On appeal from the Tax Court of New Jersey, Docket No. 6670-2003, whose opinion is reported at 24 N.J. Tax 453 (Tax 2009).
The opinion of the court was delivered by: Axelrad, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Telephonically Argued: February 25, 2010
Before Judges Axelrad, Fisher and Sapp-Peterson.
In this local property tax appeal, we consider whether a non-profit organization whose stated goals include "aiding, promoting and encouraging" educational associations "by all appropriate means" actually used the subject property for the "moral and mental improvement of men, women and children," thereby satisfying the second prong for an exemption under N.J.S.A. 54:4-3.6. We disagree with the Tax court's finding that it did not. However, as we agree that plaintiff has failed to satisfy the third statutory prong that the operation and use of the property must not be conducted for profit, we affirm denial of the exemption.
Plaintiff International Schools Services, Inc. (ISS) challenged property tax assessments for the 2002 and 2003 tax years on office condominium units it owns at l5 Roszel Road in West Windsor Township (the township). The property housed the ISS "home office" staff of about fifty people, of which ten were senior staff who oversaw or supervised the development of the service programs and recruitment at the international schools, and the remaining forty employees were support staff.*fn1 ISS contended the subject property was exempt pursuant to N.J.S.A. 54:4-3.6 as property actually used in the work of a non-profit corporation organized exclusively for the "moral and mental improvement of men, women and children." Following the township's denial of tax exemption, ISS appealed to the Tax Court.
The court granted summary judgment in favor of the township, determining that ISS was not eligible for exemption based solely on the first prong of the three-prong statutory test for exemption articulated in Paper Mill Playhouse v. Millburn Township., 95 N.J. 503, 506 (l984), i.e., that a claimant must demonstrate: (1) it is organized exclusively for the moral and mental improvement of men, women and children; (2) the property must be actually used for the tax exempt purpose; and (3) the operation and use of the property must not be conducted for profit. Int'l Sch. Servs., Inc. v. W. Windsor Twp., 21 N.J. Tax 553 (Tax 2004), rev'd, 381 N.J. Super. 383 (App. Div. 2005). The court concluded that N.J.S.A. 54:4-3.6 did not contain an exemption for an organization having general educational purposes. Int'l Sch. Servs., supra, 21 N.J. Tax at 569. The court also reviewed ISS' certificate of incorporation and found it merely indicated an intent to provide services and funds to other institutions, and not to directly uplift the general public morally and mentally, thus not entitling it to an exemption under law. Id. at 569-70. The certificate of incorporation stated, in pertinent part, that the purposes of the corporation were:
(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 and 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....
We reversed and remanded, holding the moral and mental improvement exemption contained in N.J.S.A. 54:4-3.6 did encompass a general educational purpose. Int'l Sch. Servs., supra, 38l N.J. Super. at 386. We also concluded that, for summary judgment considerations, the statement of ISS' purpose contained in the certificate of incorporation, supplemented with relevant extrinsic evidence as to the organizer's intentions, "arguably suggests a general public purpose in promoting its ideas" which has as a benefit the "moral and mental improvement of men, women and children," thereby generally meeting the first-prong requirement for exemption from property tax. Id. at 386, 388-89. We did not address the other prongs.
At trial, on remand, the focus was on the second and third prongs, i.e., whether ISS actually used the property for the taX exempt purpose and whether the operation and use of the property were conducted for profit. During the three-day trial in June 2007, ISS presented the testimony of Daniel Scinto and Dr. John Nicklas, its current and former presidents, respectively;*fn2 Dr. Roger Hove, ISS' executive vice-president since 2005; and Sandra Logorda, ISS' chief financial officer and treasurer since 2005.*fn3
John Ezysky, CPA, testified for the township. In a published opinion, the Tax court detailed the testimony and found ISS failed to satisfy the remaining two prongs of the Paper Mill Playhouse test, and entered judgment denying the exemption. Int'l Sch. Servs., Inc. v. W. Windsor Twp., 24 N.J. Tax 453 (Tax 2009).
The following testimony and evidence were adduced at trial. As ISS contends the evidence on both prongs was "essentially undisputed" and it "do[es] not question the tax judge's findings of fact," but only argues the judge's application of the law to the facts was erroneous, for ease of reference we will intermittently cite to pertinent portions of the court's factual recitation where it summarizes our review of the record.
In 2002 and 2003, ISS was a § 501(c)(3) tax exempt corporation. It was founded in l955 "to serve American international schools overseas," initially providing teachers for the schools. Dr. Nicklas testified that during 2002 and 2003, ISS' mission was to "promote, by all means possible, support of schools around the world that provided an education for Americans" and those requiring an American-style education. Id. at 459. All of the schools served by ISS provided American-style education in English. ISS decided the services it would offer based on the needs of the schools gleaned from a periodic survey and conversations with the schools. According to Dr. Nicklas, at that time ISS provided services to as many as 800 schools, with l50 to 300 schools using all of ISS' services or a large portion of them. The schools served by ISS were primarily non-profit, nondenominational, independent schools, located in l80 to l85 countries around the world, generally organized by a group of parents and supported by various organizations employing the students' parents in the communities where the schools were located. Ibid. About twenty-five to thirty percent of the students in the schools were American nationals. Ibid. Tuition was paid directly by parents or, in some instances, by their corporate employers. Ibid.
According to Dr. Nicklas, ISS was best known at the time for providing educational staff. In his view, ISS provided and selected the best American teachers and superintendents for the schools by running a series of recruitment fairs in the United States, maintaining a database of 1300 to 2000 individuals qualified to staff the international schools, providing information about the schools and ISS' services on its website, advertising for candidates in educational magazines and newspapers, and conducting initial screenings of candidates for the schools. Id. at 460. Dr. Nicklas testified that through its staffing service program ISS placed about 700 teachers in the international schools each year.
ISS also provided services to various businesses to manage schools for the dependents of their employees, performing all the functions of an American school system. Ibid. According to Dr. Nicklas, ISS had five to fifteen contracts to ...