(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that,
in the interests of brevity, portions of any opinion may not have been summarized).
Argued November 9, 1993 -- Decided March 30, 1994
PER CURIAM
Brunswick Corporation is engaged in the manufacture and sale of recreational products and services in
the defense, aerospace and industrial fields. Brunswick contests deficiency tax assessments, interest and penalties
imposed by the Director of the Division of Taxation (Director) in respect of Brunswick's 1986 and 1987
Corporate Business Tax (CBT) returns. During the tax years in issue, Brunswick owned and leased real property
and tangible personal property located in New Jersey. Brunswick challenges the authority of the Director to
adopt a regulation, N.J.A.C. 18:7-8.5(b), that adjusts the manner of calculating franchise taxes under the New
Jersey Corporation Business Tax Act (CBTA). The CBTA assesses a franchise tax on all corporations doing
business in New Jersey according to a business allocation factor that measures a corporation's business activity
in the State. That factor consists of three elements: real and tangible personal property, receipts, and payroll.
The regulation at issue adjusts the property factor by including leased property in the business allocation
factor calculation. Brunswick contests the inclusion of leased property in that calculation. Prior to 1986, N.J.S.A.
54:10-A-6(A)(section 6(A)) of the CBTA was interpreted by the Director as including only property that was
owned by the taxpayer. However, after 1986 when the Director promulgated the regulation at issue, N.J.A.C.
18:7-8.5(b), the definition included leased property.
Brunswick contends that the challenged regulation is inconsistent with section 6(A) because the
Legislature intended to limit the meaning of "taxpayer's property" to property owned by the taxpayer. According
to Brunswick, that legislative intent can be inferred from: 1) the origins of the CBTA; 2) almost forty years of
implementation by the Director limiting the meaning of that section to owned property; and 3) the Legislature's
failure to enact statutory amendments that would have accomplished the same result as the new regulation. The
Director, on the other hand, relies on Sections 8 and 27 of the CBTA for the authority to promulgate the
regulation at issue.
The Tax Court sustained the Director's authority to adopt the regulation. That court found that the
term "taxpayer's property" is neutral as to whether the allocation factor includes or excludes rental property. The
Tax Court also concluded that it is reasonable to infer that the Legislature intended to grant to the Director
broad discretion as to how the property ratio should be computed, in order to reflect the change from net worth
to net income and the legislative directive to tax income measured by capital employed. The court found that
inference confirmed by an examination of Section 8 of the CBTA as interpreted by the Supreme Court in
Metromedia, Inc. v. Director of the Division of Taxation.
The Tax Court also concluded that the Legislature's failure to amend the property allocation factor since
the inception of the CBTA did not, in and of itself, indicate any initial or continuing insistence on the part of
the Legislature that the Director's prior interpretation of Section 6(A) be continued forever. The Tax Court
reasoned that legislative inaction is compatible with a continuing faith in the Director's expertise and discretion
to administer the allocation factor in a fair manner. Moreover, the Tax Court found that the Director's prior
exclusion of rental property from the Section 6(A) allocation factor does not preclude the Director's authority
to interpret the statute anew in light of changing economic conditions and changes in the CBTA's emphasis.
Thus, the Tax Court held that it was the Legislature's intent to delegate to the Director the authority, as broad
as necessary, to fairly determine a taxpayer's allocation of income to New Jersey, and that the inclusion of leased
property in the property factor of the allocation formula was within the Director's authority.
The Appellate Division affirmed the Tax Court's decision substantially for the reasons stated by that
court. The Supreme Court granted certification.
HELD: The regulation, N.J.A.C. 18:7-8.5(b), adopted by the Director of the Division of Taxation, which
included New Jersey property rented by a taxpayer in calculating the percentage of the taxpayer's
net income properly attributable to the State, was not beyond the authority granted to the Director
under the enabling legislation of the Corporation Business Tax Act.
