Princeton University has hired one of the world’s largest law firms to defend it in litigation filed by town residents who are questioning the university’s nonprofit status and want the school to pay millions of dollars more in annual property taxes.
University officials declined to comment on the move, but confirmed they have hired Simpson Thacher & Bartlett to represent the university in the case, along with local firm Archer & Greiner as co-counsel.
The stakes are high not only for the university, but for schools —perhaps all nonprofit organizations — across the country, who face the potential of paying many million of dollars if a precedent is set by a decision against Princeton in the case.
State tax court Judge Vito Bianco said as much in a June 27 hearing when he refused the school’s request to dismiss the case.
“There’s a lot riding on this,” Bianco said at the hearing. “It’s not just for this university or for every university in the country, but for nonprofits as a whole. I think this case is going to have very, very deep” impact.
The residents, represented by Princeton attorney Bruce Afran, are arguing that the university should not be entitled to nonprofit status because it earns money from the licensing of inventions by researchers who work there. It also pays a portion of those revenues to the researchers.
The suit challenges the exempt status of 19 buildings on campus, claiming that they have non-academic or commercial uses. Buildings include the Princeton University Press, McCarter Theater, Prospect House, the Frist Center, Dillon Gymnasium, and Richardson Auditorium, 71 University Place, Chancellor Green, 48 University Place, and Ivy Lane Properties.
Simpson Thacher & Bartlett has more than 800 lawyers and represents large clients such as JPMorgan Chase, Bank of America, and the federal Department of the Treasury. It last represented the university in 2002 when it was sued by the Robertson Foundation. That case ended in 2008 with a settlement.
“If the university would pay its full share of taxes, it would pay another $2.5 million, probably,” Afran recently told the Daily Princetonian newspaper. “That’s one-half of one percent of what the university earns on its endowment every year.”
Meanwhile, Princeton reported this month that its endowment earned an 11.7 percent investment gain in the fiscal year that ended June 30, with the 10-year annualized return increasing to 10.2 percent.
The endowment value stood at $18.2 billion, an increase of about $1.2 billion from 2012. The results were certified on October 17 during a meeting of the directors of Princeton University Investment Co., the office that manages the university’s endowment.
Princeton University, 1 Nassau Hall, Princeton 08544; 609-258-3000; fax, 609-258-1294. Christopher Eisgruber, president. www.princeton.edu.