Galloway Education v. Township of Galloway

NOT FOR PUBLICATION WITHOUT APPROVAL OF
THE TAX COURT COMMITTEE ON OPINIONS

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GALLOWAY EDUCATION, LLC, :
: TAX COURT OF NEW JERSEY
Plaintiff, : DOCKET NO: 005841-2020
: 011744-2021
v. :
:
TOWNSHIP OF GALLOWAY, :
:
Defendant. :
:
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Decided: June 24, 2022.

Michael E. Sullivan for plaintiff (Parker McCay P.A., attorneys;
Michael J. Coskey and Matthew S. Oorbeck, on the brief).

Thomas G. Smith for defendant (Law Offices of Thomas G. Smith,
attorney).

CIMINO, J.T.C.

INTRODUCTION.

Plaintiff, taxpayer Galloway Education, LLC (taxpayer) is the named landlord

of a property leased to the Atlantic Community Charter School, Inc. (ACCS).

Taxpayer now seeks exemption from property taxes as a not-for-profit entity.

However, the for-profit representative of the various bondholders which financed

the purchase of the property has the essential powers of a landlord by virtue of the
terms of the lease and other governing documents. With the bondholder

representative as the de facto landlord, the motion for summary judgment as to the

exemption is denied.

STATEMENT OF FACTS.

The Atlantic Community Charter School, Inc. (ACCS), a New Jersey not-for-

profit corporation, has been issued a charter by the New Jersey Department of

Education since 2014 to operate a charter school pursuant to the Charter School

Program Act of 1995. ---
See N.J.S.A. 18A:36A-1 to -18. Under the Act, a school

receives payment from the sending districts it serves, in this case, the City of Atlantic

City, City of Absecon, Township of Egg Harbor, Township of Galloway, and the

City of Pleasantville. This payment consists of a per pupil amount as determined by

a formula that takes into account the cost to educate students from the sending

districts. N.J.S.A. 18A:36A-12. ACCS receives approximately $16,000 per student

enrolled. To operate the school, ACCS has a contract with CSMI, LLC, a

Pennsylvania limited liability company.

When the school initially opened in September of 2014, it was located in

Atlantic City. The facilities consisted of mobile trailers used as temporary

classrooms which limited the number of students that could be enrolled. At the start

of the 2016 to 2017 academic year, ACCS moved to the property in Galloway

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Township which is the subject of this appeal. The property was formerly used by

another charter school. ACCS did not own the land, but rather leased the facility.

With expanding enrollment, ACCS sought to expand the school facilities.

Comprehensive Recovery Services, Inc., a nonprofit corporation of the State of

Colorado, established Galloway Education, LLC, a Delaware limited liability

company. The limited liability company agreement of Galloway Education, LLC,

indicates that it is a “[company] organized and operated exclusively for religious,

educational, benevolent, fraternal, charitable, and reformatory purposes and not for

pecuniary profit.” The sole member which has all the interest in Galloway Education

is Comprehensive Recovery Services.

To fund the expansion project, bonds which totaled $11,165,000 were sold by

Galloway Education to investors of Hamlin Capital Management, LLC, a for-profit

investment firm located in New York. Hamlin is designated the Bondholder

Representative so long as the majority of the outstanding bonds are owned by

persons for whom Hamlin serves as an investment advisor. The proceeds of the

bonds were utilized by Galloway Education to purchase the land and construct an

addition to the school. Wilmington Trust is designated as the trustee and handled

the disbursements during construction as well as collecting the payments on the bond

and forwarding those payments to the bondholders.

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There is a lease agreement between Galloway Education and ACCS. A

review of the lease reveals that the Bondholder Representative is mentioned some

120 times. However, a closer review of the lease agreement reveals that the

Bondholder Representative exercises significant control as would a landlord. Upon

default of ACCS, the Bondholder Representative may “elect to terminate this Lease

. . .” Lease Agreement between Galloway Education and ACCS (Lease) ¶ 29(B)(iii)

(Feb. 21, 2019). Also, “[t]he Bondholder Representative may sue for and collect

Rent, Additional Rent and any other charges due hereunder . . .” Lease ¶ 29(B) (last

paragraph prior to ¶ 29(C)). And, the “Bondholder Representative may enter and

expel [ACCS] . . . and remove the effects . . . (using such force for such purposes as

may be lawful and necessary) without being liable for prosecution . . .” Lease ¶

29(B)(iv). The “Bondholder Representative, acting for the Landlord, may, without

any further demand or notice to [ACCS], . . .enter the Property and market the

Property for sale . . .” Lease ¶ 29(B) (at end after (xi)). In addition, the Bondholder

representative may “employ a consultant, at [ACCS’] expense, to make

recommendations with respect to the operations of [ACCS], which

recommendations [ACCS] is obligated to follow.” ---
Ibid.

