Court Opinion

ID: 4645989
Source: CourtListenerOpinion
Date Created: 2020-12-23 15:09:24.43893+00
Date Added: 2024-06-11T08:00:55.435090
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-0185-19T4

RIVER RATS INC.,

          Plaintiff-Appellant,

v.

BOROUGH OF FAIR HAVEN,

     Defendant-Respondent.
_______________________________

                   Submitted December 7, 2020 – Decided December 23, 2020

                   Before Judges Fasciale and Rothstadt.

                   On appeal from the Tax Court of New Jersey, Docket
                   No. 008332-2016.

                   DLA Piper, LLP, attorneys for appellant (Karl H. Buch
                   and E. Giovannie Mercado, on the briefs).

                   Cleary Giacobbe Alfieri Jacobs, LLC, attorneys for
                   respondent (Lani M. Lombardi, on the brief).

PER CURIAM

          Plaintiff River Rats Inc. appeals from an order dated August 14, 2019,

granting summary judgment to defendant Borough of Fair Haven (the Borough)
on the issue of property tax exemption for plaintiff's two contiguous lots. On

appeal, plaintiff raises the following points for this court's consideration :

             POINT I

             THE TAX [JUDGE] ERRED BY DENYING
             PLAINTIFF'S . . . MOTION FOR SUMMARY
             JUDGMENT BECAUSE [PLAINTIFF] PRESENTED
             SUFFICIENT EVIDENCE THAT IT IS ENTITLED
             TO PROPERTY TAX EXEMPTION[.] (Raised
             Below).

                   A. [Plaintiff] is [E]xclusively [O]rganized for a
                   [T]ax [E]xempt purpose[.]

                          i. [Plaintiff]'s constituent documents prove
                          that it is exclusively organized as a school
                          or college[.]

                          ii. [Plaintiff]'s constituent documents
                          prove that it is exclusively organized for
                          the moral and mental improvement of men,
                          women, and children[.]

                   B. [Plaintiffs]'s [P]roperty [C]ontains [B]uildings
                   that are [A]ctually [U]sed for a [T]ax [E]xempt
                   [P]urpose.

                          i. The buildings are actually used to operate
                          a school[.]

                          ii. The buildings are actually used to
                          operate a college[.]

                          iii. The buildings are actually used to
                          promote    the    moral   and    mental

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                                         2
                            improvement       of   men,   women,   and
                            children[.]

                   C. Plaintiff is [N]ot [C]onducted for [P]rofit.

We conclude that the structures on plaintiff's property do not qualify as buildings

within the exemption statute and plaintiff is not organized for, and exclusively

used as, a school, nor for the moral and mental improvement of men, women,

and children. We therefore affirm.

      Plaintiff is a members-only sailing organization, incorporated on June 23,

1960, and first registered as an I.R.C. § 501(c)(3) not-for-profit organization on

February 24, 1961. In its certificate of incorporation, plaintiff set forth its

purpose under article II:

            1.     To promote, encourage and sponsor children and
            family group participation and interest in aquatic
            activities.

            2.    To provide training and instruction for safety in
            the participation of aquatic activities.

            3.     To acquire, hold, manage and provide facilities
            for participation in aquatic activities and achievement
            of the purpose of the association.

      Plaintiff offers four categories of membership: family, life, sustaining,

and honorary. Family memberships are available to families with at least one

child under sixteen years old or to adults who sponsor a child and permit a family

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to use plaintiff's facilities, participate in social activities, and receive a discount

on its children's training program. Plaintiff limits family memberships to 125

families, of which no more than twenty-five can be non-residents of the

Borough.     Plaintiff's bylaws give residents preference over non-residents

whenever there are more valid applications than available family memberships.

Family members are afforded voting rights, can serve as trustees, and may be

elected as officers to the executive board. Life memberships are available to

families who were involved in plaintiff's founding or "have given long term

service" to plaintiff and provides all the rights of family membership.

