleadings, affidavits, and undisputed material statements of fact, the court concludes that no genuine issues of material fact are in dispute. Rather, this matter involves an application of law to the undisputed facts developed in the motion record, and thus, is ripe for summary judgment. B. Credit for tax paid to another state or political subdivision N.J.S.A. 54A:4-1 provides, in part, that: (a) A resident taxpayer shall be allowed a credit against the tax otherwise due under this act for the amount of any income tax or wage tax imposed for the taxable year by another state of the United States . . . with respect to income, which is also subject to tax under this act, except as provided by subsections (c) and (d) of this section. (b) The credit provided under this section shall not exceed the proportion of the tax otherwise due under this act that the amount of the taxpayer’s income subject to tax by the other jurisdiction bears to his entire New Jersey income. [N.J.S.A. 54A:4-1.] Tuohy, Sylvester L. & Yongjie v. Dir., Div. of Taxation Docket Nos. 008921-2022; 008983-2022; 009164-2022; 009166-2022; and 009240-2022 Page -18- In response to N.J.S.A. 54A:4-1, the Director promulgated regulations clarifying the approach that should be utilized in computing the tax credit that New Jersey residents may deduct “by reason of any income or wage tax paid to another state or political subdivision . . . pursuant to the New Jersey Gross Income Tax Act.” N.J.A.C. 18:35-4.1(a). N.J.A.C. 18:35-4.1(a)(3) provides, in part, that: The amount of the resident taxpayer credit for tax paid to another state or political subdivision shall not exceed the percentage derived by dividing income subject to tax [by] the other jurisdiction by the taxpayer's entire New Jersey income multiplied by the tax otherwise due under the New Jersey Gross Income Tax Act. [N.J.A.C. 18:35-4.1(a)(3).] The phrase “income subject to tax by the other jurisdiction” is defined as “those items of income that are taxed by another jurisdiction before the allowance for personal exemptions and standard and/or other itemized deductions and which are also subject to tax under the New Jersey Gross Income Tax Act.” N.J.A.C. 18:35-4.1(a)(6)(i). Importantly, “[a]ny income that has been excluded or deducted from taxable gross income of another