1. The decision of the Tax Court is affirmed substantially for the reasons expressed in Judge Lasser's
opinion. (p. 2)
2. Contrary to the position of our dissenting colleagues, the Legislature has vested the Director with broad
authority to adjust the property factor. The Director's authority to define that factor derives from Sections 8 and
27 of the CBTA. Through these sections, the Legislature has painted with a broad brush, intending that the
Director supply the details through the promulgation of regulations. (pp. 2-4)
3. Because the description of property does not include the term "owned," the language of Section 6(A)
permits an interpretation that includes leased property. The Director could properly conclude that a lessee
should pay its fair share of the cost of public benefits and services that it uses to generate profits. In view of
the changes in economic conditions, the Director needs the authority to adapt the Division's regulations to assess
more accurately the income of a lessee that is reasonably attributable to this State. If the Director has
misperceived that authority, the Legislature may override the regulation through the appropriate legislation. (pp.
5-6)
Judgment of the Appellate Division is AFFIRMED.
JUSTICE GARIBALDI, dissenting, in which JUSTICE CLIFFORD joins, is of the view that neither
Section 27 nor Section 8 of the CBTA gives the Director the authority to ignore legislative intent. The regulation
at issue is inconsistent with the Legislature's intent and represents an improper exercise of the Director's
discretionary authority. The record demonstrates that the Legislature considered and rejected the Director's
position that leased property be considered in the property factor of the CBTA. Therefore, sound principles of
statutory construction support the conclusion that the Legislature did not intend that leased property be included
in the CBTA property factor.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN join in this opinion.
JUSTICE GARIBALDI filed a separate dissenting opinion in which JUSTICE CLIFFORD joins. JUSTICE
STEIN did not participate.
SUPREME COURT OF NEW JERSEY
A-53 September Term 1993
BRUNSWICK CORPORATION, a Delaware
corporation,
Plaintiff-Appellant,
v.
DIRECTOR, DIVISION OF TAXATION,
Defendant-Respondent.
Argued November 9, 1993 -- Decided March 30, 1994
On certification to the Superior Court,
Appellate Division.
Charles M. Costenbader and Paul H. Frankel
argued the cause for appellant (Stryker, Tams
& Dill, attorneys; Charles H. Friedrich, on
the briefs).
Margaret A. Holland, Deputy Attorney General,
argued the cause for respondent (Fred DeVesa,
Acting Attorney General of New Jersey,
attorney; Joseph L. Yannotti, Assistant
Attorney General, of counsel).
PER CURIAM
Brunswick Corporation challenges the authority of the
Director of the Division of Taxation (Director) to adopt a
regulation, N.J.A.C. 18:7-8.5(b), that adjusts the manner of
calculating franchise taxes under the New Jersey Corporation
Business Tax Act (CBTA). The CBTA assesses a franchise tax on
all corporations doing business in New Jersey according to a
business allocation factor that measures a corporation's business
activity in the State. That factor consists of three elements:
real and tangible personal property, receipts, and payroll.
N.J.S.A. 54:10A-6(A).
The regulation at issue adjusts the property factor by
including leased property in the calculation. N.J.S.A. 54:10A-6(A) (section 6(A)) defines the property factor as "[t]he average
value of the taxpayer's real and tangible personal property
within the State during the period covered by its report divided
by the average value of all the taxpayer's real and tangible
personal property wherever situated during such period . . .."
Before 1986, the year in which the Director promulgated N.J.A.C.
18:7-8.5(b), the Director had interpreted section 6(A) as
including only property that was owned.
The Tax Court sustained the Director's authority to adopt
the regulation,
11 N.J. Tax 530 (1990), and the Appellate
Division affirmed substantially for the reasons stated by the Tax
Court,
13 N.J. Tax 136 (1993). We granted Brunswick's petition
for certification,
134 N.J. 476 (1993), and likewise affirm
substantially for those reasons.
In light of the dissent, we add the following comments. As the dissent acknowledges, post at ___ (slip op. at 2), administrative regulations are presumptively valid. GE Solid State v. Director, Div. of Taxation, 132 N.J. 298, 306 (1993).
Contrary to the dissent, post at ___ (slip op. at 2), the
Legislature has vested the Director with broad authority to
adjust the property factor.
The Director's authority to define that factor derives from
two sections of the CBTA: N.J.S.A. 54:10A-8 (section 8) and
N.J.S.A. 54:10A-27 (section 27). Section 8 provides:
If it shall appear to the [Director]
that an allocation factor determined pursuant
to section 6 does not properly reflect the
activity, business, receipts, capital, entire
net worth or entire net income of a taxpayer
reasonably attributable to the State, he may
adjust it by:
(a) excluding one or more of the
factors therein;
(b) including one or more other
factors, such as expenses, purchases,
contract values (minus subcontract values);
(c) excluding one or more assets in
computing entire net worth; or
(d) excluding one or more assets in
computing an allocation percentage; or
(e) applying any other similar or
different method calculated to effect a fair
and proper allocation of the entire net
income and the entire net worth reasonably
attributable to the State.