      Sustaining memberships are available to member families, do not entail

facilities privileges or voting rights, and only allow the member to participate in

plaintiff's social activities. Honorary memberships are granted to those who are

recognized by various public officials and entail the same rights as sustaining

memberships. Neither honorary members nor sustaining members are required

to pay dues. Plaintiff permits all members temporary use of its docks, summer

storage for boats, mooring storage, use of its picnic tables and dock, use of its

mooring field, and access—for a fee—to social and sailing events.

      Plaintiff owns lots 21 and 71, which are contiguous, of block 27 in the

Borough. Lot 21 is classified as a class two property (residential property, as

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                                          4
per N.J.A.C. 18:12-2.2(b)) and measures approximately 1.51 acres. Lot 71 is

classified as a class one property (vacant land, as per N.J.A.C. 18:12-2.2(a)) and

measures approximately 0.8 acres.

        On May 21, 1966, the Fair Haven Zoning Board of Adjustment

categorized plaintiff as "a community service organization not operated for

profit" and conditioned various variance approvals upon plaintiff's using the

premises for "family sailing and recreational activities associated therewith,

including instruction for boating . . . [and] a program of competitive racing and

related activities with others who are not members of" plaintiff.

        Lot 21 currently contains five wood-framed structures, covered by roofs,

that have hinged doors with padlocks and stand on cinderblocks or other

supports. The structures are between eighteen square feet and sixty-four square

feet.    There exists no indication that they are equipped with windows,

ventilation, utilities, or plumbing. Plaintiff uses four of the structures to store

equipment, including sails, masts, and rudders, and one of them to store picnic

items and other equipment for its events. It reported end-of-year values for "land

and buildings" of $27,681 in 2014 and $26,031 in 2015.              The Borough

determined that the structures were taxable improvements for 2016.

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                                        5
      On May 27, 2015, plaintiff submitted an initial statement of organization

claiming property tax exemption to the Borough's Tax Assessor (the assessor).

In its initial statement, plaintiff claimed an exemption under N.J.S.A. 54:4-3.6.

It listed its organization's purpose as "[s]ailing instruction and safe boating for

children and families," and indicated that it used its five storage structures

entirely in furtherance of that purpose.

      On September 17, 2015, the Borough sent a letter through its counsel

asking plaintiff to clarify what specific statutory exemption its use fell under,

whether it previously applied for an exemption, whether it charges fees, and

what activities it performed, among other matters. The Borough also requested

documentation regarding any prior exemption application, tax returns and a

member list, among other documents.

      In its November 3, 2015 response, plaintiff specified that it sought an

exemption because it uses its structures for educational purposes and for the

public's moral and mental improvement.

      Plaintiff stated that it sought an exemption in 2010, which the assessor

denied because its property did not have any buildings. It attached letters from

the Borough in which the Borough clarified that it denied the exemption because

the property did not contain buildings and that plaintiff did not address the other

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                                           6
statutory requirements. Plaintiff stated that it now had buildings within the

meaning of the statute, including sheds and other structures that the Borough

previously determined to be taxable improvements, and that the buildings were

necessary for its charitable purposes.

      James Banahan, plaintiff's Executive Officer, certified that lot 71 is

exclusively below the mean high tide water mark and, as such, the state owns

the property under the public trust doctrine. Accordingly, plaintiff cannot build

on the lot. He certified that club members and the general public "occasionally"

explore the lot via kayak or canoe.

      Plaintiff further explained that it offers three types of educational training

programs. The first, the "Junior Sailing Training Program," offers sessions two

and a half days per week, for four weeks. It conducts its classes via chalkboard

sessions on picnic benches and hands-on sailboat sessions in the water. The

class has a twenty-five-student limit, and the students are provided a textbook

with information on sailing and water safety. Banahan certified that children

who complete the junior program receive a state-recognized certification that

notes their hours and level of sailing expertise, though plaintiff did not specify

the state entity that recognizes the certification or provide any supporting

documentation regarding either the certification or instructional materials.

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                                         7
Plaintiff stated that it offers scholarships for students with financial need and

supports the program through members who volunteer their services and do not

receive compensation. In its 2013 and 2015 tax returns, however, plaintiff stated

that it did not provide scholarships or financial assistance.

