January 21, 2011
Re: Verizon Business Personal Property Tax Update
As indicated in previous communications, Hopewell Borough in Mercer County has appealed Verizon’s decision to cease paying the Business personal Property Tax based upon its interpretation of the applicable statute. Verizon interprets the statute to provide that once it unilaterally determines that it no longer supplies dial tone and access to at least 51% of the local telephone exchanges in a municipality, payment of the tax is not required.
The matter is now pending before Judge Menyuk in the State Tax Court. The League appeared as Amicus Curiae in the matter and the State intervened as a party. Verizon and Hopewell filed cross-motions for summary judgment, with the League submitting an Amicus brief. Oral argument, in which all parties and the League participated, was held on September 16, 2010.
In the motions, Verizon reiterated its position that the “51%” language in the statute exempts it from paying local business personal property taxes in those municipalities where it claims to no longer supply dial tone to a majority of the telephone market and, further, claims that, regardless of how the statute is interpreted, it is unconstitutional. The League has opposed Verizon’s position on the statutory interpretation issue, arguing against the self-serving interpretation that Verizon can unilaterally determine whether it is subject to the tax in a given locality. The League maintains that the statute specifically provides that those telecommunications carriers formerly subject to the New Jersey Franchise and Goss Receipts Tax Act will continue to be taxed and contains no provision for an annual “test” to determine whether the tax continues to apply.
The League also addressed the merits of Verizon’s constitutional claims, i.e., that its right to equal protection has been violated, and that the statute amounts to invalid special legislation and violates the Uniformity Clause. While the League set forth in detail the reason why these claims are unsubstantiated, the State (and Hopewell) have taken the position that a decision on the constitutional issues should be deferred, pending the Court’s resolution on the statutory interpretation issue.
Following oral argument in September, the Judge allowed the parties to submit supplemental briefing on the two points at issue. Additional briefs were submitted by Hopewell, Verizon and the League on October 25, 2010. Judge Menyuk has not yet issued a decision.
In the meantime, Verizon has continued to communicate its position that it is no longer subject to the business personal property tax to numerous additional municipalities. One municipality, the borough of Riverdale in Morris County, has responded very aggressively. The Riverdale mayor wrote to Verizon, disputed its position, and instructed the tax collector to fine Verizon $100 a day for failure to file the requisite form. He also contacted State Senator Joseph Pennachio to express his concern that the Borough was being required to take Verizon’s word that it was no longer required to pay the tax. Capturing the essence of Verizon’s position, the Mayor noted that “[i]f I were to tell the IRS that I didn’t owe any taxes and I wasn’t going to prove it, I would end up in jail.” In response, Senator Pennachio, along with Assemblymen Alex DeCroce and Jay Weber, enquired of the Office of Legislative Services (the “OLS”) whether the law obligates a company to demonstrate that it is no longer subject to the tax.
The OLS stated that is could not express an opinion because the statute does not take into consideration annual changes to a local exchange telephone company’s status. Citing the history of the statute, the OLS said that the category of taxpayers subject to the business personal property tax consists of those telephone companies formerly subject to the repealed Gross Receipts Tax, and, in the words of Robert H. Levin, Esq. of the OLS, “I do not read any language in (the statute) as creating a moving classification…” Thus, this opinion, issued in late December, is entirely consistent with the position the league has taken in the Hopewell litigation, as set forth above.
Other municipalities affected by Verizon’s actions should contact their municipal attorneys, who may feel free to confer with Joel L. Shain, Esq., League Counsel in this matter, to ensure that appropriate action is taken to protect their rights.
If you have any questions, contact Jon Moran at (609) 695-3481 ext. 121. or email@example.com
Very truly yours,
William G. Dressel, Jr.