Even outside default, the Bondholder Representative has significant control

over the property. The Bondholder Representative must consent to any change in

use of the property. Lease ¶ 8(A). ACCS “shall not assign this Lease or sublet the

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Leased Property in whole or in part without the consent of . . . the Bondholder

Representative.” Lease ¶ 9(A). “Any and all trade fixtures appliances, furniture and

other moveable furnishings and equipment constituting personal property in the

School Facility which are or have been paid for or financed by Landlord (. . .) . . .

may not be removed from the School Facility by [ACCS] at any time . . . without the

prior written consent of . . . the Bondholder Representative, unless

contemporaneously replaced with similar property of comparable or better quality.”

Lease ¶ 11. Moreover, [ACCS] has indemnified the Bondholder Representative as

to any environmental claims. Lease ¶ 13(E). Except for minor work, modifications

and additions cannot be made to the property without the consent of the Bondholder

Representative. Lease ¶ 20(A). Repairs of any damages require the Bondholder

Representative’s consent as well. Lease ¶ 15(A).

Any change in the lease is required to have the written consent of the

Bondholder Representative. Lease ¶ 35. This is evidenced by the amendments to

the lease which reveal a sign-off from the Bondholder Representative. See First

Amendment to Lease Agreement (Mar. 1, 2019) and Second Amendment to Lease

Agreement (June 1, 2020). In the event that ACCS violates any easements,

development agreements, and such, that govern and regulate the development of the

leased property, ACCS agrees to indemnify the Bondholder Representative of any

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failure to comply. Lease ¶ 22(D). The Bondholder Representative can also dictate

certain insurance requirements of ACCS. Lease ¶ 16(A).

The Bondholder Representative is also empowered to inspect the property.

Lease ¶ 30. “If [ACCS] has not exercised the applicable option to extend this Lease,

. . . the Bondholder Representative . . . shall thereafter have the right to enter the

Leased Property at all reasonable times for the purpose of exhibiting the Leased

Property to others . . . .” Lease ¶ 32(A). In addition, if the lease is not renewed, the

Bondholder Representative, can place “for sale” and “for rent” signs on the property.

Ibid.
---

The Bondholder Representative also has a say over the operations of the

school. ACCS is required to employ CSMI as manager unless another manager is

approved by the Bondholder Representative. Lease ¶ 2(A) (definition of

“manager”). The borrowing of ACCS is limited without consent of the Bondholder

Representative. Lease ¶ 11. The organizational structure of ACCS cannot change

without approval of the Bondholder Representative. Lease ¶ 28(S). ACCS is to

“deliver to . . . the Bondholder Representative . . . audited financial statements of

income, retained earnings and cash flows . . . .” Lease ¶ 38(A). In addition, “the

Bondholder Representative . . . shall have the right . . . to audit, examine, and make

excerpts or transcripts of or from the records of [ACCS].” Lease ¶ 38(C).

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The “annual fixed rent” specified in the lease coincides with the bond debt

servicing amounts. Compare Lease Exhibit C with Limited Offering Memorandum

5 (Feb. 20, 2019). In fact, Exhibit C of the unamended Lease breaks out the principal

and interest portions of the “annual fixed rent.” Lease Exhibit C. “Annual Fixed

Rent . . . shall be paid . . . by . . . [ACCS] directly to the Trustee, as the assignee of

the Landlord, for deposit in accordance with the Indenture.” Lease ¶ 6(K). See also

Indenture of Trust § 7.01(a) (Feb. 1, 2019). The Trustee would then remit payment

to the bondholders. Indenture of Trust § 3.02(b). ACCS also remits an

“administrative fee” of $62,500 directly to Galloway Education each year as

additional rent. Lease ¶6(J) ($62,500 fee), 6(K) (directly to Galloway Education).