      Plaintiff's second program is the "Adult Sailing Training Program," which

holds three classroom sessions and three days of water instruction. Volunteers

run the classes and use loaner and volunteer boats. Instructors evaluate the

students' prowess on the first day and cater subsequent instruction to the

students' particular knowledge and skill.

      Plaintiff's third program is the "Sailing Loaner Boat Program," which

consists of members who do not own their own sailboats and pay a fee to use its

three loaner boats. Plaintiff also runs weekly races during the summer for the

purpose of promoting sailing. Banahan certified that the races are open to the

public, that members of the public "occasionally participate" in the races and

that the property is open to the public on the day of the race, so that the public

can view the race for free.

      Plaintiff's primary source of income is the "Junior Sailing Training

Program." Its other sources of income include member dues, member fees,

training tuition, donations, fundraising and "miscellaneous." Plaintiff does not

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solicit contributions. It uses all fees it generates from the program to maintain

its equipment and facilities.

      On January 12, 2016, the assessor denied plaintiff's request for an

exemption and assessed lot 71 at $82,300 and lot 21 at $313,500 total: $302,000

for land, and $11,500 for buildings. Thereafter, on January 9, 2016, plaintiff

filed two petitions of appeal—one for lot 21 and one for lot 71—with the

Monmouth County Board of Taxation. On March 31, 2016, the Monmouth

County Board of Taxation issued two memorandums of judgment, denying

plaintiff's claims as to each lot on the basis that the structures do not constitute

"buildings" within the definition of the statute. The assessor did not make any

findings as to plaintiff's organizational structure or use of the property.

      Thereafter, on May 24, 2016, plaintiff filed a complaint with the tax court,

seeking an exemption for both lots. On February 1, 2019, plaintiff moved for

summary judgment. On June 18, 2019, the Borough cross-moved for summary

judgment and dismissal of plaintiff's complaint with prejudice. On August 14,

2019, the tax judge entered a final order and judgment, with an accompanying

opinion, denying plaintiff's motion for summary judgment and granting the

Borough's cross-motion for summary judgment.           In her opinion, the judge

analyzed whether plaintiff's five wooden structures constitute "buildings" under

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                                         9
the statute and found that they do not because they are not intended for human

residence or habitation, are not equipped with utilities, do not have windows or

means of ventilation, and are not permanent nor affixed to the ground. The judge

also analyzed plaintiff's claim for exemption under Paper Mill Playhouse v.

Twp. of Millburn, 95 N.J. 503, 506 (1984), and found that plaintiff does not

qualify for exemption as a school.

      The judge also found that plaintiff is not organized to promote the moral

and mental improvement of the public and is not exclusively used for that

purpose. The judge did not specifically rule on whether plaintiff operates its

property for profit but blended this analysis into whether plaintiff actually uses

its property for the public's moral and mental improvement. The judge was not

persuaded that plaintiff exists for the general public's benefit or that it is not

engaged in a seemingly commercial enterprise. Finally, the judge found that lot

71 is not exempt because it is a vacant lot that is contiguous to lot 21 that it

found is not exempt.

      We disagree with plaintiff's argument that the tax judge erred by granting

summary judgment in favor of the Borough on the issue of plaintiff's entitlement

to a property tax exemption.

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                                       10
      Rule 4:46-2 provides that a tax judge should grant summary judgment

when "there is no genuine issue as to any material fact challenged" and the

movant is entitled to judgment as a matter of law. Brill v. Guardian Life Ins.

Co. of Am., 142 N.J. 520, 540 (1995).

      When the plaintiff moves for summary judgment, the motion judge must

view the facts and reasonable inferences therefrom in the defendant's favor and

decide whether a reasonable factfinder could determine that the plaintiff has not

met its burden of proof. The judge must deny the motion if a reasonable

factfinder could decide in the defendant's favor. Globe Motor Co. v. Igdalev,

225 N.J. 469, 481 (2016). This court reviews the issue de novo. Advance Hous.,

Inc. v. Township of Teaneck, 215 N.J. 549, 566 (2013).

