The Tax Court of New Jersey issued a precedent-setting decision which will have far-ranging impacts in that it clarifies which party has the burden of proof in challenging a real property tax exemption. In 2011, a number of residents of the Borough of Princeton filed a complaint in the Tax Court of New Jersey challenging the tax-exempt status for real property taxation purposes of Princeton University. Typically in property tax matters, the original assessment is entitled to a presumption of correctness, and the taxpayer challenging an assessment has the burden of overcoming that presumption. Princeton University sought a declaration in the case as to which party has the burden of proof, in this case the residents who filed the complaint, or the university. A burden also attaches to exempt status: A property owner seeking exempt status has the burden of proof to establish eligibility to an exemption. The Tax Court described the burden to establish a property tax exemption as "stringent" because the "fundamental approach...is that ordinarily all property shall bear its just and equal share of the public burden of taxation." The court went on to say, "Statutes granting exemption from taxation represent a departure, and consequently they are most strongly construed against those claiming exemption."
The university argued that placing the burden on it to defend its exemption erroneously burdens the municipal defendant and abolishes the presumption of validity. The Tax Court concluded that the university's arguments "defy firmly established precedent." The court noted that there is a clear difference between the process for valuation assessments and that for exemption determinations. An exemption determination, it reasoned, "is an evaluation based...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." The exemption determination is "one of statutory and case law" rather than one requiring any special expertise of the assessor. Statutory construction, the court reasoned, is ultimately a judicial function. Therefore, the presumption of correctness of assessments does not apply to exemption determinations.
The court went on to say the burden of proof does not shift from the university to the residents challenging the exemption status. It concluded that the burden is always on the entity claiming the exemption. It found that "more compelling public policy concerns rest squarely on the side of the taxpayer's right to challenge the exemption, and for Princeton [University] to prove it meets the criteria for the exemption."
The Tax Court's decision clearly places the burden on those claiming an exemption, arguably making exemption challenges by residents easier to prosecute.The case is Estate of Lewis v. Trustees of Princeton University, 2015 N.J. Tax Lexis 17 (Tax Ct. Nov. 15, 2015) (approved for publication).
On Wednesday, March 15, Kate Coffey will be speaking at the 13th Annual Landlord-Tenant Law: Lease Agreements, Defaults, and Collections seminar about laws concerning leasing and condominiums.
On February 27, Kate Coffey will be speaking at the 5th Annual Landlord-Tenant Law: From Lease to Eviction Seminar for Sterling Education Services, a non-profit continuing legal education company.
Day Pitney Alert
Theresa Kelly and Howard Fetner wrote an article, "AARP Lawsuit Puts EEOC In An Awkward Position," for Law360.
Day Pitney Alert
Michael P. Byrne was mentioned in an article, "Day Pitney, Greenberg Traurig Steer $130M NYC Loan," in Law360.
Barbara Freedman Wand was quoted in the article "Banks Explore Multiple Avenues For Community Investment," in The Commercial Record.
Harold Blinderman was quoted in an article, "Coal Co.'s Win Won't Diminish EPA's Regulatory Clout," in Law360. In the article, he discusses the significance of the case, Murray Energy Corporation et al v. Administrator of Environmental Protection Agency, in which the federal District Court for the Northern District of West Virginia granted summary judgment to Murray Energy.
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