Rarely do taxpayers file tax appeals challenging an exemption claim of someone else’s property. It is even rarer when that challenge is brought against a private university. In Kenneth Fields, et al v. Trustees of Princeton University, property owners of Princeton Borough filed complaints challenging the property tax exemptions that have been granted by the Tax Assessor for properties owned by Princeton University (“Princeton”). Before deciding the actual merits of the case, however, Princeton filed a motion in an attempt to shift the burden of proof upon the plaintiffs/taxpayers.
Princeton’s argument was three-fold. First, Princeton argued that if the burden of proof was not place upon the taxpayers, it would undermine the long-standing principle that determinations of the assessor are afforded a presumption of validity. Second, Princeton insisted that when third-parties challenge an assessor’s exemption determination, those third parties are the claimants and thus must bear the burden of proof. Lastly, Princeton argued that if the burden is not placed with the taxpayers it would result in poor public policy that would “allow every citizen to overturn the tax assessor’s exemption determinations.”
The Tax Court rejected all of Princeton’s arguments. The Court drew a dichotomy between the assessor’s determinations as to the assessed value of the property and exemption determinations. Unlike the process for valuation assessments, an exemption determination is based “significantly on the reliability of representations made by the applicant in the paperwork submitted in support of the application for exemption, and of actual use of the property.” Furthermore, the Court reasoned that the “determination of an exemption is more properly one of statutory and case law interpretation than one requiring any special expertise possessed of an assessor.” Therefore, the presumption of validity attaches to an assessor’s determination as to the assessed value of the property but does not extend to exemption determinations.
The Tax Court also rejected Princeton’s second point by reiterating the long-standing principle that the party seeking exemption always bears the burden of established the asserted right to exemption. The party asserting the exemption is thus the claimant, not the party challenging an exemption. The Court also found Princeton’s public policy argument unpersuasive. The Court declared that it “finds no foreseeable danger that there will be a mass citizen uprising to usurp every tax exemption granted. . .” If anything, the Court found more compelling public policy concerns for the rights of taxpayers’ to challenge the exemption, and for Princeton to prove that it actually met all the statutory criteria for the exemption.
In light of this decision, Princeton will have to move forward with evidence establishing that it meets all the statutory criteria for tax exempt status. Under N.J.S.A. 54:4-3.6, the owner of the property must be organized exclusively for a tax exempt purpose, the property is actually and exclusively used for the tax-exempt purpose, and its operation and use of its property must not be conducted for profit. Will other private universities and educational institutions currently enjoying tax exemptions in New Jersey face similar challenges from taxpayers? Interestingly, the Tax Court judge presiding over the Princeton matter is the same judge that recently denied Morristown Memorial’s claim for exemption.
A copy of the Tax Court’s published opinion can be found here. We will follow the case and provide any updates as they come along.
For media coverage, see links below.