NJ Supreme Court Finds Group Homes Tax Exempt

by: Anthony F. Della Pelle
30 Sep 2013

The New Jersey Supreme Court affirmed a decision of the Appellate Division to classify homes rented by Advanced Housing to provide normalized community living arrangements for developmentally disabled people as tax exempt under N.J.S.A. 54:4-3.6 for tax years 2002 through 2009.  Nine Bergen County municipalities argued the properties were not used for a tax exempt purpose, but were instead subsidized housing for which an exemption should not be granted.  The central issue on appeal was whether affordable housing for people with severe and persistent psychiatric disabilities used as an integrated unit with the treatment services provided to both residents and non-residents of the program is actually being used for a charitable purpose.  The Court found Advanced Housing satisfied the legal criteria for an exemption by showing that: (1) it is organized exclusively for a charitable purpose; (2) its property is actually used for such a charitable purpose; and (3) its use and operation of the property is not for profit. See Presbyterian Homes of the Synod of N.J. v. Division of Tax Appeals, 55 N.J. 275 (1970), and International Schools Services, Inc. v. West Windsor Twp., 207 N.J. 3 (2011).

The Court identified six principles to guide future courts in making the fact-specific determination whether a non-profit corporation, organized for a charitable purpose, is “actually” using property for a charitable purpose: (1) the charitable work done by the private entity will spare the government an expense that ultimately it must bear; (2) the private entity must not be engaged in a seeming commercial enterprise; (3) the property must be used in a manner to further the charitable purpose; (4) the receipt of government subsidies or funds is not contraindicated by a charitable purpose; (5) financial support and recognition by the State of a private entity’s charitable work may be indicative that its property is used for a charitable purpose; and (6) the private entity in carrying out its charitable mission through the use of its property is addressing an important and legitimate governmental concern.

Using these criteria, the Court found Advance Housing “actually” used the residences for a charitable purpose, and thus satisfied the requirements of N.J.S.A. 54:4-3.6.  It also found that without Advance Housing, many of the residents would be at greater risk of homelessness, and place a strain on other social services.  Therefore, Advance Housing established itself as a not-for-profit corporation, organized exclusively for a charitable purpose, and that the properties for which it seeks tax exemptions are actually used for the charitable purpose of providing supportive housing for the mentally disabled, entitling them to tax-exempt status.

A copy of the New Jersey Supreme Court’s opinion in Advanced Housing v. Twp. of Teaneck, __ N.J. __ (September 25, 2013), can be found here.

For news coverage on this story, please see the following articles:

N.J. Supreme Court: Hackensack’s Advance Housing non-profit is tax-exempt – The Record

N.J. Supreme Court rules nonprofit housing groups do not have to pay property taxes – Star-Ledger

N.J. Supreme Court Ends Teaneck’s Bid To Tax Non-Profit – Teaneck Patch

For more discussion on property tax exemption cases, please see the following blog posts:

Bergen County “Group Homes” Entitled to Tax Exemption

Property Tax Exemption Denied to West Windsor Non-Profit

Tax Exemption does not require “lawful use” under zoning ordinance

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

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