As set forth in the organizational document for Galloway Education,

Comprehensive Recovery Services has the ability to transfer or assign its interest in

Galloway Education. Limited Liability Company Agreement of Galloway

Education §14 (Nov. 19, 2018). To secure the sale of bonds utilized for the project,

the Bondholder Representative required that Comprehensive Recovery Services

pledge its interest in Galloway Education. Pledge Agreement Introduction (Feb. 1,

2019). In the event of a default, the Bondholder Representative has the right to

exercise all voting rights Comprehensive Recovery Solutions has as to Galloway

Education. Pledge Agreement Article VI (last paragraph). In other words, a for-

profit entity, the Bondholder Representative, would be in effective control of the

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not-for-profit Galloway Education. Also, upon default, the Bondholder

Representative can direct the Trustee to name a successor sole member of Galloway

Education. Pledge Agreement § 7.2(e).

This matter comes before the court on motion for summary judgment. On

summary judgment, the court must assess "whether the competent evidential

materials presented, when viewed in the light most favorable to the non-moving

party, are sufficient to permit a rational factfinder to resolve the alleged disputed

issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142

N.J. 520, 540 (1995).

LEGAL CONCLUSIONS.

As explained by our Supreme Court on a number of occasions:

The fundamental approach of our tax statutes is that
ordinarily all property shall bear its just and equal share of
the public burden of taxation. Statutes granting exemption
from taxation represent a departure and consequently they
are most strongly construed against those claiming
exemption.

[Int’l Schs. Servs. v. Township of West Windsor, 207 N.J.
3, 15 (2011) (citing Princeton Univ. Press v. Borough of
Princeton, 35 N.J. 209, 214 (1961).]

Many of the exemptions for property not owned by a governmental entity are

addressed in N.J.S.A. 54:4-3.6. Exemption to property taxes were first codified in

1851. L. 1851, p. 272, § 5. The modern form of the statute first appeared in 1918

and was codified into the present form in 1937. L. 1918, c. 236, § 202; R.S. 54:4-

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3.6 (1937). Since first appearing over one hundred fifty years ago, there have been

numerous amendments. The first sentence of the statute is now 859 words and

contains a myriad of exemptions.

One of the exemptions is “for all buildings actually used for colleges, schools,

academies or seminaries . . .” N.J.S.A. 54:4-3.6. However, the statute has a second

sentence which requires that an exemption provided for in the first sentence

“appl[ies] only where the association, corporation or institution claiming the

exemption owns the property in question . . . and authorized to carry out the purposes

on account of which the exemption is claimed . . .” Ibid. 1

Galloway Education is not authorized to operate a school. The limited

offering memorandum issued by Galloway Education confirms that “Galloway

[Education] is a single purpose entity and is not a school.” Rather, ACCS is the

holder of the State charter to operate a school. There must be a confluence of

ownership and use for an exemption to be applicable. Mega Care, Inc. v. Township

of Union, 15 N.J. Tax 566, 573 (Tax 1996), aff’d. o.b., 22 N.J. Tax 604 (App. Div.

2004). Since Galloway Education and not ACCS is the owner of the property, the

1
The statute also provided that the association, corporation or institution is
incorporated or organized under the laws of this State. However, that provision was
found to be unconstitutional. WHYY, Inc. v. Glassboro, 393 U.S. 117 (1968) (rev’g
50 N.J. 6 (1967)) .
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school exemption does not apply. Correctly recognizing this provision, Galloway

Education has not sought the exemption under the school provision.

Rather, Galloway Education seeks the exemption under a 1931 amendment

exempting properties utilized for the moral and mental improvement of men, women

and children that are owned by a holding company. This exemption applies to:

. . . all buildings owned or held by an association or
corporation created for the purpose of holding the title to
such buildings as are actually and exclusively used in the
work of two or more associations or corporations
organized exclusively for the moral and mental
improvement of men, women and children . . .

[N.J.S.A. 54:4-3.6. See also L. 1931, c. 372.]

There is also another similar provision enacted in 1949 dealing with a not-for-

profit entity leasing property to a religious or charitable entity which provides:

. . . all buildings owned by a corporation created under or
otherwise subject to the provisions of Title 15 of the
Revised Statutes or Title 15A of the New Jersey Statutes
and actually and exclusively used in the work of one or
more associations or corporations organized exclusively
for charitable or religious purposes, which associations or
corporations may or may not pay rent for the use of the
premises or the portions of the premises used by them . . .

[N.J.S.A. 54:4-3.6. See also L. 1949, c. 85.]

