Property Tax Challenge
Legislation to Protect Non-Profits from Arbitrary Tax Exemption Challenges by Third Parties Reintroduced

Updated February 16, 2018

Legislation that would help curtail arbitrarily challenges to non-profits' property tax exemptions by limiting the ability of third parties to appeal the property tax exempt status of other entities has been advancing in the New Jersey Legislature. A-3113 (Gusciora) would address a significant concern that has arisen in light of the property tax challenges to Morristown Medical Center and Princeton University. The Center for Non-Profits strongly supports this bill.

In the Princeton case, a challenge to the property tax exemption of Princeton University was brought by a small group of residents who disagree with the exemption already granted by the municipality. The municipality was named a defendant in that suit. On October 14, 2016, Princeton University announced that it had reached a settlement with the plaintiffs in that case, but significant questions still remain.

In the case against Princeton University and the municipality, in a November 2015 procedural ruling, Tax Court of New Jersey Judge Vito Bianco held not only that the residents have legal standing to challenge the municipality’s determination that the University is property-tax exempt, but has also ruled that the non-profit (in this instance, Princeton University) has the burden of re-proving its eligibility for property tax exemption, even when the challenge is brought by third parties. This ruling leaves thousands of non-profit property owners of all sizes – particularly those that might be unpopular or controversial – vulnerable to arbitrary legal challenges by residents that would be extremely costly and time-consuming to defend, diverting scarce resources away from essential programs and services.

Amending the existing statute to limit the ability of third parties to challenge non-profit property tax exemptions would help to protect organizations from being arbitrarily forced to re-prove their exemptions repeatedly and from needlessly siphoning resources away from charitable purposes.

Non-profit organizations are straining under the weight of skyrocketing demand for services and resources that have not kept pace with the steadily escalating costs of providing programs and services that our communities need. Clarifying that third parties do not have standing to challenge the property tax exemption of non-profits, while preserving the authority of local governments, would provide needed assurance and protection for thousands of non-profit property owners throughout the state.

Current Status:  In the prior legislative session, the Senate version of this bill passed the Senate and cleared one Assembly committee, but failed to gain final passage in the Assembly. The new bill is awaiting consideration in the Assembly State and Local Government Committee. 

The Center continues to track the court decisions, legislation, and other developments closely for their potential ramifications for New Jersey's charitable community. We are committed to promoting policies that preserve the ability of the non-profit community to provide the programs and services that people need. 

If you have questions or would like more information about the Center's involvement in this or any other non-profit issue, contact Linda Czipo at the Center.

Read our statement in support of A-3888 (identical bill from prior session; 9/19/2016)
Read our statement in support of S-2212 (identical bill from prior session; 2/27/2017)

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