Localities look to Scale Back Property Non-Profit Tax Exemptions / Impose PILOTs (Payments in Lieu of Taxes)

Updated 10/17/2016

See also:
Princeton University Settles Property Tax Exemption Lawsuit
Center Files Amicus Brief in Princeton University Property Tax Exemption Case
Tax Court Rules Against Hospital in Morristown Property Tax Exemption Case
Legislation to Protect Non-Profits from Arbitrary Tax Exemption Challenges by Third Parties Advances
Blog: Non-Profits and Tax Policy: Not a One-Sided Equation
"Is Non-Profit Property Tax Exemption Sound Public Policy?"  Presentation slides of Center executive director Linda Czipo to 4/15/2016 Seton Hall University School of Law conference

As local governments seek to shore up shrinking revenues, they have been looking increasingly to the nonprofit sector to provide funding. This is occurring in localities across the country, notably Boston, Pittsburgh, Chicago, and many others.

In New Jersey, although court cases focusing on hospitals and universities have attracted widespread attention, municipalities have been challenging the property tax exemptions of individual organizations of all sizes with increasing frequency (e.g., West Windsor, Phlllipsburg). Camden and Red Bank in particular have been among the most aggressive in pursuing more sweeping changes.

  • In late 2011, the City of Camden, which has been in the midst of a protracted financial crisis, implemented a sweeping policy change in late 2010 in which it began placing dozens of day care centers and other non-profit organizations on the city’s tax rolls, apparently for no other reason than the organizations charged fees. Although the organizations that have launched legal challenges to the city have overwhelmingly prevailed in tax court, others who did not have the resources to do so had their properties put up for lien sales by the city.
  • In Red Bank, officials have been calling for statewide policy changes such as revisions to the property tax statute or even the state constitution in order to subject exempt properties to taxation.
  • In July 2012, Lawrence Township sent letters to non-profit property owners requesting "contributions" equivalent to 25% of what the entities would have had to pay in taxes if the property were taxable. In the fall of 2014, the township of Newton sent similar communications to the non-profits in that municipality.
  • In the wake of the June 2015 Tax Court ruling against Morristown Medical Center and the hospital's subsequent settlement with the municipality, other localities are actively exploring challenging the exemptions of the hospitals within their borders. Currently, there are at least 35 hospitals in New Jersey whose property tax exemptions have been formally challenged by their host municipalities.

The Center for Non-Profits believes strongly that efforts to remove or curtail non-profit property tax exemptions are misguided and counterproductive, and that such proposals too often disregard the significant contributions non-profits make to social and economic well-being of communities. (See our submission to NJBIZ and recent blog post explaining why.) We will continue to speak out against inappropriate attempts to raise revenues from the non-profit community. Recognizing that hard choices must be made to resolve government fiscal crises, we will also support and encourage efforts for all stakeholders to work collaboratively toward comprehensive solutions.

Feel free to share your views on this or any other issue by emailing Linda Czipo at the Center at lczipo @ njnonprofits.org (remove the spaces in the email address before sending).

For more information:

http://www.nj.com/mercer/index.ssf/2012/08/lawrence_council_seeks_new_sou.html ;
http://www.nj.com/times-opinion/index.ssf/2012/08/editorial_lawrence_faces_tough.html ; and http://www.courierpostonline.com/article/20120708/NEWS01/307080028/Camden-striking-out-court-fights-nonprofit-day-cares

National Council of Nonprofits: Government Taxes, Fees and PILOTs

PILOT Proposals Spreading to More Affluent Suburbs
August 3, 2012
The Nonprofit Quarterly

Center for Non-Profits: Center Files Amicus Brief in Princeton University Property Tax Exemption Case
Center for Non-Profits: Tax Court Rules Against Hospital in Morristown Property Tax Exemption Case
Center for Non-Profits: Non-Profits and Tax Policy: Not a One-Sided Equation (blog)
Center for Non-Profits: "Is Non-Profit Property Tax Exemption Sound Public Policy?"  Presentation slides of Center executive director Linda Czipo to 4/15/2016 Seton Hall University School of Law conference

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