In evaluating the exemptions provided by N.J.S.A. 54:4-3.6, the courts have

applied a 3-part test to determine eligibility for a local property tax exemption. This

3-part test requires that the owner of the property must show that (1) it is organized

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

tax-exempt purpose; and (3) its operation and use of the property must not be

conducted for profit. Int’l Schs. Servs., 207 N.J at 16 (citing Paper Mill Playhouse

v. Township of Millburn, 95 N.J. 503, 506 (1984)); Advance Housing, Inc. v.

Township of Teaneck, 215 N.J. 549, 567-68 (2013) (citing Paper Mill Playhouse, 95

N.J. at 506.) The three prongs of the test are commonly referred to the

“organization,” “use,” and “profit” prongs. Borough of Hamburg v. Trustees of

Presbytery of Newton, 28 N.J. Tax 311, 318 (Tax 2015).

The burden rests on the claimant to prove entitlement to a local property tax

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

Kenilworth, 147 N.J. 171, 178 (1996); Advance Housing, 215 N.J. at 566; Int’l Schs.

Servs., 207 N.J. at 15. Exemptions from taxation are to be strictly construed against

those invoking the exemption. Advance Housing, 215 N.J. at 566; Int’l Schs. Servs.,

207 N.J. at 15. N.J. Carpenters, 147 N.J. at 177. These principles foster the “well-

established policy that ‘the public tax burden is to be borne fairly and equitably.’”

Advance Housing, 215 N.J. at 566; (quoting Int’l Schs. Servs., 207 N.J. at 15).

In applying the statutory dictates of N.J.S.A. 54:4-3.6, the common thread

which runs through the controlling case law is not to elevate form over substance.

To this end, the Supreme Court has repeatedly stated that a fact specific analysis is

required. Presbyterian Homes of Synod of N.J. v. Division of Tax Appeals, 55 N.J.

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275, 286 (1970); Advance Housing, 215 N.J. at 572; Int’l Schs. Servs., 207 N.J. at

22. Coupled with this requirement of a fact specific analysis is the application of

common sense. Int’l Schs. Servs., 207 N.J. at 20; Paper Mill Playhouse, 95 N.J. at

521. The required common-sense fact-based approach requires more than merely

looking at the books of the organization and tallying up its profit and loss. Int’l Schs.

Servs., 207 N.J. at 20; Paper Mill Playhouse, 95 N.J. at 521.

Whether holding property used for a school meets the use prong per 1) the

1931 amendment pertaining to holding property for the moral and mental

improvement of men, women and children, or 2) the 1949 amendment pertaining to

a not-for-profit leasing property to a charitable purpose, turns out to be an

examination which may not be as straightforward as it seems. However, the court

need not decide this exact issue since the organizational and profit prongs are not

met.

Since the prongs are interrelated, it is helpful at times to review the prongs in

tandem. See Int’l Schs. Servs., 207 N.J. at 17 (since prongs are interwoven, Court

evaluated use and profit prongs in tandem). Here, the court will examine the

organization and profit prongs in tandem.

Merely creating a non-profit does not automatically satisfy the organizational

prong. Decisions span back over 100 years in which the subterfuge of a “corporate

dress” was found insufficient to confer non-profit status. Town of Montclair v. State

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Bd. of Equalization of Taxes, 86 N.J.L. 497, 497-98 (Sup. Ct. 1914), aff’d, 88 N.J.L.

374 (E. & A. 1915); see also Carteret Acad. v. State Bd. of Taxes & Assessment,

102 N.J.L. 525, 529 (Sup. Ct. 1926), aff’d, 104 N.J.L. 165 (E. & A. 1927). In other

words, a practical approach in necessary. For example, back in the 1910s, our courts

held that changing the status of school from a for-profit corporation to a not-for-

profit corporation was not enough to confer the local property tax exemption. Town

of Montclair, 86 N.J.L. at 497-98. See also Cateret Acad., 102 N.J.L. at 529 (similar

facts from the 1920s). Later in the 1980s, this court held that reorganizing a family

medical practice from profit making partnership to a non-profit was found

insufficient to confer the exemption. Township of Weymouth v. Mem’l Park Fam.

Prac. Ctr., Inc., 7 N.J. Tax 589, 595-96, 605 (Tax 1985).

