Case Law Summaries

Black United Fund of New Jersey, Inc. v. City of East Orange

• Opinion Date: May 9, 2001
• Real Property Law
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TAXATION—A charitable organization whose function is to distribute funds to other nonprofit agencies, even though exempt from income taxation under federal law, is not exempt from real property taxation, and even it were, failure to organize solely for an exempt purpose would also disqualify the entity.

A non-profit corporation owned real property and filed an application with the municipal tax assessor for a property tax exemption under sections of New Jersey statutes providing such exemptions for charitable purposes, historical sites, and green acres. It alleged that the municipality failed to act on the application in a timely manner and as a result, it appealed to the county Board of Taxation. The Board of Taxation held a hearing at which the corporation presented testimony by its President and CEO regarding various aspects of the organization and its use of the property. The municipality presented no evidence in opposition, nor did it dispute the testimony. Nonetheless, the board concluded that the corporation was not entitled to an exemption. On appeal, the Tax Court held that the corporation was not entitled to the Historic Site and Green Acres exemptions for the tax year in question because the property only became eligible for those exemptions after the tax year. Further, the Tax Court held that the corporation was not eligible for exemption as a charitable contribution because the organization’s certificate of incorporations and bylaws did not explicitly state an exempt purpose under the statute. The Appellate Division upheld the Tax Court, adding comments to the effect that the Tax Court correctly held that the corporate documents did not include an intent to be organized exclusively for an exempt purpose. Apparently, the organization’s stated purpose was to solicit and raise funds to distribute those funds to certain nonprofit agencies. “[M]aking distributions to an entity exempt from federal income tax is not one of the enumerated exempt purposes in” New Jersey’s tax exemption statute. It didn’t matter that the organization’s bylaws stated that it was operated for charitable, religious, and educational purposes, and to promote the interests, welfare, educational and social development of the relevant community within the meaning of section 501(c)(3) of the Internal Revenue Code of 1954. As such, the bylaws referred only to an entitlement to an exemption from federal income taxation, and made no mention of any New Jersey statutes. Under prior case law, it is well established that the standards under section 501(c)(3) “have no relation to state law governing property tax exemption.” In other words, “[n]onprofit status ... cannot be equated with charitableness. Rather, it is but one factor which merits consideration in the determination whether property is being used for charitable purposes.”

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