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International Schools Services, Inc. v. West Windsor Township

381 N.J. Super. 383, 886 A.2d 204 (App. Div. 2005)

TAXATION; EXEMPTION—A court should not interpret the language of a non-profit organization’s certificate of incorporation too narrowly when determining whether the organization has been organized for an exempt purpose.

New Jersey exempts from local real estate taxes, “property that is actually and exclusively used by non-profit organizations for the ‘moral and mental improvement of men, women and children.” The New Jersey Supreme Court has held that to determine applicability for exemption, “an entity which claims such an exemption (1) must be organized exclusively for the moral and mental improvement of men, women and children, (2) must actually and exclusively use the property for that purpose, and (3) must not be operated for profit.” A property owner, although founded in 1955, sought exemption for the years 2002 and 2003. Its certificate of incorporation set forth its purpose as: (1) aiding, promoting and encouraging schools, facilities, and other organizations that are exclusively educational in character; (2) fostering the provision of education by the payment of salaries, fellowships and grants to teachers and instructors; and (3) devoting all or part of its income to the furtherance and support of projects and institutions that are exclusively educational. Its certificate of incorporation barred the use of any of the organization’s income for the personal benefit of individuals or for the carrying out of propaganda, or for political activity. The Court thought that “although the certificate of incorporation’s language could be parsed in a way that suggests otherwise, its stated purpose, as examined through the circumstances that caused its incorporation, suggest[ed] a general intent to promote its activities among the public in general which has, as a benefit, the ‘moral and mental improvement of men, women and children.’” The municipality objected, claiming that “[t]he purpose of providing services and funds to other institutions, without more, does not qualify for an exemption under the law.” The Appellate Division rejected that contention not only because it did not comport with prior decisions regarding the scope of the exemption law, but also because it was “inconsistent with [the organization’s] certificate of incorporation.” In fact, it concluded that the “certificate of incorporation [did] not preclude but arguably suggest[ed] a general public purpose in prompting its ideas.” Thus, it rejected the lower court’s denial of the tax exemption, holding that the lower court had interpreted the language of the certificate of incorporation too narrowly when it focused on the aiding, promoting, and encouraging educational organization’s language. Having reached that conclusion, the Appellate Division remanded the matter back to the lower court for a plenary hearing on whether a tax exemption was available to the property owner.

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