On appeal from a decision of the Tax Court of New Jersey, Docket Nos. 006669-2003 and 006670-2003, reported at 21 N.J. Tax 553.
The opinion of the court was delivered by: Fisher, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges A.A. Rodríguez, Alley and C.S. Fisher.
Since 1913, New Jersey has exempted, from local real estate taxes, property that is actually and exclusively used by non- profit organizations for the "moral and mental improvement of men, women and children." N.J.S.A. 54:4-3.6. To determine its applicability, the Supreme Court has held that an entity which claims such an exemption (1) must be organized exclusively for the moral and mental improvement of men, women and children, (2) must actually and exclusively use the property for that purpose, and (3) must not be operated for profit. Paper Mill Playhouse v. Millburn Tp., 95 N.J. 503, 506 (1984).
Plaintiff International Schools Services, Inc. (ISS), founded in 1955, commenced these actions claiming exemptions for the years 2002 and 2003 on property it owns in West Windsor Township (the township). The tax judge granted the township's motion for summary judgment and denied ISS's motion for summary judgment for reasons set forth in a written decision reported at 21 N.J. Tax 553.
Although the tax judge briefly discussed the second prong of the Paper Mill Playhouse test, she nevertheless entered summary judgment in favor of the township by resting her determination on the first prong, concluding that, as a matter of law, ISS was not organized exclusively for the moral and mental improvement of men, women and children. We disagree and reverse.
We initially observe that the tax judge correctly identified the three prongs of the Paper Mill Playhouse test. The judge also determined that whether an entity is organized exclusively for the moral and mental improvement of men, women and children "must be determined from its organizational documents." 21 N.J. Tax at 568-69 (citing Black United Fund v. City of E. Orange, 17 N.J. Tax 446, 455 (Tax 1998), aff'd, 339 N.J. Super. 462 (App. Div. 2001); 1711 Third Avenue, Inc. v. City of Asbury Park, 16 N.J. Tax 174, 182 (Tax 1996); Planned Parenthood of Bergen Cty., Inc. v. City of Hackensack, 12 N.J. Tax 598, 610 n.6 (Tax 1992), aff'd, 14 N.J. Tax 171 (App. Div. 1993)). While this approach to the first prong is generally accurate, courts are not barred from considering extrinsic information if relevant to ascertaining the meaning of the corporate documents.
ISS's certificate of incorporation states:
The purposes which the Corporation will hereafter pursue are: (1) to aid, promote and encourage, by all appropriate means, including gifts of money or other property, or by other means, schools, facilities, and other organizations that are exclusively educational in character, (2) to foster the provision of education by the payment of salaries, fellowships and grants to teachers and instructors, and (3) to devote all or a part of the income or any or all of the principal of any property, real or personal, to the furtherance and support of projects and institutions that are exclusively educational; provided, however, that no part of the net earnings of such schools, facilities, projects, institutions and other organizations inures to the benefit of private shareholders or individuals, and provided further, (a) that no substantial part of the activities of such organizations is carrying out propaganda, or otherwise attempting, to influence legislation, and (b) that such organizations do not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office.
While this statement of ISS's purpose governs whether the first prong of the Paper Mill Playhouse test has been met, resort to background information further illuminates its meaning and scope.
As explained in ISS's moving certification, ISS was founded in 1955 "in response to the rapid post-war growth of schools abroad which served both American children and children of the host countries." Thus, according to ISS's submission, its goal was "to remedy the shortcomings of overseas schools in which American children were enrolled and to serve the children by enhancing the quality of their education." The intent of ISS was to further bolster this effort by fostering "the mutual understanding between the people of the United States and those of other countries by demonstrating the benefits of American-style education." Accordingly, although the certificate of incorporation's language could be parsed in a way to suggest otherwise, its stated purpose, as examined through the circumstances that caused its incorporation, suggests a general intent to promote its activities among the public in general which has, as a benefit, the "moral and mental improvement of men, women and children."
In centering on her own interpretation of the scope of the certificate of incorporation's meaning, the tax judge drew the conclusion that ISS's educational purpose did not satisfy the first prong of the Paper Mill Playhouse test because "N.J.S.A. 54:4-3.6 does not contain a general exemption for entities organized for educational purposes," and because "[t]he purpose of providing services and funds to other institutions, without more, does not qualify for an exemption under the law." 21 N.J. Tax at 569-70. We reject this conclusion not only because it does not comport with our prior decisions regarding the scope of N.J.S.A. 54:4-3.6, but also because it is inconsistent with ISS's certificate of incorporation. In applying the decisional law that has been developed by the Supreme Court and this court concerning the statute's scope and meaning, we conclude that ISS's general educational purpose is not excluded by N.J.S.A. 54:4-3.6. And, in ...