Appeals court upholds 2021 limits on nonprofit tax exemption challenges

In this photo illustration a close up shot of judge banging the gavel for silence at court (Getty Images)

A New Jersey appeals court on Wednesday rejected a challenge to a recent law that bars residents from disputing the tax-exempt status of properties they do not own before county tax boards.

The three-judge panel’s non-precedential decision rejects plaintiffs’ arguments that the new prohibition harms them, with the judges noting they can still challenge organizations’ tax-exempt status in Tax Court.

At the root of the case is a 2021 law that exempts nonprofit hospitals from taxation regardless of whether they also host for-profit activities. That law was itself a response to a 2015 court decision that found portions of nonprofit hospital properties that host for-profit services could be taxed.

The 2021 law allows such lots to be taxed, but only if they are not used exclusively for hospital purposes, and requires hospitals pay per-bed fees to their host municipality. It also bars third-party administrative challenges to a property’s tax-exempt status.

Before the trial court, the plaintiffs — New Jersey Citizen Action, the American Federation of Teachers New Jersey, and two South Brunswick residents — alleged the latter violates provisions of the state constitution that require assessments to be uniform across a taxing district and impose similar limits on property tax exemptions.

The plaintiffs did not revive the constitutional claims on appeal. Instead, they asked the court to declare that residents can challenge properties’ tax-exempt status in administrative proceedings, arguing that the new law is ambiguous because it does not say whether residents can pursue a similar action in court.

The judges saw no such ambiguity, noting that the preceding statute also made no mention of court challenges to property tax exemptions and that plaintiffs had not raised an actual dispute on the issue.

“It is not our province to provide the public with ‘guidance’ regarding an uncontroverted issue,” they said in the opinion.

Attorneys for the plaintiffs did not return a request for comment, and it’s not clear whether they’ll petition the matter to the New Jersey Supreme Court.

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