Just as having the proper corporate documents does not guarantee an

exemption, solely relying upon the corporate documents for disqualification has

been rejected by the Appellate Division. Int’l Schs. Servs., Inc. v. Township of West

Windsor, 381 N.J. Super. 383, 385 (App. Div. 2005). Specifically, the Appellate

Division indicated that “courts are not barred from considering extrinsic information

if relevant to ascertaining the meaning of the corporate documents.” Ibid. With that

said, the lease agreement and the pledge agreement are key documents to

understanding the financial arrangement in this case. Evaluating how these

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organizational documents impact the profit of the for-profit bondholders is key to

discerning whether an exemption is appropriate under the law.

As to the profit prong, Galloway Education is nominally established as a non-

profit and is the owner of the property. Galloway Education has entered into a lease

with ACCS, which at first glance is not much different than any lease which a

commercial landlord would enter into with a tenant. However, a review of the lease

reveals that it is not Galloway Education that is calling the shots in this arrangement.

Rather, it is the Bondholder Representative that has been granted extensive powers

under the lease. In addition, there is a separate pledge agreement which empowers

the Bondholder Representative to take over the membership and ownership of

Galloway Education. Overall, the activities and existence of Galloway Education

are at the mercy of the for-profit Bondholder Representative.

As to the lease, the Bondholder Representative is mentioned over 120 times

throughout the document. A review of the Lease plainly reveals that the Bondholder

Representative is the de facto landlord in this matter. The Bondholder

Representative is not merely a passive investor cutting and cashing the bond

coupons.2 The Bondholder Representative can upon default of ACCS, cancel the

2
Back in the day, bonds came printed with coupons printed on them. To receive an
interest payment, the bondholder would clip off a coupon when it came due and
redeem it for cash. Ken Belson, Coupon Clipping, the Old-Fashioned Way, N.Y.
Times, Feb. 12, 2006, at B5.
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lease, enter and expel ACCS and sue for the rents. Certainly, these are powers of a

landlord.

The powers of the Bondholder Representative are vast and extend to not only

default, but also the day-to-day operation of the property such as ACCS’ use of the

property, subletting, removal of furniture by ACCS, environmental issues, repairs

and modification to the premises by ACCS and ACCS’ insurance coverage. The

Bondholder Representative also has access to the property for inspection and

marketing and sale and can place a for-sale sign on the property.

The reach of the Bondholder Representative extends beyond operation of the

physical plant, to how ACCS conducts the business of operating a school. For

example, the Bondholder Representative must approve the management company

that operates the school on behalf of ACCS, has set limits on the amounts which

ACCS can borrow, and restricts ACCS from changing its organizational structure.

The Bondholder Representative has the right to financial statements of ACCS as

well as the right to conduct an audit of ACCS.

The court recognizes that private investors loaning money to a not-for-profit

are not required to forgo their profit. However, this situation is not where investors

are merely holding a mortgage on lands owned by a school. Here the school is a

mere tenant of the property under a lease and pledge agreement in which the

Bondholder Representative has extensive control. The taxpayer selects the form of

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business operation, and the taxpayer has to deal with the consequences of its

selection. General Trading Co. v. Dir., Div. of Tax’n, 83 N.J. 122, 136 (1980).

If the school defaults on its lease, it cannot effectively look to Galloway

Education for relief or some sort of work-out. Certainly, Galloway Education, as a

non-profit, should not be worried about profit, but rather fostering good works, albeit

indirectly, by enabling this school project. Even assuming Galloway Education

would want to help, it would be powerless since the structure of the deal places the

real power of a landlord with the Bondholder Representative. The school is at the

mercy of the Bondholder Representative who is primarily interested in the timeliness

and thus profitability of the lease payments. At best, Galloway Education functions

as a property manager under the control of the Bondholder Representative. Per the

lease, the fixed rent payments are paid to the bondholders through the Trustee

without even passing through Galloway Education. These payments correlate with

the principal and interest due on the bonds. For its services, Galloway Education

gets an administrative fee of $62,500 per year from ACCS as additional rent.

“[A]n exemption should not be granted when profit can be traced ‘into

someone’s personal pocket.’” International Schools, 207 N.J. at 24 (quoting Paper

Mill Playhouse, 95 N.J. at 522). Here, the powers conferred to the Bondholder

Representative ensure the flow of revenues from the school to the bondholders. The

court finds this situation is not much different than a for-profit entity directly leasing

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its property to the school. In such a circumstance, it is plain to see that property tax

would be due and owing. Likewise, in this case, with the actual powers of a landlord

in the hands of the Bondholder Representative ensuring a profit is made, the

exemption is denied.

There is a second basis for this court to not allow a property tax exemption.

