Full Opinion

NOT FOR PUBLICATION WITHOUT APPROVAL OF THE TAX COURT COMMITTEE ON OPINIONS ------------------------------------------------------x HUNTERDON MEDICAL CENTER/ : ATTN CFO, : TAX COURT OF NEW JERSEY : DOCKET NO: 005101-2025 : Plaintiff, : : v. : : TOWNSHIP OF RARITAN, : : Defendant. : : ------------------------------------------------------x Decided October 28, 2026. Farhan Ali for plaintiff (McCarter & English, LLP, attorneys). Wesley E. Buirkle for defendant (DiFrancesco, Bateman, Kunzman, Davis, Lehrer & Flaum, PC, attorneys). CIMINO, J.T.C. Chapter 91 limits a tax appeal if the owner of income-producing property fails to respond to a pre-suit request for income and expense data. The question is when must the property be income-producing to trigger the Chapter 91 limitation. The taxpayer asserts October 1 of the pre-tax year. For the reasons set forth herein, the court disagrees and concludes that the failure to provide income and expense data for the period specified by a reasonable Chapter 91 request will limit the appeal. Taxpayer, Hunterdon Medical Center, owns a medical office building located at 121 Highway 31 and identified as Block 18.01, Lot 12.02 on the tax maps of the Township of Raritan. During 2023, Hunterdon Medical Center occupied the building, along with a plastic surgeon’s office, and SAFE, a not-for-profit domestic violence prevention agency. The plastic surgeon only occupied the building for the earlier part of 2023 and paid rent. SAFE only paid a nominal rent of $1 per year based upon a verbal agreement. On May 6, 2024, the assessor sent a Chapter 91 request for income and expense data to Hunterdon Medical Center by regular mail. The assessor sought income and expense information for the period from January 1, 2023, to December 31, 2023. When the assessor did not receive a response, she re-sent the request by certified mail on October 29, 2024. Hunterdon Medical Center did not respond. Income and expense information is used to formulate a value for most commercial properties. As compared to the comparable sales approach, the income capitalization approach, which uses income and expense information, is the preferred method of valuing income-producing property. VBV Realty, LLC v. Township of Scotch Plains, 29 N.J. Tax 548, 558-59 (Tax 2017). By gathering and analyzing income and expense information, an assessor should be able to reach more accurate assessments. 2 After Hunterdon Medical Center filed a tax appeal for the 2025 year, the Township of Raritan filed a motion to limit the proceeding pursuant to Chapter 91 for failure to provide income and expense information. Enacted in 1979, Chapter 91 is the latest refinement of the longstanding obligation of taxpayers to “account” for their real property. L. 1979, c. 91. See also Acts of the Gen. A. of the Province of N.J. ch. 111, § 4 (John Kinsey 1732); L. 1798, c. 805, § 1; Rev. 1846 tit. 35, ch. 1, § 1; L. 1903, c. 208, § 8; L. 1918, c. 236, § 403; R.S. 54:4-34 (1937). As the statute existed prior to 1979, taxpayers had no incentive to provide information. “[T]he property owner [was] not subject to any penalty for not disclosing property income information.” S. Revenue, Fin. & Appropriations Comm. Statement to S. 309 (Jan. 26, 1978). The Legislature had a “problem” with a “property owner . . . free to appeal the assessment, notwithstanding his refusal to provide information which would . . . affect[] the valuation, and, perhaps, avoid[] the appeal from the assessment.” Ibid. “Further . . . the assessor [had] no access to information on which the appellant [was] basing his appeal and thus the assessor [was] unprepared to testify in argument to the appellant’s representations.” Ibid. If a taxpayer could withhold information until the time of appeal, “the assessor would then be required either to prepare a second valuation of the property – a tremendous waste of valuable time and resources – or to defend the original valuation on the 3 taxpayer’s appeal.” Ocean Pines, Ltd. v. Borough of Point Pleasant, 112 N.J. 1, 7 (1988). To remedy this problem, the Legislature enacted Chapter 91 limiting the right to appeal when a taxpayer ignores a request for income and expense information. L. 1979, c. 91. In relevant part, Chapter 91 amended the law to read: Every owner of real property of the taxing district shall, on written request of the assessor, made by certified mail, render a full and true account of his name and real property and the income therefrom, in the case of income- producing property, . . . and if he shall fail or refuse to respond to the written request of the assessor within 45 days of such request, . . . the assessor shall value his property at such amount as he may, from any information in his possession or available to him, reasonably determine to be the full and fair value thereof. No appeal shall be heard from the assessor's valuation and assessment with respect to income-producing property where the owner has failed or refused to respond to such written request for information within 45 days of such request . . . . [N.J.S.A. 54:4-34 (emphasis added).] If a taxpayer fails to respond to an assessor’s written request for information within forty-five days, an appeal is commonly limited to a reasonableness hearing. That is, an appeal “limited in its scope to the reasonableness of the valuation based upon the data available to the assessor . . . .” Ocean Pines, 112 N.J. at 11. With this limitation, a taxpayer faces a significant hurdle overcoming the presumption of correctness which attaches to every assessment. Pantasote Co. v. City of Passaic, 100 N.J. 408, 412 (1985) (presumption); Clinton Fountain Motel, L.P. v. Township 4 of Clinton, 18 N.J. Tax 486, 488 (App. Div. 1999) (burden). The imposition of a reasonableness hearing “essentially closes the courthouse door on the taxpayer’s right to appeal an assessment.” Southland Corp. v. Township of Dover, 21 N.J. Tax 573, 579 (Tax 2004). Due to the severe consequence, the Appellate Division undertakes a strict construction of the statute. H.J. Bailey Co. v. Township of Neptune, 399 N.J. Super. 