University to seek appellate review of tax court decision

Feb. 12, 2015 3:15 p.m.

Princeton University will seek to appeal the Feb. 12, 2015, decision by a Morris County Tax Court judge denying its motion to dismiss a complaint that seeks to rescind the University's property tax exemption for tax year 2014.

The University is taking the unusual step of asking the Appellate Division of New Jersey's Superior Court to hear an appeal concerning the applicable legal standard while the rest of the case is still pending.

The four individuals who brought the case claim, in essence, that the University is a commercial enterprise and should pay taxes on all of its properties -- including classrooms, laboratories, dormitories, etc. -- because some of its activities generate revenue.

"Under New Jersey law, nonprofit universities are entitled to property tax exemption unless it is proven that their dominant motive is to make a profit," said University General Counsel Ramona E. Romero. "In this case, the four individuals challenging the town of Princeton's decision to grant the University a property tax exemption for 2014 in its entirety have not even attempted to claim that the University's dominant motive is to make a profit, which of course it is not. The University feels strongly that the resources necessary to litigate such a case should not be diverted from our central mission of teaching and research, and that is why we seek clarity from the appellate court at this time."

Under New Jersey law, the request for permission to appeal must be filed within 20 days.  

"It has long been the public policy of New Jersey to provide property tax exemption to non- profit colleges, universities and schools, houses of worship, non-profit hospitals, and other charitable organizations so that they can devote their resources to the pursuit of their missions. The arguments made by the plaintiffs in this case potentially jeopardize all of these institutions, which is another reason we are asking the Appellate Division to review this ruling now, before this case proceeds any further," Romero said.      

In making its motion to dismiss, the University noted that the plaintiffs' argument is "completely at odds with the governing statute, an unbroken line of New Jersey Supreme Court and lower court cases…, and common sense." The statute explicitly provides that engaging in some profit making activity "does not void a school's exempt status for those properties and portions of properties not used in that activity." A school's tax exempt status is determined by its dominant motive, and this case should be dismissed because "plaintiffs make no attempt to argue that they have pled, or could plead in good faith if allowed leave to do so, that the University's dominant motive is profit."  

"Princeton's dominant motive is, simply, to be the best educational institution it can possibly be," Romero said. "Princeton's mission is to educate students and conduct the scholarship and research that generate new knowledge and new ideas. That mission has not changed in the 269 years since the University was founded.   Plaintiffs have not challenged that, they could not in good faith challenge that, and therefore this case should not proceed."