Princeton University Tax Case Slated to Begin Thursday, Oct. 6

A property tax case brought by some residents against Princeton University four years ago is slated to finally go to court this Thursday in Trenton. The case is being watched closely by leaders of education institutions and other non-profits across the state, and has received national attention.

Residents are challenging the Ivy League school’s tax-exempt status for several properties. The judge in the case has ruled against the university more than half a dozen times, refusing to throw out the case. The state Appellate Division has also ruled against the school.

The judge in the case is State Tax Court Judge Vito Bianco, who last year ruled against a hospital in a dispute about property taxes in Morristown. The landmark hospital ruling has had a domino effect across the state, with several municipalities seeking property tax revenue from hospitals in their communities.

In the university case, Bianco rejected the school’s claim that the burden of proof 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.

Initially four Princeton residents filed two lawsuits, one challenging the tax-exempt status of various Princeton University properties in the 2011 tax year, and the second challenging Princeton University’s tax exemption in the 2014 tax year. More than a dozen residents from the Witherspoon-Jackson neighborhood signed on to the lawsuit this year.

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. 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. Afran 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.

The first part of the case is slated to be heard in Trenton starting at 9 a.m. Thursday. Princeton University President Chris Eisgruber is scheduled to be the first witness for the school. The parties are still in active settlement negotiations, so it is possible that a settlement could be reached before the case begins in court Thursday.