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Chabad of Randolph, Inc. v. Township of Randolph

A-3244-07T3 (N.J. Super. App. Div. 2008) (Unpublished)

TAXATION; EXEMPTION — Even though a clergy member is affiliated with a religious organization whose dominant activity is the conduct of a religious school, if that clergyman’s activities are consistent with the activities performed by clerics of all religious denominations, the hiring organization qualifies for the exemption, and the clergyman conducts worship services separate and apart from the school’s activities, the organization is entitled to a parsonage exemption for the clergyman’s home.

A non-profit religious organization sought a tax exemption for a property where a religious leader resided. The municipal tax assessor denied the application based upon alleged zoning violations and because he concluded that the organization did not meet the requirements for a parsonage exemption. In response to the religious organization’s challenge of the assessor’s decision to the Tax Court, the municipality argued that there was no evidence to show that the clergyman, a rabbi, officiated over a congregation. The rabbi testified that he regularly conducted religious services, performed rituals such as weddings and funerals, and that he oversaw religious education for children and adults. He did acknowledge that certain services were not held in space leased at another synagogue but were held at the house in which he resided and that he purchased the house and then sold it to the organization for $1. He also acknowledged that he was fined for running a religious school at his house in violation of zoning ordinances. A municipal zoning official testified that when the variance for the construction of the home was granted, approval was only given for use as a residence. The official also testified that he observed large numbers of people entering and leaving the premises, but did not know what they were doing there.

The Tax Court found that the rabbi’s activities were consistent with the activities performed by clerics of all religious denominations and that the organization qualified for the exemption. It also found that the organization had a congregation and that worship services held at the house fell under the parsonage exemption and were constitutionally protected. The Tax Court additionally found that it was not clear whether zoning violations actually occurred since no summonses or judicial determinations were submitted as evidence. The municipality’s motion for reconsideration was denied.

On an appeal by the municipality, the Appellate Division agreed with the Tax Court that no zoning violations were established and therefore found that there was no need to determine whether a tax exemption could be denied due to a violation of a local zoning ordinance, which it referred to as a novel argument. It pointed out that the zoning violation for which the rabbi was fined had been resolved by the fine and that the violation occurred prior to the organization’s request for the exemption. It also found that since there was no evidence that worship services conducted at the house violated local zoning ordinances, there was no need to discuss whether such activities were constitutionally protected. Additionally, the municipality’s argument on appeal that the Tax Court’s decision was against the weight of the evidence was rejected. The Court, deferring considerably to the Tax Court’s findings, affirmed the decision that reversed the municipality’s denial of the parsonage tax exemption for the organization.

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