Section 27 provides: "[t]he [Director] shall prescribe and issue such rules and regulations, not inconsistent herewith, for the
interpretation and application of the provisions of this act, as
he may deem necessary."
Through sections 8 and 27, the Legislature has painted with
a broad brush, obviously intending that the Director would fill
in the details through regulations. See, e.g., Reuben H.
Donnelley Corp. v. Director, Div. of Taxation,
128 N.J. 218, 224
(1992) (stating Director has broad authority to adjust business
allocation factor to reflect more accurately taxpayer's New
Jersey business activities); F.W. Woolworth v. Director, Div. of
Taxation,
45 N.J. 466, 498 (1965) ("The various permissible means
of adjustment specified by section 8 are broad indeed,
demonstrating a wide view of the authority."); International
Paper Co. v. Director, Div. of Taxation,
11 N.J. Tax 147, 166
(Tax 1990) (stating Director authorized to adjust allocation
factors "'to avoid perceived unfairness or inequity in the
application of apportionment formulas'") (quoting Hess Realty
Corp. v. Director, Div. of Taxation,
10 N.J. Tax 63, 81 (Tax
1988)); Shelter Dev. Corp. v. Director, Div. of Taxation,
6 N.J.
Tax 547, 553 (Tax 1984) ("The broad language employed in § 6
demonstrates that the Legislature did not wish to deal with the
details of this provision, but instead left to the Director the
task of establishing the definitional framework with which to
implement allocation."). The Director's authority extends to
adopting a regulation that changes a prior administrative
interpretation. Metromedia v. Director, Div. of Taxation,
97 N.J. 313, 327 (1984) (approving Director's novel interpretation
of receipts fraction by using audience share of out-of-state
television and radio stations broadcasting in New Jersey).
Although the dissent contends that the property factor
includes only owned property, section 6(A) is not so limited.
Missing from the description of property included within the
section is the word "owned." Hence, the words of the statute
permit an interpretation that includes leased property.
Brunswick acknowledges that modern commercial practice includes
extensive leasing of property and that it earns income on the
warehouses and bowling centers that it leases in New Jersey. The
Director could properly conclude that a lessee such as Brunswick,
like an owner, should pay its fair share of the cost of public
benefits and services that it uses to generate profits. With
changes in economic conditions, such as the increasing popularity
of property leasing, the Director needs the authority to adapt
the Division's regulations to assess more accurately the income
of a lessee that is reasonably attributable to the State.
Our dissenting colleagues note with approval that "[t]he overwhelming majority of states have specifically amended their corporation business-tax laws through their legislatures to include leased property in the property allocation formula." Post at ___ (slip op. at 10). The difference between the
majority and the dissent therefore is not whether New Jersey may
include leased property in that formula. We differ on the
narrower question whether the Legislature has cloaked the
Director with sufficient authority to adopt a regulation that
includes such property in the formula. If, of course, the
Director has misperceived that authority, the Legislature may
override the regulation by appropriate legislation. See In re
Adoption of Regulations Governing State Health Plan, ___ N.J. ___
(1994) (holding Legislature may override regulations concerning
effect of State Health Plan).
The judgment of the Appellate Division is affirmed.
Chief Justice Wilentz and Justices Handler, Pollock and
O'Hern join in this opinion. Justice Garibaldi has filed a
separate dissenting opinion in which Justice Clifford joins.
Justice Stein did not participate.
SUPREME COURT OF NEW JERSEY
A-
53 September Term l993
BRUNSWICK CORPORATION, a Delaware
Corporation,
Plaintiff-Appellant,
v.
DIRECTOR, DIVISION OF TAXATION,
Defendant-Respondent.
_________________________________
GARIBALDI, J., dissenting.
N.J.S.A. 54:10A-6(A) (section 6(A)) defines the fractional
value of property to be included in calculating the "allocation
factor" under the Corporation Business Tax Act, N.J.S.A. 54:l0A-l
to -40 (CBT or the Act), as "the average value of the taxpayer's
real and tangible personal property within the State * * *
divided by the average value of all the taxpayer's real and
tangible property wherever situated * * *." That statutory
language has remained unchanged since CBT's enactment in 1945.
