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September 25, 2013

Re: Recent NJ Supreme Court Case on Charitable Tax Exemption

Dear Mayor:

The New Jersey Supreme Court has just issued an important decision reaffirming the court’s previous rulings on property tax exemptions for charities.  The case, Advance Housing, Inc. v. Township of Teaneck, involved the denial of tax exemptions for facilities that provide housing and services for people with psychiatric disabilities. The Supreme Court applied a three part test from one of its previous decisions and found that the tax exemption was denied erroneously. The decision can be found at: http://www.judiciary.state.nj.us/opinions/supreme/A7211AdvanceHousingIncvTownshipofTeaneck.pdf

The plaintiff, Advance Housing Inc., is a 501(c)(3) funded mostly through monies from the New Jersey Department of Health and Senior Services and the U.S. Department of Housing and Urban Development. It offers housing and optional mental-health, occupational placement, and life management services to low and moderate income individuals suffering from mental illness. The defendants, nine Bergen County municipalities, denied plaintiff’s a charitable property tax exemption per N.J.S.A. 54:4-3.6.  The municipalities argued, and the tax court agreed, that that the exemption did not apply for two reasons.  First, the plaintiff’s housing component was not integrated with the counseling and support services programs. Second, that the plaintiff was essentially running a “subsidized housing program for clients who happen to be eligible for its supporting and counseling services.”

The Appellate Division overturned the tax court’s decision by finding that the plaintiff was exempt from property taxes as a charity under N.J.S.A. 54:4-3.6. Today’s New Jersey Supreme Court’s decision affirms the Appellate Division. The Supreme Court applied a test it laid out in Presbyterian Homes of Synod of NJ v. Division of Tax Appeals. 55 N.J. 275 (N.J. 1970). The three part test requires the taxpayer seeking the charitable exemption to show that: 1) it is organized exclusively for a charitable purpose; 2) its property is actually being used for a charitable purpose; and 3) its use and operation of the property is not for profit. Id. at 506. In applying these requirements, the Supreme Court determined that the plaintiff, Advance Housing, was indeed entitled to a charitable exemption of municipal property taxes.

If you have any questions please contact the League’s Staff Attorney, Ed Purcell Esq., at (609) 695-3481 x 137 or at epurcell@njslom.org.

Very truly yours,

William G. Dressel. Jr.
Executive Director

 

 

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