In the long awaited conclusion to the Princeton University property tax lawsuit, the University announced that it had settled with area homeowners for more than $18 million. The residents of Princeton sought to have the University’s property tax exemption revoked on the grounds that it hosts extensive commercial activities, such as licensing from biotech research.
Under the settlement, the residents agreed to withdraw their challenges to the University’s property tax exemption in exchange for the University to pay approximately $11 million in property tax relief to the residents over the next six years and extend the voluntary contributions to the municipality by over $7 million. With the trial having been withdrawn, the property tax exemption of the University was not settled, thus leaving the University open to future litigation at the end of the six year period.
This case is important for colleges, universities, and nonprofit organizations all over the country, as it could set a precedent for future challenges to a nonprofit organization’s property tax exemption. Lawmakers in Connecticut are already considering taxing property owned by Yale University, while Maine’s governor is proposing to allow municipalities to tax nonprofit organizations. Morristown Medical Center in New Jersey had most of its property tax exemption revoked during the summer of 2015. As municipalities have a need for additional revenues, and taxpayers observe the burden that nonprofits put on city infrastructure, while not paying taxes, it is likely that we will see an increasing activity in the scrutiny of property tax exemption for nonprofit organizations.
If you would like further information or a discussion of this case, please contact Allison Carter at alcarter@deandorton.com or 859-425-7645.