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New Jersey law provides real estate tax exemptions to certain nonprofit organizations, including religious institutions, educational entities, and other charitable organizations (each referred to here as an “Eligible Entity”). To obtain such an exemption, an Eligible Entity must complete and submit an Initial Statement Claiming Property Tax Exemption (the “Application”) to the local tax assessor in the municipality where the property is located. This Application is due by November 1st of the year prior to the pre-tax year.

If the Application is approved, the exemption must be renewed every three years, again by November 1.  In cases where the tax assessor denies the exemption request, the Eligible Entity has the right to file an appeal. The appeal must be submitted on or before April 1 of the taxable year in question. Initial appeals are reviewed by the County Board of Taxation, which may affirm or overturn the assessor’s ruling. If necessary, the decision of the County Board may be further appealed by either party to the New Jersey Tax Court.

To qualify for the exemption, an organization must:

1. Be legally organized under New Jersey law;
2. Hold legal title to the property in question; and
3. Be authorized to carry out the specific activities for which the exemption is sought.

It’s important to note the organization must own the property outright. A mere equitable interest, such as a long-term lease, is insufficient for most taxpayers. For example, if an entity enters into a 99-year lease with a private owner, it does not meet the ownership requirement. The simplest way to prove ownership is by ensuring the Eligible Entity is listed as the sole owner on the deed. If ownership is shared with another entity, particularly a for-profit or non-charitable organization, this could trigger closer scrutiny by the tax assessor and potentially lead to a denial.

Legal Structure and Authorization Requirements

It’s essential to distinguish between being organized under New Jersey law and being authorized to perform charitable or religious functions. Simply incorporating in New Jersey (whether as a domestic or foreign entity) does not, on its own, establish that the organization is permitted to operate a school, hospital, or religious congregation. That authority must be clearly outlined in the entity’s certificate of incorporation or equivalent founding documents, and ideally also reflected in the bylaws or other governance materials.

Types of Exemptions

New Jersey recognizes multiple forms of property tax exemptions for nonprofit organizations. This overview focuses specifically on exemptions available to religious organizations, educational institutions, and charitable entities.

Religious Institutions

Properties owned by religious organizations may qualify for exemption when the buildings are actively used for religious purposes by entities incorporated exclusively for that mission. However, any segment of the property leased to a for-profit entity or used for non-qualifying purposes will generally become taxable.

For instance, if part of a church building is rented out to a commercial business or a for-profit daycare, that portion will be subject to property taxes. Additionally, if the religious organization’s governing documents permit commercial operations or retail sales, this may compromise its eligibility. During periods of renovation or construction, the exemption may also be challenged — especially if delays significantly disrupt religious activity on-site, leading to a finding that the property is not being used as statutorily required.

Educational Institutions

Buildings used by colleges, schools, academies, or seminaries for educational purposes may also receive property tax exemptions. However, like with religious organizations, any part of the property leased to a commercial entity becomes taxable. Also, for-profit private schools do not qualify; only those organized as nonprofit private educational institutions are eligible.

A common gray area involves residential properties owned by schools and rented to faculty. Whether such housing qualifies for exemption depends on several factors:

• Is the school earning a profit from the rent?
• Is the housing necessary to attract or retain qualified faculty?
• Does the arrangement primarily support the school’s educational mission?

If the rental is profit-driven and resembles a standard landlord-tenant relationship, the exemption will likely be denied. However, if the housing is offered at minimal cost and is clearly intended to advance the school’s educational goals, particularly in hiring and retaining quality educators, an exemption may be granted. 

Charitable Organizations

Organizations organized exclusively for charitable purposes may obtain property tax exemptions for buildings used in support of their mission. Typical examples include nonprofits serving the elderly, individuals with disabilities, or those experiencing economic hardship. However, the definition of a “charitable purpose” is not strictly codified. Determining eligibility involves evaluating factors such as:

• The nature and scope of services provided;
• The organization’s funding sources; and
• Whether the services offer public benefit or help reduce public burden.

For example, a nonprofit that offers affordable housing to individuals with mental health challenges may qualify — especially if the absence of such services would otherwise shift the burden to government facilities. Even if the nonprofit collects rent, it can still be eligible, provided the fees are modest and the overarching purpose remains charitable.

If your organization believes it may qualify for a property tax exemption under New Jersey law, it is advisable to consult with counsel familiar with the local tax assessor’s procedures and the nuances of exemption criteria.