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City of Newark v. Catholic Community Services

2005 WL 2860395 (N.J. Super. App. Div. 2005) (Unpublished)

TAXATION; EXEMPTIONS—The eligibility requirement for religious organizations seeking a real property tax exemption that calls for actual use of the property for a tax exempt purpose can be satisfied by a use that is “reasonably necessary” for such purpose, even if indirectly so.

A charitable and religious organization owned property on which a warehouse was located. The county board of taxation granted the organization a tax exemption for the property based on the fact that the property was used for a religious purpose. Two weeks after the exemption was granted, the municipality in which the property was located filed a complaint in the Tax Court contesting the exemption. It asserted that the organization was not entitled to a tax exemption because the warehouse did not contain any religious items. On that basis, the Tax Court granted summary judgment for the municipality because the property was not used actually and exclusively for a tax exempt purpose. The organization appealed the Tax Court’s decision.

After reviewing N.J.S.A. 54:4-3.6, which sets forth certain circumstances under which a property used for a religious purpose may be exempted from taxes, the Appellate Division reversed. A corporation, institution or association asserting exemption is required to establish the following factors: 1) it is organized exclusively for a tax exempt purpose; 2) the property is actually used for a tax exempt purpose; and 3) its operation and use of the property is not for profit. As to the second factor, property is actually used for a tax exempt purpose if it is “reasonably necessary” for such purpose. In this case, when evaluating whether the warehouse was reasonably necessary for a religious purpose, the Court had to determine how the warehouse was utilized by the organization. It found that the organization used the warehouse to store donated furniture and goods it received. It further found that the organization used the furniture and goods for locations where it offered social services and behavioral health programs. Thus, the Court concluded that the use of the warehouse was consistent with the organization’s religious purpose. As a result, it held that the organization was entitled to a tax exemption for the property.

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