      The burden to demonstrate the right to tax exemption is on the claimant,

Int'l Sch. Servs., Inc. v. W. Windsor Twp., 207 N.J. 3, 24 (2011), and courts

construe statutes granting exemption strictly against those seeking it. Paper

Mill, 95 N.J. at 506-07. However, strict construction of the statutes must be

reasonable and courts should not give words "a rigid scholastic interpretation

. . . . The rule of strict construction must never be allowed to defeat the evident

legislative design." Boys' Club of Clifton, Inc. v. Twp. of Jefferson, 72 N.J.

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                                       11
389, 398 (1977) (quoting Twp. of Princeton v. Tenacre Found., 69 N.J. Super.

559, 563 (App. Div. 1961)).

      The New Jersey Constitution exempts from taxation real property that is

owned by a non-profit organization and used exclusively for charitable

purposes—"as defined by law." Advance Housing, 215 N.J. at 566 (citing N.J.

Const. art. VIII, § 1, ¶ 2). The applicable law with respect to property tax

exemption is N.J.S.A. 54:4-3.6. Id. at 566-67. The portions of the statute that

are relevant to the disputed issues between the parties provides:

            The following property shall be exempt from taxation
            under this chapter: all buildings actually used for
            colleges, schools, academies or seminaries, provided
            that if any portion of such buildings are leased to profit-
            making organizations or otherwise used for purposes
            which are not themselves exempt from taxation, said
            portion shall be subject to taxation and the remaining
            portion only shall be exempt; . . . all buildings actually
            used in the work of associations and corporations
            organized exclusively for the moral and mental
            improvement of men, women and children, provided
            that if any portion of a building used for that purpose is
            leased to profit-making organizations or is otherwise
            used for purposes which are not themselves exempt
            from taxation, that portion shall be subject to taxation
            and the remaining portion only shall be exempt; . . . the
            land whereon any of the buildings hereinbefore
            mentioned are erected, and which may be necessary for
            the fair enjoyment thereof, and which is devoted to the
            purposes above mentioned and to no other purpose and
            does not exceed five acres in extent: . . . provided, in
            case of all the foregoing, the buildings, or the lands on

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                                       12
            which they stand, or the associations, corporations or
            institutions using and occupying them as aforesaid, are
            not conducted for profit[.]

            [N.J.S.A. 54:4-3.6.]

      The Supreme Court distilled the statutory requirements for a corporation

seeking exemption into the following three-part test: "(1) it must be organized

exclusively for the [tax-exempt purpose]; (2) its property must be actually and

exclusively used for the tax-exempt purpose; and (3) its operation and use of its

property must not be conducted for profit." Paper Mill, 95 N.J. at 506.

      The Court later noted that the Legislature subsequently amended the

former exclusivity-of-use requirement of N.J.S.A. 54:4-3.6 to permit exemption

for property that is "actually used" by the corporation for the tax -exempt

purpose. Int'l Sch., 207 N.J. at 16. Plaintiff's property is not actually or

exclusively used for a tax-exempt purpose, nor is it organized exclusively for a

tax-exempt purpose. Although plaintiff's operation is not conducted for profit,

plaintiff nevertheless cannot satisfy the first two parts of the three-part Paper

Mill test, nor the statutory requirement that the property contain a building. As

such, plaintiff has failed to present sufficient evidence that it was entitled to

property tax exemption for its two contiguous lots.

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                                      13
                                         I.

      We first address plaintiff's argument that its structures qualify as

"buildings" because they are permanent and have the structural characteristics

of buildings. We will also address plaintiff's contention that the structures are

ancillary buildings which store essential items necessary to its operation and are

therefore entitled to exemption.

      In Salvation Army v. Alexandria Twp., 2 N.J. Tax 292, 297 (Tax 1981),

the tax court conceded that the Legislature did not define the term "building" in

the exemption statute. The tax court set forth a two-part analysis to determine

whether a structure qualifies as a "building" under the statute. Id. at 298-300.

It termed the first part the structural test, for which the entity must be a "fabric

or edifice constructed," id. at 298 (citing Children's Seashore House v. Atlantic

City, 68 N.J.L. 385, 389-90 (1902)), that has "the physical characteristics with

respect to material and design that are inherent in buildings." Ibid.

