Martin Allen, the lawyer who successfully represented Morristown in its tax case against a local hospital, will address the Princeton governing body in closed session on Monday afternoon, Nov. 23.
The meeting is scheduled for 4 p.m. at the municipal building at 400 Witherspoon Street.
In June, a tax court judge ruled that the Morristown Medical Center must pay property taxes to the municipality. The hospital did not appeal the case and instead agreed to begin paying taxes and pay back taxes on a portion of the hospital’s property. The case could have a significant impacts on nonprofits, including Princeton University.
Four Princeton residents have filed two lawsuits challenging the tax-exempt status of various Princeton University properties, arguing that the properties are operating as for-profit entities.
The town’s tax lawyer sided with Princeton University at the most recent hearing in the Princeton case, supporting the school’s motion to place the burden of proof in the case on the residents. The judge, the same tax court judge as in the Morristown case, ruled that the burden of proof rests with Princeton University. The school must prove why the properties in question deserve to be tax exempt.
“We want to cover our bases and make sure we are doing the right thing,” Councilwoman Jenny Crumiller said of the meeting.
“The landscape seems to be fluid both on the educational side and from the tax implication side. We’d be remiss if we didn’t make sure that we are fully informed about our legal options,” Councilwoman Jo Butler said. “Schools are changing the way they operate. They are not the same institutions that they once were, in the same way that hospitals are not the same institutions that they once were.”
Butler said it’s important that the council and the town’s legal counsel are on the same page.
“Our intention in this case was to remain neutral and I was surprised to learn that the town’s tax lawyer went in a different direction in court,” Butler said.
In the Morristown decision, Judge Vito Bianco found that the nonprofit hospital had strayed from the strictly charitable function it served when it was was originally granted exemptions.
In the 88-page opinion, Bianco ruled that nearly all of the hospital was taxable because it was impossible to disentangle the nonprofit and for-profit services and finances at Morristown Medical Center. The hospital also failed to prove that its executives’ compensation wasn’t excessive. Former CEO Joseph Trunfio received $12.5 million over the three years reviewed in the case.
The hospital agreed to pay taxes for 10 years, as well as 10 years of back taxes and penalties, on the portions of the hospital used for certain profit-generating activities, including space leased to private doctors, restaurants, and shops; spaces used by private doctors to deliver emergency services, space for radiology, anesthesiology, and pathology services; and hospital garages.