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Mesivta Ohr Torah of Lakewood v. Township of Lakewood

24 N.J. Tax 314 (2008)

TAXATION; EXEMPTION — A house of worship does not lose its parsonage exemption when it collects rent incidental to its primary purpose to provide housing to its clergymen or because it receives federal rent subsidies for that housing.

A religious organization applied for an exemption from local property taxation for two owned houses, asserting that the homes were parsonages of officiating rabbis at the organization’s nearby synagogue. The municipality tax assessor denied the exemptions. The assessor believed that the organization did not operate a synagogue or serve an active congregation, as is required for a parsonage exemption. She instead decided that the organization operated a religious school, at which religious services were periodically held. As a parsonage exemption applies only to the homes of clergymen who officiate for active religious congregations at houses of worship, the assessor denied the exemptions. The county board of taxation affirmed the assessor’s decisions. The organization appealed to the New Jersey Tax Court.

The Tax Court, after taking testimony, reversed the county board decisions and granted a tax exemption to both properties. The Court explained that a parsonage tax exemption exists under New Jersey law when a home is owned or held in trust by a religious organization for religious uses in which a clergyman serving those uses lives. Under the New Jersey parsonage tax exemption an officiating clergyman that serves the needs of a reasonably localized and established congregation must reside in the subject property.

The Court first concluded that the organization maintained a separate and independent house of worship, finding that the second floor of one owned building was used exclusively as a synagogue, having a separate entrance from the religious school and maintained with funds derived from membership dues and contributions from members. The testimony also established a significant and active congregation of worshippers in the tax year at issue, where over fifty persons paid annual dues to the congregation and another forty-six persons made periodic contributions.

Secondly, the Court examined the extent of the two rabbis’ activities within the religious organization in determining whether their dwellings should be subject to a parsonage tax exemption. The Court found that the record strongly supported that one rabbi was the lead officiating clergyman who conducted prayer services, gave sermons, attended funerals, advised congregants, and performed these duties approximately 25 hours per week. The Court also found the second rabbi to be an assistant, fulfilling duties when the chief rabbi was unavailable. The assistant also was found to supervise children of the congregation during services.

The Court stated that the tax assessor’s argument that the organization’s sole motivation in purchasing the two homes was to collect rent, rather than provide housing for its clergyman was not supported in the record. The Court found the organization’s collection of rents incidental to its primary purpose to provide housing to its clergyman so as to maintain the tax exemption. The Court noted that the two rabbis were already tenants of the dwellings prior to acquisition by the organization, and that the organization owned no other rental properties. The Court did not view the homes as “profit centers” for the organization. Neither did the Court find that the organization should lose its right to an exemption because it received federal rental funds on the two homes. The Court indicated that the synagogue was funded largely by the contributions of its members and the federal rental assistance funds received were a small part of the congregation’s income. More importantly, the Court found the purpose for the exemption, the provision of housing to officiating clergy, remained intact despite the partial federal aid.


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