From 1945 until l986, the Director of the Division of Taxation
(Director) "considered [only] property owned by the taxpayer in
the calculation of the property [fraction]." Brunswick Corp. v.
Director, Div. of Taxation, ll N.J. Tax 530, 533 (Tax l99l). In
1986, however, the Director changed his long-standing view, and
promulgated N.J.A.C. 18:7-8.5(b) to include in that definition
"[o]wned, leased, rented or used" property.
The Director asserts that pursuant to N.J.S.A. 54:10A-27
(Section 27) and N.J.S.A. 54:10A-8 (Section 8) she had the
authority to redefine the property fraction. Section 27 vests
the Director with the authority to promulgate rules and
regulations as she deems necessary for the interpretation and
application of the CBT, so long as those rules and regulations
are consistent with the Act. Section 8 allows the Director to
adjust the three elements of the allocation factor. Of those
factors only the property fractions is relevant here.
Neither of those sections, however, gives the Director the
authority to ignore the intent of the Legislature. I disagree
with the Appellate Division that this is an "extremely close
statutory interpretation case." Nor does this case present a
question of the Legislature's probable intent. The new
regulation is totally inconsistent with the Legislature's intent
and represents an improper exercise of the Director's
discretionary authority. Indeed, seldom has a statute's
legislative history so clearly revealed the Legislature's intent.
Accordingly, I dissent from the majority's affirmance of the
judgment below.
Agency regulations are presumptively valid. GE Solid State v. Director, Div. of Taxation, 132 N.J. 298, 306 (1993). Nevertheless, "an administrative agency may not under the guise of interpretation give a statute a greater effect than the language allows." In re Barnert Memorial Hosp. Rates, 92 N.J. 31, 40 (1983); Service Armament Co. v. Hyland, 70 N.J. 550, 563 (1976). An agency is bound by its enabling legislation. The administrative officer is merely a "'creature of legislation who must act only within the bounds of the authority delegated to [that officer].'" In re Jamesburg High School Closing, 83 N.J. 540, 549 (1980)(quoting Elizabeth Fed. Sav. & Loan Ass'n v. Howell, 24 N.J. 488, 499 (1957)).
We have a duty to restrain an administrative agency when it acts beyond the scope of the authority granted it by the Legislature. Because of the Legislature's unmistakable intent that the property fraction not include leased property, the Director lacks the power to amend section 6(A) to include leased property by issuing a new regulation, N.J.A.C. l8:7-8.5(b); hence, the amendment cannot stand.
In construing a statute the primary task for the Court is to "'effectuate the legislative intent in light of the language used and the objectives sought to be achieved.'" Merin v. Maglaki, l 26 N.J. 430, 435 (1992)(quoting State v. Maguire, 84 N.J. 508, 5l4 (l980)). The language of sections of a statute must be read in the context of the statute as a whole. Waterfront Comm'n v. Mercedes-Benz, 99 N.J. 402, 4l4 (l985). The majority has all but ignored the plain meaning of the language of the statute, contrary to the tenet that "[i]n the absence of explicit indication of a special meaning, words will be given their ordinary and well understood meaning." In re Barnert Memorial
Hosp. Rates, supra, 92 N.J. at 40; Safeway Trails, Inc. v.
Furman,
41 N.J. 467, 478, cert. denied,
379 U.S. 14,
85 S. Ct. 144,
13 L. Ed.2d 84 (1964). When the statute was enacted in
1945, the Legislature intended the words "taxpayer's real and
tangible personal property" to include only property actually
owned by the taxpayer and not leased property. The scope of
section 6(A) was never intended to be ambiguous or neutral,
notwithstanding the absence of the term "owned." Limiting the
property factor to "owned" property was completely consistent
with the then-prevailing practice of other states that had
adopted similar corporation business tax statutes incorporating
the so-called "Massachusetts formula" for the allocation of
corporate income. See Jerome Hellerstein, State Taxation:
Corporate Income and Franchise Taxes ¶ 9.l9[1], at 9-l07 (l993).
