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Joseph P. Hayes Theatre v. Beach Haven Borough

A-0528-04T5 (N.J. Super. App. Div. 2005) (Unpublished)

TAXATION; EXEMPTIONS—Under real property tax law, for a residence owned by an otherwise qualified organization to be exempt, it must be predominantly used as an integral part of the organization’s operation rather than primarily being a convenience to the tenant.

A not for profit corporation presented musical and dramatic productions at a theater for the enjoyment of adults and children. It sought exemption from real estate taxes for certain of its properties, namely two residential buildings. One of the buildings provided “temporary housing and rehearsal space for twenty-eight visiting artists, twenty of whom [were] interns.” The other building, next door to the theater, provided “rehearsal space and temporary housing for visiting artists.” The theater argued that because those structures housed “the theater’s resident actors and staff, they were an integral part of, and reasonably necessary for, the proper operation of the theater.” Under case law, for a residence to be tax exempt, “the property must be predominantly used as an integral part of the operation of the exempt organization rather than being primarily a convenience to the tenant.” In addition, “[t]he residence must also be reasonably necessary for the proper and efficient operation of the exempt organization.”

The lower court concluded that there was no evidence that “any residents of either housing facility were on call twenty-four hours a day.” It also did not find a security problem that needed to be addressed by the theater. Many of the theater’s apprentices commuted from their own homes. Further, one of the buildings was located “several blocks” from the theater. Thus, according to the tax court, “the facilities were not reasonably necessary for the proper operation of the theater, but were instead merely a convenience for the interns and performers.” The Appellate Division reviewed the record, finding that the lower court’s decision was “based on sufficient credible evidence,” and refused to reject the findings. Even though the convenience of the buildings probably made “summer employment more attractive for the actors and interns, ... convenience and attraction [did] not render the structures necessary to the theater.” There was little or no evidence that the theater was required, by contract, to provide free housing to its actors. Further, the theater also rented housing in a unit across the street and the theater could have met any obligation for “free housing” without utilizing its own properties.


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