NJ Tax Court Maintains Churches’ Tax Exemption

Christopher John Stracco, Esq.*

In its recent decision in The Roman Catholic Archdiocese of Newark v. City of East Orange, the New Jersey Tax Court affirmed the property tax exemption on two Roman Catholic churches.(1) The most significant aspect of the decision was the Tax Court’s rejection of the government’s contention that the Court must examine the nature, level, amount or quantum of religious use of otherwise qualified property in order to sustain the requested property tax exemption.

The government of the City of East Orange challenged the property tax exemptions of two Roman Catholic Churches on two grounds: that the properties were insufficiently used for religious worship or religious purposes, and that the alleged minimal amount of religious use militated against the tax exemption of the properties. The Archdiocese argued that an examination by the court of the nature, level, amount or quantum of religious use would constitute an impermissible intrusion into the religious activities of the Roman Catholic Church, and thus would violate the Church’s First Amendment protections under the Constitution of the United States and similar protections under Article I, ¶¶ 3 and 4, of the New Jersey Constitution.

During the relevant tax years the Archdiocese offered weekly mass at the two churches in question, although the Church conceded that usually no more than two persons were present at each mass — the pastor and the security guard for the church, who was a church employee. The doors to the churches were unlocked at the times of Masses, but the Masses were not publicized and there was no advance notice to the public. The church buildings were also used as repositories for church records, artifacts, and furniture; occasional church meetings also were held at the sites. Also, at one of the sites the parish gymnasium was occasionally used by a Catholic youth athletic organization for practices and team meetings.

In its decision the court initially set out the three-tier test for qualification for a property tax exemption under New Jersey tax law:

  • The organization claiming the exemption for the property must be organized exclusively for the exempt purpose;

  • The property must actually and exclusively be used for the exempt purpose; and the owner entity must not operate or use its property for profit.(2)

The court noted that the government did not challenge the Archdiocese’s qualifications as a religious corporation that was organized exclusively for religious purposes, nor did the City contest that the properties in question operate in a not-for- profit manner. The City’s claim was that the level of religious activity taking place at the property was insufficient to justify the tax exemption. Although it is not specifically stated in the Court’s opinion, it can be inferred by an observant reader that the purpose of the Masses was called into question by the government.(3)

The Tax Court noted that the courts in New Jersey had never addressed the issue of whether a minimum level of activity is required to obtain a tax exemption for property used for religious worship or religious purposes. The Tax Court then reviewed cases from other jurisdictions and concluded that, almost universally, other states had rejected a "quantum of use" test in determining the tax exempt status of property utilized for religious purposes.(4) The Tax Court concluded that the courts in other states steer clear of any First Amendment conflicts that might arise from restrictive interpretations of tax exemption statutes as they pertain to religious organizations, and instead offer flexible and reasonable interpretations that minimize the burden on religious organizations to obtain exemptions for religious use of their property.(5)

The Tax Court noted that the New Jersey exemption statute "only requires actual and exclusive use and does not impose a de minimis test on entitlement to religious worship or religious purposes exemptions."(6) The Court found that the New Jersey statute was consistent with the favorable treatment of religious institutions in New Jersey which are protected by three separate provisions of the New Jersey Constitution, one of which specifically requires the granting of exemptions from taxation for property exclusively used for religious purposes.(7) In upholding the tax exemptions on the properties in question, the Tax Court held as follows:

To measure the quantum of religious use of a completed building as a condition of granting a tax exemption would engage the courts in an improper evaluation of religious practice....once [a property is] occupied and used...the failure to grant exemptions would be inappropriate.

Religious institutions are entitled to the exemption...if they demonstrate that the property is actually used for a religious purpose, and that the amount of use in this case, although minimal, is sufficient to sustain the exemption. Once it has been proven that the religious activities are conducted on the property, the taxpayer has met its prima facie case on that issue, and then must prove only that such exempt use is exclusive to establish entitlement to the exemption.(8)

With regard to whether religious activities were conducted on the property, the Tax Court found that the two properties in question were used for religious worship purposes, Catholic Mass was held weekly during the three tax years in dispute, occasional religious meetings took place at the sites, and Catholic youth athletic practices and meetings also took place at one of the properties. The Court concluded that the fact that no one except the parish priest and a parish employee attended mass was irrelevant, as was any motive or purpose of the Masses because Mass services were part of the spiritual practice of the Roman Catholic Church. Therefore, the tax exemptions on the properties were upheld by the Court.

The lesson of this case is significant. The Tax Court of New Jersey did not succumb to the arguments of the City with respect to an examination of the nature, level, amount or quantum of the religious use involved for purposes of granting the tax exemption. The Court could very easily have done this. The result would have been an unnecessary, unwarranted, and as the New Jersey Court recognized, an unconstitutional, intrusion by the government into religious practices. Such a result would have instituted a new standard whereby tax exemptions were conditioned upon what the government and the courts believe constitute an appropriate nature, level, amount or quantum of religious use.

*Christopher John Stracco is a partner in Morristown, New Jersey’s Pitney, Hardin, Kipp & Szuch specializing in taxation litigation and appeals.

  1. Roman Catholic Archdiocese of Newark v. City of Newark, Docket No. 000392-95, et seq., (Tax Ct. May 27, 1998), approved for publication in volume 16 of the New Jersey Tax Court Reports.
  2. Id., Slip Op., p. 5, citing Paper Mill Playhouse v. Millburn Township, 95 N.J. 503, 506 (1984).
  3. See Slip Op., p. 3 ("...it is not so clear as to the purpose of the Masses") and p. 15 ("...any motive or purpose of such Masses [is irrelevant]").
  4. See Institute in Basic Life Principles, Inc. v. Watersmeet Township, 551 N.W. 2d 199 (Mich. Ct. App. 1996); General Conference of the Church of God 7th Day v. Carper, 558 P.2d 832 (Colo. 1976); Congregation Emanu-el of the City of New York v. City of New York, 270 N.Y.S. 6, 9 (N.Y. Sup. Ct. 1934); Corporation of the Episcopal Church in Utah v. Utah State Tax Commission, 919 P.2d 556 (Utah 1996).
  5. Slip Op., p. 13.
  6. Id. citing N.J.S.A. 54:4-3.6.
  7. See N.J. Const. Art. I, ¶¶ 3, 4; Art. VIII, § 1, ¶ 2.
  8. Slip Op., pp. 14-15.


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