Moreover, the Legislature adopted the language of section 6(A)
from a New York statute. Later, New York amended its statute
specifically to include rented real property and rented tangible
personal property. Brunswick Corp., supra, ll N.J. Tax at 537
n.4. The failure of New Jersey's Legislature also to amend its
statute demonstrates the Legislature's intent that rental
property be excluded from New Jersey's formula.
Indeed, the Director had consistently construed the scope of
that provision to be so limited for over twenty-seven years. Id.
at 533 n.3. The practical administrative construction of a
statute over a period of years should be given great weight by
the courts as evidence of its conformity with legislative intent.
See Body-Rite Repair Co. v. Director, Div. of Taxation,
89 N.J. 540, 545-46 (l982); GE Solid State, supra, l32 N.J. at 32l
(Handler, J., dissenting) ("More important, the statutory
exemption as interpreted and applied by the Director has endured
for a long time.").
However, even if we were to accept the Tax Court's
interpretation of the words "taxpayer's . . . property" as
"neutral", we still must consider what the Legislature intended
by those allegedly "neutral" words. To do so we must look to the
legislative history. Such an examination conclusively
establishes that the Legislature never intended to include leased
property in the property fraction of the CBT.
This is not a case in which the Legislature failed to consider amending the statute to address the specific issue in question. In fact, the Legislature specifically considered a request to amend the statute to include leased property and declined to do so. A "caveat against drawing inferences from legislative acquiescence might be compelling were this not a case where the Legislature had given no consideration whatsoever to this issue." Garfield Trust Co. v. Director, Div. of Taxation, l 02 N.J. 420, 43l, appeal dismissed, 479 U.S. 925, 107 S. Ct. 390, 93 L. Ed.2d 345 (l986). However, where a legislature has considered and then rejected a proposal, "[t]he stricture against
drawing inferences one way or another from legislative
acquiescence in judicial and administrative interpretation of
legislative enactments atrophies with every such unsuccessful
introduction." Ibid.
The most significant evidence that the Legislature
specifically considered and rejected amending section 6(A) to
include leased property is disclosed in the Report of the New
Jersey Tax Policy Committee, "Non-Property Taxes in a Fair and
Equitable Tax System," part V, at 25-28 (Feb. 23, l972) ("l972
Report"). That Tax Policy Committee undertook a review of the
taxation of business in New Jersey and, in particular, the CBT.
The Committee recommended that the Legislature amend the
"allocation" provisions in various respects to conform to the
then-prevailing practices in other states. In particular, the
Tax Policy Committee recommended that the Legislature amend the
property fraction to include leased property, noting that that
change had been made by many other states, including California,
Connecticut, Delaware, Maryland, Massachusetts, Michigan, and New
York (rented real property only). Id. at 26 & n.2l.
Although the Legislature amended the CBT in various
respects, it did not amend section 6(A). Thus, despite an
explicit recommendation, the New Jersey Legislature chose to make
no change to the property fraction. However, when the
Legislature enacted the Corporation Income Tax Act, N.J.S.A.
54:l0E-l to -24 (CIT) in l973, it specifically included as a
property-factor provision "the average value of the taxpayer's
owned, rented or leased real and tangible personal property. . ."
N.J.S.A. 54:l0E-6(a); L. l973, c. l70, § 6 (emphasis added).
Under established canons of statutory construction, when the
Legislature has carefully employed a term in one place and
excluded it in another, courts should not imply that term when
the Legislature has excluded it. GE Solid State, supra, 123 N.J.
at 308.
Equally significant was the failure of the Legislature at
its very next session (l974-l975) to enact Assembly Bill No.
l8l7, which, among other Act amendments, would have incorporated
verbatim into the CBT property factor the language of its
recently-enacted CIT counterpart, i.e., that taxpayer's property
included rented or leased property. That bill was introduced in
the Assembly on May l6, l974, and thereupon referred to the
Committee on Taxation. The Committee reported out that bill,
with amendments, and went to a second reading on April 2l, l975.
The full Assembly never voted on it, however. See Garfield Trust
Co., supra, l02 N.J. at 43l-32 (holding analogous circumstances
"conclusive[]" of legislative intent).
