For the seventh time since June of 2013, a New Jersey Tax Court has ruled against Princeton University in lawsuits about the school’s tax-exempt status.
A tax court judge on Friday denied Princeton University’s motion to dismiss a lawsuit challenging the tax-exempt status of some Princeton University properties.
University lawyers had called for the lawsuit to be thrown out based on procedural issues regarding the filings. The motion to dismiss argued that the plaintiffs failed to meet basic standards that the law requires be met in filing their complaints, and claimed that since those requirements were not met, the court was not permitted to hear their claims.
In January, the University also lost an appeal challenging the tax court judge’s decision that the burden of proof is on the school to show why certain properties should be tax exempt. Lawyers for the school argued that there is a longstanding principle that plaintiffs are required to prove their claims, particularly when they seek to overturn a government action, which in the Princeton University case was the granting of property tax exemption.
Four Princeton residents have filed two lawsuits, one challenging the tax-exempt status of various Princeton University properties in the 2011 tax year, and the second suit challenging Princeton University’s tax exemption in the 2014 tax year.
The case will likely be heard up in the state tax court in Morristown in October.
In November of 2015, State Tax Court Judge Vito Bianco rejected the University’s claim that the burden of proof in the case should be on the residents who are challenging the tax exemption.
The lawyer for the residents, Bruce Afran, successfully argued that the burden of proof is always with the party claiming an exemption from taxation, and not with the party challenging the granting of an exemption.
“Princeton’s arguments defy firmly established precedent that `the party seeking exemption under a statute granting exemption from property taxation bears the burden of proving that the bases for it have been established,” wrote Bianco in his decision at the time.
The burden of proof would rest on the residents if they were challenging the assessment amounts the municipal tax assessor calculated for University properties, but challenging the school’s tax exemptions is a separate issue and the same burden would not apply, the judge ruled. The burden of proof for granting a tax exemption rests on the organization seeking the tax exemption.
“There is a clear difference between the process for valuation assessments and that of exemption determinations,” Bianco wrote. “While the former involves extensive experience and first-hand knowledge of the property being assessed, the real estate appraisal process, and the marketplace, the latter is an evaluation based significantly on the reliability of representations made by the applicant in the paperwork submitted in support of the application for exemption, and of the actual use of the property for which a tax exemption is claimed.”
“In this court’s view, if the right of these taxpayers to appeal Princeton’s property tax exemption is to have any meaning, then public policy demands that Princeton must bear the burden of establishing it qualifies for property tax exemption under applicable law, given the more compelling public policy concern here that all property shall bear its just and equal share of the public burden of taxation,” Bianco wrote.
Earlier this year, the same judge rejected Princeton University’s request to have the 2014 case dismissed. The school asked the Superior Court Appellate Division to hear an appeal concerning the “applicable legal standard” for the case while the rest of the case is still pending, and the Appellate Division also ruled against the University.
In the summer of 2013, Bianco rejected a motion by Princeton to dismiss the 2011 case, and said the case could be an important one for nonprofits. After the filing of 2014 case, the school requested that the both cases be moved from Morristown back to Trenton. At the time, the lawyer for the plaintiffs in the case accused the school of moving the case in order to judge shop.
Residents decided to challenge the tax exempt status of various Princeton University properties after examining the results of the 2010 Princeton property revaluation.
They contend that Princeton University should be paying property taxes on many buildings that are currently tax exempt, because the buildings have commercial functions. Their lawyer for the residents argues that the school has evolved into a hybrid, and is operating retail food establishments, ticketing operations and numerous other commercial operations. The school also receives royalties for patents, and some of the profits are distributed to faculty members.
Representatives for Princeton University have argued that all the money made by the school is intended to support the school’s educational mission, and thus the school should not pay taxes on any of the buildings.