Cottage Club’s nine-year legal battle to gain exemption from Princeton Borough property taxes as a historic site was dealt another setback on June 25, when the appellate division of the New Jersey Superior Court affirmed state officials’ decision to deny the club’s request for tax-exemption.
In its decision, the court ruled that Cottage should continue to pay taxes because it is not open to the public for 96 days out of the year – the standard for tax exemption as a historic site imposed by the most recent statutes governing the issue. Attorneys for the eating club argued that the continued denial of tax-exemption by the state was unjust because the more stringent 96-day requirement was imposed only after a 2007 New Jersey Supreme Court decision reversed an earlier appellate court ruling, granting tax-exempt status to Cottage under rules that were then more lenient.
Cottage, which was designated a historic site in 1999, first filed for tax-exemption under that status in 2001 after it began offering occasional tours of its mansion to the public. At the time, the law required historic sites seeking tax exemption to be open to the public for 12 days per year. Cottage met the 12-day requirement, but its request was nonetheless denied in 2003 by the New Jersey Department of Environmental Protection, the state entity that, at the time, had the authority to consider tax-exemption petitions. The DEP cited the club’s inaccessibility to the public as its grounds for refusal.
In 2004, state assemblyman Reed Gusciora (D) introduced legislation nicknamed the “Cottage Bill” after the club decided to appeal the DEP’s decision. The law extended the public access requirement for tax exemption from 12 to 96 days and was strongly backed by the Borough, which stood to lose hundreds of thousands of dollars in revenue if Cottage were exempted from paying its taxes. Town officials have argued that granting tax exemption to Cottage would be contrary to the spirit of the historic provision in the tax code and would effectively amount to town residents subsidizing a private dining facility.
On appeal, however, the Supreme Court ruled in 2007 that the new law did not clearly state the date on which it became enforceable and could not be applied to Cottage since its application for tax-exemption was then years-old. The court remanded the application to the DEP and granted Cottage its requested exemption, which meant that the Borough would owe Cottage more than $300,000 in property taxes paid by the club since it applied for certification in 2001.
Yet, just three weeks after the ruling, a new law was introduced in the state legislature that clarified the intent of the 2004 “Cottage Bill” and applied it to all sites designated as historic after July 1, 1999 – including Cottage. According to the 2004 amendments, only two property owners out of the more than 35,000 designated historic sites in the state applied for tax exemption since that date. The amendments also shifted jurisdiction over granting tax exemptions from the DEP to the Division of Taxation.
Under these amended regulations, the state has continued to deny Cottage tax-exemption, and this most recent appellate court decision upheld the state’s authority to retroactively apply tax regulations.
Princeton Tower Club is currently the only eating club with tax-exempt status, which was granted in 1972 when the club argued that it provided space on its premises for University functions like precepts and seminars.