In l990, Senate Bill lll2 was introduced pursuant to the
recommendation of the State and Local Expenditure and Revenue
Policy Commission. That Bill would have expressly amended
section 6(A) to include leased property. The commentary states
that the Bill "reflects the current interpretation of the law as
reflected in * * * [the regulations]." The Bill was withdrawn
six months after the commencement of this litigation. Brunswick
asserts that the withdrawal was at the Director's request but
more importantly asserts that the introduction of the bill that
specifically includes rented and leased property supports its
position that such property never was included in section 6(A).
Thus, the new regulation is invalid. The Director, however,
relies on that commentary for support that the current
interpretation of section 6(A) includes leased property. In any
event, regardless of the reason, the Legislature once again
failed to amend section 6(A) to include leased property.
The Legislature's specific inclusion of such property in the
CIT "shows that the Legislature knows how to make this sort of
specific exemption when it intends to do so; the absence of a
counterpart specific exemption in the Corporation Business Tax
Act suggests that the Legislature did not intend such an
exemption." Garfield Trust Co., supra, l02 N.J. at 432. The
Legislature's failure to amend the CBT and its insertion of
identical language in the CIT conclusively establishes that the
Legislature did not intend to include "leased" property in the
CBT property fraction.
I am also unpersuaded by the Director's argument that the
new regulation was the result of the inclusion of a net-income
base in the CBT and of changing economic conditions. Like the
apportionment factors in l945, the "entire net income" base,
added in l958 (L. l958, c. 63, §3), was derived substantially
verbatim from its New York statutory counterpart. See Amerada
Hess Corp. v. Director, Div. of Taxation, l
07 N.J. 307, 3l5-16
(l987), aff'd,
490 U.S. 66, l09 S. Ct. l6l7, l
04 L. Ed.2d 58
(l989). By the time the New Jersey Legislature adopted the
"entire net income" base, New York had long since amended its
property factor expressly to include "rented" real property. The
Legislature, however, did not adopt the New York property factor
amendment. N.Y. Tax Law § 2l0(l0) (added by L. l949, c. 848,
§3); see Airwork Serv. Div. v. Director, Div. of Taxation,
97 N.J. 290, 294 (l984) (holding purposeful and deliberate omission,
on enactment of New Jersey Sales and Use Tax, of exemption found
in New York counterpart act, which served as the model for New
Jersey Act), cert. denied,
471 U.S. 1127,
105 S. Ct. 2662,
86 L.
Ed.2d 278 (1985). Nor did the Legislature adopt the formulation
of the property factor in the Uniform Division of Income for Tax
Purposes Act ("UDITPA"), which had been approved in l957. 7A
U.L.A. §10 at 349 ("the average value of the taxpayer's real and
tangible personal property owned or rented and used"). Instead,
following the addition of the "entire net income" base in l958,
the Director formalized by regulation his then long-standing
construction of the property factor as limited to "owned"
property. N.J.A.C. l6:l0-4.l50 (eff. Jan. l, l959) (redesignated
N.J.A.C. l8:7-8.5(a)(2) in Aug. l969).
Moreover, the commercial phenomenon of corporate leasing is
not, and as of the effective date of the Contested Regulations
was not, of recent vintage. The New York Legislature recognized
those "economic conditions" as early as l949 and amended its
statutory property factor accordingly. Those same "economic
conditions" also induced the National Conference of Commissioners
of Uniform State Laws and the American Bar Association as early
as l957 expressly to include leased property in the property
factor of the then-proposed Uniform Division of Income for Tax
Purposes Act. 7A U.L.A. at 331.
In short, the Legislature, fully aware of the "changed
conditions" on which the Tax Court and the Director place marked
reliance, expressly "contemplated. . .[the] specific situation"
at issue herein and, notwithstanding the arguable policy
justification for that recommended change, elected to make no
change in section 6(A).
The overwhelming majority of states have specifically
amended their corporation business-tax laws through their
legislatures to include leased property in the property
allocation formula. Besides New York, forty-one other states and
the District of Columbia have made similar statutory amendments
to include rented or leased property in the allocation formula
along with owned property. See Ala. Code § 40-27-1, art. IV (10)
(1993); Alaska Stat. § 43.19.010 (1993); Ariz. Rev. Stat. Ann.
§ 43-1140 (1993); Ark. Code Ann. § 26-51-710 (Michie 1993);
Cal. Rev. & Tax Code § 25129 (West 1993); Colo. Rev. Stat. § 24-60-1301(IV).10 (1993); Conn. Gen. Stat. § 12-218 (1993); Del.
