Princeton University To Pay $18.2M To Settle Suit Over Tax-Exempt Status

Princeton University agreed on Oct. 14, 2016 to pay $18.2 million to end a closely watched lawsuit that challenged the school’s property-tax exemption.

The settlement leaves unresolved some important issues engulfing tax exemptions for nonprofits. Still fresh is a 2015 ruling that Morristown Medical Center was not eligible for an exemption on most of its property; the hospital then settled for $15.5 million.

In the Princeton case, Fields v. Trustees of Princeton University, the homeowner plaintiffs claimed that the university was engaged in for-profit ventures, such as through licenses and commercial use of its scientific and engineering facilities. The plaintiffs said they have paid more in taxes to compensate for the university’s exemption.

In 2015, a New Jersey Tax Court judge ruled that the university bore the burden of showing it was eligible for the exemptions.

Under the $18.2 million settlement, the university will pay $2 million in 2017 and then $1.6 million a year for five years to a fund for Princeton recipients of a New Jersey Homestead Property Tax Credit Act benefit. 

In addition, the university will make three contributions of $416,700 to the nonprofit Witherspoon Jackson Development Corp. to facilitate housing and related needs of low-income residents in the town.

The university also will pay the town of Princeton $3.48 million in 2021 and in 2022, the amount it is scheduled to contribute in 2020, the final year of its seven-year agreement with the town. 

The agreement is not to be construed as an admission by the school that any of its exempt property should be subject to taxation.

If you have questions about this topic or would like to discuss your tax law needs, John Wisniewski may be reached at (732) 651-0040 or JWisniewski@wisniewskilaw.com.

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