      The tax court termed the second part the functional test, which "involves

a determination of the purpose for which a structure was intended, as related to

the purpose of the charitable organization." Id. at 299-300. In relation to the

land, the building must "be the principal factor in the scheme and not a mere

incident to the purposes of the encampment or some other temporary device."

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                                        14
Id. at 299 (quoting Children's Seashore, 68 N.J.L. at 390). The court cautioned

that a "less restrictive definition" could lead to the exemption of "large

aggregations of property from the common burden of taxation." Ibid. (quoting

Children's Seashore, 68 N.J.L. at 391).

        In Salvation Army, the tax court examined the plaintiff's claim for

exemption of nine permanent tent platforms, which were between eighteen and

twenty-four square feet, made of wood and rested on cinderblocks that were not

embedded in the ground. Id. at 300-01. The plaintiff pitched tents on them

during the camping season and up to nine people could fit in them. Id. at 301.

The tax court held that the structures were not "buildings" under the structural

test.   Ibid.   The court in Fairleigh Dickinson University v. Florham Park

Borough, 5 N.J. Tax 343, 346 (Tax 1983), also recognized this dichotomy of

temporariness versus permanence. It held that the guardhouses in question were

not "buildings" because it did not have evidence before it that they "were of

sufficient permanence to be considered buildings." Ibid.

        Here, the structures in question do not satisfy the structural test. They do

not appear to be intended for habitation. They are small and do not have

windows, and there is no indication that they have ventilation, utilities, or

plumbing. They rest on cinderblocks and do not display any indications of

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                                         15
permanence. Rather, they appear to be akin to portable storage containers that

plaintiff uses to store and secure its possessions.

      As to the functional test, the tax court in Salvation Army found that the

plaintiff's structures failed to satisfy this test as well. Id. at 301-02. The

campers' cabins qualified as "buildings" within the definition of the statute, as

they provided permanent housing that was essential to the plaintiff's summer

camp. The tents and platforms, however, were incidental and temporary. Ibid.

      Here, like in Salvation Army, the structures do not satisfy the functional

test. They are not the focal point of the property. Rather, they are small,

moveable, shed-like structures on a large plot of land. The sole function they

serve is to store plaintiff's possessions. Plaintiff does not utilize them for a

function essential to its operations such as conducting classroom sessions or

sailing practice. Because plaintiff does not satisfy the structural nor function

tests, its structures cannot meet the statutory requirement that the tax-exempt

land contain a "building."

      The Salvation Army tax court also noted that the Legislature emphasized

the exemption of buildings and only intended for land holdings to be exempted

when they are necessary for the enjoyment of the buildings. Id. at 296. As such,

"[v]acant land is entitled to no exemption" under the statute. Ibid. Accord City

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                                        16
of Hackensack v. Hackensack Med. Ctr., 9 N.J. Tax 460, 462 (Tax 1988) (stating

that "[l]and is exempt under N.J.S.A. 54:4-3.6 only as an incident to the

exemption of buildings erected thereon").

      As to the statutory exemption for land necessary for the fair enjoyment of

the building, "necessary" does not mean that the land is indispensable, but that

it is reasonably necessary to accomplish the purposes of the institution. Boys'

Club, 72 N.J. at 401. As such, the caselaw does not support the exemption of

either the structures on lot 21 or the land. Under Salvation Army, plaintiff's land

must be necessary to the enjoyment of the buildings for the surrounding land on

lot 21 to be exempt. Clearly it is not. It therefore follows that lot 71, which was

only "occasionally" explored by members and the public, which is insufficient

to qualify as necessary to plaintiff's sailing operations, also cannot qualify. The

tax judge noted—and we agree—that once lot 71 is found to not be exempt on

its own, and lot 21 is found to not be exempt, the former cannot gain exemption

by virtue of being contiguous to the main lot.

      As to plaintiff's argument regarding ancillary buildings, we examine the

property as a whole, in relation to its tax-exempt purpose. See Fairleigh

Dickinson, 5 N.J. Tax at 356 (noting that property should be examined "as a

whole in relation to its purpose and not merely as a composite of unrelated,

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                                       17
individual buildings"). Viewing the property as a whole in relation to its purpose

of teaching sailing skills, the small, portable sheds that store equipment do not

constitute ancillary buildings under the statute.

