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NOT FOR PUBLICATION WITHOUT APPROVAL OF

THE TAX COURT COMMITTEE ON OPINIONS

TAX COURT OF NEW JERSEY

Patrick DeAlmeida R.J. Hughes Justice Complex

Presiding Judge P.O. Box 975

Trenton, New Jersey 08625-0975

(609) 292-8108 Fax: (609) 984-0805

March 9, 2012

Vitold L. Milaszewski

80 Windward Drive

Barnegat, New Jersey 08005

Carl A. Wohlleben

Deputy Attorney General

Division of Law

R.J. Hughes Justice Complex

P.O. Box 106

25 Market Street

Trenton, New Jersey 08625-0106

Re: Vitold L. Milaszewski v. Director, Division of Taxation

Docket No. 012213-2011

Docket No. 016538-2011

Dear Mr. Milaszewski and DAG Wohlleben:

This letter constitutes the court’s opinion after trial in the above-referenced matters in which plaintiff challenges the final decision of the Director, Division of Taxation denying his applications for homestead property tax reimbursements for tax years 2009 and 2010. For the reasons explained more fully below, the Director’s final determinations are affirmed.

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I. Procedural History and Findings of Fact

Because this matter is assigned to the small claims division, the trial was conducted pursuant to, R. 8:11(a)(1), which provides that “hearings shall be informal and the court may hear such testimony and receive such evidence as it deems necessary or desirable for a just and equitable determination of the case,” R. 8:11 (b). Based on the evidence gathered during the trial, as well as the documents submitted by the parties prior to trial, the court makes the following findings of fact.

During 2009 and 2010, plaintiff Vitold L. Milaszewski owned the residence at 80 Windward Drive, Barnegat Township, Ocean County. In 1986, Mr. Milaszewski, a former railroad employee, began receiving monthly disability retirement annuity payments under the Railroad Retirement Act (“RRA”), 45 U.S.C.A. §228a, et seq. Under Tier 1 of the RRA, plaintiff receives a monthly payment equal to what he would receive for his disability retirement under the Social Security Act, 42 U.S.C.A. §401, et seq. Under Tier 2 of the RRA, plaintiff receives an additional monthly payment pursuant to the railroad retirement formula.

Plaintiff applied for homestead property tax reimbursements for tax years 2009 and 2010 based on his disability. On June 28, 2011, after a hearing, the Director denied plaintiff’s application for tax year 2009. The Director determined that plaintiff was not entitled to a reimbursement because “disabled person” is defined in the statute authorizing the reimbursement as “an individual receiving monetary payments pursuant to Title II of the federal Social Security Act ( 42 U.S.C. s 401 et seq.) on December 31, 1998, or on December 31 in all or any part of the year for which a homestead property tax reimbursement under this act is claimed.” N.J.S.A. 54:4-8.67. The Director concluded that because plaintiff was retired and receiving benefits under the RRA and not the Social Security Act he did not qualify for a reimbursement.

On August 10, 2011, plaintiff filed a letter with the court in which he expressed his desire to appeal the Director’s decision with respect to tax year 2009. After communication with staff members of the Clerk of the Tax Court, plaintiff filed a formal Complaint challenging the Director’s decision with respect to tax year 2009 on October 21, 2011. The Director has not challenged the timeliness of the tax year 2009 Complaint. That Complaint was assigned Docket No. 012213-2011.

Plaintiff also filed an application for a homestead property tax reimbursement for tax year 2010. On September 9, 2011, the Director issued a letter to plaintiff denying his application with respect to tax year 2010 for the reasons stated above. The September 9, 2011 final determination also concluded that plaintiff has been erroneously granted reimbursements for tax years 2007 and 2008 and demanded that he repay the total of $2,177.62 erroneously granted to him.

On October 21, 2011, plaintiff filed a Complaint challenging the Director’s final determination with respect to tax year 2010. That Complaint was assigned Docket No. 016538-2011.1

The court consolidated the two matters for trial and for the purpose of this letter opinion.

II. Conclusions of Law

The court’s analysis begins with the familiar principle that the Director’s interpretation of tax statutes is entitled to a presumption of validity. “Courts have recognized the Director’s expertise in the highly specialized and technical area of taxation.” Aetna Burglar & Fire Alarm Co. v. Director, Div. of Taxation, 16 N.J. Tax 584, 589 (Tax 1997) (citing Metromedia, Inc v. Director, Div. of Taxation, 97 N.J. 313, 327 (1984)). The scope of judicial review of the Director’s decision with respect to the imposition of a tax “is limited.” Quest Diagnostics, Inc. v. Director, Div. of Taxation, 387 N.J. Super. 104, 109 (App. Div.), certif. denied, 188 N.J. 577 (2006). The Supreme Court has directed the courts to accord “great respect” to the Director’s application of tax statutes, “so long as it is not plainly unreasonable.” Metromedia, supra, 97 N.J. at 327. See also GE Solid State, Inc. v. Director, Div. of Taxation, 132 N.J. 298, 306 (1993) (“Generally, courts accord substantial deference to the interpretation an agency gives to a statute that the agency is charged with enforcing.”)

In addition, the Appellate Division has instructed this court to construe the statutes defining eligibility for homestead rebates narrowly. MacMillan v. Director, Div. of Taxation, 180 N.J. Super. 175, 178 (App. Div. 1981), aff’d, 89 N.J. 216 (1982). “[T]ax preference provisions are strictly construed against those claiming exemption. This is so with regard to local property taxes. It is also true with respect to state taxes.” Ibid. (citations omitted). Where the homestead rebate “statute is outspoken and unambiguous” its terms must be strictly applied. Id. at 179. Accord Fedders Fin. Corp. v. Director, Div. of Taxation, 96 N.J. 376, 384-86 (1984); Vavoulakis v. Director, Div. of Taxation, 12 N.J. Tax 318, 329 (1992) , aff’d o.b., 13 N.J. Tax 322 (App. Div. 1993).

