Property Tax Exemption Does Not Require Compliance With Municipal Zoning Ordinance

by: Anthony F. Della Pelle
3 Aug 2011

A New Jersey appellate court has reversed an earlier Tax Court decision denying a property tax exemption because the taxpayer was using the property contrary to local zoning. The appellate court held that the tax exemption statute, N.J.S.A. 54:4-3.6, does not require, as a prerequisite, compliance with the municipal zoning ordinance. The taxpayer operated Oak Knoll School of the Holy Child, a Catholic elementary school located in Summit.  The taxpayer appealed the final order of the Tax Court, which affirmed the City of Summit’s revocation of the school’s long-standing tax exemption, pursuant to the tax exemption statute.

The taxpayer owns property adjacent to the school improved with a single-family residence that had been used as a residence for nuns until sometime in 2000.  The property was exempt from real estate taxes during this time. After the residential use was discontinued the taxpayer continued to use the building for other school purposes. Under the applicable zoning ordinance, however, educational institutions were not permitted uses in the zone, although they were recognized as permitted conditional uses. In 2005, the City revoked the tax exemption on the property based because the use was not permitted. The City argued before the Tax Court that the use of the property is illegal and as such, it does not qualify for an exemption from taxation.
Tax Court judge concluded that a taxpayer may be denied an exemption if the property is in violation of the municipal zoning ordinance. The appellate court reversed holding that the tax exemption statute “does not require the property be a lawful use under the municipality’s zoning ordinance in order to qualify for tax exemption.”

A copy of the Appellate Division’s opinion in Society of the Holy Child Jesus v. City of Summit, Docket No. A-1126-09T3 can be found here.