Tax court judge broadens property rights available under Domestic Partnership Act
When New Jersey Tax Court Judge Vito Bianco ruled on March 15 that Louis Paul Hennefeld was entitled to a 100 percent property tax exemption from the Township of Montclair, he was engaging in a creative reading of the New Jersey Domestic Partnership Act, enacted by former Gov. James McGreevey, that went into effect on July 10, 2004, but one that seemed consistent with the wording of the law and the intention of the State Legislature.
Under applicable laws, a U.S. military veteran certified by the Veterans Administration (VA) as 100 percent disabled due to service-related reasons is entitled to a complete exemption from taxes on his wholly-owned property. If the veteran is only a partial owner, the exemption is reduced accordingly.
Hennefeld served in the U.S. Air Force for 15 years between 1952 and 1968, with only one brief gap, and received an honorable discharge on May 7, 1968. The following month, the Department of Veterans Affairs certified that his “wartime service-connected disability was totally disabling.”
Hennefeld and Blair William O’Dell later became a couple and have lived together since 1975. They jointly purchased their home in Montclair in 1985, with right of survivorship, which means that each has a half interest in the house and on the death of one, the other becomes the sole owner. Hennefeld applied for the property tax exemption, and the Montclair authorities determined he was entitled to a 50 percent exemption, because he owned half of the property.
Hennefeld and O’Dell accepted this decision at the time, but things have since changed. The couple entered into a Vermont civil union in July 2000, right after the statute went into effect. In 2003, they married legally in Niagara Falls, Ontario. And as soon as the New Jersey Domestic Partnership Act (DPA) went into effect, they registered as domestic partners on July 12, 2004.
Once they were married, the couple figured they should be entitled to be treated as spouses for purposes of the property tax exemption. New Jersey allows married couples to hold property as “tenants by the entirety,” a vestige of the old English common law concept that a married couple consists of but one legal person. In January 2004, reasoning that they should be treated equally as a married couple, Hennefeld and O’Dell filed an application with the Montclair tax assessor for the 100 percent exemption.
The assessor turned them down, on the ground that to get the entire exemption, Hennefeld must be the “sole owner.” The couple then, as joint tenants with right of survivorship “re-conveyed” the property to themselves as “tenants by the entirety,” and applied again, this time to the Essex County Board of Taxation, for the full exemption last March. By that point the state DPA had been enacted but not yet implemented. The county board turned them down finally on August 13, 2004, by which time they had registered as domestic partners under the now fully implemented DPA.
The couple appealed to the Tax Court.
Judge Bianco confronted several different arguments in this case. One was that since the two men had conveyed the property to themselves as tenants by the entirety, Hennefeld was now a 100 percent owner, entitled to the full exemption. They also argued that they are married under Canadian law and New Jersey should recognize the marriage. They argued that their Vermont civil union also entitled them to be treated as spouses. Finally, as a last fallback, they argued that spousal treatment should follow from their New Jersey domestic partnership status.
The last, fallback argument was the one that won out. Bianco, following a ruling last year by a federal bankruptcy court in Washington State, determined that the Canadian marriage was of no effect as a matter of New Jersey law. Based on the federal Defense of Marriage Act, he found that that New Jersey was not required to recognize the Vermont Civil Union. And after an intensive review of property ownership rights, he concluded that the attempt of these two men to re-convey the property to themselves in that form was held to be void.
But the couple’s registration as domestic partners under New Jersey law was another matter. Focusing in on the precise wording of the law, Bianco noted that everywhere in the DPA that the Legislature specified rights and benefits for domestic partners it used the word “including.” Looking at past review of such language by the New Jersey judiciary, Bianco quoted from another case, noting that the court “viewed the word ‘including’ as merely illustrative, not limiting.” In other words, the specific list in the legislation did not exhaust all the rights, and similar rights might also be covered.
It was significant in Bianco’s view that that the Legislature specifically authorized certain tax breaks for registered domestic partners, because, according to the legislative findings, they were functional family households deprived of such benefits because they could not marry.
The judge also noted that in other portions of the DPA, “the Legislature used specific language of limitation.”
Bianco cautioned that he was not recognizing the Canadian marriage or the Vermont civil union in this case. He was merely finding that the property tax exemption was enough like the other kinds of tax rights granted in the statute so that it was appropriate to apply it to this case.
In other respects as well, the decision was not a total win for Hennefeld and O’Dell. The full exemption only became available as of the date of the couple’s New Jersey domestic partnership in mid-2004, not their Canadian marriage in 2003.
On one hand, Bianco’s progressive interpretation of the New Jersey statute provides a rationale for other state courts to adopt a liberal construction in particular cases that lend themselves to similar reasoning.
The case, however, is an unfortunate addition to the emerging case law of non-recognition regarding Canadian marriages and Vermont civil unions. It will be interesting to see what happens when a married same-sex Massachusetts couple moves to New Jersey and seeks to hold property as tenants by the entirety or claim some other right rooted in marital status.