                                       II.

      We next turn to plaintiff's argument that its constituent documents

demonstrate that it is exclusively organized for training and education, which is

the essence of a school or college, and that its structures—which it also argues

are "buildings"—provide formal instruction in a manner consistent with a school

or college.

      We look at the corporation's organizational documents, including its

bylaws and articles of incorporation, when determining whether it is organized

exclusively for a tax-exempt purpose. Phillipsburg Riverview Org., Inc. v.

Town of Phillipsburg, 26 N.J. Tax 167, 176 (Tax 2011).

      As to plaintiff's actual use of the property for the charitable purpose, the

proper application of this test "depends upon the facts of each case." Paper Mill,

95 N.J. at 514. In Advance Housing, the court summarized the issue:

              Although all relevant considerations cannot be captured
              by any list given the ever-changing scenarios that will
              arise, and although each consideration may not
              necessarily deserve the same weight, here are some that
              apply to the circumstances of this case: (1) the
              charitable work done by the private entity will spare the

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                                        18
            government an expense that ultimately it must bear . . .
            (2) the private entity must not be engaged in a seeming
            commercial enterprise . . . (3) the property must be used
            in a manner to further the charitable purpose . . . (4) the
            receipt of government subsidies or funds is not
            contraindicative of a charitable purpose . . . (5)
            financial support and recognition by the State of a
            private entity's charitable work may be indicative that
            its property is used for a charitable purpose . . . and (6)
            the private entity in carrying out its charitable mission
            through the use of its property is addressing an
            important and legitimate governmental concern[.]

            [215 N.J. at 572-73 (internal citations and quotations omitted).]

      Plaintiff's organizational documents do not meet the first prong of the

Paper Mill test and, as such, it does not qualify for exemption under the statute

as an educational institution. Its constitution does set forth its purpose as

providing training for aquatic activities, and its certification of incorporation

lists its purpose as providing training and instruction in aquatic activities and

safety in those activities. However, it fails the exclusivity requirement of the

first prong because its bylaws demonstrate that it uses its property exclusively

for its members' social activities.

      Plaintiff argues that interpreting the exclusivity requirement to exclude

social activities would deny exemption to traditional schools because they

organize social and entertainment activities, such as dances, proms and

fundraisers. However, these activities are incidental to the schools' educational

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                                       19
purposes and activities, are typically sporadic, and often occur after school

hours. Here, plaintiff offers two entire classes of memberships—sustaining

memberships and honorary memberships—that revolve entirely around

participation in social activities.

      Plaintiff also does not qualify as a school or college under the caselaw.

N.J. Carpenters Apprentice Training & Educ. Fund v. Borough of Kenilworth ,

147 N.J. 171, 173-74 (1996), involved the exemption claim for the building

owned and operated by a carpenters training and education fund. The Court

declined to adopt a "broad" definition of "school" that would encompass "all

institutions of learning." Id. at 178. The Court noted that prior caselaw "does

not suggest that every barber's college or art school is also a college[.]" Id. at

182. Although the fund did serve an educational purpose in training apprentices

to become carpenters, its primary purpose was to benefit the construction

industry, a profit-making sector of the economy, and it did not benefit society

in the way the Legislature contemplated when it enacted the statute. Id. at 189.

"[I]t is the public benefit resulting from education that justifies granting sc hools

and colleges exemption from taxation[.]" Ibid. (citing Kimberley Sch. v. Town

of Montclair, 2 N.J. 28, 42 (1949)).

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      Similarly, the Court in Textile Research Institute v. Township of

Princeton, 35 N.J. 218, 223 (1961), affirmed the agency's denial of exemption

to the land and property of an organization that provided research and instruction

in the textile field on the basis that it was primarily designed to benefit the textile

industry.   The court held that "the word 'college' does not embrace an

organization which is controlled by a particular profit-making segment of

society and which is devoted principally and primarily to research for the benefit

of that industry." Id. at 222-23. Moreover, In Township of Princeton v. Institute

for Advanced Study, 59 N.J. Super. 46, 49 (App. Div. 1960), the Court examined

the exemption of buildings used in connection with an educational institution.

