Cottage loses tax-exempt bid

Still smarting from the wounds of losing a 10-year battle for tax-exempt status a year ago, Cottage Club was informed by a state court earlier this month that it can no longer pursue appeals of taxes it paid several years ago.

Caught in the fray between the New Jersey Supreme Court and the state legislature, the club’s tax-exempt status was officially recognized by the state from 2001 to 2004. A state tax court ruled on Nov. 21 that the deadline for Cottage to appeal the property taxes it paid to the Borough in those few years has now passed.

Beginning in 2001, attorneys for the club argued that Cottage, which offers tours of its mansion on certain days each year, qualifies for tax-exempt status as a historic landmark and a nonprofit organization. On those grounds, the club applied for tax-exempt certification in 2001.

After being granted tax-exempt status by a New Jersey Supreme Court ruling in 2007, Cottage lost its certification a few weeks later when a piece of legislation specifically targeting the club altered the requirements for tax-exemption.

Because the ruling officially granted Cottage tax-exempt status for the period between its 2001 application and the torpedoing legislation in 2004, the club was until this week pursuing appeals to have its property taxes for the years 2002, 2003 and 2004 — the years during which it was officially recognized as exempt — returned.

A state tax court ruled this week that Cottage can no longer pursue these appeals on the grounds of its briefly recognized historic landmark status because the statute of limitations on appeals for taxes from these years had run out.

The club must advise the court and the Borough in writing by Dec. 15 as to whether it will continue to argue its appeals for tax-exemption on the grounds that it is a non-profit organization. Officers of Cottage Club declined to comment.

In 2001, state law required historic sites to be open to the public 12 days per year. Though Cottage met the 12-day requirement, the New Jersey Department of Environmental Protection denied its request in 2003 on grounds of inaccessibility to the public.

As the club was planning to appeal the DEP decision, state assemblyman Reed Gusciora (D) introduced a bill, nicknamed the “Cottage Bill,” to extend the number of days of public access required for a site to qualify for tax-exemption from 12 to 96. The state legislature passed the bill in 2004.

When the club appealed its case to the New Jersey Supreme Court in 2007, the court preserved the club’s exemption as outside the purview of the law. Because the law did not clearly state the date from which exemptions fell under its purview, it could not be applied to Cottage because the club’s exemption was already years-old. The court remanded the application to the DEP and granted Cottage its requested exemption.

Because the court had upheld the club’s exemption, the Borough then owed the club more than $300,000 in property taxes the club had paid since it initially applied for tax-exemption in 2001.

Just three weeks after the ruling, the state legislature passed additional legislation that clarified the purview of the Cottage Bill to include Cottage. The new legislation stated that the restrictions of the Cottage Bill would apply to all sites designated as historic after July 1, 1999. This applied to Cottage and one other property in the state.

Get the best of ‘the Prince’ delivered straight to your inbox. Subscribe now »

The club appealed the revision of the legislation. In 2010, the appellate division of the New Jersey Superior Court upheld the validity of the new restrictions, maintaining that Cottage must continue to pay taxes because it is not open to the public for 96 days out of the year. This ended the club’s battle to win a lasting tax-exempt status.