Galloway Education is established under Delaware law as a limited liability

company. Comprehensive Recovery Services, a Colorado not-for-profit corporation

is the sole member of Galloway Education. As part of the bond financing deal, the

Bondholder Representative required that Comprehensive Recovery Services pledge

its interest in Galloway Education. In the event of a default, the Bondholder

Representative can exercise all voting rights or direct that a successor sole member

be named.

With the powers conferred by the pledge agreement, the ownership of

Galloway Education is precarious because the Bondholder Representative can seize

control of a nominally not-for-profit entity in order to protect the profits of the

bondholders. Certainly, the laws of this State do not contemplate that not-for-profit

entities are controlled or owned, or subject to be controlled or owned, by for-profit

entities. Even if the laws of Delaware or Colorado (where Galloway Education and

Comprehensive Recovery Services are organized) contemplate such a result, our

laws do not contemplate such control by a for-profit would allow eligibility for a tax

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exemption. It is one thing for a lender or a Bondholder Representative to have a

mortgage on a property owned by a non-profit, it is quite another thing for a profit-

making entity to have the ability to seize and obtain full and unfettered control of

the not-for-profit entity for its own purposes.

Our courts have previously dealt with properties used for seemingly not-for-

profit activities that do not qualify for an exemption because the properties benefit

for-profit enterprises. In New Jersey Carpenters, a training facility was established

by contractors and the union to train apprentices. Id., 147 N.J. at 173, 175. While

the training facility itself is not established to generate a profit, it was created to

primarily benefit a specific for-profit sector of the economy. Id. at 184, 185. As a

result, the Supreme Court rejected the exemption. Id. at 189. In addition, in Textile

Research Institute v. Township of Princeton, 35 N.J. 218 (1961), a not-for-profit

institute also had the objective of benefitting a profit-making segment of society. Id.

at 223. As a result, the Court rejected its claim to an exemption. Ibid. These

decisions comport with the Supreme Court’s repeated instruction to apply a common

sense fact-based approach which requires more than merely looking at the books of

the organization and tallying up its profit and loss. Int’l Schs. Servs., 207 N.J. at 20;

Paper Mill Playhouse, 95 N.J. at 521.

Here, the structure of deal is plainly for the benefit of the bondholders

represented by the Bondholder Representative. Control of the nominally not-for-

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profit Galloway Education can be transferred at the demand of the Bondholder

Representative to a for-profit to protect the profits of the bondholders. The not-for-

profit in this case exists to benefit a for-profit endeavor. This provides further basis

to deny the exemption.

Finally, there is a third basis to deny the exemption. The distinction between

profit-making and not-for-profit activities must be “evident, readily ascertainable,

and separately accountable for taxing purposes” and “presumes an ability to identify

it, segregate it, and measure it for local taxing purposes.” Int’l Schs. Serv., 207 N.J.

at 23. “Otherwise, to permit a nonprofit entity to claim a property tax exemption

when it has become inseparably entangled with for-profit entities would allow

indirect taxpayer subsidization of those entities. In other words, a competitive

advantage would be conferred on those for-profit entities at the expense of the

taxpaying public.” Ibid. There is a “duty [for a not-for-profit] to conduct its affairs

in such a fashion as to allow local taxing authorities to readily determine its

eligibility for exemption.” Id. at 24. Failing this duty leads to a “quagmire of

entanglement” which necessitates denial of the exemption. Id. at 24-25.

There is nothing sinister or wrong with the Bondholder Representative

ensuring that a profit is made. The court realizes that the avenues for financing

would be limited without the potential for a profit. However, a tax exemption here

would allow “indirect taxpayer subsidization” of the bondholders. See Id. at 23.

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This would confer a competitive advantage upon the bondholders at the expense of

the other taxpayers in the municipality. Ibid.

The layers of entities and lengthy agreements obfuscate that the for-profit

entities in this case have essential control over the operation of a seemingly not-for-

profit endeavor. A local tax assessor should not be forced to peel off complex layers

of corporate and organizational structure to determine who is really in control, or

who really profits. The taxpayer here has failed to conduct its affairs in such a way

for the local assessor to readily determine eligibility. Assessors must always be

vigilant as to for-profit entities using the façade of not-for-profit entities to gain the

competitive advantage of reduced taxation. Here, the entanglement of the for-profit

and not-for-profit interests necessitates denial of the exemption.

CONCLUSION.

For the foregoing reasons, plaintiff’s motion for summary judgment is

DENIED.

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