Tax Court to Nonprofit – Only 2% Exempt.

Name: McKirdy & Riskin, P.A.
Address: 136 South Street, Morristown, NJ, 07850
Telephone: 973-539-8900

Home » Property Tax Appeal » Tax Court to Nonprofit – Only 2% Exempt.

by: Anthony F. Della Pelle

23 Dec 2011

In Phillipsburg Riverview Organization Inc. v. Town of Phillipsburg, (December 16, 2011, Approved for Publication), the Tax Court denied in part and granted in part a property tax exemption pursuant to N.J.S.A. 54:4-3.6 to plaintiff, Phillipsburg Riverview Organization Inc. (“PRO”), a New Jersey not-for-profit corporation. Under its Articles of Incorporation, PRO was formed to promote public interest in a wide variety of interests, including, but not limited to, historic preservation, preservation of open space, protection of natural resources and promotion of arts and culture.

The property at issue in this case is operated by PRO as an Arts Center. The building is 5,500 square feet and includes classroom space, an art gallery, artist studio space, and dance studio space. There is also 100 square feet of office space used by PRO’sEnvironmentalResourceCenter, which promotes the organizations environmental causes.

The court, relying on Paper Mill Playhouse v. Millburn Township, 95 N.J. 503 (1984), found that PRO failed to demonstrate that the use and operation of the property was not conducted for profit. In fact, the court found that the artist studio, the dance studio, art gallery and classroom space were used for profit and that only the basement office space used by PRO Environmental Resource Center satisfied the three criteria for property tax exemption under the test set forth in Paper Mill Playhouse. As such, the court concluded that PRO was entitled only to a partial exemption for the PRO office space, which is less than two percent of the entire building.