381, 386-87 (App. Div. 2008). Nevertheless, the failure to provide a Chapter 91 response is not always fatal. For non-income-producing property, there are not any legal ramifications for failure to respond to a Chapter 91 request. Id. at 388. While the law requires a taxpayer response even if the property is not income-producing, Chapter 91’s claim limitation does not apply if the property is not income-producing. Id. at 386. In other words, “owners of non-incoming-producing properties [have] the unilateral right to ignore Chapter 91 requests with impunity.” Id. at 389. In this case, two issues arise. The first question is as of what date, or range of dates, must a property be income-producing. The second question is whether a nominal $1 per year lease truly makes a property income-producing. The court only has to address the second issue if Hunterdon Medical Center is successful on the first. There are four possible answers to the first question as to the income- producing date or period. These are (1) the date the request is mailed; (2) the date 5 the request is answered; (3) the period specified in the request; or (4) October 1 of the pre-tax year. Hunterdon Medical Center urges the court to conclude that October 1 of the pre-tax year is the proper date. However, this is problematic for a number of reasons. Assessors value property as of October 1 of the pre-tax year. 1 N.J.S.A. 54:4-23. Traditionally, this review must be completed by January 10. N.J.S.A. 54:4-35. Many times, assessors send Chapter 91 requests prior to October 1. This allows time for both the statutorily mandated forty-five days to respond as well as time for the assessors to evaluate the data as it is received. Using October 1 would mean that the assessor could not send out the notices until October 1, thereby curtailing the period for review. The second problem with using October 1 also applies to any other single date. If a property is income-producing during some periods of the year but not income- producing during others, a single date may fail to accurately reveal the rental income history. A property otherwise rented throughout the year should not be deemed non- income-producing because of a vacancy a few days around October 1. Or, the failure of a tenant to pay rent around October 1 should not automatically render a property non-income-producing. For example, a successful and profitable landlord of summer seasonal boardwalk retail property could answer the property does not 1 For the 2025 tax year, that would be October 1, 2024. 6 produce income in response to a late in the year Chapter 91 request. Moreover, even with a response, income could be missing and the vacancy rate skewed. Overall, the use of any single date has the potential to misrepresent the status of the property. From a practical perspective, an evaluation and determination whether a property is income-producing has to cover a period of time, not just one day. This reading comports with the prior Appellate Division decision of Alfred Conhagen, Inc. v. Borough of South Plainfield, 16 N.J. Tax 470 (App. Div. 1997). In Conhagen, the tax assessor sent a Chapter 91 request on July 14, 1994. Id. at 471. The taxpayer failed to comply. Ibid. It appeared uncontradicted that for three years prior to May 1994, the property was income-producing. Id. at 472. “The prior use of petitioner’s property, rendered the property ‘income-producing property.’” Ibid. (emphasis added). Likewise, setting aside for a moment the issue of the $1 per year SAFE occupancy, the plastic surgeon’s occupancy during a portion of the period requested rendered the property income-producing. The Appellate Division in Conhagen also indicated “[w]here the property has not produced income, the taxpayer is obliged to report that fact to the tax assessor.” Id. at 473. Hunterdon Medical Center reads this provision to impliedly free itself from Chapter 91’s claim limitation for failure to disclose. The basis is a terse letter sent on June 29, 2023, a year prior to the request at issue. The letter, sent in response to the prior year’s Chapter 91 request, reported Hunterdon Medical Center occupies 7 all of the building except for SAFE’s $1 per year occupancy. While technically correct as of the date of the letter, June 29, 2023, the letter fails to reveal that the plastic surgeon’s tenancy did not end until early 2023. This case demonstrates the pitfalls of allowing a singular date for determining income-producing status. The Appellate Division made clear a taxpayer must disclose that “the property has not produced income,” not the property is not producing income. Ibid. (emphasis added). If the law was otherwise, taxpayers might be free to disclose that their property is not income-producing on a date which they alone select. This would serve as a temptation to engage in the mischief attendant with selecting a date during a vacancy or delinquency. This could render a Chapter 91 response being the classic case of a “half-truth can be as deceptive as a positive misrepresentation.” In re Shack, 177 N.J. Super. 358, 363 (App. Div. 1981). As applied to this case, whether the assessor was notified or not, the purported change in status of the property for 2023 does not immunize Hunterdon Medical Center from responding to the reasonable request of whether the property has produced income for the 2023 calendar year. 2 2 To be clear, requesting 2023 calendar year income and expense information in 2024 for use in setting the 2025 assessment (as of October 1, 2024) is reasonable. The court leaves the appropriateness of other time periods to a case in which the issue presents itself. 8 At the end of the day, if Hunterdon Medical Center would have responded to the Chapter 91 request, it would have disclosed that the property was income- producing for 2023 based upon the occupancy of the plastic surgeon. That did not occur. The court limits taxpayer’s appeal to a reasonableness hearing. Moreover, the court does not have to reach the issue of whether the $1 per year nominal rent from SAFE constitutes income. The court will address the $1 rent when and if the issue presents itself. 9