In 1975, our Constitution was amended to authorize the enactment of laws to allow homeowners and residential tenants “a rebate or a credit of a sum of money related to property taxes paid by or allocable to them at such rates and subject to such limits as may be provided by law.” N.J. Const. (1947) Art. VIII, §1, par. 5. Since that time, the Legislature has enacted a series of homestead rebate programs for resident homeowners and tenants. Vavoulakis v. Director, Div. of Taxation, supra, 12 N.J. Tax at 323-24. Although the programs have had various names and eligibility requirements, the purpose of the programs has consistently been “the beneficent purpose of alleviating the heavy realty tax burden.” Rubin v. Glaser, 83 N.J. 299, 307, app. dis., 449 U.S. 977, 101 S. Ct. 389, 66 L. Ed.2d 239 (1980).

A homestead property tax reimbursement is available to any person sixty-five or more years of age or who is disabled who meets certain income limits and who, as a “homeowner, has made a long-term contribution to the fabric, social structure and finances of one or more communities in this State, as demonstrated through the payment of property taxes . . . on any homestead . . . used as a principal residence in this State for at least 10 consecutive years at least three of which as owner of the homestead for which a homestead property tax reimbursement is sought prior to the date that an application for a homestead property tax reimbursement is filed.” N.J.S.A. 54:4-8.67. The amount of the reimbursement is the difference between the amount of property tax due in the year for which the reimbursement is claimed and the amount due in the “base year.” Ibid. The “base year” is tax year 1997 or the first year in which a claimant becomes eligible for a reimbursement after December 31, 1997. Ibid.

For purposes of the homestead property tax reimbursement tax year is defined as “the calendar year in which a homestead is assessed and the property tax is levied thereon and it means the calendar year in which income is received and accured.” N.J.S.A. 54:4-8.67. In addition, a homestead must be a “dwelling house” which “is owned and used by the eligible claimant as the eligible claimant’s principal residence.” Ibid. To qualify for the reimbursement, a claimant must own the residence, be 65 or over, and meet annual income limitations during the tax year at issue. Because the tax year is defined as the calendar year, a claimant must satisfy the statutory obligations as of December 31st of the tax year.

In addition, the Legislature limited eligibility to disabled persons “receiving monetary payments pursuant to Title II of the federal Social Security Act ( 42 U.S.C. s 401 et seq.) on December 31, 1998, or on December 31 in all or any part of the year for which a homestead property tax reimbursement under this act is claimed.” N.J.S.A. 54:4-8.67. The Legislature established clear parameters for eligibility for the reimbursement, including a requirement that to be eligible for reimbursement a taxpayer must be receiving disability payments under the Social Security Act. Plaintiff does not satisfy that condition. He receives disability retirement benefits under federal statutory provisions other than the Social Security Act.

There can be no doubt that the Legislature did not intend to include disability payment recipients under the RRA as eligible for a reimbursement. N.J.S.A. 54:4-8.67 references the Social Security Act by title and statutory citation. No other federal law is included in the statute. This contrasts with N.J.S.A. 54A:6-3, which provides an exclusion from income under the gross income tax for “[a]ll payments received under the Railroad Retirement Act administered by the Federal Government.” It is clear that the Legislature is aware of the RRA and specifically incorporated reference to that Act in tax statutes when it desired to do so.

Plaintiff argues that all recipients of disability retirement benefits under federal statutes should be treated equally under New Jersey law. The Legislature, however, is accorded significant leeway when enacting a tax benefit and authorizing the expenditure of State funds. It exercised its prerogative to limit reimbursement to those receiving payment under the Social Security Act. One readily apparent rationale for this limitation is that taxpayers receiving disability retirement payments under the RRA receive a more generous benefit than those receiving benefits under the Social Security Act. As explained above, and as established by the documents submitted during trial, under Tier 1 of the RRA plaintiff receives a monthly payment equal to what he would receive under the Social Security Act and under Tier 2 of the RRA plaintiff receives an additional monthly payment. It would be perfectly rational for the Legislature to conclude that the homestead property tax reimbursement should not be available to the recipients of the higher monthly payments. The court detects nothing legally suspect about such a classification.

The court lacks the authority to rewrite the statute to extend the reimbursement benefit to taxpayers receiving a disability retirement under the RRA. While the court does not doubt that plaintiff would be assisted in maintaining his home were he to receive a reimbursement, this observation alone is insufficient to award relief. It is this court’s obligation to enforce unambiguous statutory provisions, regardless of whether a variation of those provisions might accommodate a particular taxpayer or better accomplish the stated goals of the law.

The Tax Court Clerk will enter Judgment affirming the Director’s Final Determinations.

Very truly yours,

Patrick DeAlmeida, P.J.T.C.

1 With respect to at least one of the tax years the Director also found that plaintiff’s income exceeded the income eligibility limits incorporated in the reimbursement statute. The Director’s decision on this point was based on plaintiff’s reported gambling winnings. The court granted plaintiff leave to submit after trial proof of gambling losses exceeding the reported winnings. Because the court resolves the question of plaintiff’s eligibility for a homestead property tax reimbursement based on his disability retirement under the RRA, the court need not reach the question of whether plaintiff’s income exceed the statutory limit for the years in question.