Code Ann., tit. 30, § 1903 (b)(6)(a) (1992); D.C. Code Ann.
§ 47-1810.2(e)(1) (1993); Fla. Stat. ch. 214.71(1) (1993); Ga.
Code Ann. § 48-7-31(a)(2)(a) (1993); Haw. Rev. Stat. § 235-30
(1993); Idaho Code § 63-3027(j) (1993); Ill. Rev. Stat. ch. 35
¶ 304(a)(1)(A) (1993); Ind. Code § 6-3-2-2(c) (1993); Kan.
Stat. Ann. § 79-3280 (1992); Ky. Rev. Stat. Ann.
§ 141.120(8)(a)(1) (Baldwin 1993); Me. Rev. Stat. Ann. tit. 36,
§ 5211.9 (West 1993); Md. Code Ann., Tax-Gen. § 10-402(C)(2)
(1993); Mass. Gen. L. ch. 63, § 38(d) (1993); Mich. Comp. Laws
§ 208.47 (1993); Minn. Stat. §§ 290.191.09 to .10 (1993); Mo.
Rev. Stat. § 32.200, art. IV (10) (1993); Mont. Code Ann. § 15-31-307(1) (1992); Neb. Rev. Stat. § 77-2734.12 (1992); N.H.
Rev. Stat. Ann. § 77-A:3, I(a) (1991); N.M. Stat. Ann. § 7-4-11
(Michie 1993); N.C. Gen. Stat. § 105-130.4(j)(1) (1992); N.D.
Cent. Code § 57-38.1-10 (1993); Ohio Rev. Code Ann. § 5733.05
(B)(2)(a) (Baldwin 1992); Okla. Stat. tit. 68, § 2358 (A)(5)(A)
(1993); Or. Rev. Stat. § 314.655(1) (1992); 72 Pa. Cons. Stat.
§ 7401 (3)(2)(a)(10) (1992); S.C. Code Ann. § 12-7-1150 (Law.
Co-op. 1991); Tenn. Code Ann. § 67-4-811 (1993); Tex. Tax Code
Ann. § 141.001, art. IV (10) (West 1993); Utah Code Ann. § 59-7-312 (1993); Va. Code Ann. § 58.1-409 (Michie 1993); Wash. Rev.
Code § 82.56.010, art. IV (10) (1992); W. Va. Code § 11-24-7(e)(1) (1993); Wis. Stat. § 71.25(7) (1993).
None of those states relied on an administrative agency
effectively to amend the language of their corporation business
tax, as the majority is allowing the Director to do. For a
variety of reasons, the approach taken by those other states is
the proper one.
I cannot emphasize strongly enough that this is not a case
in which an administrative official, confronted with
circumstances that could not have been contemplated by the
Legislature, must interpret the statute anew in a manner
consistent with the "probable intent" of the Legislature. See,
e.g., Amerada Hess Corp., supra, l07 N.J. at 3l8-l9. In all
respects material here, those "economic conditions" had long
since "chang[ed]," a fact of which the New Jersey Legislature has
been demonstrably aware.
Whether the Director or even this Court thinks that the
inclusion of leased property in the property fraction is proper
is not important. Neither the administrative agency nor the
Court can take liberties with the statutory language, "even to
subserve a supposedly desirable policy not effectuated by the act
as written." R.H. Macy & Co. v. Director, Div. of Taxation,
77 N.J. Super. 155, 173 (App. Div. 1962), aff'd o.b.,
41 N.J. 3
(1963). What the Legislature thinks, on the other hand, is
important. The Director had no power to do what the Legislature
repeatedly has failed to do.
Here the record amply demonstrates that the Legislature
considered and then rejected the Director's position that leased
property is to be considered in the property fraction of the CBT.
Although numerous legislatures have adopted that type of
amendment, our Legislature has not.
My interpretation also comports with the principle that
taxes that expand the source of taxes, unlike exemptions, are to
be strictly construed against the government. Fedders Fin. Corp.
v. Director, Division of Taxation,
96 N.J. 376, 385-86 (l984).
Thus, I conclude that sound principles of statutory construction
support my conclusion that the Legislature did not intend that
leased property be included in the CBT property fraction.
I would reverse the judgment of the Appellate Division.
Justice Clifford joins in this dissent.