Turnpike Authority is Not a “Local Government Unit”: Tax Court

All politics, the saying goes, is local. Not so with government, according to a recent decision from New Jersey’s Tax Court. In an opinion that teaches more about legislative drafting than it does about tax policy, the court in New Jersey Turnpike Authority v. Township of Monroe parsed a complex definition of “local government unit” in the Garden State Preservation Trust Act (GSPTA). It held that the New Jersey Turnpike Authority did not come within that definition, and thus could not claim that status to obtain an exemption from roll-back taxes on a parcel it purchased in 2009.

To mitigate the impacts of a construction project on wetlands, the Authority purchased some 400 acres of vacant land in Monroe Township for the purpose of donating it to the Department of Environmental Protection. The land was assessed as farmland for property tax purposes, but the Authority did not use it for agricultural or other permissible purposes. Monroe’s tax assessor then sought to impose three years of “roll-back” taxes on the land, as authorized both by the state Constitution and by statute, because the land had not been used for any purpose that entitled it to assessment as farmland.

The Authority claimed an exemption from the roll-back taxes under the GSPTA, which exempts from roll-back taxes lands “acquired by the State [or] local government unit” for recreation and conservation purposes. Apparently ignoring the possibility that it was the State for purposes of the exemption, the Authority argued that it was a “local government unit,” defined in the GSPTA to include “a county, municipality, or other political subdivision of the State, or any agency, authority, or other entity thereof the primary purpose of which” is to acquire and hold lands for recreation and conservation purposes.

The Tax Court focused on the word “thereof” in the definition, and held that it applied only to the words preceding it: “a county, municipality, or other political subdivision of the State.” The Authority, it held, is not an agency or authority of either a county or a municipality, and is not an agency or authority of any political subdivision because it is part of the Department of Transportation, a principal department of the Executive Branch of the State government.

Having come to the common-sense conclusion that the Authority is part of the Executive Branch, and not part of a local government unit — albeit via an admirably careful and thorough reading of the statute — the Tax Court invited supplemental briefing on whether it could qualify for an exemption as the “State.” Tax lawyers, and grammarians, will be paying close attention.

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