Ocean Grove “Christian Seaside Resort” Ruled Tax Exempt

by: Thomas Olson
14 May 2021

Just like the Administrative Office Building we blogged about here, Judge Sundar has rejected Neptune Township’s contention that a property in their township owned by non-profit corporation Ocean Grove Camp Meeting Association for their “Christian Seaside Resort” was being used for a non-exempt, for-profit purpose. In Ocean Grove Camp Meeting Ass’n of The United Methodist Church v. Township of Neptune, Judge Sundar was tasked with determining dueling summary judgment motions about whether the Plaintiff’s operation of their rental property was tax-exempt. The Township of Neptune concluded that the property in question was income-generating and operated similarly to a “bed and breakfast,” with no concrete religious services conducted on the property. The Plaintiff contended that for the tax year in question and pursuant to their approval, the only people to rent the property were organizations that conducted religious activities or were there for spiritual purposes. Judge Sundar ruled in favor of the Plaintiff, stating the property was tax-exempt.

The facts in the case were uncontested. The Plaintiff is not directly affiliated with the Methodist Church; however, the Plaintiff’s articles of incorporation state the organization is Methodist, is interested in advancing the mission and spirituality of the Methodist Church, and the organization’s board of directors are Methodist. The Plaintiff rented the property to various organizations (secular and non-secular), religious leaders holding their retreats, or to groups celebrating birthdays and family reunions. When groups stayed on the property, they were provided a continental breakfast, a kitchen that may be used to make meals, and beach passes. It was determined that each organization that rented from the Plaintiff was required to provide an itinerary for the weekend and have their application approved by the Plaintiff. However, the itineraries the Plaintiff accepted varied in their intricacy: some itineraries had loose schedules with group meetings only once or twice a day, with the lessee allowing their members to spend their time how they pleased; other itineraries planned out the lessee’s entire weekend. Plaintiff’s employees did not directly oversee any of the activities or strictly enforce certain rules when organizations stayed there unless the lessee requested Plaintiff’s presence for certain spiritual meetings or activities. For the three to five years prior to the 2018 tax assessment, it had been determined the Plaintiff did not rent to any individual or organization which did not in some way provide religious or charitable services. The Plaintiff deposited the profits made from renting into the United Methodist Church’s accounts to fund the various programs of the Church. The board of directors did not receive compensation from the profits.

In looking at the facts, Judge Sundar concluded that the property was tax-exempt under N.J.S.A. 54:4-3.6. Judge Sundar rejected the tax-exemption provided by New Jersey L. 1870, c. 157 because the property in question was valued over the $5,000.00 limit imposed by that statute. While the Plaintiff was considered a 501(C)(3) organization under the Internal Revenue Code, that does not provide an automatic exemption under New Jersey Law. However, Judge Sundar ruled that under N.J.S.A. 54:4-3.6’s “MMI Clause” the property was tax-exempt. Important in Judge Sundar’s consideration was that most of those lessees who rented were religious organizations, and even those who were secular still stayed for some religious purpose. An example Judge Sundar used was when the Chiefs of Police Association stayed at the property. Part of their stay included a service to pray for fallen police officers. Additionally, since the organization determined who could and could not stay there, it ensured that their guests fit within the mission of their Articles of Incorporation. Judge Sundar did not find certain amenities, like the continental breakfast or beach passes, to negatively affect the fact that the organization which stayed there had some charitable or religious purpose. Finally, since the profits made from the lessee were not paid out to those who ran the site, rather going to the Methodist Church’s programs, Judge Sundar found the property was being used for religious or charitable purposes in accordance with N.J.S.A. 54:4-3.6.

If you are interested in reading the opinion, it may be found here.

The author acknowledges the assistance of William Olson, a Law Clerk at McKirdy, Riskin, Olson & DellaPelle, in preparing this article. Mr. Olson is a member of the Class of 2021 at Rutgers Law School.