The Society of the Holy Child Jesus operates a Roman Catholic church and religious school in Summit. One of the buildings they own is used as an administrative headquarters.
The City of Summit discovered that the Society had never applied for the necessary zoning variances to operate a church in the city. Without the zoning approvals, the city revoked their real estate tax exemption. In 2007, the New Jersey Tax Court decided in favor of the city, citing previous cases under New Jersey's Farmland Assessment Act.
The Society appealed the ruling, and last week the Appellate Division reversed the Tax Court, ruling that the statute for tax exempt entities does not require compliance with zoning regulations.
The case is unusual. This kind of issue usually comes up when the local government, desperate for money, looks for ways to tax otherwise exempt property. In this case,the school's neighbors in a residential district started the litigation over zoning, and the city got involved in taxes afterwards. The zoning issue is still being litigated.