Tax Exemption does not require “lawful use” under zoning ordinance
A New Jersey appellate court reversed a State Tax Court judge’s opinion by holding that N.J.S.A. 54:4-3.6 does not require that a property be used in a manner permitted by a municipality’s zoning ordinance. The subject property consisted of a two and one-half story home which had previously housed nuns in connection with an adjoining school. Around 2000, the school began using the house to host school-related meetings, parties, and as office space for one of the school’s employees. Zoning for the property recognized school uses as a conditional use required to meet specific requirements before being recognized as a permitted use. The tax assessor determined the property was not being used for an exempt purpose and sought to collect taxes on the property. The school thereafter filed complaints challenging the assessment and the exemption status.
Before the Tax Court, the municipality argued that the use was not permitted in the zone, and therefore did not qualify for an exemption. Analogizing the statute to the Farmland Assessment Act, the Judge found the property did not qualify for the requested exemption. The Appellate Division disagreed because the use of the property met the criteria for exemption under Paper Mill Playhouse v. Millburn Twp., 95 N.J. 503, 506 (1984). The Appellate Division adopted “a bright-line standard that entitles the taxpayer to exemption if its use of the property is consistent with the tax-exempt purposes embodied in its legislation” because such a standard “is consistent with New Jersey’s statutory and constitutional mandates.”
For a discussion on tax-exempt properties, please see the following blog posts:
Property Owner Keeps Tax Abatement After Municipality Failed to “Turn Square Corners”
Newark Church Denied Property Tax Exemption
Hospital’s Off-Site Physical Therapy Center Granted Property Tax Exemption
NJ Courts Deny Property Tax Exemption
The author wishes to acknowledge the assistance of Cory K. Kestner, Esq., of McKirdy & Riskin, PA, in the preparation of this article.
