Residents challenging certain building uses
By Victoria Hurley-Schubert, Staff Writer
Some of Princeton University’s tax exemptions are being challenged by a small group of residents.
A lawsuit is challenging the validity of some of Princeton University’s tax exempt buildings assessed at $120 million and may help taxpayers of Princeton Borough by adding $2.2 million to municipal coffers if successful. The 20 buildings listed in the suit range from a gymnasium to an eating club to a publishing house and to the university’s infirmary.
The suit, filed earlier this month, will place the burden of proof on the university to show it is engaged in exempt functions and prove that each building is being used within the exemption, which could put be in jeopardy because of revenue sharing, particularly in the science departments.
”We are not challenging their core academic buildings, and there are several dozen of them,” said Bruce Afran, a Princeton attorney who specializes in public interest law, representing the plaintiffs. “This case very carefully deals with buildings that do not have academic functions or minimal academic functions.”
The litigation is brought by Linden Lane residents Estate of Eleanor J. Lewis; Kenneth Fields; Mary Ellen Merino; Joseph King and Kathryn King. A former attorney, Ms. Lewis’ estate is funding the legal action.
”We chose properties that were completely tax exempt,” said Mr. Fields, whose property value increased 30 percent during the revaluation, along with his neighbors. “The properties they are paying tax on, it’s a whole another issue if they are paying enough tax.”
The university is using pretext, or window dressings, to claim exemptions for certain properties, said Mr. Afran. “The law looks at the division of the property and its primary uses,” said Mr. Afran. “There’s an assumption out there that anything that supports the university is exempt and its not true. The university acknowledges this, it pays tax on the football stadium, for example.”
The statute exempts buildings “actually used for colleges, schools, academies and seminaries,” he said. “What they mean by that are college buildings, buildings used as colleges. They don’t mean any building someone can look to and say that’s useful for us to have, it helps support our work. The Legislature was very careful not to use such broad language; in the same statute, it refers to the exemptions for hospitals and religious corporations, there the language is different and says ‘all buildings used in the work of’ … it doesn’t contain in that phrase ‘in the work of’ colleges and schools.”
When crafting the statute, the Legislature was not willing to give universities a “free pass” on tax exemptions, so the language was tightened to limit the tax-exempt claims that universities can make, Mr. Afran contends. “Case law says tax exemptions are narrowly interpreted and the cases say all taxpayers must bear the burden of taxation,” he said. “The taxpayer has to prove their property is exempt, it’s not our job to prove it’s not, it’s their job to prove it is.”
University officials stand by their exemptions, saying all exempt properties are being used to further the education of students and for students well-being.
”All of the properties cited in the complaint are used to support the university’s educational and research mission, so they are appropriately tax exempt,” said Emily Aronsen, university spokesperson. “The law governing tax exemptions is broad and covers many services we provide to our students whether they are in the classroom or not. The courts have found a wide variety of uses to constitute actual use for school purposes.”
This includes a range of operations: student lounges, housing, athletic facilities, physical plant buildings, storage of records and supplies and other support functions. “They have been given exempt status because of their reasonable necessity to the operation of a school,” she said.
Not all learning happens in a classroom. “The courts have found a wide variety of uses for school purposes,” said Ms. Aronsen. “Students engage in learning and educational activities both inside and outside of class in many forms and in many venues across campus.”
Exemptions have included: storage facilities, dining halls, utility systems and health systems.
The Borough of Princeton was also named because it is the taxing authority, said Maeve Cannon, borough attorney. “(The residents) are filing an appeal saying ‘we don’t think these properties are tax exempt.’ It’s up to Princeton University to demonstrate they are (tax exempt),” said Ms. Cannon. The borough is named as a party because the land is situated in the borough and the assessor assigns the value and confirms the tax-exempt status.
Tax exemptions take place after an application process to the local assessor.
”The local tax assessor makes the final determination which properties are tax exempt and which are not,” said Ms. Aronsen. “We file tax statements supporting exemptions and many of the properties in the complaint have had their status reviewed for more than 60 years, so for more than 60 years, the assessor has determined these are tax exempt.”
Exemptions are given on a building-by-building basis and the use of the building, said Neal Snyder, borough tax assessor. “They have to come to me and tell me what use the building is for. I review it (say) yes or no. What is the intent of the building what is the main intent of this building? Court cases have been very generous to exempt entities, as long as the intent is for the education.”
Exempt status is reviewed every three years, said Mr. Snyder. Buildings fall under exemption because “it’s part of the whole process of what the university is doing,” said Mr. Snyder. “When they initially filed, they stated a use for the building and that’s how they become exempt.”
”We’re confident we will prevail in this case,” said Ms. Aronsen. “The law governing tax exemptions is broad and covers many of the services we provide.”
Another facet of the lawsuit is the university’s burden to prove it is engaged in exempt functions, such as research. “One of the things we think that needs to be explored is profit sharing,” said Mr. Afran. “This will be addressed in the lawsuit, because they will have to show they do not share profits to their staff, because if they do, they are not non-profit. When you divide profits among people, you are no longer non-profit and not exempt from property tax.”
”We’re glad the labs are there and the research is being done, but what should they be paying property tax on?” said Mr. Fields.
Many of the university’s science faculty share in income received from the use of their patents. “For example, Edward Taylor has the drug Alimta, and the university is making between $100 to $200 million a year on that drug,” said Mr. Afran. “The university policy actually says that faculty receive a percent of revenues based on the amount of money that’s come in on the patent.”
”If they are sending profits to professors based on patents, then they are in the same position as Hunterdon Medical Center (which was stripped of its exempt status for revenue sharing with physicians, which was sending money to private pockets based on profits) because they might not be entitled to any exemption if they are dividing profits with faculty,” he said.

