Rumors of the demise of NJ's hospital property tax exemption are greatly exaggerated...

In a recent unpublished opinion, the Appellate Division of the New Jersey Superior Court affirmed the dismissal of a complaint seeking leave to impose omitted assessments on Riverview Medical Center, now owned by Meridian Health Corporation, in Red Bank, New Jersey. This unusual situation grows out of a 2015 Tax Court decision entitled AHS Hospital Corp v. Town of Morristown. In that case, an exempt hospital had its exemption revoked due to an alleged change in use and lost its challenge to the assessments imposed by the municipality thereafter. 

In this case, the municipality filed petitions at the county board of taxation, and later at the Tax Court, seeking to impose omitted assessments for 2014 and 2015. Notably, the petitions were filed after the AHS Hospital Corp. opinion was issued, after the 2015 deadline for filing appeals. The Tax Court found that the omitted assessments would be improper as there had been no showing of a change in use, and no timely appeals had been filed. 

The Appellate Division affirmed for substantially the same reasons as the Tax Court. The Appellate Division agreed that the Borough's request for discovery to explore the property's use was a "fishing expedition", and that they had no evidence of a change in use. 

While this ruling is helpful for hospitals in that it affirms the requirement of a predicate change in use to trigger a removal of an exemption and subsequent omitted assessment, the underlying rationale for the denial of an exemption announced in AHS Hospital Corp. is unchanged. Nevertheless, the procedural and process safeguards should not be overlooked. The Appellate Division's decision can be accessed below. 

Borough of Red Bank v. RMC-Meridian Health