By Greg Forester, Staff Writer
The legal battle between Princeton Borough and the Cottage Club should continue in the coming weeks, according to Thomas Olson, a lawyer representing the private eating club that serves Princeton University students.
The club has alleged, beginning in 2002, that it is eligible for tax-exempt status and is owed back taxes, because of its placement on both state and national historic registers.
At stake is about $60,000 a year in borough tax revenue and nearly $390,000 in back taxes, plus interest.
Further action, which would be filed in Mercer County Superior Court, could follow a Sept. 16 ruling by the New Jersey Supreme Court that denied a motion made by the club.
The motion asked the Supreme Court to order the state Department of Environmental Protection to give the Cottage Club tax-exempt status as a historical structure.
Mr. Olson, the Cottage Club attorney, characterized the Supreme Court decision as “procedural, and definitely not on the merits” of the case, in that it allows the Cottage Club to continue its case in lower courts.
The borough maintains the club is ineligible due to its private status and a lack of public access, as required for tax exemption, and that the club’s actions represent an attempt to circumvent its tax obligations.
”What they’re asking for is a bailout of some $60,000 per year that would have to be paid by other taxpayers,” said Michael Herbert, the attorney representing the borough.
A decision against the borough could also open the way for the other 10 eating clubs to pursue similar status, threatening the $500,000 a year the borough receives in property taxes.
But borough officials remain optimistic that they will prevail.
Mr. Herbert noted that state legislation passed in 2004 and in 2007 has clearly established that tax-exempt status is to be reserved for historical structures with significant public access, and not for places like the Cottage Club.
Mr. Herbert said that at the time of the club’s original appeal, there were only nine days a year that the public had access to the building.
At that time, the public needed at least 12 days of access for a structure to receive tax-exempt status, but Assemblyman Reed Gusciora (D-Princeton) sponsored legislation in 2004 to increase that figure to 96 days.
The Cottage Club countered by claiming the 2004 legislation could not apply to the club retroactively. The state Supreme Court sided with the club in a May 2007 ruling that instructed the state Department of Environmental Protection to confer tax-exempt status on the club.
But more help came to the borough from the state legislature, where Mr. Gusciora sponsored legislation the same year. It clarified the earlier statute, making it retroactive to 1999, the year in which the Cottage Club attained its status.
The new statute moved tax-exemption decisions to the jurisdiction of the state Department of the Treasury, instead of the Department of Environmental Protection.
Mr. Gusciora, following the Sept. 16 Supreme Court ruling, released a statement asserting, “The Cottage Club’s only reason to exploit its century-old building’s historic status was in a blatant attempt to dine-and-dash on its $61,000-plus annual tab.”
Mr. Herbert said that in both cases the state legislature gave a clear indication that institutions like the Cottage Club should not be given tax-exempt status without the necessary public access.
”The state said look, we never intended to have an organization like the Cottage Club receive the tax windfall,” said Mr. Herbert of the 2007 legislation.
Mr. Herbert expressed regret that the Cottage Club intended to continue its legal battle.
”That’s sad commentary,” said Mr. Herbert. “We have 10 other eating clubs and they all pay their taxes. They’re not asking for the same windfall.”