The institution in question was a non-profit organized for advanced study. Id.

at 49. It had twenty-two faculty members and about 125 students, most of whom

were on leaves of absence from other universities and participated in the

institution to pursue their respective fields of research or study. Id. at 50. The

institution did not have formal instruction and afforded members office space

and secretarial help, with the freedom to pursue their own research. Id. at 50-

51. In holding that the institution was a "college," the court employed an

expanded interpretation of "college" that "comport[ed] with the manifest re ason

and obvious purpose of the law." Id. at 55. The court noted that the institution

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                                         21
had "every attribute of an institution of learning" and "encourag[ed] the cause

of education and research." Ibid.

      Here, plaintiff's organizational documents demonstrate that it intends to

benefit its members by providing them with sailing instruction, as opposed to

benefitting the for-profit sailing industry. However, it does not satisfy any of

the other criteria for a school or college. It is not accredited as a school by the

New Jersey Department of Education or any other governmental agency. Its

organizational documents reference training and instruction, but do not assert

that it is a school or college. Plaintiff does not attach its certification of cou rse

completion or set forth what, if any, benefits inure to its members by virtue of

obtaining the certificate.    Plaintiff only provides limited instruction to its

students for a brief period of time and furthering the cause of sailing knowledge

and proficiency does not provide the necessary public and societal benefit for to

qualify for exemption.

                                         III.

      We now address plaintiff's contention it is organized for the public's moral

and mental improvement because it promotes public interest in sailing and

contributes to the educational and cultural development of society by educating

families about sailing and by allowing the community to view the races.

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                                        22
      "There is no legislative delineation of the 'moral and mental improvement'

classification in the exemption statute.         The cluster of abstract concepts

themselves suggest that, at most, only a descriptive definition is contemplated."

Chester Theatre Grp. of Black River Playhouse v. Borough of Chester, 115 N.J.

Super. 360, 364 (App. Div. 1971). In Chester Theatre, the court found that a

theater organization satisfied the purpose of the exemption in that it sought "to

enrich the experience of its members and patrons and to ennoble and strengthen

their character," id. at 365, and to "develop[] or better[] . . . the mental faculties."

Id. at 364. Courts have applied the classification "to various public and civic

organizations, which directly serve the public by contributing to the educational,

cultural and spiritual development in society in general." Phillipsburg, 26 N.J.

Tax at 176. "[T]he entity must 'perform[] an important public service through

its activities which promote "the moral and mental improvement of men, women

and children[.]"'" Int'l Sch. Servs., Inc. v. W. Windsor Twp., 381 N.J. Super.

383, 388 (App. Div. 2005) (second alteration in original) (quoting Town of

Bloomfield v. Acad. of Med., 47 N.J. 358, 366 (1966)).

      Just as plaintiff's organizational documents demonstrate that it is not

organized exclusively as a school, they also demonstrate that it is not organized

exclusively for the public's moral and mental improvement. Its bylaws show

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that its members are its beneficiaries. Plaintiff offers four different classes of

memberships, and the free memberships offer benefits involving soci al

activities, with very limited other benefits. The family membership, which

requires a fee, provides the most benefits.

      Even if this court were to examine whether plaintiff exclusively uses its

property for the public's moral and mental improvement, plaintiff fails to meet

this prong because its bylaws limit nearly all benefits of its activities to

members. Not only does plaintiff only permit members to avail themselves of

its sailing training and instruction, but it only permits members to use its doc ks,

store boats and use its moorings, use its picnic tables and docks, and access

social and sailing events.

      The only benefit plaintiff offers to the non-member public is community

access to the river and the ability to view races on its race days. The public

otherwise has limited access (or no access) to the river, because the shoreline is

occupied by private residences. However, temporary and limited access to the

property does not equate to actual use of the property by the public. This limited

public benefit clearly does not suffice as a valuable public service that enhances

the public's moral and mental improvement, especially in light of our Court's

holdings that "[s]tatutes granting exemption from taxation represent a departure

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and consequently they are most strongly construed against those claiming

exemption." Int'l Sch., 207 N.J. at 15 (quoting Princeton Univ. Press v. Borough

of Princeton, 35 N.J. 209, 214 (1961)).          Courts have held that members'

benefitting from "social intercourse" is insufficient reason to grant properties

the moral and mental improvement exemption. Camden Lodge No. 111 v. City

of Camden, 135 N.J.L. 532, 534 (Sup. Ct. 1947).

