Page 4 THE VILLADOM TIMES I • April 23, 2014 Area Tax Court denies club’s motion for summary judgment by Jennifer Crusco New Jersey Tax Court Judge Patrick DeAlmeida has denied the Ramapo Valley Railroad Club’s motion for summary judgment with regard to the assessment placed on its leasehold interest in the VFW Post 192 (Ho-Ho-Kus/ Ridgewood) building at 620 Cliff Street in Ho-Ho-Kus. The case will now be scheduled for trial. DeAlmeida sent notice of his April 11 decision to Steven R. Irwin, Esq., who represents the club, and David Bole, Esq., who represents the Borough of Ho-Ho-Kus in this matter. The club had sought an order invalidating the assess- ment placed on its leasehold interest in the VFW building for tax years 2010 and 2011. However, DeAlmeida found factual issues germane to the validity of the assessment remain in dispute. According to the judge, the motion record did not include enough evidence regarding RVRC’s use of the building, the extent and frequency of the club’s invitations to the public to enter the premises to view model railroad layouts, the extent and frequency of RVRC’s other community out- reach efforts, limitations on club membership, and any club efforts to lessen the burdens on government. He also said the record did not contain sufficient evidence about the club’s sources of income, the extent of its expenses, the compensation of its officers, admission charges to its exhibits, and the extent of the group’s financial assets. The VFW owns the building and the land on which it is located. This non-profit organization obtained title to the property from the municipality through a 1954 deed, which prohibits the lease of the property by the VFW without the borough’s consent. In 1993, the VFW leased the property to the RVRC. At that time, the VFW’s membership had asked the borough council for assistance maintaining the building due to the VFW’s then-aging membership. The club had lost its layout space in Ramsey, and the agreement was billed as a solution for both organizations. When the VFW underwent a revi- talization, the “lease in perpetuity” agreement became an issue, as the veterans have limited space within their build- ing and are restricted as to when they can use the facility. The lease was renewed in 2002. That 10-year agreement includes consecutive five-year renewals. The RVRC must provide VFW with access to the building for monthly meet- ings and during the week before Memorial Day. Prior to the 2002 lease, the tax assessor designated the property as exempt as it was being used by a national war veterans’ organization. However, in late 2009, Ho-Ho-Kus Tax Assessor Marie Merolla advised VFW Post 192 Com- mander Stanley Kober that she had reviewed the lease and property tax exemption forms and found that a change should be made on the VFW building’s tax-exempt status. Merolla said the change was warranted due to the lease with the club and the fact that the veterans have access to the building for meetings only once a month and one week before Memorial Day. Merolla noted that the property is being entirely leased to the club, with limited access to the veterans. While the railroad club is a non-profit, Merolla said it does not meet the statutory requirements for prop- erty tax exemption. According to the law covering taxation in leasehold situations, Merolla found that the exemption should be pro- rated. The area used by the veterans remains exempt, the assessor found. However, she determined that the remain- ing portion of the building is taxable, with the tax payable by the lessee. New Jersey permits a full tax exemption for veterans’ organizations that meet specific legal requirements, and allows these organizations to derive income without losing their exemption. “However, when the veteran organization property is leased to a non-exempt tenant the lessee has the lease- hold estate, and is listed as the owner, even though they do not actually own the property. (N.J.S.A. 54:4-2.3). As the leasehold owner, they are responsible for their portion of the real estate taxes,” Merolla previously stated. She added that the law provides that, in the absence of payment, “a lien on the leasehold estate is to be made and…(the club) shall be personally liable.” RVRC filed a petition of appeal with the Bergen County Board of Taxation seeking an exemption for 2010. The club claimed it was entitled to an exemption because it uses the property for the moral and mental improvement of men, women, and children. The club also asserted that, because its use of the property is entitled to an exemption, the Leasehold Taxing Act does not apply. The county board denied the club’s claim. RVRC amended its certificate of incorporation and con- stitution in October 2010 to state that the club’s purposes are “to foster, sponsor, promote, educate, (and) encourage all interested men, women, and children to enjoy, practice, and improve the hobby of model railroading,” to assist other organizations with a similar purpose, and that “the only allowable” purposes of the club “are such activities as are enumerated in New Jersey statutes as would entitle the club to property tax exemption to the extent that any such property taxes would otherwise be applicable.” The club subsequently sued the Borough of Ho-Ho-Kus over the assessment and declined to pay the tax bill. The club’s members have cited the organization’s educa- tional and charitable functions, including the annual holi- day event, which is open to the public. In 2011, Irwin said the club had done nothing to imperil the exemption from taxation that the VFW has. Bole previously said that the tax collector advised that the case could end with a tax sale. The situation is unique, he noted, since the club does not own the building. He explained that a tax sale involving the property would con- sist of an interested party purchasing the tax sale certifi- cate. The purchaser would not be buying the building, but rather the interest in the building now held by the club; that is, the leasehold. The attorney pointed out that it would be unusual for someone to buy the tax sale certificate when a leasehold situation would be inferior to ownership.