Nonprofit Law Update: Princeton University Settles Taxpayer Litigation

Princeton University had been engaged in a years long state court battle with a group of Princeton Borough residents who were challenging the University's tax exempt status.  

The gist of the lawsuit was that the residents alleged that because Princeton University distributes millions of dollars of profit from patent royalties to its faculty that the University is not entitled to claim exemption from local property tax.  The Plaintiffs' theory was that they all ended up paying more in taxes because of the University's exemption. 

The University reached settlement with the resident group, and agreed to:

  •  contribute $2 million in 2017 and $1.6 million in the following five years to a fund that will distribute the money to Princeton residents who received a homestead benefit under the New Jersey Homestead Property Tax Credit Act;
  • give $416,700 each year from 2017 through 2019 to the Witherspoon Jackson Development Corporation, which helps fund housing for economically disadvantaged residents; and
  • make a $3.5 million annual contribution to the town of Princeton in 2021 and 2022.

These are large dollars to be sure but obviously represented a way for the University to control the outcome of the litigation.  The loss of real estate tax exemption would have cost the University vastly more than the settlement amount.