      Plaintiff argues that it offers "tangible benefits to families and the

community," including instilling teamwork, communication, responsibility,

problem-solving skills, and a sense of adventure. Although sailing is certainly

a fine activity, it is a recreational activity and does not contribute to the public's

moral and mental improvement. Entities are organized for the public's moral

and mental improvement when organized for higher-level purposes, particularly

those intended to strengthen character and develop mental faculties. See, e.g.,

Paper Mill, 95 N.J. at 507 (theater organization organized "to promote 'a greater

interest in and a greater appreciation of art, music, drama, history, literature,

education and the theater'"); Bloomfield, 47 N.J. at 362 (organization dedicated

to "'pathological and anatomical study and investigation, and the advancement

and promotion of medical and surgical science,'" and that maintained largest

medical library in State, which was open to public); Princeton Univ. Press, 35

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N.J. at 211 (printing and publishing plant that published outstanding scholarly

works and was formed "for the promotion of education and scholarship"); Int'l

Sch., 381 N.J. Super. at 385-86 (organization designed "'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'"); Chester

Theatre, 115 N.J. Super. at 361-62 (theater group that provided artistic

performances open to public and sought "'to stimulate, perpetuate and develop

interest in the dramatic arts and to educate the general public in the arts'");

Planned Parenthood of Bergen Cty., Inc. v. Hackensack, 12 N.J. Tax 598, 609

(Tax 1992) (organization dedicated to provision of gynecological and

reproductive healthcare services to under-privileged mothers). This is not the

case here.

                                            IV.

      Finally, we address plaintiff’s argument that it satisfies the third prong of

the Paper Mill test because it is not conducted for profit.

      In examining whether any organization is conducted for profit, we focus

on "whether charges are fixed with the obvious intention of yielding a profit."

Kimberley Sch., 2 N.J. at 37. When considering a school, specifically, we

consider:

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             [T]he background and nature of the organization of the
             school; the character and nature of the membership of
             its board of trustees or other governing body,
             particularly where former private owners are there
             represented; the amount of its income as compared with
             its costs of operation; the amount of any excess of
             income over costs, and the actual and possible use of
             such excess; the existence and extent of its accumulated
             surplus and the purpose to which it may be put; and the
             amount of tuition charges as compared with those of
             similar schools; the scale of salaries paid to its teachers
             and officials as compared with similar schools, public
             as well as private; and the many other factors bearing
             upon the ascertainment of the dominant motive in the
             conduct of the school which need not now be detailed.

             [Id. at 38.]

      In Paper Mill, the Court stated that this court should not look solely at an

organization's net income, but should engage in "a pragmatic inquiry into

profitability [and] a realistic common sense analysis of the actual operation of

the taxpayer[.]"     95 N.J. at 521.       The statute does not require that the

organization operate at a loss or that it cannot achieve a surplus. Ibid. One of

the critical factors "is where the profit goes. . . . 'If we can trace it into someone's

personal pocket . . . the [organization] is not entitled to tax exemption.'" Id. at

522 (citing City of Trenton v. N.J. Div. of Tax Appeals, 65 N.J. Super. 1, 12

(App. Div. 1960)).

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      Here, nearly all factors in the record support plaintiff's arguments that it

does not operate or use its property for profit. Nearly all of its employees are

volunteers and its bylaws provide that, upon dissolution, it will dispose of its

assets to other 501(c)(3) organizations. It operates at a loss most years and,

when it does make a profit, it uses the excess income in subsequent years for

organizational purposes. There is nothing in the record that demonstrates that

its profit went into the personal pockets of anyone in the organization.

      Although we accept plaintiff's argument that it does not operate for profit,

we affirm the grant of summary judgment to the Borough based on plaintiff's

failure to satisfy the first two prongs of the Paper Mill test and the statutory

requirement that the property contain buildings.

      Affirmed.

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